Series 99 Practice Exam

1. A clearing firm's obligations in a single security across many trades are offset into one net long or short position for settlement. What is this process called?

• A. Continuous net settlement
• B. Trade-for-trade settlement
• C. Prime brokerage give-up
• D. Payment versus payment

2. Which US Treasury office maintains the list of Specially Designated Nationals against which firms screen customers and transactions?

• A. The Financial Industry Regulatory Authority
• B. The Municipal Securities Rulemaking Board
• C. The Securities Investor Protection Corporation
• D. The Office of Foreign Assets Control

3. A customer's Regulation T payment obligation is not met by the required date and no extension is obtained. What is the standard consequence?

• A. The position is liquidated and the account is frozen for 90 days
• B. The account is closed permanently
• C. The firm must absorb the loss with no customer consequence
• D. The trade is cancelled as though it never occurred

4. Two individuals hold a joint account. On the death of one, the survivor takes the entire account. Which registration is this?

• A. Joint tenants with right of survivorship
• B. Tenants in common
• C. Custodial account under UTMA
• D. Transfer on death with a named beneficiary

5. Before a customer's first options transaction, what must the firm deliver, and by when must the options account agreement be returned?

• A. The options disclosure document at or before account approval, with the agreement returned within 15 days of approval
• B. The options disclosure document within 30 days after the first trade
• C. A prospectus for each option contract before every trade
• D. Nothing, because listed options are exempt from disclosure requirements

6. Which SEC rule establishes the minimum liquid capital a broker-dealer must maintain to remain in business?

• A. Rule 10b-5, the antifraud rule
• B. Rule 15c3-3, the customer protection rule
• C. Rule 17a-4, the records retention rule
• D. Rule 15c3-1, the net capital rule

7. A customer sells short 500 shares. Under Regulation SHO, what must the broker-dealer do before effecting the short sale?

• A. Have reasonable grounds to believe the security can be borrowed and delivered, known as the locate requirement
• B. Obtain written SEC approval for the short sale
• C. Confirm the customer holds an equal long position elsewhere
• D. Wait until the security has advanced on an uptick

8. An investor holds a fixed-income product and is concerned that the purchasing power of its future payments may decline over time. Which type of risk is this concern describing?

• A. Inflation (purchasing-power) risk
• B. Default risk
• C. Liquidity risk
• D. Reinvestment risk of principal at maturity

9. A firm receives currency of 15,000 dollars from a single customer in one business day. Which report is generally required?

• A. A Currency Transaction Report, because aggregate currency exceeded 10,000 dollars in one day
• B. A Suspicious Activity Report, because any currency receipt is inherently suspicious
• C. No report, because the threshold is 25,000 dollars
• D. A Form U4 amendment

10. Which entity maintains the issuer's record of registered shareholders and processes transfers of registered ownership?

• A. The transfer agent
• B. The clearing corporation
• C. The introducing broker
• D. The market maker

11. Which organization acts as the central securities depository holding immobilized certificates and effecting book-entry movement of securities between participants?

• A. The National Securities Clearing Corporation
• B. The Depository Trust Company
• C. The Municipal Securities Rulemaking Board
• D. The Options Clearing Corporation

12. What information must appear on a customer trade confirmation at or before completion of the transaction?

• A. The firm's projected price target for the security
• B. Whether the firm acted as agent or principal, along with the security, quantity, price and trade date
• C. The registered representative's personal position in the security
• D. The identity of the contra party in every agency transaction, without exception

13. When evaluating the risk profile of an investment product, which characteristic generally increases the potential for greater price volatility?

• A. A shorter time to maturity for a fixed-income instrument
• B. Higher sensitivity of the product's value to changes in market conditions
• C. A guaranteed principal return backed by an insurer
• D. A fixed, contractually stated coupon paid at par

14. A brokerage firm fails and a customer's securities cannot be located. What is the maximum SIPC protection per customer, and how much of that may be for cash?

• A. 500,000 dollars total, of which up to 250,000 dollars may be for cash
• B. 500,000 dollars total, of which up to 500,000 dollars may be for cash
• C. 250,000 dollars total, of which up to 100,000 dollars may be for cash
• D. 1,000,000 dollars total, with no separate cash sublimit

15. Which situation best illustrates liquidity risk in an investment product?

• A. Inflation erodes the real value of future fixed payments
• B. The product cannot be sold quickly without accepting a significantly lower price
• C. Rising interest rates reduce the market value of the product
• D. The product's issuer defaults on a scheduled payment

16. A firm must reconcile its records of securities positions against the depository's records. How often is this reconciliation typically performed for active positions?

