Business Development
7%of exam
Account Opening
9%of exam
Recommendations
73%of exam
Transactions
11%of exam
Quick Facts
- Questions
- 125 scored
- Total items
- 135 total
- Time
- 3h 45m
- Pass
- 72%
- Sponsor
- FINRA firm
- Corequisite
- SIE
- Fee
- $395
- Format
- Multiple choice
IPO vs Reg D
IPO
- Registered offering
- Public sale
- Prospectus required
Reg D
- Private placement
- Accredited investors
- Restricted resale
Public vs private
Communications
- Retail
- 25+ retail persons
- Institutional
- Institutions only
- Correspondence
- One or few
- Principal approval
- Before retail use
- Research report
- Quiet periods matter
- Options ODD
- Before options approval
- CMO ad
- Special risk disclosure
New Issues
- IPO
- Initial public offering
- Red herring
- Preliminary prospectus
- Final prospectus
- Post-effective disclosure
- Cooling-off
- No sales
- Syndicate
- Underwriting group
- Selling group
- Sells, no risk
- Reg D
- Private placement
- QIB
- Rule 144A buyer
Recommendation Order
Facts first, recommendation second
KYC firstProfile mattersReg BI applies
KYC vs Suitability
KYC
- Collect facts
- Know customer
- Account basis
Suitability
- Use facts
- Match recommendation
- Product fit
Facts vs fit
Account Picker
- Customer is minor→Custodial(UGMA/UTMA)
- Multiple owners→Joint(Survivorship varies)
- Borrowing requested→Margin(Agreement required)
- Firm chooses timing→Discretionary(Written authority)
- Entity opens account→Corporate(Resolution required)
- Beneficiary transfer→TOD(Avoid probate)
Account Docs
- CIP
- Verify identity
- KYC
- Essential facts
- Reg S-P
- Privacy notices
- POA
- Trading authority
- Discretionary
- Written authorization
- Trusted contact
- Senior protection
- Corporate resolution
- Entity authority
- Options agreement
- Before options trading
Customer Profile
- Objective
- Income/growth/speculation
- Liquidity
- Cash need
- Time horizon
- Investment period
- Tax status
- Tax impact
- Risk tolerance
- Loss comfort
- Net worth
- Assets minus liabilities
- Experience
- Product familiarity
- Hold advice
- Reg BI covered
Function Weights
7 | 9 | 73 | 11
Business 7Accounts 9Recommendations 73Transactions 11
GO vs Revenue
GO
- Tax backing
- Voter approval
- Debt limit
Revenue
- Project revenue
- Feasibility matters
- Rate covenant
Taxes vs project
Product Picker
- Need voting upside→Common stock(Equity)
- Need fixed dividend→Preferred(Hybrid)
- Need interest income→Bond(Debt)
- Need tax-free income→Municipal(Tax)
- Need daily pooled pricing→Mutual fund(NAV)
- Need intraday basket→ETF(Exchange)
- Need insurance wrapper→Variable annuity(Separate account)
- Need options hedge→Protective put(Hedge)
Equities
- Common
- Voting ownership
- Preferred
- Fixed dividend
- ADR
- Foreign shares
- Rights
- Short-term subscription
- Warrants
- Long-term purchase
- REIT
- Real estate pool
- Penny stock
- High disclosure risk
Options Direction
Call up | put down
Call buysPut sellsBuyer has rightSeller has obligation
Mutual Fund vs ETF
Mutual fund
- Forward NAV
- Redeemable shares
- Prospectus sale
ETF
- Intraday price
- Exchange traded
- Brokerage commissions
NAV vs market
Option Strategy
- Bullish stock substitute→Long call(Limited risk)
- Bearish stock substitute→Long put(Limited risk)
- Own stock; seek income→Covered call(Upside capped)
- Own stock; seek hedge→Protective put(Floor created)
- Expect volatility→Long straddle(Two premiums)
- Expect stability→Short straddle(Unlimited risk)
Debt
- Par
- $1,000 face
- Coupon
- Stated interest
- Current yield
- Income / price
- YTM
- Total bond return
- YTC
- Call-date return
- Discount
- Below par
- Premium
- Above par
- Duration
- Rate sensitivity
- Accrued interest
- Buyer pays seller
Bond Rates
Rates up | prices down
Inverse relationshipCoupon fixedYield adjustsLong duration hurts
Call vs Put
Call
- Buy stock
- Bullish buyer
- Upside leverage
Put
- Sell stock
- Bearish buyer
- Downside hedge
Buy vs sell
Muni Yield Picker
- Compare taxable yield→TEY(Divide by complement)
- Bought premium muni→Amortize premium(Basis down)
- Bought discount muni→Accrete discount(Basis up)
- Need disclosure→Official statement(Muni primary)
Munis
- GO
- Tax-backed debt
- Revenue
- Project-backed debt
- BAN
- Bond anticipation note
- TAN
- Tax anticipation note
- TEY
- Tax-free comparison
- AMT
- Preference item risk
- Official statement
- Muni disclosure
- EMMA
- Muni market data
Muni Backing
GO taxes | revenue project cash
GO tax pledgeRevenue user feesTEY for brackets
Funds
- Mutual fund
- Forward NAV
- ETF
- Intraday trading
- Closed-end
- Market price
- UIT
- Fixed portfolio
- 12b-1
- Distribution fee
- Breakpoint
- Sales charge discount
- LOI
- Future breakpoint intent
- ROA
- Household aggregation
Options
- Call
- Right to buy
- Put
- Right to sell
- Long option
- Pays premium
- Short option
- Obligation assumed
- Covered call
- Stock plus short call
- Protective put
- Stock plus long put
- Spread
- Long and short
- Straddle
- Same strike
Variable Products
- Variable annuity
- Separate account
- Fixed annuity
