Series 24 Practice Exam

1. Two clients are bearish on the same stock. One buys puts on the stock; the other sells the stock short. Which statement BEST compares the risk of the two positions?

• A. Both positions expose the client to theoretically unlimited loss
• B. The put buyer's loss is limited to the premium paid, while the short seller's potential loss is theoretically unlimited
• C. The short seller's loss is limited to the proceeds received from the sale
• D. The put buyer's loss is unlimited, while the short seller can lose only the margin deposited

2. A corporation with cumulative preferred stock outstanding suspends all dividends for two years and then wants to resume paying a dividend on its common stock. What must the corporation do first?

• A. Pay all skipped dividends in arrears on the cumulative preferred before paying any common dividend
• B. Pay only the current period's preferred dividend, because skipped dividends are forfeited
• C. Nothing — preferred and common dividends are independent of each other
• D. Obtain a shareholder vote authorizing the forfeiture of the missed preferred dividends

3. An issuer offers a convertible bond with a coupon lower than the rate on its comparable nonconvertible debt, yet investors readily buy the issue. Which statement BEST explains why?

• A. The conversion privilege has value, so investors accept a lower coupon in exchange for potential participation in the underlying stock's appreciation
• B. Convertible bonds are always secured by collateral, which reduces credit risk enough to justify the lower coupon
• C. Convertible bonds are immune to interest-rate risk, so investors need less coupon compensation
• D. Convertible bonds rank ahead of all other corporate debt in a liquidation

4. An investor buys 100 shares of a stock at 40 per share and writes one 45 call, receiving a premium of 2. Ignoring commissions and dividends, what is the investor's maximum potential gain? (All figures are hypothetical.)

• A. $200
• B. $500
• C. $700
• D. The gain is unlimited because the investor owns the stock

5. A U.S. investor holds shares of a foreign company. Over the holding period, the share price in the local market is unchanged, but the foreign currency weakens significantly against the U.S. dollar. What is the effect on the investor's position measured in dollars?

• A. No effect, because the local share price did not change
• B. The dollar value of the position declines, illustrating currency (exchange-rate) risk
• C. The dollar value of the position rises, because a weaker foreign currency makes the shares cheaper to buy
• D. Only future dividends are affected; the principal value in dollars is unchanged

6. A client tells a representative that a long-term U.S. Treasury bond is 'completely risk-free' and is therefore an appropriate place for funds the client needs in about two years. Which response is MOST accurate?

• A. Agree — Treasury securities carry no risks of any kind
• B. Although the bond is considered free of default risk, its market price can fall substantially if interest rates rise, so the client faces interest-rate risk over a short horizon
• C. The bond's chief drawback is liquidity risk, because Treasury securities rarely trade
• D. The bond is inappropriate primarily because of its high credit risk

7. A municipality issues a bond to finance a toll bridge, with debt service to be paid solely from the tolls the bridge collects. Which statement correctly describes the primary source of repayment and the key credit consideration?

• A. The issuer's general taxing power backs the bond, so tax collections are the key credit factor
• B. The earnings of the financed facility back the bond, so the project's ability to generate sufficient revenue is the key credit factor
• C. The federal government guarantees the bond, so credit analysis is unnecessary
• D. The bond is automatically secured by a lien on all municipal property

8. An investor purchases a zero-coupon bond and holds it to maturity. Compared with the holder of a comparable coupon-paying bond, which risk tied to periodic interest payments does the zero-coupon holder avoid?

• A. Interest-rate risk affecting the bond's market price before maturity
• B. Reinvestment risk on periodic interest payments
• C. Default risk of the issuer
• D. Purchasing-power risk over the holding period

9. An investor pays a premium of 3 to buy one XYZ 50 call. Ignoring commissions, at what stock price at expiration does the investor break even? (All figures are hypothetical.)

• A. 47
• B. 50
• C. 53
• D. 56

10. A corporation has both mortgage bonds secured by a lien on its plant and unsecured debentures outstanding. In a liquidation, which statement correctly describes the position of the debenture holders?

• A. They rank as general creditors, behind the mortgage bondholders' claim on the pledged property
• B. They rank equally with the mortgage bondholders, because both are bondholders of the same issuer
• C. They rank ahead of the mortgage bondholders if the debentures were issued first
• D. They rank behind the common stockholders, because debentures are unsecured

11. Which statement correctly describes a stock warrant at the time it is issued?

• A. It is a long-term instrument whose exercise price is typically set above the stock's current market price
• B. It is a short-term instrument whose exercise price is typically set below the stock's current market price
• C. It represents an immediate ownership stake in the issuer, including voting rights
• D. It obligates the holder to purchase the underlying stock before it expires

12. A client comparing annuity contracts asks who bears the investment risk in a variable annuity during the accumulation period. Which response is accurate?

