Series 7 Flashcards: 500+ Free Interactive Cards (2026)

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Chapter 1: The Series 7 Exam and How to Pass It (12 cards)

Series 7 scored questions: 125 (plus 5 unscored pretest questions)
Series 7 time limit: 3 hours 45 minutes (225 minutes)
Series 7 passing score: 72
SIE's role for the Series 7: Corequisite: you must pass both for the General Securities Representative registration
Who enrolls you for the Series 7?: Your sponsoring member firm, by filing Form U4 (120-day window)
Form U5: Filed by a firm when a registered person leaves (termination notice)
Series 63: State law exam most states require for agents
Registration lapse: After 2 years without association (MQP can extend to 5 years with annual CE)
Retake wait from Jan 19, 2027: 15 days after 1st/2nd failure; 60 days after 3rd
Pacing on exam day: About 1 minute 44 seconds per question
EXCEPT / NOT questions: Three answers are true; find the false one
Guessing penalty: None — answer every question

Chapter 2: Prospecting, Communications and New Issues (28 cards)

Correspondence: Written to 25 or fewer retail investors within 30 days; supervised, no prior approval needed
Institutional communication: Sent only to institutional investors; supervised under written procedures
Retail communication approval: Prior principal approval (with limited exceptions)
Public appearance: Unscripted participation in a seminar, interview or forum
Static social media content: Retail communication — needs prior principal approval
Interactive social media content: Supervised like correspondence
Telemarketing hours: 8:00 a.m. to 9:00 p.m., called party's local time
Established business relationship (DNC exemption): Transaction within 18 months, or inquiry within 3 months
Cooling-off period: At least 20 days after filing a registration statement
Red herring: Preliminary prospectus: no final price or effective date
Indication of interest: Non-binding expression of interest during cooling-off
Tombstone: Limited ad under Rule 134: facts only, no recommendation
Firm commitment: Underwriter buys the issue and bears the risk
Best efforts: Underwriter acts as agent; issuer bears the risk
All or none: Offering cancelled if the entire issue isn't sold
Standby underwriting: Underwriter buys shares not taken in a rights offering
Spread components: Manager's fee + additional takedown + selling concession
Green shoe: Over-allotment option: up to 15% more shares
Stabilization: Bid at or below the public offering price; disclosed
Rule 506(b): Unlimited accredited + up to 35 non-accredited; no general solicitation
Rule 506(c): General solicitation allowed; verified accredited investors only
Rule 147: Intrastate offering exemption
Reg A Tier 2 limit: $75 million in 12 months
Rule 144 holding period: 6 months (reporting issuer) / 1 year (non-reporting)
Rule 144 volume limit: Greater of 1% of outstanding shares or 4-week average weekly volume
Form 144 threshold: More than 5,000 shares or $50,000 in 90 days
Rule 5130: Restricted persons can't buy equity IPOs (10% de minimis)
Rule 5131: Prohibits spinning (IPO allocations as quid pro quo)

Chapter 3: Opening and Managing Customer Accounts (21 cards)

Trusted contact person: Adult the firm may contact about exploitation or the customer's welfare; no trading authority
Specified adult: Age 65+, or 18+ with an impairment (Rule 2165)
CIP: Verify identity; check OFAC's SDN list
Reg BI obligations: Disclosure, care, conflict of interest, compliance
Form CRS: Relationship summary for retail investors
Quantitative suitability: Trading frequency must not be excessive
JTWROS: Deceased owner's share passes to survivors
Tenants in common: Deceased owner's share passes to the estate
UTMA / UGMA: One custodian, one minor; gifts irrevocable; no margin
Discretion: Choosing asset, action or amount: needs written authority + principal approval
Time-and-price discretion: Allowed verbally; usually good for the day only
Full power of attorney: Agent may trade and withdraw funds
CTR: Currency transactions over $10,000 in a day
SAR threshold (broker-dealers): $5,000 or more; confidential
Monetary instrument log: Cash purchases of $3,000–$10,000
Three AML stages: Placement, layering, integration
Structuring: Splitting cash deposits to avoid CTRs — illegal
Reg S-P: Privacy notices and opt-out rights
Account record update: Sent at least every 36 months
Statements: At least quarterly
Rule 3210: Employee of another member needs employer's prior written consent to open account