- General account
- Accumulation unit
- Pay-in measure
- Annuitization
- Payout conversion
- Death benefit
- Beneficiary floor
- Subaccount
- Investment option
- 1035 exchange
- Tax-free insurance swap
Alternatives
- DPP
- Pass-through income
- Limited partner
- Passive investor
- General partner
- Manages partnership
- Hedge fund
- Limited liquidity
- Private placement
- Registration exempt
- Reg A
- Mini public offering
- CMO
- Prepayment risk
Suitability + Reg BI
- Reasonable basis
- Product suitable generally
- Customer specific
- Fits profile
- Quantitative
- No excessive trading
- Best interest
- No customer harm
- Disclosure
- Material facts
- Care
- Diligent recommendation
- Conflict
- Mitigate or disclose
- Documentation
- Record recommendation
Tax + Risk
- Capital gain
- Sale profit
- Ordinary income
- Interest income
- Qualified dividend
- Preferential rate
- TEY
- Muni comparison
- Reinvestment risk
- Lower future rates
- Call risk
- Early redemption
- Credit risk
- Issuer default
- Inflation risk
- Purchasing power loss
Margin Sides
Long debit | short credit
LMV minus debitCredit minus SMVSMA equals excess
Broker vs Dealer
Broker
- Agent
- Matches trades
- Charges commission
Dealer
- Principal
- Own inventory
- Earns spread
Agent vs principal
Order Picker
- Need immediate fill→Market(Price uncertain)
- Set maximum buy→Buy limit(At or lower)
- Set minimum sell→Sell limit(At or higher)
- Protect long stock→Sell stop(Below market)
- Protect short stock→Buy stop(Above market)
- Control stop price→Stop limit(Execution uncertain)
Orders
- Market order
- Execution priority
- Limit order
- Price control
- Stop order
- Trigger market
- Stop limit
- Trigger limit
- Not held
- Broker discretion
- DNR
- Do not reduce
- Solicited
- Rep recommended
- Unsolicited
- Customer initiated
- Principal trade
- Firm inventory
- Agency trade
- Commission trade
Market vs Limit
Market
- Execution likely
- Price uncertain
- Speed priority
Limit
- Price controlled
- Execution uncertain
- Or better
Speed vs price
Settlement + Records
- T+1
- Regular settlement
- Confirmation
- Trade details
- TRACE
- Bond reporting
- RTRS
- Muni reporting
- DK
- Comparison dispute
- DVP/RVP
- Institutional settlement
- Complaint
- Written grievance
- U4 update
- Reportable changes
Stop vs Stop Limit
Stop
- Trigger market
- Fill likely
- Price uncertain
Stop limit
- Trigger limit
- Price controlled
- May miss
Protection vs certainty
Margin
- Reg T
- 50% initial
- LMV
- Long market value
- SMV
- Short market value
- Debit
- Customer loan
- Credit
- Short account balance
- SMA
- Excess equity
- Maintenance
- Ongoing minimum
- Margin call
- Deposit required
- Hypothecation
- Pledge customer securities
Reg T vs Maintenance
Reg T
- Initial purchase
- 50% equity
- Federal Reserve
Maintenance
- Ongoing minimum
- Exchange/firm rules
- Triggers call
Initial vs ongoing
Conduct
- Insider trading
- MNPI misuse
- Churning
- Excessive trading
- Front running
- Trade ahead
- Selling away
- Unapproved securities
- OBA
- Written notice
- Gifts
- $100 yearly limit
- AML
- Detect suspicious activity
- SAR
- $5,000 suspicious activity
- CTR
- Over $10,000 cash
- SIPC
- Broker failure coverage
Common Traps
Item Count
125 scored ≠ 135 total
Corequisite
SIE required ≠ Sponsor still required
Muni Scope
Sales allowed ≠ Underwriting needs Series 52
Order Certainty
Market fills ≠ Limit may miss
Stop Trap
Stop becomes market ≠ Stop-limit may miss
Fund Pricing
Mutual fund forward NAV ≠ ETF market price
Bond Math
Rates rise ≠ Prices fall
Margin Timing
Reg T initial ≠ Maintenance ongoing
SIPC
Broker failure ≠ Not market loss
Discretion
Time/price okay ≠ Action needs authority
Last Minute
- 1.F3 drives 73%
- 2.125 scored; 135 total
- 3.Pass mark is 72%
- 4.SIE plus sponsor required
- 5.No reference materials allowed
- 6.Business 7; accounts 9
- 7.Transactions 11%
- 8.Recommendations dominate exam
- 9.Rates up; bond prices down
- 10.Call buys; put sells
- 11.Market fills; limit controls price
- 12.GO taxes; revenue project cash
- 13.Mutual funds forward-price NAV
- 14.SIPC protects custody, not loss
- 15.Discretion needs written authority
Buy on Amazon
Practice exams on ExamEdge
Take courses on Udemy
Online course on MometrixSame family resources
Explore More FINRA Series Exams
Continue into nearby exams from the same family. Each card keeps practice questions, study guides, flashcards, videos, and articles in one place.
More From This Family
Videos and articles for deeper review.
Video50+ FREE Series 7 Practice Questions 2026 + AnswersThis examVideo7 Proven Study Methods for Certification Exams (2026)This examVideoCall Option ExplainedThis examVideoConvertible Bond ExplainedThis examArticle50+ FREE Series 7 Practice Questions 2026 + Answers20 min readArticle7 Proven Study Methods for Certification Exams (2026)14 min readArticleFree Day Trading Course for Financial Advisors (2026): How to Answer Client Questions10 min readArticleFree Exam Prep Resources 2026: Complete Guide to Free Study Materials9 min read