• A. Daily, so breaks are identified and resolved promptly
• B. Annually, at the fiscal year end
• C. Only when a customer disputes a statement
• D. Every three years, in line with records retention

17. Which statement correctly pairs two published characteristics of the Series 99 examination?

• A. It contains 50 scored questions and requires a passing score of 68 percent
• B. It contains 75 scored questions and requires a passing score of 70 percent
• C. It contains 100 scored questions and requires a passing score of 68 percent
• D. It contains 50 scored questions and requires a passing score of 72 percent

18. Which statement best describes the difference between a cash account and a margin account?

• A. A cash account requires full payment for purchases, while a margin account permits borrowing part of the purchase price from the firm
• B. A cash account permits short selling, while a margin account does not
• C. A margin account requires full payment, while a cash account permits borrowing
• D. The two are identical except for the interest rate charged

19. Securities held by a broker-dealer in its own name on behalf of customers, rather than registered in each customer's name, are said to be held in what form?

• A. Street name
• B. Direct registration
• C. Legend form
• D. Bearer form

20. A customer purchases 10,000 dollars of marginable stock in a new margin account. Under Regulation T, what is the initial margin requirement?

• A. 5,000 dollars, or 50 percent
• B. 2,500 dollars, or 25 percent
• C. 3,000 dollars, or 30 percent
• D. 10,000 dollars, or 100 percent

21. Which self-regulatory organization writes the rules that govern broker-dealer conduct in municipal securities, even though it has no examination or enforcement arm of its own?

• A. The Municipal Securities Rulemaking Board
• B. The Financial Industry Regulatory Authority
• C. The Securities Investor Protection Corporation
• D. The Federal Reserve Board

22. A stock is quoted 24.10 bid, 24.18 ask. A customer places a market order to sell 100 shares. Ignoring commissions, at approximately what price should the order execute?

• A. 24.10, the bid
• B. 24.18, the ask
• C. 24.14, the midpoint
• D. 24.28, the ask plus the spread

23. A broker-dealer computes the amount owed to customers versus amounts receivable from customers and deposits any excess into a special account for the exclusive benefit of customers. What is this computation called?

• A. The customer reserve formula computation
• B. The net capital computation
• C. The margin maintenance computation
• D. The trial balance reconciliation

24. Which organization issues, guarantees and clears listed options contracts in the United States?

• A. The Financial Industry Regulatory Authority
• B. The Depository Trust Company
• C. The Options Clearing Corporation
• D. The Securities Investor Protection Corporation

25. A firm lends fully paid customer securities to another broker-dealer. What is required of the firm?

• A. A written fully paid lending agreement with the customer and collateral maintained for the loan
• B. Nothing, because fully paid securities may be lent at the firm's discretion
• C. Prior approval of each loan by the SEC
• D. Conversion of the customer's account to a cash account

26. A representative is comparing two products. Which factor most directly reflects credit (default) risk rather than market risk?

• A. The likelihood that the issuer will fail to meet its payment obligations
• B. The degree to which the product's price moves with broad market indices
• C. The ease with which the product can be sold without a large price concession
• D. The effect of general interest-rate changes on the product's price

27. Which type of order becomes a market order only once the security trades at or through a specified price, and carries no price protection thereafter?

• A. A stop order
• B. A limit order
• C. A stop-limit order
• D. A fill-or-kill order

28. A customer instructs their broker-dealer to move an entire brokerage account to another firm. Which system automates the transfer, and what is the typical validation timeframe for the carrying firm?

• A. ACATS; the carrying firm generally must validate or take exception within one business day
• B. ACATS; the carrying firm has thirty calendar days to validate
• C. CNS; the carrying firm validates on settlement date
• D. FINRA CRD; the receiving firm validates within five business days

29. An operations associate is processing a customer's purchase of a mutual fund. At what price is the order executed under forward pricing?

• A. The next net asset value computed after the order is received
• B. The net asset value computed at the close of the prior business day
• C. The average net asset value over the preceding five days
• D. A price negotiated between the customer and the distributor

30. A corporate action in which shareholders may choose between receiving cash or additional shares is best described as which type?

• A. A voluntary corporate action requiring an election from the holder
• B. A mandatory corporate action with no holder involvement
• C. A mandatory action with options that the issuer selects
• D. A reorganization requiring SEC pre-approval of each election

31. A customer's account holds a free credit balance. What obligation does the firm have with respect to those funds?

• A. Promptly pay them out on demand and disclose how they are used while held
• B. Invest them in the firm's proprietary account for the customer's benefit
• C. Retain them permanently as compensation for account maintenance
• D. Transfer them to the clearing corporation each night

32. Under SEC Rule 15c3-3, the customer protection rule, what must a broker-dealer do with fully paid and excess margin securities?

• A. Sell them if the customer does not trade for twelve months
• B. Maintain physical possession or control of them, segregated from the firm's own assets
• C. Transfer them to the firm's proprietary trading account weekly
• D. Pledge them as collateral for the firm's own borrowings

33. A customer wishes to transfer only certain positions rather than an entire account to another firm. Within ACATS, what is this type of transfer called?

• A. A partial transfer
• B. A full transfer with residual credit
• C. A position netting
• D. A give-up

34. Property in an account with no owner contact for a statutory dormancy period must generally be turned over to a state authority. What is this process called?

• A. Rehypothecation
• B. Subrogation
• C. Escheatment
• D. Netting

35. A clearing firm carries accounts introduced by another broker-dealer on a fully disclosed basis. Which firm generally holds customer funds and securities and issues the confirmations and statements?

