Introduction
Hello and welcome to the wonderful world of securities licensing exams. As you may know, FINRA member firms that solicit or accept orders but do not carry customer accounts or hold customer funds or securities are called introducing broker-dealers. Even though introducing broker-dealers don’t hold customer funds or clear and execute their own trades, just like carrying broker-dealers, regulators require introducing broker-dealers to have at least one associated person (e.g., the chief financial officer) who is responsible for firm record-keeping. This person must register as a “Limited Principal—Introducing Broker-Dealer Financial and Operations,” or Introducing Broker-Dealer FINOP. In addition to overseeing a firm’s books and records, an Introducing Broker-Dealer 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 an introducing broker-dealer to register as a Limited Principal and pass the Introducing Broker-Dealer Financial and Operations Principal Examination (Series 28). You get two hours to answer the 95 questions on the Series 28 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 28 has no “unscored” questions, nor does it have a prerequisite exam. You simply need to know the relevant rules and how to apply them.
FINRA divides the Series 28 exam into four “functions.” For purposes of clarity, we have organized this text into four sections, as follows. The corresponding “function” is identified in parentheses:
- • Section One—Net Capital (Function 3 on the FINRA outline)—31 questions
- • Section Two—Customer Protection, Funding and Cash Management (Function 4 on the FINRA outline)—18 questions
- • Section