Financial and Operations Principal Exam
The Series 27 exam qualifies candidates to serve as a Financial and Operations Principal (FINOP) at a FINRA member broker-dealer. FINOPs are responsible for the firm's financial and regulatory reporting, net capital compliance, customer protection obligations, and overall operational integrity. This role is typically held by the CFO, COO, or a designated financial officer who ensures the firm meets all SEC and FINRA financial responsibility rules.
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Practice Questions
Test your knowledge with these Series 27-style questions. Click an answer to check if you are correct.
1. Under the aggregate indebtedness standard, a broker-dealer's aggregate indebtedness may not exceed what ratio to its net capital?
Correct: C. Under the aggregate indebtedness standard of SEC Rule 15c3-1, a broker-dealer's aggregate indebtedness (total liabilities) cannot exceed 15 times its net capital. If the ratio exceeds this level, the firm must take immediate action to reduce indebtedness or increase capital.
2. How often must a broker-dealer that carries customer accounts compute the customer reserve formula under SEC Rule 15c3-3?
Correct: B. Most broker-dealers that carry customer accounts must compute the customer reserve formula on a weekly basis, as of the close of the last business day of the week. The required deposit must be made by the following Tuesday (one business day after computation). Some smaller firms may qualify for monthly computation.
3. What is the standard haircut applied to equity securities under the net capital rule?
Correct: C. Under SEC Rule 15c3-1, equity securities (stocks) are subject to a standard 15% haircut, which is deducted from their market value in the net capital computation. This reflects the potential for price decline in the securities position. Government securities receive smaller haircuts, while less liquid securities may receive larger ones.
4. SIPC coverage provides protection up to what maximum amount per customer?
Correct: C. SIPC protects customers of failed broker-dealers up to $500,000 per customer, of which no more than $250,000 may be for cash claims. SIPC does not protect against market losses -- it only covers the loss of securities and cash due to a broker-dealer's financial failure.
5. Which of the following is considered a non-allowable asset in the net capital computation?
Correct: C. Non-allowable assets are items that cannot be readily converted to cash and must be deducted from net worth in the net capital computation. Office furniture and equipment (fixed assets) are non-allowable. Other non-allowable assets include prepaid expenses, goodwill, and unsecured receivables. Cash, Treasury securities, and properly secured customer receivables are allowable assets.
Related Exams
The Series 27 is often held alongside other principal-level registrations at a broker-dealer firm.
General Securities Principal
Covers the supervisory and compliance side of broker-dealer management. Often held in conjunction with the Series 27 by senior firm officers.
General Securities Representative
A typical prerequisite before pursuing the Series 27. The Series 7 provides the foundational securities knowledge upon which FINOP responsibilities are built.