• A. The clearing firm
• B. The introducing firm
• C. Both firms jointly, in equal shares
• D. Neither; the depository holds them and issues statements

36. Which market participant quotes both a bid and an offer and stands ready to buy and sell a security for its own account?

• A. A market maker
• B. An introducing broker
• C. A transfer agent
• D. A custodian bank

37. A customer holds a long margin position with a market value of 40,000 dollars and a debit balance of 32,000 dollars. Using the 25 percent FINRA maintenance requirement, is the account in a maintenance call?

• A. Yes, because equity of 8,000 dollars is below the 10,000 dollar requirement
• B. No, because equity of 8,000 dollars exceeds the 25 percent of the debit balance
• C. No, because maintenance is measured against the original purchase price
• D. Yes, because the debit balance exceeds 50 percent of market value

38. A firm delivers securities to a counterparty but the counterparty does not deliver payment on settlement date. From the delivering firm's perspective, what has occurred?

• A. A fail to receive on the cash side, arising because delivery versus payment did not complete
• B. A short sale requiring a locate
• C. A corporate action requiring an election
• D. An escheatment event

39. Under SEC Rules 17a-3 and 17a-4, blotters, general ledgers and customer account records must generally be preserved for how long?

• A. One year in any location
• B. Permanently, with no accessibility requirement
• C. Three years, with the first year in an easily accessible place
• D. Six years, with the first two years in an easily accessible place

40. An issuer declares a 3-for-2 stock split. A customer holds 400 shares. How many shares does the customer hold after the split, and what happens to any fractional entitlement?

• A. 600 shares, with no fraction arising in this case
• B. 266 shares, with a fraction paid in cash
• C. 1,200 shares, with no fraction
• D. 400 shares, because splits affect only the price

41. A broker-dealer's stock record shows, for a given security, a long position of 10,000 shares and a short position of 9,900 shares. What does this indicate?

• A. A 100-share break that must be researched and resolved
• B. A normal condition requiring no action
• C. That the firm owes a customer a dividend
• D. That the firm must file a Suspicious Activity Report

42. A customer buys 100 shares of a listed common stock in a cash account on a Tuesday. Under the standard settlement cycle now in effect for US equities, when does regular-way settlement occur?

• A. Wednesday, one business day after the trade date
• B. Thursday, two business days after the trade date
• C. Friday, three business days after the trade date
• D. The same day, because listed equities settle on trade date

43. Under a T+1 settlement cycle, what is the relationship between a dividend's ex-date and its record date?

• A. The ex-date is two business days before the record date
• B. They fall on the same business day
• C. The ex-date is one business day after the record date
• D. The ex-date is one business day before the record date

44. A customer exercises a long equity call option. What is the standard settlement for the resulting stock position relative to the exercise date?

• A. The stock trade settles on the standard equity settlement cycle following exercise
• B. The stock position settles the same day the option is exercised
• C. The stock position settles five business days after exercise
• D. No stock position results; only cash is exchanged

45. US Treasury bills are issued at a discount and mature at face value. How is the investor's return realized?

• A. As the difference between the discounted purchase price and the face value at maturity
• B. Through semiannual coupon payments
• C. Through quarterly dividends declared by the Treasury
• D. Through a variable rate reset every 90 days

46. A firm's daily record of all purchases and sales of securities, receipts and deliveries, and cash movements is known as what?

• A. The blotter
• B. The stock record
• C. The trial balance
• D. The customer statement

47. A customer's account is charged interest on a debit balance carried in a margin account. Which document must the customer have received explaining the terms of margin borrowing?

• A. The margin disclosure statement and the credit agreement
• B. The official statement
• C. The options disclosure document
• D. The Form ADV Part 2

48. A firm is budgeting the enrollment cost for an associate who must register for the Series 99 qualification exam. What is the published cost of the exam?

• A. $50
• B. $75
• C. $100
• D. $150

49. An associated person's registration is terminated. Within what period must the member file a Form U5, and what is the general record retention period for the form?

• A. Within 30 days of termination, and the form is retained for at least three years
• B. Within 90 days of termination, retained for one year
• C. Within 10 business days, retained for six years
• D. No filing is required if the person leaves voluntarily

50. A new customer opens a brokerage account and refuses to provide a Social Security number or taxpayer identification number, saying she will supply it "after the first trade settles." Under the Customer Identification Program (CIP) requirements that a broker-dealer must apply at account opening, what is the firm's proper course?

• A. Open the account and permit trading, since CIP only requires that identity be verified within a reasonable time after opening.
• B. Obtain the required identifying information before the account is opened, and follow the firm's written CIP procedures for what happens if the information cannot be obtained or verified.
• C. Open the account as a cash-only account, because CIP applies only to margin accounts.
• D. Open the account and file a Currency Transaction Report in place of the missing identification.

51. A firm's general ledger shows a suspense entry that has been open for several weeks because operations cannot determine which account a received payment belongs to. What is the correct treatment from a books-and-records and financial-responsibility standpoint?

