FINRA Series 7 / SIE Exams Series 7: Securities Regulation, Underwriting, and Professional Conduct Syllabus

Series 7: Securities Regulation, Underwriting, and Professional Conduct syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Series 7: Securities Regulation, Underwriting, and Professional Conduct in FINRA Series 7 / SIE Exams, not a summary of it.

1. 1

   Securities Acts and Registration

   3 topics

   • Foundational Federal Legislation
     • Securities Act of 1933: registration and prospectus
     • Securities Exchange Act of 1934: secondary market regulation
     • Investment Company Act of 1940 and Investment Advisers Act of 1940
   • Exempt Securities and Transactions
     • Regulation D private placements and accredited investors
     • Regulation A and intrastate (Rule 147) offerings
     • Rule 144 and Rule 145
   • Disclosure and Issuer Reporting
     • Form 10-K, 10-Q, and 8-K reporting
     • Proxy solicitation and shareholder communications
2. 2

   The Underwriting Process

   3 topics

   • Primary Offerings
     • Firm commitment versus best efforts underwriting
     • Syndicate, selling group, and underwriting spread
     • Tombstone ads, red herring, and the cooling-off period
   • Distribution Rules
     • FINRA Rule 5130 and 5131 (new issue/IPO restrictions)
     • Stabilizing bids and the Securities Act quiet period
   • Municipal Underwriting
     • Competitive versus negotiated sales
     • Official statement and the notice of sale
3. 3

   FINRA Conduct Rules and Ethics

   3 topics

   • Communications with the Public
     • FINRA Rule 2210 communication categories and approval
     • Testimonials, projections, and prohibited claims
   • Markups, Commissions, and Fair Dealing
     • FINRA 5% markup policy
     • Fair prices and reasonable commissions
   • Code of Procedure and Arbitration
     • Code of Procedure for rule violations
     • Code of Arbitration for monetary disputes
     • Mediation as dispute resolution

Series 7: Securities Regulation, Underwriting, and Professional Conduct flashcards for FINRA Series 7 / SIE Exams

20 of 50 cards from the Series 7: Securities Regulation, Underwriting, and Professional Conduct deck — real questions with worked answers.

1. What does the Securities Act of 1933 regulate?

   The primary market — the issuance/registration of new securities and the disclosure (prospectus) requirements for public offerings. Known as the 'Paper Act' or 'Truth in Securities' law.

2. What does the Securities Exchange Act of 1934 regulate?

   The secondary market — trading of outstanding securities. It created the SEC, regulates exchanges, broker-dealers, insider trading, margin (via the Fed), and ongoing issuer reporting.

3. Which federal law created the SEC?

   The Securities Exchange Act of 1934.

4. What did the Maloney Act of 1938 do?

   Amended the Securities Exchange Act of 1934 to allow creation of self-regulatory organizations (SROs) for the OTC market, leading to the NASD (now FINRA).

5. What does the Investment Company Act of 1940 regulate?

   It classifies and regulates investment companies — face-amount certificate companies, unit investment trusts (UITs), and management companies (open-end/mutual funds and closed-end funds).

6. What does the Investment Advisers Act of 1940 do?

   Requires persons who are in the business of giving securities advice for compensation to register as investment advisers and regulates their conduct.

7. What did the Securities Investor Protection Act of 1970 create, and what does it cover?

   Created SIPC, which protects customers of a failed broker-dealer up to $500,000 total, of which a maximum of $250,000 may be cash.

8. What did the Insider Trading and Securities Fraud Enforcement Act of 1988 establish for penalties?

   Civil penalties of up to 3x the profit gained or loss avoided (treble damages), plus criminal penalties; it also requires firms to maintain written supervisory procedures to prevent insider trading.

9. Under the Securities Act of 1933, what are the four broad categories of EXEMPT SECURITIES?

   U.S. government and agency securities, municipal securities, securities of banks/insurance companies, and securities of charitable/nonprofit and certain other entities (e.g., commercial paper ≤270 days).

10. Is commercial paper an exempt security, and under what condition?

    Yes — short-term corporate debt (banker's acceptances and commercial paper) is exempt if its maturity does not exceed 270 days (9 months).

11. What is the difference between an exempt security and an exempt transaction?

    An exempt security is exempt regardless of how it is sold (e.g., munis, Treasuries). An exempt transaction is a particular manner of sale that is exempt (e.g., Reg D private placement) even though the security itself may not be exempt.

12. What is Regulation A+ and its two offering tiers?

    A small-offering exemption from full registration. Tier 1: up to $20 million in 12 months. Tier 2: up to $75 million in 12 months (with audited financials and ongoing reporting).

13. Under Regulation D Rule 506(b), how many non-accredited investors are permitted and is advertising allowed?

    Up to 35 non-accredited (but sophisticated) investors plus unlimited accredited investors; general solicitation/advertising is NOT permitted.

14. How does Rule 506(c) of Regulation D differ from 506(b)?

    506(c) permits general solicitation/advertising but ALL purchasers must be accredited investors, and the issuer must take reasonable steps to verify accredited status.

15. Name two ways an individual can qualify as an accredited investor by financial thresholds.

    Annual income over $200,000 (or $300,000 joint) in each of the last two years with expectation to continue, OR net worth over $1 million excluding primary residence.

16. What is Rule 147 (the intrastate offering exemption)?

    Exempts offerings sold only to residents of a single state by an issuer doing business in that state; resales restricted to in-state residents for 6 months after the offering closes.

17. What is Rule 144 and the holding period for restricted stock?

    Governs the resale of restricted and control (affiliate) securities. Restricted securities must be held for a minimum of 6 months (for a reporting issuer) before public resale.

18. Under Rule 144, what is the volume limitation for affiliate sales?

    In any 90-day period, an affiliate may sell the greater of 1% of the outstanding shares OR the average weekly trading volume over the preceding 4 weeks.

19. Under Rule 144, when must Form 144 be filed?

    At the time the sell order is placed, if the sale exceeds 5,000 shares OR $50,000 in any 90-day period. Form 144 is valid for 90 days.

20. What is Rule 144A?

    Permits the resale of restricted securities to Qualified Institutional Buyers (QIBs) — institutions owning/investing at least $100 million in securities — without the Rule 144 holding period.

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