Introduction
Hello and welcome to the wonderful world of securities licensing exams. As you may know, FINRA member firms that carry customer accounts or hold customer funds or securities or operate as municipal securities brokers are required to have at least one associated person, at a minimum the chief financial officer, who is responsible for firm record-keeping.
Broker-dealers that have a minimum net capital requirement of $250,000 and municipal securities brokers that have a minimum net capital requirement of $150,000 under SEC Rule 15c3-1 must register this person as a “Limited Principal—Financial and Operations,” or FINOP. In addition to overseeing a firm’s books and records, a FINOP is also responsible for making sure a broker-dealer complies with financial responsibility rules and for supervising back office operations.
FINRA requires anyone who wants to be a FINOP at a firm that holds funds or securities to register as a Limited Principal and pass the Financial and Operations Principal Qualification Examination (Series 27). The 150-question Series 27 exam consists of 145 scored questions and 5 additional “unscored” questions that are randomly distributed throughout the exam. The unscored questions are ones that FINRA is trying out. You get 3 hours and 45 minutes to take the exam, and you need a 69% to pass. Like other FINRA exams, there is no penalty for guessing, so test-takers should answer every question. Unlike other principal level exams, the Series 27 has no prerequisite exam. You simply need to know the relevant rules and how to apply them.
FINRA divides the Series 27 exam into five “functions.” For purposes of clarity, we have organized this text into five sections, as follows. The corresponding “function” is identified in parentheses:
- • Section One—Net Capital (Function 4 on the FINRA outline)—41 questions
- • Section Two—Customer Protection (Function 3 on the FINRA outline)—24