• A. The item must be researched and cleared promptly, and while unresolved it must be reflected in the firm's records and treated conservatively in the firm's financial computations
• B. The item may remain in suspense indefinitely as long as it is disclosed in the next annual audited financial statement
• C. The item should be credited to the firm's income account, since an unclaimed receipt is firm revenue
• D. The item should be removed from the general ledger and tracked only on a departmental spreadsheet until the owner is identified

52. A member firm's operations department is reviewing its currency transaction reporting procedures. A customer makes a single cash deposit that exceeds the reporting threshold set by the Bank Secrecy Act. Which statement about the firm's obligation is correct?

• A. The firm must file a currency transaction report with FinCEN for the transaction, using the threshold and deadline published in the applicable regulations
• B. The firm must notify the customer that a currency transaction report is being filed and obtain the customer's consent
• C. No report is required because broker-dealers are exempt from currency transaction reporting; only banks must file
• D. The firm may satisfy the requirement by noting the deposit on the customer's next account statement

53. During a monthly reconciliation, an operations associate finds that the firm's stock record shows 500 more shares of a security long than the total of the positions confirmed by the depository, the transfer agent and the firm's vault count. What is the correct characterization and immediate operational step?

• A. It should be cleared by adjusting the depository's records to agree with the firm's stock record
• B. It is immaterial, because the stock record is an internal document with no regulatory standing
• C. It is a short difference that should be netted against an unrelated long difference in another security so the overall stock record balances
• D. It is an unreconciled difference that must be researched and resolved through the firm's books-and-records process, and until resolved it may affect the firm's net capital and reserve computations

54. An operations associate is unsure whether an unusual instruction from a registered representative is permissible. What is the appropriate action?

• A. Process it and document the concern afterward
• B. Process it, because the representative owns the customer relationship
• C. Refuse it without explanation and take no further step
• D. Escalate to a supervisor or compliance before processing

55. A customer complaint is received in writing alleging a sales practice violation. What is the firm's basic obligation?

• A. Record the complaint, retain it, and report it to FINRA in accordance with the reporting rule
• B. Resolve it verbally with the customer and destroy the correspondence
• C. Forward it directly to the SEC and take no internal action
• D. Take no action unless the customer files an arbitration claim

56. Under a firm's Customer Identification Program, which information must generally be obtained for a new individual customer before opening an account?

• A. Name, date of birth, physical address and an identification number such as a taxpayer identification number
• B. Only the customer's name and email address
• C. Name, employer and estimated annual trading volume
• D. Name and a signed acknowledgment of the firm's privacy notice

57. Under the FINRA rule addressing financial exploitation of specified adults, what may a member do when it reasonably believes exploitation is occurring?

• A. Take no action, since firms have no authority to delay customer instructions
• B. Liquidate the account and remit proceeds to the trusted contact
• C. Place a temporary hold on a disbursement and notify the trusted contact, subject to the rule's conditions
• D. Transfer the account to a firm officer's control indefinitely

58. Under Regulation S-P, what must a broker-dealer provide to customers regarding personal financial information?

• A. An initial and annual privacy notice, with an opportunity to opt out of certain information sharing
• B. A quarterly report listing every party that received the customer's data
• C. Written consent before any internal use of customer information
• D. Nothing, because broker-dealers are exempt from privacy requirements

59. A firm receives a customer's check made payable to a third party rather than to the firm or the customer's account. What is the appropriate operational response?

• A. Decline the item and escalate, because third-party payments raise money laundering and misappropriation concerns
• B. Deposit it into the customer's account and note the third party in the file
• C. Deposit it into the firm's operating account
• D. Return it to the customer without any internal record

60. A customer dies holding an individual account. What is the appropriate operational treatment of open orders in the account?

• A. Cancel open orders and freeze the account pending required documentation
• B. Execute all open orders immediately to protect the estate
• C. Transfer the account to the registered representative's discretion
• D. Continue accepting instructions from the deceased customer's spouse

61. An operations associate is asked to open an account for a customer who wishes to grant trading authority to a third party. What document is required?

• A. A written trading authorization or power of attorney from the account owner
• B. A verbal instruction noted in the account file
• C. A Form U4 for the third party
• D. A Suspicious Activity Report identifying the third party

62. An associated person wants to accept a gift from a vendor seeking the firm's business. Under FINRA's gifts rule, what annual limit generally applies per person?

• A. 500 dollars per recipient per year
• B. 50 dollars per recipient per year
• C. 100 dollars per recipient per year
• D. There is no limit if the gift is disclosed

63. A registered representative sells a security to a customer at a price above the prevailing market and charges an undisclosed markup well beyond industry norms. Which principle is violated?

• A. The fair prices and commissions requirement, historically the 5 percent policy
• B. The net capital rule
• C. The customer identification program
• D. Regulation SHO

64. An operations associate notices a customer wiring funds in from multiple unrelated third parties and immediately requesting withdrawals with almost no trading. What is the appropriate response?

