Function 1: Seeks Business for the Broker-Dealer from Customers (7% Exam Weight)

Series 7 — Function 1: Seeks Business for the Broker-Dealer from Customers

Master the Series 7 — Function 1: Seeks Business for the Broker-Dealer from Customers function of the Series 7 (General Securities Representative) exam with official regulatory rules, quantitative formulas, and targeted practice drills.

Start Series 7 Focused Drill →

Authoritative Series 7 Study Notes

Key Concepts & Regulatory Highlights

Covers capital markets origination, public and private securities offerings under the Securities Act of 1933, FINRA Rule 5110 (Corporate Financing & Green Shoe 15% overallotment), FINRA Rule 5130 (IPO restricted persons), SEC Rule 144 control/restricted stock resales, Rule 144A Qualified Institutional Buyers (QIBs), and Regulation D private placements.

📐 Essential Calculation Formulas

SEC Rule 144 Affiliate 90-Day Volume Limit

Greater of (1% of Outstanding Shares) OR (4-Week Avg Weekly Volume)

Applies to all sales by corporate affiliates (officers, directors, 10%+ shareholders) over any 90-day period.

Underwriting Spread Allocation

Gross Spread = Manager's Fee + Underwriting Fee + Selling Concession

Selling concession is the largest component, paid to syndicate or selling group members placing shares.

📜 Core Regulatory Rules & Requirements

✓FINRA Rule 5130 (New Issue IPO Restrictions): Prohibits member firms, associated persons, portfolio managers, and materially supported or co-residing immediate family members from buying equity IPOs at the public offering price.

✓SEC Rule 144 Volume Limits: Control persons (affiliates) selling restricted or control stock must file Form 144 (if >5,000 shares or >$50,000) and may sell in any 90-day period the greater of 1% of outstanding shares or the 4-week average weekly trading volume.

✓SEC Rule 144A (QIBs): Allows immediate private resale of unregistered securities to Qualified Institutional Buyers managing at least $100 million in discretionary securities of unaffiliated issuers.

✓Regulation D Rule 506(b) vs. 506(c): Rule 506(b) allows unlimited accredited investors and up to 35 sophisticated non-accredited investors with NO general solicitation; Rule 506(c) allows general solicitation if 100% of purchasers are verified accredited investors.

✓Green Shoe Overallotment Option (FINRA Rule 5110): Permits the underwriting syndicate to expand an offering by up to 15% of the original issue size to cover syndicate short positions.

💡 High-Yield Exam Watchouts

•FINRA Rule 5130 IPO restrictions apply ONLY to initial public offerings of common equity—never to secondary offerings, preferred stock, debt, REITs, or mutual funds.
•Under MSRB Rule G-37, a Municipal Finance Professional (MFP) may contribute up to $250 per election to an official for whom the MFP is entitled to vote without triggering a 2-year ban on negotiated underwriting business.

Why Study Series 7 — Function 1: Seeks Business for the Broker-Dealer from Customers?

The Series 7 — Function 1: Seeks Business for the Broker-Dealer from Customers portion of the General Securities Representative (Series 7) exam is critical for passing on your first attempt. Understanding these concepts builds both test-day precision and practical regulatory fluency.

Our practice questions and formulas are engineered to mirror the official Series 7 blueprint and statutory complexity you'll encounter at Prometric.

Oro Pro Pass

Oro Pro Pass — Unlock All 8 FINRA Series, Mock Exams 2–4 & Ad-Free Study

Upgrade to remove all advertisements and unlock full-length disjoint simulations for Series 6, 7, 63, 65, 66, 79, and 24.

View Pro Pass Plans →

Ready for the full simulation experience?

Try a Comprehensive Series 7 Practice Exam →