• A. The insurance company, because the contract's value is guaranteed from its general account
• B. The annuity owner, because the contract's value depends on the performance of the separate-account portfolios the owner selects
• C. The risk is shared equally between the insurer and the owner by contract
• D. The selling firm, which must make the owner whole for any investment losses

13. As an equity option approaches its expiration date with all other factors unchanged, its time value steadily erodes. This erosion generally works in favor of which market participant?

• A. The buyer (holder) of the option
• B. The writer (seller) of the option
• C. The issuer of the underlying stock
• D. Neither party, because time decay affects buyers and writers equally

14. A candidate misses a scheduled Series 24 appointment entirely, without notifying anyone in advance. Based on the published cancellation policy and the exam's registration cost, what fee does the candidate incur?

• A. No fee — the appointment is simply forfeited
• B. $100
• C. $235
• D. $470

15. A candidate associated with a broker-dealer needs to be enrolled for the Series 24. How is the examination request typically initiated?

• A. The firm submits a Form U4 to request the exam
• B. The candidate submits a Form U4 on their own behalf
• C. The candidate self-enrolls directly through the test vendor's website
• D. No filing is needed — the candidate simply schedules an appointment and pays at the test center

16. A candidate wants to weight study time toward the two supervision functions covering general broker-dealer activities (Function 2, 45 items) and retail and institutional customer-related activities (Function 3, 32 items). Taken together, what portion of the Series 24's 150 scored items do these two functions represent?

• A. 77 items — more than half of the exam
• B. 77 items — slightly less than half of the exam
• C. 87 items — more than half of the exam
• D. 45 items — under one-third of the exam

17. A candidate passed the SIE exam and then spent time away from the industry before associating with a firm to pursue the Series 24. For how long does the passing SIE result remain valid?

• A. 120 days
• B. 4 years
• C. It remains valid indefinitely
• D. It lapses immediately once the candidate is no longer associated with a firm

18. How many scored items on the Series 24 exam are devoted to Function 2, Supervision of General Broker-Dealer Activities?

• A. 75
• B. 45
• C. 150
• D. 32

19. An individual studying independently wants to sign up for the Series 24 on their own, without involvement from a firm or regulator. Under FINRA's enrollment requirements, is this possible?

• A. No — enrollment requires sponsorship by an eligible regulatory authority, and self-enrollment is not available for the Series 24
• B. No — but self-enrollment becomes available once the candidate schedules through Prometric
• C. Yes — anyone may self-enroll after paying the exam fee
• D. Yes — but only after the individual has first passed the SIE

20. Through which vendor does a Series 24 candidate schedule the exam appointment, and in which settings may the exam be taken?

• A. Prometric — but only in person at a test center
• B. The candidate's sponsoring firm administers the exam on its own premises
• C. FINRA administers the exam directly at its own offices
• D. Prometric, FINRA's test delivery vendor — at a local test center or online

21. A candidate scheduled to sit for the Series 24 develops a conflict and wants to reschedule the appointment without incurring any fees. What is the minimum advance notice the candidate must give?

• A. 2 business days before the appointment
• B. 10 business days before the appointment
• C. 120 days before the appointment
• D. No minimum — any notice given before the appointment time avoids fees

22. A firm is budgeting the enrollment fees for a new hire's qualification path and wants to know the combined cost of the SIE and Series 24 enrollments, assuming each exam is passed on the first attempt. Considering only these two published fees, what total should the firm budget?

• A. $235
• B. $335
• C. $470
• D. $100

23. A registered representative who currently holds a Series 7 registration is being promoted to a supervisory role and must qualify as a General Securities Principal. Which statement correctly describes the examination prerequisites for sitting for the Series 24?

• A. The candidate must have passed the Securities Industry Essentials (SIE) exam and an appropriate representative-level exam, such as the Series 7.
• B. There are no prerequisites; the Series 24 may be taken directly by any associated person.
• C. Only the SIE exam is required before the Series 24.
• D. Only a representative-level exam such as the Series 7 is required; the SIE is not part of the path.

24. Two unaffiliated traders privately agree to simultaneously enter a buy order and a sell order for the same security at the same price, creating the appearance of trading activity and interest without either party's true beneficial ownership position changing as intended. What is this coordinated activity called?

• A. Matched orders, a manipulative practice creating a false appearance of market activity
• B. Block trading
• C. Program trading
• D. Riskless principal trading

25. An investment banker learns during due diligence for a pending merger that the target company's stock will likely rise sharply once the deal is announced. Before the announcement, the banker buys shares of the target in a personal brokerage account. What violation has occurred?