Chapter 4: Retirement and Education Accounts (20 cards)

2026 IRA limit: $7,500 (+$1,100 catch-up at 50+)
IRA contribution deadline: Tax-filing deadline of the following year
Early withdrawal penalty: 10% before 59½ (unless an exception applies)
RMD age: 73 (75 for those born 1960 or later)
Roth qualified distribution: 5 years + age 59½ (or death, disability, first home up to $10,000)
Roth RMDs for original owner: None
Indirect rollover window: 60 days; one per 12 months for IRAs
Employer plan indirect rollover withholding: 20% mandatory
Rule of 55: No 10% penalty on plan distributions after separating at 55+
SIMPLE IRA early withdrawal in first 2 years: 25% penalty
SEP-IRA: Employer-only contributions, same % for all eligible employees
403(b): Public schools and 501(c)(3) organizations
Governmental 457(b): No 10% penalty after separation from service
2026 401(k) limit: $24,500 (+$8,000 at 50+; $11,250 at 60–63)
2026 SIMPLE limit: $17,000
529 plan K–12 limit (2026): $20,000 per year
529 five-year election: Front-load five years of gift exclusions ($95,000 in 2026)
Coverdell ESA limit: $2,000 per beneficiary per year
ERISA: Governs private-sector employer plans
10-year rule: Most non-spouse IRA beneficiaries must empty the account within 10 years

Chapter 5: Equity Securities (26 cards)

Ex-date under T+1: Same day as the record date
Payment date: Date the dividend is actually paid
Reverse split: Fewer shares, higher price, same total value
Par value of common stock: Accounting value, unrelated to market price
Treasury stock: Issued shares the company bought back: no votes, no dividends
Statutory voting: One vote per share per seat
Cumulative voting: Shares × seats, in any combination — helps minority holders
Preemptive rights: Right to keep proportionate ownership
Who sets the record date?: Board of directors
Who sets the ex-date?: FINRA / the exchange
Cumulative preferred: Missed dividends accrue and must be paid before common
Participating preferred: May receive extra dividends above stated rate
Callable preferred: Issuer can retire it; called when rates fall
Most rate-sensitive preferred: Straight (non-convertible, fixed-rate)
Conversion ratio: Par ÷ conversion price
Rights: Short-term (30–45 days), below-market subscription price
Warrants: Long-term; exercise price above market at issue; often attached as sweeteners
Sponsored ADR: Created with the foreign issuer's participation
ADR unique risk: Currency risk
Stock split effect: More shares, lower price, same total value
Outstanding shares: Issued − Treasury
Preferred dividend: Rate × Par ($100)
Parity price of stock: Convertible's market price ÷ Conversion ratio
Parity price of convertible: Stock price × Conversion ratio
Right value, cum-rights: (Market − Subscription) ÷ (Rights per share + 1)
Right value, ex-rights: (Market − Subscription) ÷ Rights per share

Chapter 6: Debt Securities: Prices, Yields and Risks (31 cards)

