Series 7 Learn

Chapter previews

The learn index previews the handbook scope, then full access adds the reader, flashcards, mapped practice, notes, and progress tools.

Chapters

1. Chapter 1: Building an Investor Profile. Chapter 1 establishes what a registered representative must know before making any recommendation. Focus on the difference between financial and non-financial profile information, how to rank investment objectives by risk, and the three suitability obligations under FINRA Rule 2111. Regulation Best Interest defines the standard for broker-dealers; the fiduciary duty defines the standard for investment advisers. Know when each applies, what each requires, and how customer profile information drives both.
2. Chapter 2: Customer Accounts. Chapter 2 covers how accounts are opened, documented, and maintained. Know the ownership structures — individual, joint (JTWROS vs. TIC), corporate, partnership, trust, and custodial — and what documentation each requires. Understand who may give instructions in each registration type. Margin and options accounts require specific prior approvals. CIP rules require collecting name, date of birth, address, and ID number for every new account.
3. Chapter 3: Customer Communications. Chapter 3 covers what a firm may communicate and under what rules. The three categories — retail communications, correspondence, and institutional communications — have different approval and review requirements. Retail communications to more than 25 investors in 30 days require principal pre-approval. Research reports require specific conflict-of-interest disclosures. Know the rules for prospectus delivery, social media, and the cooling-off period for new offerings.
4. Chapter 4: Equity Securities. Chapter 4 covers equity securities: the rights of common and preferred shareholders, how ADRs work, market structure, and the tax treatment of dividends and capital gains. Preferred stock comes in several forms — cumulative, non-cumulative, participating, and convertible — and each has different rules. The ex-dividend and record dates determine who receives dividends. Preemptive rights protect existing shareholders from dilution.
5. Chapter 5: Fundamentals of Debt. Chapter 5 covers how bond prices and yields interact. When market rates rise, bond prices fall — and the reverse. Know the three yield measures: nominal (coupon), current yield, and yield to maturity. For a discount bond, coupon < CY < YTM; for a premium bond, the order reverses. Duration measures price sensitivity to rate changes. Zero-coupon bonds accrete toward par, with annual imputed interest taxed even though not received.
6. Chapter 6: Corporate Debt. Chapter 6 covers corporate debt instruments: secured bonds (mortgage, collateral trust, equipment trust), unsecured bonds (debentures, subordinated debentures), and money market instruments (commercial paper, bankers' acceptances, negotiable CDs). Convertible bonds carry a lower coupon because the conversion option has value. Know the priority of claims in bankruptcy: secured debt, senior unsecured, subordinated debt, preferred stock, common stock.
7. Chapter 7: Municipal Debt. Chapter 7 covers municipal securities: GO bonds backed by the taxing power of the issuer, revenue bonds backed by project receipts, and short-term notes (BANs, RANs, TANs). Federal income tax exemption is the defining feature of munis. Use the Tax-Equivalent Yield formula to compare munis to taxable bonds. MSRB regulates dealers; know the official statement as the disclosure document. Private activity bonds may be subject to the AMT.
8. Chapter 8: U.S. Treasury and Government Agency Debt. Chapter 8 covers U.S. Treasury and government agency debt. Direct Treasury obligations — bills (discount basis, <1 year), notes (2–10 years), bonds (10–30 years), and TIPS (inflation-adjusted) — carry the full faith and credit of the U.S. government. Agency securities (FNMA, FHLMC) are GSEs with implied but not explicit backing. Only GNMA has explicit government backing. STRIPS separate coupon and principal; interest accretes and is taxed annually.
9. Chapter 9: Investment Companies. Chapter 9 covers investment companies: open-end mutual funds (priced at NAV, redeemed by the fund), closed-end funds (traded on an exchange, price differs from NAV), UITs (fixed portfolios), and ETFs (exchange-traded, priced intraday). Know NAV calculation, the three mutual fund share classes (A, B, C), breakpoints, the 12b-1 fee, and the letter of intent. ETFs trade intraday; mutual funds price once daily.
10. Chapter 10: Variable Products. Chapter 10 covers variable annuities and variable life insurance. Variable annuities are securities — registered with the SEC, sold with a prospectus. During the accumulation phase, investors own accumulation units; at annuitization, those convert to annuity units. The investor bears investment risk in the separate account. Variable life insurance ties both the death benefit and cash value to separate account performance. A 1035 exchange allows tax-free transfer between annuity contracts.