• A. Free-riding
• B. Best execution violation
• C. Churning
• D. Insider trading based on material nonpublic information

26. A registered representative recommends and executes an unusually high volume of trades in a customer's account, generating substantial commissions, when the trading activity is inconsistent with the customer's stated investment objectives and financial situation. What prohibited practice does this describe?

• A. Front running
• B. Marking the close
• C. Churning
• D. Free-riding

27. A branch office is subject to inspection. What determines the frequency of the required examination?

• A. The office's classification, with offices of supervisory jurisdiction and branches conducting supervisory activity inspected at least annually and other locations on a regular periodic schedule
• B. The revenue the office generates
• C. The number of employees at the location
• D. The preference of the branch manager

28. A firm's net capital falls below its required minimum. What must occur?

• A. Immediate notification to the regulators and cessation of business other than liquidating transactions, since operating below the minimum is prohibited
• B. Notification at the next month-end reporting date
• C. Continued operation while capital is raised
• D. Notification only if the deficiency persists beyond a week

29. A firm's anti-money laundering programme is reviewed. What elements must it contain?

• A. Written policies, a designated compliance officer, ongoing training, independent testing, and risk-based customer due diligence including beneficial ownership identification
• B. Written policies and training only
• C. A designated officer with no independent testing requirement
• D. Suspicious activity reporting with no other programme elements

30. Electronic correspondence with the public must be supervised. What approach satisfies the obligation for internal email volume?

• A. A documented review process which may be risk-based and sampled rather than reading every message, provided the methodology is reasonable and evidenced
• B. Reading every message individually in all cases
• C. Reviewing only messages a representative flags as significant
• D. No review, since email is retained for later examination

31. An introducing firm operates under a carrying agreement with a clearing firm. How is supervisory responsibility divided?

• A. The agreement must allocate each function in writing, and the introducing firm retains responsibility for its own customers' accounts and sales conduct regardless of what the clearing firm performs operationally
• B. The clearing firm assumes all supervisory responsibility for the introduced accounts
• C. Responsibility is shared equally with no written allocation required
• D. Neither firm is responsible where the agreement is silent

32. A firm's written supervisory procedures are being reviewed. What must they establish beyond describing the rules?

• A. Who performs each supervisory review, how often, how it is documented, and who supervises the supervisor
• B. Only a summary of the applicable regulations
• C. Only the firm's organizational chart
• D. Only the disciplinary consequences for violations

33. A firm holds customer funds and securities. What does the customer protection framework require?

• A. Segregation of fully paid and excess margin securities in a control location and maintenance of a reserve account computed to the prescribed formula
• B. Commingling of customer and firm assets to improve efficiency
• C. Segregation only of securities, with cash treated as firm assets
• D. No segregation where the firm carries insurance

34. A firm must retain business records. What supervisory obligation attaches to the retention system itself?

• A. Records must be preserved for prescribed periods in a non-rewriteable non-erasable format or an equivalent audit-trail arrangement, with prompt retrievability
• B. Records may be retained in any format provided they exist somewhere
• C. Records may be deleted once an examination concludes
• D. Only paper records are subject to preservation requirements

35. A firm designates a principal to be responsible for ensuring that customer account records, order tickets, and correspondence are retained for the periods required by applicable rules and are readily accessible for regulatory examination. What supervisory function does this designation address?

• A. Trade reporting to a market data facility
• B. Investment banking allocation review
• C. Options account approval
• D. Books and records retention and accessibility supervision

36. A firm discovers that its net capital has fallen below the minimum required level under applicable financial responsibility rules. What is the firm's MOST immediate supervisory and regulatory obligation?

• A. Continue normal operations without any notification requirement
• B. Wait until the next scheduled audit to disclose the deficiency
• C. Provide prompt notice to its regulators and take corrective action, potentially restricting business activities until capital is restored
• D. Immediately liquidate all customer accounts

37. A firm classifies its branch offices by risk level, considering factors such as the products sold, disciplinary history of registered persons, and customer complaint volume. Higher-risk branches are inspected more frequently and sometimes without advance notice. What supervisory principle does this practice reflect?

• A. A risk-based approach to branch office inspection frequency and methodology
• B. A requirement that all branches be inspected on an identical fixed schedule
• C. A prohibition on ever conducting unannounced inspections
• D. An exemption from inspection for branches with fewer than five representatives

38. A firm receives a written complaint from a customer alleging that a representative made unauthorized trades in the customer's account. What supervisory obligation does this complaint trigger for the firm?