Credit spread widening: Signals rising concern about default risk
Reinvestment risk: Cash flows reinvested at lower rates
Price compression: Callable bond prices stall near the call price as rates fall
Floating-rate note: Coupon resets; price stays near par
Bond price quote: Percentage of $1,000 par
Discount bond yields: Nominal < current < YTM < YTC
Premium bond yields: Nominal > current > YTM > YTC
Yield to worst: Quote the lower of YTC and YTM
Duration: Price sensitivity; higher for longer maturities and lower coupons
Zero-coupon duration: Equals its maturity
Call risk: Bonds called when rates fall; reinvest at lower rates
Put feature: Holder can sell back at par; lower yield
Sinking fund: Issuer sets aside money to retire bonds
Accrued interest period: Last payment date up to (not including) settlement
Corporate/muni day count: 30/360
Treasury day count: Actual/actual
Lowest S&P investment grade: BBB−
Normal yield curve: Upward sloping
Inverted yield curve: Short rates above long rates; possible recession signal
Dollar price: Quote (% of par) × $1,000; 1 point = $10; 1/32 = $0.3125
Current yield: Annual interest ÷ Market price
Approximate YTM: [Annual interest + (Par − Price) ÷ Years] ÷ [(Par + Price) ÷ 2]
Price change from duration: ≈ −Duration × Change in yield
Accrued interest (30/360): Par × Coupon × Days ÷ 360
T-bill price: Face × [1 − (Discount yield × Days ÷ 360)]
TIPS interest: Coupon rate × Inflation-adjusted principal
Tax-equivalent yield: Municipal yield ÷ (1 − Tax rate)
Municipal-equivalent yield: Taxable yield × (1 − Tax rate)
Property tax: Assessed value × Mills ÷ 1,000
Debt service coverage: Net revenue ÷ Debt service
Total takedown: Additional takedown + Concession

Chapter 7: Corporate Debt and Money Market Instruments (16 cards)

Convertible bond coupon: Lower than comparable non-convertible bonds
Guaranteed bond: Payment guaranteed by another company, usually a parent
Bond covenant example: Limit on additional borrowing
High-yield bond suitability: Investors seeking income who can bear default risk
Mortgage bond: Secured by real property
Equipment trust certificate: Secured by equipment (railroads, airlines)
Collateral trust bond: Secured by securities held by a trustee
Debenture: Unsecured; general creditor
Subordinated debenture: Ranks behind other unsecured debt
Income bond: Pays interest only if earned
Trust Indenture Act of 1939: Requires indenture and independent trustee for public corporate debt
Commercial paper exemption: 270 days or less
Banker's acceptance: Bank-guaranteed time draft for trade financing
Repurchase agreement: Sale with agreement to repurchase — a short-term secured loan
Eurodollars: U.S. dollars deposited outside the U.S.
Negotiable CD: Bank-issued, $100,000+, tradable

Chapter 8: U.S. Government, Agency and Mortgage-Backed Securities (20 cards)

T-bill pricing: Discount yield; bid yield higher than ask
Agency interest taxation: Most agencies fully taxable (FHLB and FFCB are state-exempt)
Negative convexity: MBS gain less when rates fall because prepayments speed up
T-bill maturities: 4 to 52 weeks
Treasury note maturities: 2 to 10 years
Treasury bond maturities: 20 or 30 years
Treasury quotes: 32nds of a point
STRIPS taxation: Annual phantom interest, federally taxable; state-exempt
TIPS: Principal adjusts with CPI; at maturity get greater of adjusted or original par
I bonds: Non-marketable savings bonds; fixed rate + inflation rate
GNMA: Full faith and credit of the U.S.
FNMA / FHLMC: GSEs; no explicit federal guarantee; fully taxable
Pass-through payments: Monthly principal and interest
Prepayment risk: Falling rates speed prepayments
Extension risk: Rising rates slow prepayments
PAC tranche: Most predictable CMO cash flows
Companion tranche: Absorbs prepayment variability — most risk
Z-tranche: Accrues interest; paid after earlier tranches
IO tranche: Gains when rates rise
PO tranche: Gains when rates fall

Chapter 9: Municipal Securities (27 cards)