• A. Close the account without notifying anyone at the firm
• B. Contact the customer to explain that a Suspicious Activity Report will be filed
• C. Escalate to the AML compliance function for evaluation and possible Suspicious Activity Report filing
• D. Take no action unless a single transaction exceeds 10,000 dollars

65. An operations professional coordinates the firm's annual due diligence on a third-party vendor that prints and mails customer confirmations. Which finding should most clearly prompt escalation before the contract is renewed?

• A. The vendor has relocated its printing facility to a different state
• B. The vendor has begun subcontracting the mailing function to a fourth party the firm has never assessed
• C. The vendor raised its per-piece pricing above the prior year's rate
• D. The vendor replaced its account relationship manager

66. Under Regulation S-P, a broker-dealer must provide customers with notice of its privacy policies and a reasonable opportunity to opt out before disclosing nonpublic personal information to a nonaffiliated third party. Which arrangement falls within an exception, so that no opt-out opportunity is required?

• A. Providing customer names and account balances to an unaffiliated insurance agency that wishes to market annuities
• B. Providing customer information to a clearing firm so it can process and settle the customers' securities transactions
• C. Selling a list of customer email addresses to an unaffiliated financial newsletter publisher
• D. Providing customer information to an unaffiliated marketing consultant retained to design a general brand campaign

67. An operations professional drafts a plain-language letter explaining an upcoming change to the firm's settlement and delivery procedures and plans to mail it to the firm's entire retail customer base. A colleague says the letter is purely administrative and therefore outside FINRA Rule 2210. The most accurate view is that:

• A. The letter is exempt, because it does not promote a product or service
• B. The letter is a communication with the public subject to Rule 2210's content standards and the rule's approval, recordkeeping and, where applicable, filing requirements
• C. The letter is institutional communication because it originates in operations rather than sales
• D. The letter needs no review, because operations personnel are not permitted to make recommendations

68. A customer emails an operations associate: "Your firm's transfer department lost my securities and I want my money back." The associate believes the transfer was processed correctly and that the customer is simply confused. What should the associate do?

• A. Reply to the customer explaining the transfer was correct, and take no further action because no valid grievance exists
• B. Treat the email as a customer complaint and forward it through the firm's escalation channel, because whether a written grievance is meritorious is not the associate's determination to make
• C. Wait to escalate until the customer submits the grievance on the firm's official complaint form
• D. Escalate only if the customer states a specific dollar amount of loss

69. A firm's beneficial owner mailing vendor is preparing a proxy distribution. The issuer has requested contact information for the beneficial owners of its shares held in street name at the firm. Which group's identifying information may the firm supply to the issuer?

• A. Only the NOBO group — those beneficial owners who have not objected to disclosure of their name, address and holdings
• B. Only the OBO group, since objecting owners have already been identified to the firm
• C. Both groups, because proxy distribution is a corporate-governance purpose exempt from customer confidentiality
• D. Neither group; issuers may never obtain beneficial owner identities from a carrying firm

70. An operations associate is assembling a package of new account documents to send to an outside clearing vendor over the internet. The package contains customer names, account numbers and Social Security numbers. Under Regulation S-P's safeguards requirement, the associate's firm must primarily have in place which of the following?

• A. Written policies and procedures reasonably designed to protect the security and confidentiality of customer records and information
• B. A signed written consent from each customer before any record containing a Social Security number leaves the firm's premises
• C. An annual certification from the vendor that it will not experience a data breach
• D. A requirement that all customer records be transmitted only in paper form by courier

71. During a routine review of wire instructions, an operations associate notices that a long-dormant account has suddenly begun requesting a series of outbound wires to a jurisdiction with no connection to the customer's file, each request arriving by email in unusually terse language. The associate is uncertain whether this is a real concern. What is the appropriate action?

• A. Call the customer at the telephone number given in the most recent email to confirm the instructions
• B. Escalate the observation through the firm's established escalation channel to compliance or the designated principal
• C. Process the wires, since each one was authorized in writing by the accountholder of record
• D. Wait to see whether the pattern continues over the next several statement cycles before raising it

72. A customer telephones the operations desk to complain that a transfer was mishandled. The associate resolves the matter on the call to the customer's satisfaction and makes no written record. Under FINRA Rule 4513, which statement is most accurate?

• A. An oral complaint resolved on the call need not be recorded in the complaint file maintained under Rule 4513
• B. Every expression of dissatisfaction, oral or written, must be entered in the Rule 4513 complaint file
• C. The complaint must be recorded in the Rule 4513 file only if the customer refuses the resolution offered
• D. The complaint must be recorded in the Rule 4513 file because it concerned the handling of customer assets

73. An operations professional at a member firm is asked by the firm's marketing group to review a retail communication that will be posted on the firm's public website describing the firm's mutual fund platform. The operations professional notices the piece quotes a fund's performance but omits any mention of fees. Under FINRA Rule 2210, what is the governing standard the operations professional should apply?