• A. No obligation unless the customer files a formal arbitration claim
• B. An obligation to investigate, and, where required, report the complaint to regulators within applicable reporting requirements
• C. An obligation to immediately terminate the representative without investigation
• D. An obligation to reimburse the customer automatically, regardless of the investigation's outcome

39. A registered representative discloses to the firm an intent to serve as a paid consultant for an unrelated business while remaining registered with the firm. What must the principal do before the representative may proceed?

• A. Automatically deny the request without review
• B. Ignore the disclosure, since outside activities are the representative's personal matter
• C. Evaluate the proposed activity for potential conflicts of interest with the firm's business and customers before approving or denying it
• D. Approve the request without any further evaluation

40. A customer over 65 shows signs of diminished capacity and requests a large withdrawal to an unfamiliar third party. What may the firm do?

• A. Place a temporary hold on the disbursement where financial exploitation is reasonably believed, notify the trusted contact where one exists, and conduct an internal review within the prescribed period
• B. Process the request immediately, since the customer has authority over the account
• C. Close the account and return the assets to the customer
• D. Notify the third party recipient of the concern

41. A customer requests discretionary authority be given to their representative. What is required?

• A. Written authorization from the customer, written acceptance by the firm, and principal approval, with each discretionary order identified and the account reviewed frequently
• B. A verbal instruction from the customer recorded in the file
• C. Nothing beyond the representative's own record of the arrangement
• D. Written authorization from the customer alone

42. A retail communication concerning an investment company is prepared for distribution. What is the principal's obligation?

• A. Approval by an appropriately registered principal before use, with filing where required and retention of the approval record
• B. Approval only after the first distribution
• C. No approval where the material was prepared by the fund company
• D. Approval by the compliance department without principal involvement

43. A customer opens an options account. What must the principal approve and when?

• A. Approval of the account for the specific options levels based on the customer's investment experience, objectives and financial situation, before or promptly after the first transaction as the rules prescribe
• B. Approval after the customer's first loss
• C. No approval, since options are self-directed
• D. Approval by the representative rather than a principal

44. An account shows frequent trading generating substantial commissions relative to the account's size and stated objectives. What must the principal do?

• A. Take no action where the customer authorized each trade individually
• B. Close the account without inquiry
• C. Take no action where each individual trade was suitable
• D. Investigate for excessive trading, examining turnover and cost-to-equity ratios alongside the customer's objectives, and document the conclusion and any action

45. A communication is distributed to 30 institutional investors and no retail investors. How is it classified and supervised?

• A. As an institutional communication, exempt from prior principal approval but subject to written procedures for review and to the content standards prohibiting misleading statements
• B. As a retail communication requiring prior principal approval
• C. As correspondence, since fewer than 25 recipients are involved
• D. As exempt from all content standards and review

46. A firm must deliver a relationship summary disclosure to retail investors. What supervisory obligation attaches to it?

• A. Procedures ensuring delivery within the prescribed timing, retention of evidence of delivery, and updating and redelivery when the disclosure materially changes
• B. Delivery only on request from the customer
• C. Delivery once at account opening with no obligation to update
• D. Delivery by the clearing firm rather than the introducing firm

47. A firm is developing supervisory procedures for handling institutional customer orders that differ in size and sophistication from typical retail orders. Which consideration MOST appropriately distinguishes the supervisory approach applied to institutional accounts from that applied to retail accounts?

• A. Institutional accounts are entirely exempt from all supervisory review
• B. Institutional accounts require the same suitability analysis applied identically to retail accounts in every respect
• C. Certain suitability obligations may be satisfied differently in light of the institutional customer's demonstrated sophistication and capacity to evaluate risk independently
• D. Institutional accounts must always be reviewed less frequently than retail accounts regardless of activity

48. An elderly customer's representative reports concerns that the customer may be experiencing diminished cognitive capacity and is requesting an unusual, large wire transfer to an account the firm has not seen before. What should the firm consider doing, consistent with rules addressing financial exploitation of vulnerable adults?

• A. Refuse all future transactions in the account permanently
• B. Consider placing a temporary hold on the disbursement while the concern is reviewed, and contact the customer's designated trusted contact person if one is on file
• C. Report the customer to law enforcement as the only permissible response
• D. Process the wire transfer immediately without delay to avoid customer complaints

49. A principal reviewing a customer's account calculates that the account's annual trading costs, including commissions and markups, would require an unusually large return just to break even for the year. What analysis has the principal performed, and why does it matter?