GO bond backing: Full faith, credit and taxing power
Revenue bond backing: Revenues of the financed facility
Double-barreled bond: Revenue bond also backed by taxing power — analyzed as GO
Moral obligation bond: Legislature's non-binding pledge
Special assessment bond: Paid by benefited property owners
Special tax bond: Backed by a specific tax (gas, tobacco)
IDR: Backed by corporate lease payments; may trigger AMT
Feasibility study: Key for revenue bonds
Overlapping debt: Debt of other jurisdictions shared by the same taxpayers
Rate covenant: Fees must cover operations and debt service
Gross revenue pledge: Debt service paid before O&M
Net revenue pledge: O&M paid first
TAN / RAN / BAN: Repaid from taxes / other revenues / future bond proceeds
Territorial bonds: Puerto Rico, Guam, USVI: triple tax-exempt
Muni premium (secondary): Must be amortized; no deductible loss
Muni OID: Accretion is tax-exempt
Muni market discount: Taxable as ordinary income (if beyond de minimis)
Official statement: Muni disclosure document; deliver by settlement
Legal opinion: Written by bond counsel
Syndicate order priority: Presale, group net, designated, member
Eastern account: Undivided liability
Western account: Divided liability
MSRB enforcement: None — FINRA, SEC and bank regulators enforce
G-37 de minimis: $250 per election to officials you can vote for
G-23: Financial advisor can't underwrite the same issue
RTRS reporting: Within 15 minutes
EMMA: MSRB website for disclosure and trade data

Chapter 10: Investment Companies: Mutual Funds, ETFs and UITs (26 cards)

Open-end fund: Continuous offering; redeems at NAV
Closed-end fund: Fixed shares; trades on exchanges at premium/discount
UIT: Fixed portfolio, redeemable units, no active management
ETF: Trades intraday; can be margined and shorted
ETN: Unsecured note; issuer credit risk
Forward pricing: Orders get the next computed NAV
Max sales charge: 8.5% of POP
No-load label: No sales charges and 12b-1 ≤ 0.25%
Letter of intent: 13 months; backdate up to 90 days
Rights of accumulation: Existing holdings count toward breakpoints; never expire
Breakpoint selling: Recommending just below a breakpoint — violation
Class A shares: Front-end load, breakpoints, lower 12b-1
Class B shares: Declining CDSC; convert to A
Class C shares: Level load; ~1% CDSC for a year
Redemption payment: Within 7 calendar days
Changing fund objective: Majority shareholder vote
Investment adviser role: Manages the portfolio for a fee
Custodian role: Holds the fund's assets
Transfer agent role: Records, issues and redeems shares
Buying the dividend: Investing just before a distribution — immediate tax, no gain
SAI: Statement of additional information, free on request
Names rule: 80% of assets match the fund's name
NAV per share: (Assets − Liabilities) ÷ Shares outstanding
Sales charge %: (POP − NAV) ÷ POP
POP: NAV ÷ (1 − Sales charge %)
Premium / discount (closed-end): (Market price − NAV) ÷ NAV

Chapter 11: Variable Annuities and Insurance-Based Products (15 cards)

Variable annuity regulation: Securities ('33 and '40 Acts) and insurance
Accumulation units: Owned during accumulation; value varies
Annuity units: Fixed number after annuitization; value varies
AIR: Benchmark: payments rise if returns beat it
Life only payout: Highest payment; nothing to beneficiaries
Joint and last survivor: Pays until the second death; lowest payment
Non-qualified withdrawals: LIFO: earnings first, taxed as ordinary income
Exclusion ratio: Part of each annuity payment is tax-free return of basis
1035 exchange: Tax-free annuity-to-annuity or life-to-annuity
Rule 2330 principal review: Within 7 business days of a complete application
M&E fee: Pays for insurer guarantees
Variable life loan: At least 75% of cash value after 3 years
Variable life exchange right: To whole life within 24 months
Death benefit tax: Life insurance proceeds generally income-tax-free
Annuity death benefit tax: Gains taxable as ordinary income to beneficiary

Chapter 12: Direct Participation Programs, REITs and Alternative Investments (22 cards)