• A. The communication is acceptable because performance figures are supplied by the fund company, which bears responsibility for their accuracy
• B. The communication must be fair and balanced, provide a sound basis for evaluating the facts, and may not omit material information that would make it misleading
• C. The communication is acceptable so long as it carries a disclaimer stating that past performance does not guarantee future results
• D. The communication only needs to be fair and balanced if it is distributed to more than the number of retail investors specified in the rule's correspondence threshold

74. An operations professional in a firm's corporate actions group learns, in the course of processing the paperwork, that an issuer whose shares the firm carries for customers will announce an unannounced merger next week. A friend asks the professional what is going on with that stock. What is the professional's obligation?

• A. The professional may discuss it because operations personnel do not have customer-facing duties and therefore owe no confidentiality
• B. The professional may share the information if the friend agrees not to trade on it
• C. The professional must keep the information confidential and treat it under the firm's information barrier and personal trading policies, because access to material nonpublic information arises from the job, not the job title
• D. The professional may share it once the firm's trading desk has completed its own positioning in the security

75. A member firm's operations group is documenting its Regulation S-ID identity theft prevention program. The group asks who is responsible for the program and how it is maintained. Which statement is correct?

• A. The program must be approved by the board or an appropriate committee or designated senior management, and updated periodically to reflect changes in risk
• B. The program is a compliance department document and requires no approval outside compliance
• C. Once approved, the program is fixed and may be amended only when a regulator directs a change
• D. The program applies only to accounts opened after its adoption date

76. A member firm's operations department wants to begin accepting customer instructions through a third-party consumer messaging application because several customers prefer it. The application does not permit the firm to capture or archive the message content. What is the principal supervisory obstacle to approving this channel?

• A. FINRA prohibits firms from communicating with customers by any electronic method other than firm-issued email
• B. The firm cannot supervise, retain, or produce communications it is unable to capture, so the channel cannot be approved as configured
• C. The channel is permissible if each customer signs a written acknowledgment waiving the firm's recordkeeping obligations
• D. The channel is permissible for operational messages such as address changes but not for anything touching securities business

77. An operations professional passed the SIE and then took a two-year leave of absence during which no registration was maintained, and now wishes to return to an Operations Professional role at a member firm. Which statement is accurate about the qualification requirements?

• A. A passing SIE result is valid for four years, so the SIE remains available to satisfy the corequisite when combined with the Series 99
• B. The SIE must be retaken because a passing SIE result expires after two years
• C. Passing the Series 99 alone confers the Operations Professional registration; the SIE is only a prerequisite for representative-level registrations
• D. The individual may resume operations duties immediately and complete any outstanding qualification exams within the first year of employment

78. An operations department is clearing out a storage room that contains printed consumer report information and old account applications bearing customer Social Security numbers. A supervisor proposes placing the boxes in the building's general recycling bin because the documents are past the firm's retention period. Under Regulation S-P, the best response is that:

• A. General recycling is acceptable once the retention period has run, because the records no longer need to be produced
• B. The firm must take reasonable measures to protect against unauthorized access in connection with the disposal, such as shredding or burning the paper records
• C. The records may be recycled if the firm first sends affected customers an opt-out notice
• D. Disposal is permitted only after each affected customer consents in writing

79. A member firm's operations group is preparing a year-end mailing to accounts held in street name. The firm must decide which customers' names and addresses it may release to an issuer that has requested them for a corporate communication. Which distinction determines that decision?

• A. Whether each customer has objected to disclosure of their name and address — objecting beneficial owners are withheld, while non-objecting beneficial owners may be provided
• B. Whether the account is a margin account or a cash account, since only margin customers' identities may be released
• C. Whether the customer has traded the issuer's security within the current calendar year
• D. Whether the issuer has agreed to reimburse the member firm for the cost of the mailing

80. A vendor that provides a member firm's trade reconciliation software asks the firm to sign an amended master agreement that would let the vendor store the firm's customer account files on servers operated by an unnamed fourth-party subcontractor. What is the firm's primary obligation before signing?

• A. None; once a vendor is onboarded, the firm's due diligence obligation is complete for the life of the relationship
• B. Conduct due diligence on the arrangement, including the downstream subcontractor's safeguarding of customer information, because outsourcing the activity does not outsource the firm's responsibility
• C. Obtain written consent from each affected customer before any vendor may process account data
• D. Register the vendor and the subcontractor with FINRA as associated persons of the firm

81. An operations professional at a broker-dealer receives a call from a person who identifies himself as the son of an elderly customer. He asks the firm to confirm the customer's current account balance and the address on file, explaining that he manages his father's affairs. He is not named on the account and no third-party authorization is on file. What should the operations professional do?

• A. Confirm only the address, since a mailing address is not financial information
• B. Decline to disclose any account information and refer the caller to the firm's procedures for establishing third-party authority
• C. Provide the balance but not the address, because balances change daily and are not permanent records
• D. Provide the information if the caller can state the customer's date of birth correctly

82. A member firm engages a cloud vendor to host images of customer account applications, which include Social Security numbers. During due diligence, which finding should most concern the firm's operations and compliance staff?