11. Chapter 11: Alternative Products. Chapter 11 covers alternative investments: REITs, direct participation programs, and limited partnerships. REITs must distribute at least 90% of taxable income; distributions have three components taxed differently. DPPs provide pass-through tax treatment but are illiquid. Limited partners have liability capped at their investment. Oil and gas programs offer depletion allowances; real estate programs offer depreciation deductions. Passive loss rules restrict how DPP losses can be used.
12. Chapter 12: Options. Chapter 12 covers options. Know the four basic positions (long call, short call, long put, short put), their maximum gain, maximum loss, and breakeven. Build from there to strategies: covered calls limit upside, protective puts create a floor, straddles profit from volatility, spreads limit both gain and loss. The exam tests calculation, not just identification — practice working through gain/loss scenarios with sample premiums and strike prices.
13. Chapter 13: Offerings. Chapter 13 covers securities offerings: the registration process under the 1933 Act, how IPOs are structured, the cooling-off period, and the roles of the managing underwriter and syndicate. Know firm commitment vs. best efforts underwriting. Know the exemptions: Reg D (private placement, accredited investors), Reg A (mini-IPO), and Rule 144 (restricted and control securities). Stabilizing bids and short sales in an underwriting are permitted under specific rules.
14. Chapter 14: Investment Risks, Returns and Disclosures. Chapter 14 covers investment risk types, cost basis methods, books and records requirements, and senior investor protections. Systematic risk affects the whole market; unsystematic risk is specific and diversifiable. The wash sale rule disallows a loss if the same security is repurchased within 30 days. Long-term capital gains (held >12 months) are taxed at preferential rates; short-term gains are ordinary income. Trusted contact persons are designated for customer wellbeing — they have no account authority.
15. Chapter 15: Portfolio and Market Analysis. Chapter 15 covers portfolio construction and market analysis. Diversification eliminates unsystematic risk; systematic risk remains. Correlation determines how well assets offset each other — a correlation of −1 maximizes diversification benefit. Standard deviation measures total risk; beta measures market risk only. The Sharpe ratio measures risk-adjusted return. Technical analysis studies price and volume patterns; fundamental analysis evaluates financial statements and intrinsic value.
16. Chapter 16: Fundamental Analysis. Chapter 16 covers fundamental analysis: how to read financial statements and calculate key ratios. EPS = net income ÷ shares outstanding. P/E = price ÷ EPS. Current ratio = current assets ÷ current liabilities; quick ratio excludes inventory. Debt-to-equity measures leverage. Working capital = current assets − current liabilities. These ratios help assess profitability, liquidity, and leverage — the foundation of individual security analysis.
17. Chapter 17: Orders and Trade Execution. Chapter 17 covers order types, trade execution, and prohibited practices. Market orders guarantee execution but not price. Limit orders guarantee price but not execution. Stop orders trigger at a price but execute as market orders — no price guarantee. Reg SHO's alternative uptick rule restricts short selling after a 10% single-day decline. Know the prohibited practices: front-running, painting the tape, matched orders, and excessive markups.
18. Chapter 18: Margin. Chapter 18 covers margin: how accounts work, what Regulation T requires, and how to calculate equity, maintenance margin calls, and buying power. Reg T requires 50% initial margin on equity purchases. Minimum maintenance is 25% for long positions, 30% for short. When equity falls below maintenance, a margin call is issued. The SMA records excess equity above Reg T, representing buying power. Pattern day traders must maintain $25,000 equity.
19. Chapter 19: Settlement and Regulatory Reporting. Chapter 19 covers trade settlement, clearing, delivery, and regulatory reporting. Equities settle T+1. Government securities also settle T+1. TRACE requires fixed-income trades to be reported within 15 minutes of execution. The DTC holds securities electronically and facilitates book-entry settlement. FINRA Rule 4511 specifies records retention: most records for 6 years. Know the role of NSCC in clearing equity trades.
20. Chapter 20: Resolving Disputes and Suitability. Chapter 20 covers dispute resolution, regulatory disclosures, and suitability edge cases. FINRA mediation is voluntary and non-binding. FINRA arbitration is binding and final. Simplified arbitration applies to claims of $50,000 or less. Form U4 is the registration application; Form U5 is the termination notice. BrokerCheck is the public record of registrations and disclosures. Churning is governed by Rule 2111's quantitative suitability obligation and FINRA Rule 2010.