Non-traded REIT risk: Illiquidity and high fees
Fund of hedge funds: Diversified but two layers of fees
At-risk rules: Deductible losses limited to amount at risk
Equipment leasing program: Cash flow plus depreciation deductions
Private equity fund: Long lock-ups; accredited/qualified investors
General partner: Manages; unlimited liability; fiduciary
Limited partner: Passive; limited liability
Certificate of limited partnership: Filed with the state
Subscription agreement: Signed by investor; GP accepts
Passive losses: Offset passive income only
Raw land: Most speculative real estate program
Existing properties: Lowest-risk real estate program
Exploratory drilling: Highest-risk oil and gas program
Income program: Lowest-risk oil and gas program
IDCs: Usually deductible in year one
Depletion: Deduction for using up natural resources
REIT distribution requirement: 90% of taxable income
REIT losses: Do not pass through
MLP: Publicly traded partnership; K-1 tax reporting
BDC: Invests in small/private companies; 90% distribution
Hedge fund investors: Accredited investors / qualified purchasers
Principal-protected note risk: Issuer credit risk

Chapter 13: Options I: Fundamentals and Basic Strategies (37 cards)

Call buyer: Right to buy; bullish
Put buyer: Right to sell; bearish
Call writer: Obligation to sell; bearish/neutral
Put writer: Obligation to buy; bullish/neutral
Call breakeven: Strike + premium
Put breakeven: Strike − premium
In the money (call): Market above strike
In the money (put): Market below strike
Time value: Premium − intrinsic value
Long option max loss: The premium
Naked call max loss: Unlimited
Protective put: Long stock + long put
Covered call: Long stock + short call
Short stock hedge: Buy a call
OCC assignment: Random to firms
Equity option exercise settlement: T+1, in shares
Long call: breakeven: Strike + premium
Long call: maximum gain: Unlimited
Long call: maximum loss: Premium
Short call: breakeven: Strike + premium
Short call: maximum gain: Premium
Short call: maximum loss: Unlimited
Long put: breakeven: Strike − premium
Long put: maximum gain: BE × 100
Long put: maximum loss: Premium
Short put: breakeven: Strike − premium
Short put: maximum gain: Premium
Short put: maximum loss: BE × 100
Covered call: breakeven: Cost − premium
Covered call: maximum gain: (Strike − cost + premium) × 100
Covered call: maximum loss: BE × 100
Protective put: breakeven: Cost + premium
Protective put: maximum gain: Unlimited
Protective put: maximum loss: (Cost + premium − strike) × 100
Short stock + long call: breakeven: Short price − premium
Short stock + long call: maximum gain: BE × 100
Short stock + long call: maximum loss: (Strike − short price + premium) × 100

Chapter 14: Options II: Spreads, Straddles, Index Options and Rules (22 cards)

Bull call spread: Buy lower strike, sell higher (debit)
Bear call spread: Sell lower strike, buy higher (credit)
Bear put spread: Buy higher strike, sell lower (debit)
Bull put spread: Sell higher strike, buy lower (credit)
Debit spread wants: Premiums to widen; exercise
Credit spread wants: Premiums to narrow; expiration
Long straddle: Expects big move either way
Short straddle: Expects little movement; unlimited risk
Collar: Long stock + long put + short call
Index option settlement: Cash, next business day
Index hedge formula: (Portfolio × beta) ÷ (index × $100)
Importer paying euros: Buy euro calls
Options agreement deadline: 15 days after approval
ODD delivery: At or before account approval
Long option margin: Paid in full if 9 months or less; 75% if longer
Call spread: breakeven: Lower strike + net premium
Call spread: maximum gain: Debit: strike difference − debit · Credit: credit
Call spread: maximum loss: Debit: debit · Credit: strike difference − credit
Put spread: breakeven: Higher strike − net premium
Straddle: breakeven: Strike ± total premium
Straddle: maximum gain: Long: unlimited · Short: premiums
Straddle: maximum loss: Long: premiums · Short: unlimited

Chapter 15: Economics, Investment Analysis and Portfolio Management (26 cards)

