Series 24 Practice Exam

1. 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

2. 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

3. 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

4. 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.

5. 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.

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. A portfolio manager rotates sector weightings, increasing exposure to consumer staples and utilities while reducing exposure to cyclical industrials, based on a view that the economy is entering a contraction. What is this practice generally called?

• A. Sector rotation based on the business cycle
• B. Tax-loss harvesting
• C. Dividend reinvestment
• D. Dollar-cost averaging

13. 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

14. A client's primary objectives are preservation of principal and immediate access to funds for an expense expected within a few months. Which product BEST aligns with these objectives, and what trade-off does it involve?

• A. A long-term corporate bond fund, trading higher credit risk for income
• B. A money market fund, accepting a comparatively low return in exchange for stability and liquidity
• C. A small-capitalization growth stock fund, accepting volatility for growth potential
• D. A sector-concentrated equity fund, accepting business risk for potential appreciation

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. A client owns 100 shares of a stock that has appreciated substantially. The client fears a near-term decline but wants to keep the upside if the stock continues to rise. Which strategy BEST fits this objective?

• A. Write a covered call against the shares
• B. Buy a put on the stock
• C. Sell the shares now to lock in the gain
• D. Buy additional shares to increase the position

22. 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

23. 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

24. 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

25. 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

26. Interest rates decline sharply and homeowners across the country refinance their mortgages. Which risk does this scenario create for an investor holding a mortgage-backed pass-through security?

• A. Prepayment risk — principal is returned earlier than expected and must be reinvested at the new, lower rates
• B. Extension risk — principal is returned later than expected, lengthening the security's effective life
• C. Default risk — widespread refinancing signals that borrowers are in financial distress
• D. Liquidity risk — the security can no longer be traded once mortgages are refinanced

27. 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

28. 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

29. 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

30. A retiree holds a diversified portfolio of money market fund shares intended to serve as an emergency cash reserve. During a period of severe credit market stress, one of the fund's underlying commercial paper holdings defaults. What risk has this event exposed?

• A. Interest rate risk causing the fund's share price to rise above $1.00
• B. Credit risk within the fund's holdings, which can threaten the fund's ability to maintain a stable net asset value
• C. Currency risk from foreign-denominated holdings
• D. Reinvestment risk from an early bond call

31. A municipal issuer sells variable rate demand notes (VRDNs) that reset their interest rate periodically and give the holder the right to tender the notes back to a remarketing agent at par on short notice. What feature MOST directly supports the notes' liquidity for investors?

• A. The periodic put option allowing the holder to tender the notes back at par
• B. Federal deposit insurance on the principal
• C. A fixed long-term maturity with no early redemption feature
• D. Mandatory conversion into common stock at maturity

32. An investor purchases a collateralized mortgage obligation and selects a tranche that is structured to receive principal payments only after several senior tranches have been fully repaid. Compared with the senior tranches, this tranche is MOST exposed to which risk?

• A. Extended and less predictable timing of principal repayment
• B. No exposure to mortgage prepayment activity
• C. Lower credit risk than the senior tranches
• D. Guaranteed principal repayment on a fixed schedule

33. A client purchases an equity-indexed annuity that credits interest based on a stock index's performance but caps the maximum credited return at 6% per year, regardless of how much the index gains. Which trade-off does this cap represent?

• A. Unlimited downside exposure in exchange for unlimited upside
• B. Immediate loss of principal if the index falls below the cap
• C. A limit on upside participation in exchange for principal protection from market declines
• D. Conversion of the annuity into a variable life insurance policy

34. A closed-end fund's shares are trading on an exchange at $18 per share, while the fund's underlying net asset value per share is calculated at $20. What does this relationship describe?

• A. The fund is trading at a premium to NAV
• B. The fund is trading at a discount to NAV
• C. The fund's shares are about to be delisted
• D. The fund is required to redeem shares at $20

35. A U.S. investor purchases an American Depositary Receipt representing shares of a company based in an emerging market. Beyond ordinary stock price risk, which additional risks does this investment MOST directly carry?

