In the Series 7 New Issues section, many students start out optimistic. After all, it is the first chapter in the Kaplan text (as of this writing), so you would think it would be easy. It’s not.
Today we will provide a few tips on where to focus your attention.
Series 7 New Issues: It’s the Jargon
The Series 7 New Issues section is confusing for most people due to its jargon. Like everything in finance, some things have several words to describe them, whereas in other cases, one word can mean several things.
When it comes to New Issues, much of the verbiage is difficult to understand. To make matters worse, you may not understand the new issue process in the first place.
To clarify, New Issues on the Series 7 are a reference to primary offerings. A primary offering is when a security is offered for the first time to the public. Such an offering can come from a corporation raising debt or equity. For example, an initial public offering of stock is a primary offering. However, new bonds from a municipality can also be a primary offering.
In both cases, the securities being offered are being offered for the first time. When a primary offering occurs, the process is aided by an investment bank – usually a division within a broker-dealer.
Underwriting Spread vs Underwriting Fee
Although the underwriting spread and the underwriting fee sound very similar, they are very different.
The above is just a small example of the jargon on this exam that can be confusing. The underwriting spread is a reference to all of the fees charged by a broker-dealer in association with a primary offering. The difference between how much money was raised by a company going public, and the total value of the securities offered to the public is what is referred to as the underwriting spread.
The underwriting fee on the other hand is a small portion of the underwriting spread. Ultimately, the fee is what gets paid to the syndicate (think, investment bankers).
Other terms, such as takedown, total takedown, and concession also show up in this section. Unpacking those would require a much longer post, but an understanding is important to make sure you get a few extra points.
Overall, this section isn’t likely to be much more than five or six questions on the real exam. But for the Series 7 Exam 2025, that’s enough to make it worth spending some time on. If you need some help, feel free to reach out to a Series 7 tutor. Good luck!