Wednesday, January 21, 2009

Do you have the actual exam questions that I'll see?

Customers often ask if I have the actual Series 7 questions that they will see on their exam. It's a good question. I mean, if somebody has the actual questions, why don't we just memorize them and be done with it?

Unfortunately, nobody has the actual Series 7 questions. And if they did, they could get into serious legal hassles if they tried to provide or sell them. NYSE owns the Series 7--it's their intellectual property. If you damage that intellectual property, they will sue you. They did it not so long ago to the bigger firms, back before I got into the business, and they won a fairly large monetary settlement, plus an agreement to stop trying to obtain actual Series 7 questions.

So, how do these "test prep" companies come up with their questions? By looking at the outline and getting feedback from test-takers. Unfortunately, people mis-report their exam experience as a general rule. I just got a nice phone call from a nice young woman who had passed her Series 7 and was very troubled about seeing some funky securities called "PAOs" on her exam. I have to admit, my stomach dropped, but then I realized that if we substituted a "C" for an "O," we'd be talking about a PAC or "planned amortization class," which is a type of CMO. Point is, she was smart enough to pass the Series 7 but still unable to accurately report what she had seen on the test. Multiply that kind of "information" times a few thousand callers and it's no wonder so many books are so loaded up with bullet points and possible test questions too numerous to memorize, let alone understand.
Second, knowing that the phrase "PAC" was "on the test" doesn't help me determine if it was an important concept, or just the obviously wrong answer choice on one or two questions. If you fill a 900-page book with all the bullet points ever reported to show up on the Series 7 through the rumor mill, what are you actually accomplishing? The Series 7 doesn't just ask you to spit back bullet points. It's mostly about applying concepts. Obviously, if the question simply asks "what is regular-way settlement for common stock transactions," you do, in fact, spit back "T + 3." But , more likely, they'll tell you some long story and see if you can apply the concept of settlement/clearing of transactions to something you weren't quite expecting.

By the way, here is what the regulators say about the question of whether any company has the "actual exam questions."

Does NASAA or anyone else give out the exam questions?
Questions from NASAA exams are not available outside the exam setting. Doing so would compromise the exams and turn them into memorization tests rather than tests of competency.

Oh well.
Guess we'll all have to study, after all.

1 comment:

  1. So, who DOES have the actual Series 7 questions? Can you email me their website or phone number?