• A. None, because ADRs trade exclusively in the issuer's home currency
• B. Only interest rate risk, since ADRs are debt instruments
• C. Only reinvestment risk from dividend payments
• D. Currency risk and the political and economic risk of the issuer's home country

36. A bank loan fund invests in floating-rate senior secured loans made to below-investment-grade corporate borrowers. Compared with a fixed-rate high-yield bond fund, the floating-rate fund is generally LESS exposed to which risk, while remaining similarly exposed to credit risk?

• A. Liquidity risk in a stressed credit market
• B. Default risk of the underlying borrowers
• C. Risk of loss if a borrower enters bankruptcy
• D. Interest rate risk, because the loans' coupons reset periodically with market rates

37. A client in a high tax bracket purchases units of a publicly traded master limited partnership within an individual retirement account. Which tax consideration should the client be MOST aware of in this specific account type?

• A. Unrelated business taxable income (UBTI) generated by the MLP could create a tax liability within the IRA
• B. MLP distributions are always tax-free in any account type
• C. The IRA custodian will automatically convert the units into common stock
• D. MLP income is exempt from all federal taxation when held in a retirement account

38. An investor purchases Treasury STRIPS, which are stripped zero-coupon obligations backed by the U.S. government, in a taxable brokerage account. Even though no cash interest is received until maturity, what tax treatment applies each year the STRIPS are held?

• A. The entire gain is taxed as a capital gain only in the year of maturity
• B. No taxable income arises until the STRIPS are sold or mature
• C. STRIPS held in a taxable account are entirely tax-exempt
• D. The investor generally owes tax annually on imputed (phantom) interest as the discount accretes

39. A client redeems a bank certificate of deposit before its stated maturity date because of an unexpected cash need. What is the MOST likely financial consequence of this early redemption?

• A. The client incurs an early withdrawal penalty, typically forfeiting a portion of accrued or credited interest
• B. The CD automatically converts into a savings bond
• C. The client receives a bonus for early redemption
• D. The bank forfeits the client's principal above FDIC limits

40. A client owns a variable annuity in the accumulation phase and is reviewing the contract's annual charges, which include mortality and expense risk fees, administrative fees, and subaccount management fees. What is the cumulative effect of these layered charges on the contract?

• A. They are refunded in full at the time of annuitization
• B. They reduce the net investment return credited to the client's subaccount values over time
• C. They eliminate the contract's surrender charge
• D. They guarantee a minimum rate of return regardless of subaccount performance

41. An investor sells a put option on a stock without owning an offsetting short position or sufficient cash reserved to purchase the shares if assigned. If the stock price falls sharply and the option is exercised against the investor, what is the MOST direct consequence?

• A. The investor receives the shares for free
• B. The investor's maximum loss is limited to the premium received
• C. The option expires worthless regardless of the stock's price
• D. The investor is obligated to buy the shares at the strike price, which may be well above the current market price

42. An investor believes a stock is about to make a large price move but is uncertain of the direction, so the investor simultaneously buys a call and a put on the same stock with the same strike price and expiration. What is this options strategy called, and what is its primary risk?

• A. A covered call; the risk is unlimited loss if the stock rises
• B. A long straddle; the risk is losing both premiums if the stock fails to move enough in either direction
• C. A protective put; the risk is loss of dividend income
• D. A bull call spread; the risk is early assignment

43. A corporation issues warrants attached to a bond offering, each warrant entitling the holder to purchase common stock at a fixed price over an extended period, often several years. If the stock never rises above the warrant's exercise price during that period, what happens to the warrants?

• A. They expire worthless, and the holder loses the value paid for them
• B. The issuer must repurchase them at face value
• C. They are exchanged for preferred stock at maturity
• D. They automatically convert into additional bonds

44. A client's portfolio is heavily concentrated in publicly traded equity and mortgage REITs across multiple sponsors. Despite this diversification across sponsors, what risk remains largely unmitigated?