• A. The vendor's contract contains no confidentiality or information-security obligations and no restriction on the vendor's reuse of the data
• B. The vendor's data centers are located in more than one geographic region
• C. The vendor charges per gigabyte rather than a flat annual subscription fee
• D. The vendor's software was written in a programming language the firm's technology staff does not use internally

83. An asset manager directs brokerage commissions from client trades to a broker-dealer that, in return, supplies the manager with proprietary equity research reports. The arrangement is a soft dollar arrangement. Which characteristic is essential for it to fall within the safe harbor?

• A. The manager must rebate an equivalent cash amount to the clients whose commissions paid for the research
• B. The broker-dealer must execute the trades at the lowest commission rate available anywhere in the market
• C. The research must be made available to the broker-dealer's retail customers at the same time
• D. The products or services obtained must be brokerage or research services that provide lawful and appropriate assistance in the manager's investment decision-making, and the commissions must be reasonable in relation to their value

84. A member firm's internal review concludes that an associated person in the operations department misappropriated funds from a firm suspense account. Under FINRA Rule 4530, what is the firm's reporting posture?

• A. The firm must report the event to FINRA within the period the rule prescribes, and reporting is required even though the firm itself, not a customer, suffered the loss
• B. No report is required because no customer was harmed and the firm absorbed the loss internally
• C. A report is required only if the associated person is criminally charged by a prosecutor
• D. The obligation is satisfied by noting the matter in the firm's complaint file under FINRA Rule 4513

85. An operations professional maintains the firm's complaint file under FINRA Rule 4513. A customer's written complaint is received and resolved the same week by refunding a disputed fee. What must the firm's record reflect?

• A. The complaint must be recorded with the required identifying and disposition information and retained for the period the rule prescribes, notwithstanding the prompt resolution
• B. No entry is required, because a complaint resolved within the same week is not an unresolved grievance
• C. An entry is required only if the customer declines the refund and repeats the complaint in writing
• D. The entry may be deleted once the refund clears, because retaining resolved complaints overstates the firm's complaint history

86. A member firm wants to compensate an individual who is not registered with the firm for referring institutional clients whose accounts have generated commissions. The firm proposes to pay the referrer a share of those commissions. The proposal is problematic primarily because:

• A. Transaction-based compensation for securities business generally may be paid only to registered persons and registered entities
• B. Institutional clients may not be solicited by referral in any form
• C. The payment would have to be reported as a customer complaint
• D. Referral fees are permissible only if the referrer holds an Operations Professional registration

87. An operations associate notices that a registered representative has, on three occasions, asked the cashiering desk to expedite disbursements to a third party on an elderly customer's account and has twice supplied the withdrawal form already signed. The associate raises it with their immediate supervisor, who says the representative is a top producer and to "let it go." The associate's next step should be to:

• A. Defer to the supervisor, who is the designated escalation point in the chain of command
• B. Stop processing the representative's tickets without notifying anyone, to avoid alerting the representative
• C. Escalate the matter through another channel identified in the firm's written supervisory procedures, such as compliance or the AML officer
• D. Contact the customer directly to ask whether the disbursements were authorized

88. While processing an address change, an operations professional notices that the request arrived by email from an address that does not match the one on file, the new address is a mail drop, and a request to wire funds out of the account arrived two days later. Under the firm's identity theft prevention program required by Regulation S-ID, these observations are best characterized as:

• A. Red flags that the program requires the firm to detect and respond to appropriately
• B. Suspicious activity that must be reported to the customer before any further processing occurs
• C. Irrelevant to the identity theft program, which applies only to new account openings
• D. Conclusive evidence of identity theft requiring immediate closure of the account

89. A customer's monthly statement is returned as undeliverable. Two days later the firm receives a telephone request, purportedly from the same customer, to add a new bank account for outgoing wires. Under the identity theft prevention program contemplated by Regulation S-ID, what is the correct characterization of these two events?

• A. They are red flags that the firm's program should detect, and the program must provide for an appropriate response, such as heightened verification before acting
• B. They are conclusive evidence of identity theft, so the firm must close the account and file a report before any further contact with the customer
• C. They are relevant only if the customer later disputes the wire, because Regulation S-ID governs after-the-fact remediation
• D. They fall outside Regulation S-ID because returned mail is a postal matter, not a covered account event

90. An operations professional who joined a member firm this year passed the Series 99 and the SIE and is now registered as an Operations Professional. Which statement about the professional's ongoing continuing education obligation is correct?

• A. An Operations Professional is exempt from the Regulatory Element because the registration does not involve contact with retail customers
• B. Continuing education is satisfied entirely by the firm's Firm Element training, with no separate FINRA-administered component
• C. The Regulatory Element must be completed annually by December 31 for each registration category held, and a registration that remains inactive for two consecutive years is administratively terminated
• D. The Regulatory Element is required only in the second year after initial registration and every three years thereafter

91. A member firm logs several customer complaints during a calendar quarter. None of them alleges theft, forgery or a violation that the firm has concluded occurred. Which statement best describes the firm's obligation under FINRA Rule 4530?

• A. No reporting is required, because reporting is triggered only by allegations of theft or misappropriation
• B. The firm must still report statistical and summary information about the quarter's customer complaints to FINRA on the periodic schedule FINRA publishes
• C. The firm must report each complaint individually as an event as soon as it is received
• D. Reporting is required only if the customer also files an arbitration claim

92. A member firm learns that an associated person in its operations department has been charged with a felony involving misappropriation of funds at a prior employer. Under FINRA Rule 4530, what is the firm's obligation?