• A. A cost-to-equity (breakeven) analysis, which helps identify potentially excessive trading activity in the account
• B. A margin maintenance calculation, which determines if a margin call is due
• C. A best execution review, which evaluates order routing quality
• D. A net capital computation, which determines the firm's regulatory capital adequacy

50. A firm receives a customer complaint alleging a suitability violation. Under the firm's supervisory procedures, to whom must this complaint be escalated for review?

• A. A principal designated with responsibility for reviewing and responding to customer complaints
• B. Only the representative named in the complaint
• C. The firm's outside auditor exclusively
• D. No escalation is required if the dollar amount in dispute is small

51. A customer wants to write uncovered (naked) equity call options, a strategy carrying substantially greater risk than covered call writing. Compared with approving a routine covered call strategy, what should the firm's options approval process for this account reflect?

• A. A heightened level of review reflecting the greater risk and margin exposure of uncovered option writing
• B. The same minimal review as any other options strategy, since all options carry identical risk
• C. No principal approval at all, since options approval only applies to covered strategies
• D. Automatic approval once the account has been open for one year

52. A new customer account is opened and the first trade is entered before a principal has reviewed the account's opening documentation. What supervisory deficiency does this sequence of events create?

• A. A failure to complete required new account approval before trading activity begins
• B. A violation of net capital requirements
• C. A failure to file a Form U5
• D. A violation of the firm's business continuity plan

53. An individual who is not currently associated with any broker-dealer asks whether they can enroll themselves directly for the Series 24. Which statement is accurate?

• A. They may self-enroll and pay the fee directly, because the exam is open to the general public.
• B. They may self-enroll now, but the result will not become effective until a firm hires them.
• C. They cannot self-enroll; the Series 24 requires sponsorship by an eligible regulatory authority.
• D. They may enroll on their own as long as a passing SIE result is already on file.

54. An individual who has passed only the SIE is hired by a broker-dealer that wants to register the individual as a general securities principal. Before the individual may take the Series 24, what else is required?

• A. Passing an appropriate representative-level qualification exam, such as the Series 7.
• B. Nothing further — a passing SIE result alone satisfies the prerequisite for the Series 24.
• C. Completing a minimum period of supervisory experience at the firm.
• D. Retaking the SIE, because it must be passed in the same calendar year as the Series 24.

55. The Series 24 content outline assigns 45 items to Function 2 (Supervision of General Broker-Dealer Activities) and 32 items to Function 3 (Supervision of Retail and Institutional Customer-Related Activities). Of the exam's 150 multiple-choice items, how many are allocated to the remaining functions?

• A. 118 items
• B. 105 items
• C. 77 items
• D. 73 items

56. A firm has submitted an exam request for a candidate's Series 24. FINRA then posts an enrollment window during which the candidate must take the exam. How long is this window?

• A. 60 days
• B. 90 days
• C. 120 days
• D. 180 days

57. A candidate passed the SIE five years ago and has not been registered since. A broker-dealer now hires the candidate and begins the process of qualifying them as a general securities principal. Considering only the published fees for a new SIE attempt and the Series 24, what total must be paid for these two exams?

• A. $235, because the earlier SIE result still satisfies the prerequisite
• B. $335
• C. $470
• D. $100

58. A Series 24 candidate has a scheduled appointment at a Prometric test center but a conflict arises. To avoid paying any fee, what is the minimum advance notice the candidate must give to cancel or reschedule?

• A. 2 business days
• B. 5 business days
• C. 10 business days
• D. 30 calendar days

59. The Federal Reserve raises its target for short-term interest rates in response to persistent inflation. All else equal, how would this action MOST likely affect the prices of outstanding long-term fixed-rate bonds?

• A. Bond prices would be unaffected because the Fed only controls short-term rates
• B. Bond prices would fall as newly issued bonds offer more competitive yields
• C. Bond prices would fall only if the bonds are callable
• D. Bond prices would rise because higher rates increase demand for existing bonds

60. A newly elected government cuts personal income tax rates and increases spending on public infrastructure projects to boost economic growth. Which category of economic policy does this action represent?

• A. Monetary policy
• B. Trade policy
• C. Regulatory policy
• D. Fiscal policy

61. An investor holding a fixed-rate corporate bond notices that inflation has risen well above the bond's coupon rate over the holding period. What is the MOST direct consequence for the investor?

• A. The bond's face value automatically increases to offset inflation
• B. The real (inflation-adjusted) return on the bond declines even though the nominal coupon payments are unchanged
• C. The issuer must raise the coupon rate to match inflation
• D. The bond immediately becomes convertible into inflation-protected securities

62. The Federal Open Market Committee decides to stimulate a sluggish economy. Which of the following actions is a classic example of expansionary monetary policy?

