Operations Professional Qualification Exam
The Series 99 exam qualifies individuals to perform operations functions at FINRA member firms. It covers the knowledge required for settlement and clearing, trade processing, account administration, margin and lending operations, corporate actions, regulatory reporting, and maintaining books and records. The exam also tests professional conduct and ethical standards expected of operations professionals. This exam requires the SIE exam and firm sponsorship.
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Key Concepts
The standard settlement cycle for most securities is T+1 (trade date plus one business day). The DTCC (Depository Trust & Clearing Corporation) is the primary infrastructure for post-trade processing in the U.S. markets. Its subsidiaries include the NSCC (National Securities Clearing Corporation), which handles clearing and settlement through continuous net settlement, and the DTC (Depository Trust Company), which provides custody and asset servicing.
When a trade fails to settle on time, it results in a fail-to-deliver (seller's side) or fail-to-receive (buyer's side). SEC Regulation SHO requires close-out of fails-to-deliver in equity securities, and persistent fails can trigger trading restrictions. Operations professionals must monitor and resolve settlement exceptions to minimize risk and regulatory exposure.
SEC Rule 17a-3 specifies the records that broker-dealers must create and maintain, including trade blotters, general ledger, customer account records, order tickets, confirmations, and customer complaint files. SEC Rule 17a-4 specifies retention periods for these records.
Key retention periods include: trade blotters and general ledger must be kept for 6 years, customer account records for 6 years after account closure, communications (correspondence and emails) for 3 years, and order tickets for 3 years. Records must be maintained in a non-rewritable, non-erasable format (WORM -- Write Once, Read Many). Operations professionals must ensure compliance with these requirements and be prepared for regulatory examinations.
SEC Rule 15c3-3 (the Customer Protection Rule) requires broker-dealers to safeguard customer assets. It has two main requirements: the possession or control requirement, which mandates that fully paid and excess margin securities be in the firm's physical possession or control, and the reserve formula, which requires firms to maintain a special reserve bank account for the exclusive benefit of customers.
The reserve computation must be performed weekly, and any deficit must be deposited by the following business day. This rule ensures that customer assets are protected in the event of a broker-dealer failure and are not used for the firm's proprietary activities. Operations professionals play a critical role in ensuring daily compliance with these requirements.
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Key Concepts
The Bank Secrecy Act (BSA) requires financial institutions to maintain AML programs that include: a system of internal controls, designation of an AML compliance officer, ongoing employee training, and independent testing of the program. Operations professionals must understand their role in detecting and reporting suspicious activity.
Key reporting requirements include: Suspicious Activity Reports (SARs) must be filed within 30 days of detecting suspicious activity (no dollar minimum for broker-dealers), and Currency Transaction Reports (CTRs) must be filed for cash transactions exceeding $10,000. Firms must also screen against the OFAC (Office of Foreign Assets Control) sanctions list and implement a Customer Identification Program (CIP) to verify customer identities at account opening.
The Securities Investor Protection Corporation (SIPC) protects customers of failed broker-dealers by returning securities and cash held in customer accounts. SIPC coverage is up to $500,000 per customer, including a maximum of $250,000 for cash claims.
Important limitations: SIPC does not protect against investment losses due to market decline -- it only covers the return of missing assets when a broker-dealer fails. SIPC does not cover commodity futures, fixed annuity contracts, or investment contracts not registered with the SEC. Operations professionals must ensure that customer account structures maximize SIPC protection and that customers understand the scope and limits of coverage.
Study Tips for the Series 99 Exam
- Focus heavily on Section 1. At 70% of the exam, securities industry knowledge and BD operations dominates. Settlement, clearing, trade processing, and books and records will make up the bulk of questions.
- Know the settlement cycle inside and out. Understand T+1 settlement, the role of DTCC/NSCC/DTC, fail scenarios, and how corporate actions affect settlement dates. These are core operations concepts.
- Master record retention periods. Know which records must be retained for 3 years vs 6 years under SEC Rules 17a-3 and 17a-4. Expect several questions testing specific retention requirements.
- Understand AML thoroughly. AML is tested across both sections. Know SAR and CTR filing requirements, CIP obligations, OFAC screening, and common red flags for suspicious activity.
- Learn the Customer Protection Rule. SEC Rule 15c3-3 is fundamental to operations. Understand the possession/control requirement, the reserve formula, and how customer assets must be segregated.
- Practice under timed conditions. With 55 questions in 90 minutes, you have about 1.6 minutes per question. The questions are generally straightforward if you know the material, so focus on thorough preparation rather than test-taking strategy.
Practice Questions
Test your knowledge with these Series 99-style questions. Click an answer to check if you are correct.
1. The standard settlement cycle for equity securities traded on a U.S. exchange is:
Correct: B. The standard settlement cycle for most U.S. securities is T+1 (trade date plus one business day). This was shortened from T+2 to reduce counterparty and systemic risk in the settlement process.
2. Under SEC Rule 17a-4, trade blotters must be retained for a minimum of:
Correct: C. Trade blotters, general ledgers, and customer account records must be retained for 6 years under SEC Rule 17a-4. Correspondence and order tickets are retained for 3 years. The first 2 years of all retained records must be kept in an easily accessible location.
3. SIPC coverage protects customers up to what maximum amount per account?
Correct: B. SIPC protects customers up to $500,000 per account, with a $250,000 sublimit for cash claims. SIPC covers the return of missing assets when a broker-dealer fails but does not protect against market losses.
4. A Currency Transaction Report (CTR) must be filed for cash transactions exceeding:
Correct: C. Under the Bank Secrecy Act, a CTR must be filed for cash transactions exceeding $10,000. Firms must also be alert to structuring -- the practice of breaking up transactions to avoid the $10,000 reporting threshold, which is itself a violation.
5. SEC Rule 15c3-3 requires broker-dealers to:
Correct: B. SEC Rule 15c3-3 (the Customer Protection Rule) requires broker-dealers to maintain possession or control of fully paid and excess margin securities and to maintain a special reserve bank account for the exclusive benefit of customers. The net capital requirement is covered by a separate rule (15c3-1).
Related Exams
These exams are commonly pursued alongside or before the Series 99.
Securities Industry Essentials
The prerequisite for the Series 99. Covers fundamental concepts of securities products, markets, regulatory agencies, and prohibited practices.
General Securities Representative
Operations professionals who want to expand into client-facing roles often pursue the Series 7 for general securities representative qualification.