Leading indicators: Building permits, new orders, stock prices
Coincident indicators: Industrial production, personal income, payrolls
Lagging indicators: Duration of unemployment, prime rate, unit labor costs
Fed easing: Lower rates; buy securities
Fed tightening: Higher rates; sell securities
Fiscal policy: Congress and the President: spending and taxes
Current ratio: Current assets ÷ current liabilities
Quick ratio: (Current assets − inventory) ÷ current liabilities
Working capital: Current assets − current liabilities
Debt-to-equity: Measures financial leverage
Support: Price where buying halts declines
Resistance: Price where selling halts advances
Beta: Volatility relative to the market
Alpha: Actual return − expected return
Sharpe ratio: (Return − risk-free) ÷ standard deviation
Systematic risk: Can't be diversified away
Real return: Nominal return − inflation
Strategic allocation: Long-term targets with rebalancing
Tactical allocation: Short-term shifts based on outlook
Dollar-cost averaging: Fixed dollars at regular intervals; lower average cost
EPS: (Net income − Preferred dividends) ÷ Common shares
P/E ratio: Price ÷ EPS
Dividend payout: Dividends per share ÷ EPS
Dividend (current) yield: Annual dividend ÷ Price
Total return: (Income + Price change) ÷ Beginning value
Capital loss deduction: Up to $3,000 per year; excess carried forward

Chapter 16: Taxation of Investments (15 cards)

Long-term holding period: More than 1 year
Net capital loss deduction: Up to $3,000 per year; rest carried forward
Inherited basis: Fair market value at death; always long-term
Gifted basis (gain): Donor's basis and holding period
Gifted basis (loss, value below basis): Fair market value at gift date
Wash sale window: 30 days before or after the loss sale
Wash sale result: Loss disallowed; added to new basis
Default cost basis method: FIFO
2026 gift exclusion: $19,000 per recipient
2026 lifetime exemption: $15 million
Net investment income tax: 3.8% above $200,000 single / $250,000 joint MAGI
Qualified dividend rates: 0%, 15%, 20%
Return of capital: Reduces basis; not taxed until basis is zero
Reinvested distributions: Taxable and added to basis
Stock dividend basis: Total basis spread over more shares

Chapter 17: Margin Accounts (24 cards)

Reg T set by: Federal Reserve Board
Reg T initial: 50%
FINRA minimum equity: $2,000
Long maintenance: 25%
Short maintenance (stocks $5+): 30%
Long call level: Debit ÷ 0.75
Short call level: Credit ÷ 1.30
Long equation: LMV − DR = EQ
Short equation: SMV + EQ = CR
Restricted account: Equity below 50% but above maintenance
SMA: Excess equity line of credit; not reduced by market declines
Buying power: SMA × 2
Selling stock and SMA: SMA credited with 50% of proceeds
Hypothecation agreement: Required; firm may pledge securities
Loan consent agreement: Optional; firm may lend securities
Rehypothecation limit: 140% of the debit balance
Intraday margin standards (2026): Maintenance must be met throughout the day; PDT rule eliminated
Not marginable at purchase: New issues, including mutual funds (until held 30 days)
Long account: LMV − DR = EQ
Short account: SMV + EQ = CR
Reg T requirement: 50% of market value
Excess equity (SMA): EQ − Reg T requirement
Long maintenance call level: DR ÷ 0.75
Short maintenance call level: CR ÷ 1.30

Chapter 18: Orders, Trading, Settlement and Confirmations (26 cards)

Principal: Trades for own account; markup/markdown
Agent: Arranges trades; commission
Market maker: Quotes two-sided markets
Third market: Listed stocks traded OTC
Fourth market: Institution-to-institution, no broker
Buy stop: Above market; triggered at or above stop
Sell stop: Below market; triggered at or below stop
Stop-limit risk: May not execute after trigger
Fill or kill: Entire order immediately or cancel
Immediate or cancel: Partial fills allowed; rest cancelled
All or none: Entire order, not necessarily immediately
Orders reduced for cash dividends: Buy limits and sell stops (BLiSS)
Markup basis: Prevailing market price (inside quote)
Riskless principal: Offsetting trade after receiving a customer order
Interpositioning: Inserting an unnecessary party — violation
Manning rule: Can't trade ahead of customer limit orders
Front running: Trading ahead of a block order
Reg SHO locate: Must locate borrowable shares before a short sale
Rule 201: 10% decline triggers short sale price test
Regular-way settlement: T+1
Cash settlement: Same day
Reg T payment: 2 business days after settlement (T+3)
Freeriding: Selling before paying; 90-day freeze
Market-wide circuit breakers: 7% and 13%: 15-minute halts (before 3:25 p.m.); 20%: rest of day
TRACE: Corporate and agency bond trade reporting
ACATS: Validate within 1 business day; complete within 3 after validation