• A. The Fed purchases Treasury securities in the open market to add reserves to the banking system
• B. The Fed raises the reserve requirement for member banks
• C. Congress passes a bill increasing government infrastructure spending
• D. The Treasury Department increases the tax withholding rate

63. An analyst observes that short-term Treasury yields have risen above long-term Treasury yields, a pattern known as a yield curve inversion. Historically, market participants have viewed this pattern as MOST closely associated with which condition?

• A. Accelerating long-term economic expansion
• B. Guaranteed deflation within the following month
• C. A heightened likelihood of an economic slowdown or recession
• D. An immediate increase in corporate bond issuance

64. A bank's cost of borrowing reserves directly from the Federal Reserve's lending facility is generally set at a different rate than the rate banks charge each other for overnight loans of reserves. Which two rates does this describe?

• A. The LIBOR rate and the SOFR rate
• B. The prime rate and the Treasury bill rate
• C. The discount rate and the federal funds rate
• D. The municipal bond yield and the corporate bond yield

65. A representative with a history of customer complaints is placed under heightened supervision. What does this require?

• A. A written plan specifying the additional controls, who applies them and how compliance is evidenced, tailored to the specific conduct concern
• B. A verbal instruction to the representative's immediate manager
• C. Restricting the representative to institutional accounts only
• D. An annual review with no interim monitoring

66. An associated person wishes to engage in a private securities transaction away from the firm. What is the principal's obligation?

• A. Require notice only after the transaction completes
• B. Permit the transaction provided no customer of the firm is involved
• C. Require prior written notice, and where the person will receive compensation, decide whether to approve and, if approved, supervise the transaction as the firm's own
• D. Prohibit all outside transactions without exception

67. A registered person discloses an outside business activity. What must the principal evaluate?

• A. Whether the activity would interfere with the person's responsibilities, be confused by customers as the firm's business, or raise conflicts requiring conditions or prohibition
• B. Only whether the activity generates income above a threshold
• C. Only whether the activity involves securities
• D. Nothing, since outside activities are the individual's private matter

68. A firm must conduct an annual compliance meeting and a yearly certification. What do these establish?

• A. That each registered person participates in a compliance interview or meeting, and that the chief executive certifies the firm has processes to establish and test its policies
• B. That the firm has had no violations during the year
• C. That every registered person has passed an examination
• D. That the compliance department approves every transaction

69. A registered representative is hired from another firm. What must the principal review before approving the association?

• A. The applicant's disclosure record including prior regulatory actions, customer complaints and terminations, obtained through the industry registration system
• B. Only the applicant's production figures at the prior firm
• C. Only whether the applicant holds the required examinations
• D. Only the applicant's references from former colleagues

70. A broker-dealer is preparing to submit a new hire's registration application. Before the individual can be registered, what process must the firm complete regarding the applicant's background?

• A. A credit check only, with no other background review required
• B. Fingerprinting and a background check as part of the registration process
• C. A polygraph examination administered by the firm
• D. A minimum five-year employment verification with no other checks

71. A registered representative's employment with a broker-dealer is terminated. What filing is the firm required to make regarding this individual's registration status?

• A. A Form U5 reporting the termination
• B. A Form U4 amendment only
• C. A Form BD amendment
• D. No filing is required if the termination is voluntary

72. A registered representative is charged with a disqualifying criminal offense while employed at a broker-dealer. Within what general timeframe is the firm required to file an amendment to the representative's Form U4 disclosing this material event?

• A. Within one year, at the next annual renewal
• B. Only if the representative is convicted after a full trial
• C. Promptly, generally within a short number of business days of the firm learning of the event
• D. There is no requirement to amend the U4 for a criminal charge

73. A firm designates an individual to supervise a specific line of business, such as investment banking, and that individual must hold an appropriate principal registration before assuming supervisory responsibility. What does this requirement primarily ensure?

• A. That supervisory responsibility for a given business line is held by someone qualified through the applicable principal-level examination and registration
• B. That the individual has at least ten years of industry experience
• C. That the individual has passed only the SIE exam
• D. That the individual is exempt from continuing education requirements

74. An individual was convicted of a felony ten years ago involving fraud. The individual now seeks to become registered as a general securities principal. What status does this conviction MOST likely create under industry rules?

• A. No effect, since the conviction occurred more than five years ago
• B. Statutory disqualification, which generally requires special review before the individual may become associated with a firm
• C. An automatic bar from all future securities employment with no exceptions
• D. A requirement to retake only the SIE exam

75. A registered representative is required to complete periodic computer-based training covering regulatory, compliance, and ethical topics at set intervals following initial registration. What is this ongoing training requirement called?