• A. Company-specific management risk at each individual REIT
• B. Concentration risk tied to the overall real estate and interest rate sensitivity common to the REIT sector
• C. Currency risk from international real estate holdings
• D. The risk that REIT dividends will be classified as tax-exempt income

45. An investor buys shares of an actively managed open-end mutual fund and later decides to redeem the shares. At what price will the redemption be executed?

• A. The fund's next calculated net asset value per share after the redemption order is received
• B. The prior day's closing exchange price
• C. A price negotiated directly between the investor and another shareholder
• D. The fund's initial public offering price

46. A client purchases a private placement security under an exemption from registration. Compared with a registered, exchange-listed security, what risk is MOST heightened for the client?

• A. Excessive daily price volatility from high trading volume
• B. Mandatory dividend payments the issuer cannot reduce
• C. Automatic principal guarantee from the placement agent
• D. Limited resale opportunities due to transfer restrictions and the absence of a public trading market

47. 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

48. 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

49. 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

50. 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

51. 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

52. 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.

53. 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

54. 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

55. 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

56. 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

57. 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

58. A trader at a broker-dealer learns that the firm's institutional desk is about to execute a large block order in a stock that will likely move the market price. Before that order is entered, the trader buys shares in a personal account to profit from the anticipated price impact. What is this practice called?

• A. Dollar-cost averaging
• B. Front running
• C. Hedging
• D. Arbitrage

59. Near the close of trading, a trader enters a series of small purchase orders in a thinly traded stock specifically intended to push the closing price higher than it would otherwise be. What manipulative practice does this describe?

• A. Dollar-weighted averaging
• B. Marking the close
• C. Best execution
• D. Stop-loss triggering

60. 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

61. A customer opens a new margin account and purchases $10,000 of marginable stock under Regulation T's standard initial margin requirement. Approximately how much of the purchase must the customer deposit from their own funds, absent any special account restrictions?

• A. Approximately $1,000
• B. Approximately $2,500
• C. Approximately $5,000
• D. Approximately $7,500

62. A trader wants to sell a stock short. Before entering the order, the firm must have reasonable grounds to believe the security can be borrowed and delivered by settlement date. What requirement does this describe?

• A. The net capital requirement for broker-dealers
• B. The suitability requirement for options accounts
• C. The best execution requirement for retail orders
• D. The locate requirement under short sale rules

63. A representative exercises discretion in a customer's account, deciding the security, quantity, and timing of trades, without having first obtained written authorization from the customer and without the account being approved as discretionary by a principal. What is the status of this activity?

• A. It is permitted as long as the trades are profitable
• B. It is permitted if disclosed to the customer after the fact
• C. It is a prohibited unauthorized exercise of discretion
• D. It is permitted for accounts under $10,000 in value

64. 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

65. A registered representative wants to maintain a personal brokerage account at a firm other than their employer. Before opening that outside account, what is the representative generally required to do?

• A. Notify the employing firm in writing and provide it the opportunity to receive duplicate account statements or confirmations
• B. Obtain written consent from every customer whose account they service
• C. Close all accounts at their employing firm first
• D. Nothing, since personal accounts are not subject to any employer notification

66. A customer buys securities in a cash account but does not pay for them within the required settlement period, and before paying, sells the same securities for a profit. What prohibited practice has occurred?

• A. Position limit violation
• B. Short-and-distort trading
• C. Free-riding
• D. Late trading of mutual fund shares

67. A brokerage firm's new account form requires customer securities to be held in the name of the brokerage firm rather than the customer's own name, with the firm maintaining internal records of beneficial ownership. What is this registration arrangement called?

• A. Street name registration
• B. Transfer on death registration
• C. Joint tenancy registration
• D. Custodial registration under UTMA

68. 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

69. 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

70. 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

71. 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

72. 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

73. 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

74. 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

75. 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

76. 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

77. 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

78. 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

79. 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

80. 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

81. 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

82. 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

83. 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

84. 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

85. 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

86. 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

87. 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

88. 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

89. 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

90. 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

91. 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

92. 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

93. 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

94. 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

95. 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

96. 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

97. 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

98. 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

99. 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

100. 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