The Series 24 exam is the General Securities Principal Qualification exam designed by the Financial Industry Regulatory Authority (FINRA) to test the general knowledge of managers as it relates to rules and regulations within a broker dealer environment.
There are five sections on the Series 24 test, with a total of 150 multiple-choice questions. Ten pretest questions are distributed throughout the exam to monitor the performance of new questions on the exam. Test takers are given three hours and forty-five minutes to complete the exam, with a 70% score necessary to pass the exam. The Series 24 is computer based with immediate performance results on each section provided.
There are many ways to prepare for the exam, for example, by studying sample test questions using study guides or attending a formal testing center. Although test questions are modified periodically to keep pace with industry trends, it is the test taker’s responsibility to keep current with changing rules and regulations in the industry.
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The Supervision of Investment Banking, Underwriting Activities, and Research section has thirty-three questions on the topics such as issuer requirements, public offerings, transactions exempt from the registration requirements of the Securities Act of 1933, shelf distributions, mergers and acquisitions, securities distribution, underwriting, distributions, tender offers, FINRA/National Association of Securities Dealers (NASD) rules, research, regulatory filings, communications, and antitrust regulations.
The second part of the exam is about supervision of trading and market making activities, which covers topics on NASDAQ sand over-the-counter (OTC) securities, market requirements, marketplace rules and transaction reporting, requirements for NASDAQ market makers, and quotation and execution requirements. A test taker should be knowledgeable with New York Stock Exchange (NYSE) trading regulations and trading protocols.
The third part of the Series 24 exam is about supervision of brokerage office operations, which deals with client accounts, documentation, custodial accounts, and accounts as they relate to deceased and incompetent persons. This section of the test has questions on nonqualified retirement plans, regulations, and margin requirements. Clearing procedures and FINRA/NASD practices are required.
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The fourth section of the test is the sales supervision and general supervision of employees section, which has topics on general securities definitions, prohibitions, regulations on deceptive devices, registration and regulations of brokers and dealers, distributions and redemptions, the Sarbanes Oxley Act, sales literature, and insider trading.
The last section of the Series 24 is on compliance and financial responsibility rules. There are fourteen questions on registration and regulations of broker dealers, accounts and records, Securities Investor Protection Corporation (SIPC) rules, FINRA/NASD conduct rules, and NASD Rule 3140.
The Series 24 exam is comprehensive and tests very specific areas of supervision. It is a closed-book test, and severe penalties are imposed on candidates who are found cheating on the exam.
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by Enoch Morrison | Last Updated: January 9, 2019