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The Series 7 Exam (General Securities Representative Qualification Examination) assesses a candidate's knowledge of, and ability to perform, tasks related to borrowing money and securities in client accounts. This section focuses heavily on regulations, specifically margin accounts****short selling, and customer account handling.
Key areas covered under "Borrowing Money and Securities" in the Series 7 include: Margin Accounts (Rules & Calculations): Understanding Regulation T (which governs the extension of credit by brokers), initial margin requirements, minimum maintenance requirements, and how to calculate equity, SMA (Special Memorandum Account), and market value in margin accounts. Short Selling: The rules for borrowing securities from a brokerage to sell them, with the expectation of buying them back at a lower price. Customer Account Handling: Guidelines for establishing and managing margin accounts, including required disclosures, customer agreements, and hypothecation (pledging customer securities as collateral). Types of Accounts: Distinguishing between cash accounts, margin accounts, and specialized accounts.
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