Chapter 1: Seeking Business & Communications
This chapter covers 7% of the Series 7 exam (approximately 9 questions) and focuses on how broker-dealers communicate with the public and bring new securities to market.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 1 | Public Communications and Advertising | FINRA Rule 2210, retail vs. institutional communications, principal approval, filing requirements |
| 2 | New Issues and Underwriting | Firm commitment vs. best efforts, syndicate formation, stabilization, IPO allocation, Reg M |
Why This Chapter Matters
Before a customer can invest, the firm must communicate properly and the securities must be brought to market through an underwriting process. This chapter covers the rules governing both: what firms can and cannot say in communications, and how new securities are distributed to the public.
The exam tests whether you understand the different types of communications, approval requirements, and the mechanics of underwriting including syndicate agreements, stabilization rules, and new issue allocation.
Exam Strategy
At 7% of the exam, this is a smaller section, but the questions are very rule-specific. Focus on:
- Communication categories: Retail, institutional, and correspondence have different approval requirements
- Underwriting mechanics: Know the difference between firm commitment, best efforts, and all-or-none
- Syndicate terms: Eastern vs. Western accounts, concessions, reallowances
- Regulation M: Stabilization rules and cooling-off periods