1|Page
# SERIES 7 EXAM PREP
## 2026-2027 ACADEMIC YEAR EDITION
### 500+ MULTIPLE-CHOICE QUESTIONS
WITH DETAILED RATIONALES
ITSJEREGUIDE
# EXAM 1: SEEKS BUSINESS FOR THE BROKER-DEALER
## SECTION 1: PROSPECTING AND BUSINESS DEVELOPMENT (Questions 1-20)
**Question 1**
A registered representative is preparing a seminar to attract potential investors. Which of the
following activities is permitted without prior FINRA approval?
A. A prerecorded seminar that is replayed at the firm's main office
B. A seminar held at a local hotel where the representative discusses general market conditions
C. A seminar where specific investment recommendations are made
D. A seminar that is broadcast on public access television
**Correct Answer: B**
,2|Page
**Rationale:** A seminar held at a local hotel where the representative discusses general market
conditions without making specific investment recommendations is permitted without prior
FINRA approval. Under FINRA Rule 2210, communications that are not considered "retail
communications" (i.e., communications directed to fewer than 25 retail investors within a 30-day
period) generally do not require prior approval, provided they are not making specific investment
recommendations.
**Why A is incorrect:** A prerecorded seminar that is replayed to multiple audiences constitutes
retail communication and may require prior approval depending on the content and distribution.
**Why C is incorrect:** A seminar where specific investment recommendations are made would
be considered a retail communication requiring approval by a principal, particularly if it is
directed to retail investors.
**Why D is incorrect:** A seminar broadcast on public access television reaches a broad
audience and constitutes retail communication requiring prior approval.
---
**Question 2**
According to FINRA rules, which of the following is considered a "retail communication"?
A. A seminar attended by 15 retail investors
B. A social media post directed to the general public
C. An internal memo to branch managers
D. A one-on-one conversation with a client
**Correct Answer: B**
,3|Page
**Rationale:** A social media post directed to the general public is considered a retail
communication under FINRA Rule 2210. Retail communications are any written (including
electronic) communication that is distributed or made available to more than 25 retail investors
within a 30-day period.
**Why A is incorrect:** A seminar attended by 15 retail investors is not a retail communication;
it is considered a "correspondence" as it is directed to fewer than 25 retail investors.
**Why C is incorrect:** An internal memo to branch managers is not a retail communication as
it is not directed to retail investors.
**Why D is incorrect:** A one-on-one conversation with a client is not a retail communication;
it is a personal communication.
---
**Question 3**
A registered representative wants to use a testimonial in a social media advertisement. Which of
the following is TRUE regarding testimonials under FINRA rules?
A. Testimonials are prohibited in all retail communications
B. Testimonials are permitted if they are not misleading and include disclosure of any
compensation paid
C. Testimonials are permitted without any restrictions
D. Testimonials are permitted only if the client is a celebrity
**Correct Answer: B**
, 4|Page
**Rationale:** Testimonials are permitted in retail communications provided they are not
misleading and include appropriate disclosures, including any compensation paid to the person
giving the testimonial. The communication must also disclose whether the person is a client and
whether past performance is indicative of future results.
**Why A is incorrect:** Testimonials are not prohibited; they are permitted with proper
disclosures.
**Why C is incorrect:** Testimonials have restrictions and require disclosures.
**Why D is incorrect:** Testimonials are not limited to celebrities; any client can provide a
testimonial with proper disclosures.
---
**Question 4**
Which of the following statements regarding the use of third-party research reports by registered
representatives is TRUE?
