FINRA SIE vs. Series 7 exams: similarities, differences, sample questions, and how to pass both | Achievable Test Prep (2024)

Are you considering a career in the securities industry but unsure about the differences between these key exams? Let’s explore the FINRA Securities Industry Essentials (SIE) exam vs. Series 7 exams (which is now known as the Series 7 Top-Off Exam). Understanding the distinctions between the SIE vs. Series 7 exams, as well as the similarities and overlaps can help you understand their significance in launching your career in finance.

The SIE exam, introduced by FINRA, is an introductory financial essentials exam. It assesses basic knowledge of the securities industry, including products, risks, regulations, and industry structure. Passing the SIE is the first step toward a financial services career.

On the other hand, the Series 7 exam evaluates the competence of entry-level registered representatives to sell a broad range of securities. It covers in-depth topics, including corporate securities, investment company securities, and more. The Series 7 exam requires sponsorship, which means you must be employed at a FINRA member firm that sponsors your application to take the test.

The SIE and Series 7 exam must both be completed in order to be eligible for your FINRA Series 7 General Securities Representative license.

In the world of securities exams, the SIE and Series 7 share some important similarities. They both cover essential topics that are the building blocks of a successful career in finance.

Both the SIE and Series 7 exams test your knowledge in key areas like communications, capital markets, customer accounts, and securities products. Understanding these subjects is vital for working in the financial industry.

1. Communications with the Public: Both exams check how well you understand how financial professionals talk to the public and the rules for good communication.
2. Capital Market Activities: Knowing about activities like SEC registration, underwriting, and exempt transactions is important for both exams.
3. Securities Products: You’ll be tested on your knowledge of different securities, like stocks, bonds, investment companies, options, and direct participation programs.

These shared topics provide a solid foundation for your career in finance, whether you start with the SIE or progress to the Series 7. Now let’s explore the differences between these exams to help you understand how to prepare.

The SIE Exam and Series 7 Exam have some key differences you should know about:

Examples of different content

Both the SIE Exam and Series 7 Top-Off cover similar topics, but they go into different levels of detail. The Series 7 Top-Off goes deeper into the material compared to the SIE. For example, the SIE focuses on basic stuff like single positions and hedging strategies in options. But the Series 7 Top-Off gets more advanced, looking at things like spreads and straddles.

Also, the SIE covers the basics of direct participation programs (DPPs), while the Series 7 Top-Off looks at specific types, such as real estate and oil and gas. And there are some extra subjects in the Series 7 Top-Off, like taxation, rules of good delivery, and short sale rules, that aren’t in the SIE.

But here’s the cool part! The SIE Exam has a unique twist: it tests industry rules and regulations. That means you’ll learn about things like registration and continuing education for registered representatives, as well as business conduct rules like the gift limit, outside business activities, and political contributions.

The way overlapping content is tested also varies between the two exams. The SIE Exam tends to focus on definitions and straightforward questions about products and their risks. In contrast, the Series 7 Top-Off places greater emphasis on applying concepts to more complex scenarios.

To give you a better idea, let’s compare sample questions for common stock, corporate debt, and mutual funds in both exams. Answers will be shared at the bottom of the post.

Sample questions

SIE Question 1: A customer buys 700 shares of ABC stock at $81 on Thursday, February 11. The following year, the customer sells 700 shares of ABC stock at $97 on Wednesday, February 14. What is the tax consequence?

A. Passive income

B. Earned income

C. Long-term capital gain

D. Short-term capital gain

Series 7 Top-Off Question 1: An investor purchases 400 shares of XYZ stock at $200, paying a $1 per share commission. After several months of ownership, XYZ Co. performs a 25% stock dividend. What is the adjusted cost basis for the investor?

A. 320 shares at $250.00 per share

B. 320 shares at $251.25 per share

C. 500 shares at $160.00 per share

D. 500 shares at $160.80 per share

SIE Question 2: An investor purchased a 4% corporate bond for $975. Subsequently, the price of the bond declined to $950. This investor will receive her next interest payment in the amount of

a. $40.

b. $20.

c. $25.

d. $95.

Series 7 Top-Off Question 2: A couple in their mid-60s is preparing to retire within the next two years. They have significant life savings but continue to seek income from their long-established investment portfolio. They are willing to take some risk at this stage in their lives but do not want to expose their remaining life savings to undue risk, realizing that they may need to tap their assets for health care or other needs. In order to satisfy the goals of this couple, you would be most likely to advise them to purchase a(n)

a. real estate limited partnership.

b. high-grade corporate bond.

c. exchange-listed REIT.

d. blue-chip common stock.

SIE Question 3: Which of the following mutual fund sales practices is prohibited by the Investment Company Act of 1940?

A. accepting late orders after the market closes

B. offering a reduced sales charge if a client gets above a breakpoint

C. putting an additional fee or a management charge on sales of open-end funds

D. reducing the maximum sales commission

Series 7 Top-Off Question 3: Maria is a new client. She is 81 years old, and her monthly living expenses are exceeding her social security income. She has only $8,000 in total assets. Her holdings consist of Class B Mutual Funds. Her dividends and capital gains received from the fund are being reinvested. Which of the following recommendations may be suitable and help Maria?

A. Sell out of her Class B bond mutual funds and buy ETFs.

B. Increase Large-cap holdings, such as S&P 500 companies.

C. Change dividend and capital gains reinvestment to cash.

D. Liquidate the Class B Mutual Funds and buy safe Municipal Bonds.

From the examples above, you can see that the SIE question is direct and definition-based, while the Series 7 Top-Off question involves a more detailed scenario. The Series 7 questions require that you dig through these scenarios to decipher what the question is truly asking.

Now that we’ve explored the differences between the SIE and Series 7 Top-Off, how can you prepare effectively? Here are some essential study tips:

• Get reliable study materials: Invest in good study materials. They should cover everything you need to know, and use adaptive learning techniques to focus you on your weakest areas. (Achievable’s FINRA SIE and Series 7 courses do just that.)

• Practice, practice, practice: When you practice answering questions regularly, it’ll help you understand and remember the exam materials better. It’ll also get you used to the exam style and make you feel more confident.

• Make a study schedule: Set aside enough time to work on each topic. Having a well-planned schedule will keep you on track and avoid last-minute cramming, which isn’t going to help you retain information.

• Get expert help: Consider working with a securities instructor or tutor for when you get stuck on a topic and need more clarification. It’ll help you understand complex topics faster and stay focused on your goal.

While the Series 7 Top-Off exam has some tougher questions because it’s all about suitability (matching investments to clients), the SIE Exam is not a piece of cake. It has its own challenges.

The SIE Exam has tricky questions about industry rules and regulations that you won’t find in any other FINRA exam. That means you need to know those rules inside out.

Knowing the differences between the Series 7 vs SIE exams will help you get ready for both and do awesome. Keep working hard, and remember, every step you take gets you closer to your career dreams.

Answers to SIE questions: 1) C, 2) B, 3) A

Answers to Series 7 Top-Off questions: 1) D, 2) B, 3) C