• A. No obligation arises unless and until the associated person is convicted
• B. The firm must report the event to FINRA within the period the rule prescribes, because the rule reaches specified criminal charges, not only convictions
• C. The obligation belongs solely to the prior employer, where the alleged conduct occurred
• D. The firm satisfies the rule by noting the matter in the associated person's personnel file for examiner review

93. An operations professional routinely answers customer service questions by text message from a personal mobile phone because the firm's approved messaging platform is slow. The messages concern account transfers and disbursement status. Which statement is most accurate?

• A. The practice is acceptable, because operations personnel do not make recommendations and the texts contain no investment advice
• B. The practice is acceptable, because personal devices are the property of the associate and outside the firm's supervisory reach
• C. Business-related communications must be conducted through channels the firm can supervise and retain, regardless of the device or application used
• D. The practice is acceptable if the associate forwards a summary of each conversation to the firm's email system

94. An operations professional is classifying data elements for the firm's privacy program. Which of the following is NOT nonpublic personal information under Regulation S-P?

• A. The fact that an individual is a customer of the firm, learned from the account-opening process
• B. A customer's listed residential telephone number, obtained from a widely distributed public directory
• C. A customer's account balance as shown on the firm's monthly statement
• D. A list of customers derived from the firm's account records, even if it contains only names

95. An operations professional is configuring the firm's Regulation S-ID identity theft prevention program. Which of the following best describes what the program must do with the red flags it identifies?

• A. Report every identified red flag to FINRA before the account may be reopened
• B. Detect the red flags, respond appropriately to prevent and mitigate identity theft, and update the program periodically as risks change
• C. Freeze any account exhibiting a red flag until the customer appears in person with government-issued identification
• D. Refer each red flag to the firm's clearing firm, which owns the program for introduced accounts

96. Under Regulation S-P, a broker-dealer wants to share a customer's account number and transaction history with a nonaffiliated marketing company so the marketer can promote its own products to that customer. What does Regulation S-P principally require of the firm?

• A. Nothing, because account numbers are not nonpublic personal information
• B. The firm must provide the required privacy notice and a reasonable opportunity to opt out before disclosing nonpublic personal information to a nonaffiliated third party, and separate limits apply to disclosing account numbers for marketing
• C. The firm may disclose freely so long as the marketer signs a confidentiality agreement, which removes the information from the rule's scope
• D. The firm must obtain the customer's affirmative written consent in every case before any information may be shared with any third party

97. A customer calls an operations desk and says: "I need you to liquidate everything today and wire it to an overseas account — my grandson is in jail and his lawyer says we have to pay tonight, and please don't tell my daughter, she's listed on my account." The customer is 84 and has never previously requested a wire. Which response is best?

• A. Process the wire as instructed, since the account holder has authority over the account and the request is unambiguous
• B. Refuse the transaction outright and close the account to protect the customer
• C. Recognize the pattern as a red flag of potential financial exploitation and escalate it under the firm's procedures before the funds move
• D. Call the daughter first and act on whatever instruction she gives instead

98. A registered representative at a member firm delivers two tickets to a professional sporting event to an operations manager at a mutual fund's transfer agent, hoping to speed up the processing of the firm's transfer requests. Under FINRA Rule 3220, the gifts and gratuities rule, what governs whether this is permissible?

• A. The gift is subject to an annual per-recipient value limit set by FINRA, and the firm must keep a record of the gift; the current dollar limit is published by FINRA
• B. Gifts to employees of a transfer agent are unrestricted because a transfer agent is not a customer of the member firm
• C. Any gift is permissible provided the recipient's employer does not have a written policy prohibiting gifts
• D. Entertainment and gifts are treated identically under the rule, so tickets are always prohibited regardless of value

99. An operations associate at a member firm is asked by a state securities examiner, who has arrived unannounced, to provide immediate access to customer account records. The associate has never handled a regulatory request before. What is the associate's correct course of action?

• A. Provide the records immediately, because regulators are entitled to firm books and records on demand and any delay obstructs the examination
• B. Decline to acknowledge the request and refer the examiner to the firm's outside counsel without notifying anyone internally
• C. Provide only the records for accounts the associate personally processes, since the associate can verify only those
• D. Escalate the request promptly to a supervisor or the compliance department, which handles regulatory requests under the firm's written procedures

100. A member firm acts as transfer agent for a small issuer and, in that capacity, holds the issuer's list of registered securityholders. The firm's retail marketing group asks the operations department for the list so it can mail an invitation to open brokerage accounts. Under FINRA Rule 2060, what should the operations professional do?

• A. Release the list, because the firm lawfully possesses it and the mailing is not a securities recommendation
• B. Decline to release the list for solicitation purposes unless the issuer has authorized that use
• C. Release the list only after a registered principal approves the mailing as a retail communication
• D. Release the list once the names of any institutional holders are removed