• A. The Regulatory Element of continuing education
• B. The Firm Element of continuing education
• C. The annual compliance meeting
• D. The statutory disqualification review

76. An individual who wants to take the Series 24 asks whether they can simply enroll on their own and pay the fee directly, without any firm involvement. What is the correct response?

• A. Self-enrollment is not available for the Series 24; enrollment requires sponsorship by an eligible regulatory authority, and a candidate associated with a broker-dealer typically has the firm submit a Form U4 to request the exam
• B. The individual may self-enroll online because sponsorship is optional for supervisory-level exams
• C. The individual may submit a Form U4 on their own behalf without any firm involvement
• D. The individual may self-enroll now but must obtain sponsorship before results are released

77. A candidate registered for the Series 24 oversleeps and fails to appear for the scheduled Prometric appointment. Based on the cancellation policy and the exam's published cost, what fee does the candidate incur?

• A. $235 — a fee equal to the cost of the exam
• B. $100 — a flat administrative penalty
• C. No fee, but the candidate must submit a new enrollment request
• D. Half of the exam fee, with the balance credited toward a rescheduled appointment

78. A registered representative preparing to move into a supervisory role asks what must be completed before sitting for the Series 24 examination. Which of the following correctly states the prerequisite requirement?

• A. Pass the Securities Industry Essentials (SIE) exam and an appropriate representative-level qualification exam, such as the Series 7
• B. Pass only the SIE exam; no representative-level qualification exam is required
• C. Pass a representative-level exam such as the Series 7; the SIE is waived for supervisory candidates
• D. No prerequisite exams are required before taking the Series 24

79. A representative has a financial interest in a company and recommends its stock to a customer without disclosing that interest. What ethical and regulatory principle has been violated?

• A. The obligation to disclose material conflicts of interest to the customer
• B. The requirement to maintain accurate books and records
• C. The prohibition on selling away
• D. The prohibition on unauthorized trading

80. A firm's registered representative engages in conduct that, while not explicitly itemized in any specific rule, is widely regarded within the industry as dishonest and unfair to customers. Under FINRA's broad ethical standard, is this conduct subject to discipline?

• A. No, because only conduct listed in a specific numbered rule can be disciplined
• B. Yes, because the standard of just and equitable principles of trade covers conduct inconsistent with high standards of commercial honor even without a specific itemized rule
• C. No, because ethical standards apply only to firms, not individual representatives
• D. Yes, but only if a customer files a formal civil lawsuit first

81. A representative recommends a proprietary product that pays a higher commission than a comparable third-party alternative, without regard to which product better serves the customer's stated goals. Under the standard of conduct applicable to retail recommendations, what has the representative failed to do?

• A. Filed a timely Form U4 amendment
• B. Registered the product with the state securities administrator
• C. Delivered a prospectus before the trade settled
• D. Placed the customer's interest ahead of the firm's or the representative's own financial interest

82. A candidate is reviewing the administrative parameters of the Series 24 qualification examination. How many multiple-choice items must the candidate answer on this exam?

• A. 120 questions
• B. 150 questions
• C. 175 questions
• D. 200 questions

83. With 150 scored items and a passing threshold of 70%, what is the minimum number of items a candidate must answer correctly to pass the Series 24 exam?

• A. 100 items
• B. 105 items
• C. 113 items
• D. 120 items

84. How much time is a candidate allotted to complete the Series 24 examination?

• A. 225 minutes (3 hours and 45 minutes)
• B. 240 minutes (4 hours)
• C. 180 minutes (3 hours)
• D. 200 minutes

85. A market maker's quotations are supervised. What obligation applies to a firm publishing a two-sided quote?

• A. It must honour the quoted price for at least the published size when contacted, since backing away is a serious violation
• B. It may decline to trade at the quote if the market has moved unfavourably
• C. It must trade only with customers rather than other dealers
• D. It may withdraw the quote after receiving an order at it

86. A firm routes customer orders to a venue that pays for order flow. What must supervision establish?

• A. That routing decisions satisfy the duty of best execution through regular and rigorous review of execution quality, and that the payment arrangement is disclosed
• B. Only that the arrangement is disclosed, since disclosure satisfies the obligation
• C. Only that the venue is a registered market centre
• D. Nothing, since routing is an operational rather than supervisory matter

87. A firm's proprietary trading desk and its customer order flow must be supervised together. What structural control addresses the conflict?

• A. Information barriers restricting the flow of customer order information to proprietary traders, with surveillance testing that the barrier holds
• B. Physical separation of the desks with no restriction on information flow
• C. A policy statement discouraging misuse of order information
• D. Reviewing proprietary trades annually

88. A trader executes a series of transactions between accounts under common control producing no change in beneficial ownership. What concern does this raise?