Chapter 19: Regulation, Prohibited Practices, Complaints and Records (20 cards)

Securities Act of 1933: New issues
Securities Exchange Act of 1934: Secondary markets; created the SEC
Investment Company Act of 1940: Regulates investment companies
Investment Advisers Act of 1940: Regulates investment advisers
Churning: Excessive trading for commissions
Selling away: Private securities transactions without approval
Rule 3240: Borrowing/lending with customers only under exceptions and firm procedures
Sharing in accounts: Written approval; proportionate share (except immediate family)
Painting the tape: Wash or matched trades to fake activity
Insider trading civil penalty: Up to 3× profit gained or loss avoided
Outside business activities: Prior written notice (Rule 3270; Rule 3290 from Oct 25, 2027)
Regulatory Element CE: Annually
Gift limit (Rule 3220): $300 per person per year
Complaint records: Keep at least 4 years
Rule 4530 reporting: Specified events within 30 days; statistics quarterly
Arbitration eligibility: 6 years from the event
Simplified arbitration: Claims of $50,000 or less
SIPC limits: $500,000 per customer, including $250,000 cash
Life-of-firm records: Articles, partnership agreements, minute books, stock certificate books
BrokerCheck: FINRA's public database of firm and rep backgrounds

Glossary terms (70 cards)