A. Third-party research reports can be distributed without review
B. Third-party research reports must be reviewed and approved by a principal before distribution
C. Third-party research reports cannot be distributed to retail clients
D. Third-party research reports are exempt from all FINRA rules
**Correct Answer: B**
**Rationale:** Third-party research reports must be reviewed and approved by a principal
before distribution to clients. Under FINRA rules, a broker-dealer is responsible for the content
# SERIES 7 EXAM PREP
## 2026-2027 ACADEMIC YEAR EDITION
### 500+ MULTIPLE-CHOICE QUESTIONS
WITH DETAILED RATIONALES
ITSJEREGUIDE
# EXAM 1: SEEKS BUSINESS FOR THE BROKER-DEALER
## SECTION 1: PROSPECTING AND BUSINESS DEVELOPMENT (Questions 1-20)
**Question 1**
A registered representative is preparing a seminar to attract potential investors. Which of the
following activities is permitted without prior FINRA approval?
A. A prerecorded seminar that is replayed at the firm's main office
B. A seminar held at a local hotel where the representative discusses general market conditions
C. A seminar where specific investment recommendations are made
D. A seminar that is broadcast on public access television
**Correct Answer: B**
,2|Page
**Rationale:** A seminar held at a local hotel where the representative discusses general market
conditions without making specific investment recommendations is permitted without prior
FINRA approval. Under FINRA Rule 2210, communications that are not considered "retail
communications" (i.e., communications directed to fewer than 25 retail investors within a 30-day
period) generally do not require prior approval, provided they are not making specific investment
recommendations.
**Why A is incorrect:** A prerecorded seminar that is replayed to multiple audiences constitutes
retail communication and may require prior approval depending on the content and distribution.
**Why C is incorrect:** A seminar where specific investment recommendations are made would
be considered a retail communication requiring approval by a principal, particularly if it is
directed to retail investors.
**Why D is incorrect:** A seminar broadcast on public access television reaches a broad
audience and constitutes retail communication requiring prior approval.
---
**Question 2**
According to FINRA rules, which of the following is considered a "retail communication"?
A. A seminar attended by 15 retail investors
B. A social media post directed to the general public
C. An internal memo to branch managers
D. A one-on-one conversation with a client
**Correct Answer: B**
,3|Page
**Rationale:** A social media post directed to the general public is considered a retail
communication under FINRA Rule 2210. Retail communications are any written (including
electronic) communication that is distributed or made available to more than 25 retail investors
within a 30-day period.
**Why A is incorrect:** A seminar attended by 15 retail investors is not a retail communication;
it is considered a "correspondence" as it is directed to fewer than 25 retail investors.
**Why C is incorrect:** An internal memo to branch managers is not a retail communication as
it is not directed to retail investors.
**Why D is incorrect:** A one-on-one conversation with a client is not a retail communication;
it is a personal communication.
---
**Question 3**
A registered representative wants to use a testimonial in a social media advertisement. Which of
the following is TRUE regarding testimonials under FINRA rules?
A. Testimonials are prohibited in all retail communications
B. Testimonials are permitted if they are not misleading and include disclosure of any
compensation paid
C. Testimonials are permitted without any restrictions
D. Testimonials are permitted only if the client is a celebrity
**Correct Answer: B**
, 4|Page
**Rationale:** Testimonials are permitted in retail communications provided they are not
misleading and include appropriate disclosures, including any compensation paid to the person
giving the testimonial. The communication must also disclose whether the person is a client and
whether past performance is indicative of future results.
**Why A is incorrect:** Testimonials are not prohibited; they are permitted with proper
disclosures.
**Why C is incorrect:** Testimonials have restrictions and require disclosures.
**Why D is incorrect:** Testimonials are not limited to celebrities; any client can provide a
testimonial with proper disclosures.
---
**Question 4**
Which of the following statements regarding the use of third-party research reports by registered
representatives is TRUE?
A. Third-party research reports can be distributed without review
B. Third-party research reports must be reviewed and approved by a principal before distribution
C. Third-party research reports cannot be distributed to retail clients
D. Third-party research reports are exempt from all FINRA rules
**Correct Answer: B**
**Rationale:** Third-party research reports must be reviewed and approved by a principal
before distribution to clients. Under FINRA rules, a broker-dealer is responsible for the content
