Series 7 Exam: Corporate Ownership — Flashcards

The Series 7 exam, known formally as the General Securities Representative Qualification Examination, heavily covers corporate ownership as part of its focus on equities and equity-related securities. This exam, administered by FINRA, tests a candidate’s knowledge of corporate ownership structures, equity securities, and the rights associated with ownership. 

Key Aspects of Corporate Ownership in the Series 7 Exam:
Equity Securities: Candidates must understand that equity securities represent ownership in a corporation. The most common type is common stock, but the exam also covers preferred stock.
Rights of Ownership: The exam focuses on the rights and privileges of shareholders, including voting rights (usually one vote per share) and the right to receive dividends, if declared.

Types of Corporate Securities:
Common Stock: Represents equity ownership, provides voting rights, and has potential for capital appreciation.
Preferred Stock: An equity security that represents ownership but usually does not provide voting rights; it often offers a fixed dividend.
Rights and Warrants: Instruments that allow existing shareholders or new investors to purchase additional shares, often at a discount.
Capitalization: Understanding how a corporation raises capital through equity financing, including Authorized, Issued, Outstanding, and Treasury shares.
Distributions: The exam covers corporate actions such as cash dividends, stock dividends, and stock splits.
Restrictions: Concepts like restricted stock and control stock are covered, particularly under SEC Rule 144.
Rights Offering: A mechanism where a corporation offers existing shareholders the opportunity to purchase additional shares, typically below the current market price. 

Exam Context:
The Series 7 exam requires a 72% score to pass (90 out of 125 questions) and is taken after passing the Securities Industry Essentials (SIE) exam. It covers not only the products but also the suitability of recommending these equity securities to customers.