Accredited investor: An investor meeting SEC wealth, income or credential tests (for individuals: net worth over $1 million excluding primary residence, income over $200,000/$300,000, or a Series 7, 65 or 82 license).
Accrued interest: Interest earned since the last payment date, paid by a bond buyer to the seller.
ACATS: The Automated Customer Account Transfer Service, used to move accounts between firms.
ADR (American depositary receipt): A receipt issued by a U.S. bank representing shares of a foreign company.
AIR (assumed interest rate): The rate used to set the number of annuity units at annuitization; payments rise or fall as actual returns exceed or trail it.
Alternative minimum tax (AMT): A parallel tax calculation that adds back certain preference items, such as interest on private activity municipal bonds.
Basis point: One one-hundredth of one percent (0.01%).
Best efforts: An underwriting in which the underwriter acts as agent and the issuer bears the risk of unsold securities.
Beta: A measure of a security's volatility relative to the overall market.
Breakpoint: A purchase level at which a mutual fund's front-end sales charge is reduced.
Callable: A feature allowing the issuer to redeem a bond or preferred stock before maturity.
Churning: Excessive trading in an account to generate commissions.
CMO (collateralized mortgage obligation): A mortgage-backed security divided into tranches with different payment priorities and risks.
Cooling-off period: The period of at least 20 days between filing a registration statement and its effective date.
Correspondence: Written communications to 25 or fewer retail investors within 30 days.
Credit spread: The yield difference between a bond and a comparable Treasury.
Cumulative preferred: Preferred stock whose missed dividends accumulate and must be paid before common dividends.
Current yield: Annual interest or dividends divided by the market price.
Debenture: An unsecured bond backed only by the issuer's general credit.
Direct participation program (DPP): An investment, typically a limited partnership, that passes income and losses through to investors.
Discretion: Authority to choose the asset, action or amount of a trade without the customer's specific approval.
Duration: A measure of a bond's price sensitivity to interest-rate changes, expressed in years.
EMMA: The MSRB's Electronic Municipal Market Access website.
Ex-dividend date: The first date on which a buyer is not entitled to a declared dividend; the same day as the record date under T+1 settlement.
Firm commitment: An underwriting in which the underwriter buys the entire issue and bears the risk of unsold securities.
Form CRS: The client relationship summary broker-dealers must deliver to retail investors.
Front running: Trading ahead of a customer's order to profit from the expected price movement.
General obligation (GO) bond: A municipal bond backed by the issuer's full faith, credit and taxing power.
Hypothecation: Pledging securities as collateral for a margin loan.
Indication of interest: A non-binding expression of interest in a new issue, taken during the cooling-off period.
Intrinsic value: The amount by which an option is in the money.
Letter of intent (LOI): A non-binding pledge to invest enough in a fund family within 13 months to qualify for a breakpoint.
Liquidity risk: The risk that an investment cannot be sold quickly without a significant price concession.
Market maker: A dealer that continuously quotes bids and offers in a security.
Markup: The difference between the prevailing market price and the price a dealer charges a customer.
MSRB: The Municipal Securities Rulemaking Board, which writes rules for municipal securities dealers and municipal advisors.
Municipal note: A short-term municipal obligation, such as a TAN, RAN, BAN or GAN.
NAV (net asset value): A fund's assets minus liabilities, per share.
OCC: The Options Clearing Corporation, which issues and guarantees listed options.
Official statement: The disclosure document for a municipal bond offering.
Parity: The price at which a convertible security and the underlying common stock are equal in value.
Passive income: Income from limited partnerships and other businesses in which the investor does not materially participate.
Premium (option): The price paid by an option buyer to the seller.
Prepayment risk: The risk that mortgage borrowers repay early when rates fall.
Preliminary prospectus (red herring): The disclosure document used during the cooling-off period; omits the final price.
Prospectus: The disclosure document for a registered securities offering.
Regulation Best Interest (Reg BI): The SEC standard requiring broker-dealers to act in a retail customer's best interest when making recommendations.
Regulation T: The Federal Reserve rule governing credit extended by broker-dealers; sets 50% initial margin.
REIT: A real estate investment trust; must distribute at least 90% of taxable income.
Restricted person: Under FINRA Rule 5130, a person prohibited from buying equity IPOs, such as broker-dealer employees.
Retail communication: Written communications distributed to more than 25 retail investors within 30 days.
Revenue bond: A municipal bond backed by the revenue of a specific facility.
Rights offering: An offer to existing shareholders to buy new shares, usually below market, in proportion to their holdings.
SAR: A suspicious activity report, filed with FinCEN for suspicious transactions of $5,000 or more.
Selling away: Selling securities outside the scope of one's employment without the firm's approval.
SIPC: The Securities Investor Protection Corporation, which protects customers of failed broker-dealers up to $500,000 ($250,000 cash).
SMA (special memorandum account): A line of credit created by excess equity in a margin account.
Spread (options): The simultaneous purchase and sale of options of the same type with different strikes or expirations.
Straddle: A call and a put with the same strike and expiration, both bought or both sold.
Systematic risk: Market-wide risk that cannot be eliminated by diversification.
T+1: Regular-way settlement one business day after the trade date.
Tax-equivalent yield: The taxable yield needed to equal a tax-exempt yield after taxes.
Time value: The portion of an option's premium above its intrinsic value.
TIPS: Treasury Inflation-Protected Securities, whose principal adjusts with the CPI.
Trusted contact person: An adult the firm may contact about a customer's welfare or possible financial exploitation.
UGMA/UTMA: State laws governing custodial accounts for minors.
Unsystematic risk: Risk specific to a company or industry that can be reduced by diversification.
Wash sale: A loss sale followed by a purchase of substantially identical securities within 30 days before or after; the loss is disallowed and added to the new basis.
Yield to maturity (YTM): The total annualized return on a bond held to maturity.
Zero-coupon bond: A bond issued at a deep discount that pays no periodic interest and matures at par.

Flashcard FAQ

How many Series 7 flashcards are there?

More than 500: key concepts, rules, numbers and formulas for all 19 chapters, plus the glossary terms.

How should I use flashcards for the Series 7?

Study one chapter at a time right after reading it, mark the cards you know, and come back daily to the rest. In the last two weeks, shuffle all chapters together.