• A. Wash trading or matched orders creating a false appearance of activity, which supervisory surveillance must be designed to detect
• B. Excessive commission generation only
• C. A recordkeeping deficiency only
• D. No concern, since no beneficial ownership changed

89. A firm executes an over-the-counter corporate bond trade with a customer. Applicable rules generally require the firm to report this trade to the appropriate reporting facility within a specified, short period after execution. What supervisory concern does a delayed or missed report MOST directly raise?

• A. A failure to meet trade reporting timeliness requirements, undermining post-trade price transparency
• B. A net capital deficiency
• C. A violation of the firm's business continuity plan
• D. A failure to obtain best execution on that trade

90. A firm's supervisory system for its options trading desk includes monitoring aggregate customer and proprietary positions in a given underlying security against applicable regulatory caps. What is this monitoring designed to detect?

• A. Violations of the firm's business continuity plan
• B. Failures to file Form U5 upon termination
• C. Deficiencies in the firm's net capital computation
• D. Potential breaches of options position limits designed to prevent excessive concentration and market manipulation risk

91. A firm executing customer orders must seek the most favorable terms reasonably available under prevailing market conditions, considering factors such as price, speed, and likelihood of execution. What obligation does this describe?

• A. Trade reporting obligation
• B. Firm quote obligation
• C. Best execution
• D. Position limit compliance

92. A firm registered as a market maker in a security publishes a two-sided quotation showing a bid and an offer price and size. A customer calls to trade at the quoted price and size. What obligation does the market maker generally have with respect to that published quote?

• A. No obligation, since quotes are purely indicative and non-binding
• B. A firm quote obligation to honor the displayed price and size, subject to applicable size and timing limits
• C. An obligation to honor the quote only for institutional customers
• D. An obligation to update the quote only once per trading day

93. A dealer stands ready to buy a security at one price and sell it at a slightly higher price, profiting from the difference while providing continuous two-sided quotations. What is this difference commonly called?

• A. The markup schedule
• B. The commission rate
• C. The bid-ask spread
• D. The dividend yield

94. A firm participates in a public offering and receives indications of interest from customers. What allocation practice is prohibited?

• A. Conditioning an allocation on the customer's agreement to buy additional shares in the aftermarket or to pay excessive compensation for other services
• B. Allocating to customers who have expressed interest at the offering price
• C. Allocating on a pro rata basis among interested customers
• D. Declining to allocate to a customer with no prior relationship

95. A firm acts as underwriter in a public offering and its research department covers the issuer. What restriction applies around the offering?

• A. A quiet period restricting research publication for a defined interval after the offering and around lock-up expiration, with the length depending on the firm's role
• B. A permanent prohibition on covering any issuer the firm underwrote
• C. No restriction, provided the research carries a disclosure
• D. A requirement to publish favourable research supporting the offering

96. A research analyst's compensation is being determined. What restriction applies?

• A. It may not be tied to specific investment banking transactions, and investment banking personnel may not have input into individual analyst compensation
• B. It must be tied to the revenue of transactions the analyst covered
• C. It may be determined solely by the investment banking department
• D. No restriction applies where the analyst discloses the arrangement

97. A firm maintains a structural and informational separation between its investment banking department and its research department to prevent banking relationships from improperly influencing research analysts' opinions. What is this separation commonly called?

• A. A net capital segregation requirement
• B. A customer identification barrier under AML rules
• C. A best execution wall between trading desks
• D. An information barrier, often called a Chinese wall, between investment banking and research

98. A firm participating in an underwriting allocates a portion of the offering's shares to a brokerage account of a company executive at another firm who is in a position to direct investment banking business to the underwriter, as a means of currying favor. What prohibited practice does this allocation represent?

• A. Free-riding
• B. Marking the close
• C. Front running
• D. Spinning, the improper allocation of hot IPO shares to reward or influence business referrals

99. A firm underwrites an initial public offering for a company. Following the IPO, the firm's research department is restricted from publishing a research report on the newly public company for a specified period after the offering. What is this restricted period commonly called?

• A. A cooling-off period before the registration statement is filed
• B. A blackout period on all firm trading
• C. A quiet period restricting post-IPO research publication
• D. A lockup period preventing insiders from selling shares

100. An underwriter agrees to purchase an entire new issue of securities from the issuer at a set price and resell it to the public, bearing the risk of any unsold shares. Which underwriting arrangement does this describe?

• A. Firm commitment underwriting
• B. Best efforts underwriting
• C. All-or-none underwriting
• D. Standby underwriting