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Financial Services · Series 24

FINRA Series 24 – General Securities Principal Exam Practice Test

The FINRA Series 24 – General Securities Principal Exam addresses supervision of broker-dealer securities activities and the controls principals use to protect customers and support compliant operations. Practice topics include reviewing recommendations and trading, responding to suspected misconduct, handling customer information and legal requests, maintaining records, and updating supervisory procedures as business practices change.

Exam overview

Exam providerFinancial Industry Regulatory Authority
Exam codeSeries 24
CategoryFinancial Services

About the FINRA Series 24 – General Securities Principal Exam

A principal must identify when an activity requires review, determine what evidence to preserve, and direct an appropriate response through the firm’s supervisory process. Relevant judgment includes assessing possible signature falsification, unauthorized disclosure of account data, unsuitable or excessive trading, and errors in order entry. Supervisory work also involves evaluating third-party data-processing arrangements, reviewing customer-specific recommendation documentation, and deciding how to handle subpoenas before records are produced. Questions in the available bank further address whether proposed borrowing between a representative and customer requires procedural review, and how written supervisory procedures should reflect new referral practices. These scenarios emphasize escalation, documentation, customer protection, and controls that make decisions traceable. Practice can help you distinguish an immediate containment or correction step from a broader investigation, procedural update, or documented review.

Sample Practice Questions

Review a selection from this exam's published US Practice Tests practice bank.

Question 1

A firm discovers that a representative has been sharing confidential customer account information with an unauthorized person. What should the firm do first?

  1. AAssess and contain the disclosure, preserve relevant evidence, and escalate promptly through the firm’s privacy and compliance processes.
  2. BDelete the messages immediately so the information cannot be shared again.
  3. CWait to act until the customer files a written complaint.
  4. DNotify all customers of the firm before determining what information was involved.
Show answerCorrect answer: A

A prompt, coordinated response can limit further exposure while preserving evidence needed to assess the incident. The firm should follow its incident-response procedures and determine notification obligations based on the facts and applicable requirements.

Question 2

A firm plans to retain a third-party provider to process customer account data. Which supervisory consideration is most appropriate?

  1. AThe firm’s obligations end once the provider signs a confidentiality agreement.
  2. BThe firm should evaluate the provider’s controls, define responsibilities, and monitor the arrangement while protecting customer information.
  3. CThe firm should give the provider unrestricted access so it can respond quickly to any request.
  4. DThe firm may rely on the provider to decide which regulatory requirements apply to the firm.
Show answerCorrect answer: B

Using a service provider does not remove the firm’s responsibility to oversee the activity. Risk-based due diligence, clear contractual responsibilities, monitoring, and appropriate safeguards for customer information are prudent controls.

Question 3

A member firm discovers that a registered representative may have falsified customer signatures on account documents. What is the most appropriate initial supervisory response?

  1. AWait for the customer to file a complaint before taking action
  2. BPromptly investigate, preserve relevant records, and assess whether reporting or other action is required
  3. CHave the representative correct the documents without documenting the change
  4. DTransfer the representative’s customers to another representative and close the matter
Show answerCorrect answer: B

A firm should promptly investigate red flags, preserve relevant evidence, and determine appropriate customer-protection, supervisory, and reporting steps. Quietly altering records or waiting for a complaint can worsen the risk and undermine the review.

Question 4

A principal reviews a proposed municipal securities transaction and discovers that the firm has not documented the basis for its customer-specific recommendation. What is the best response before the recommendation is made?

  1. ARequire the representative to establish and document a reasonable basis for the recommendation in light of the customer’s circumstances.
  2. BApprove the recommendation because municipal securities are generally considered conservative.
  3. CPermit the recommendation if the customer has previously bought municipal securities.
  4. DRely solely on the issuer’s offering materials as evidence that the recommendation is suitable.
Show answerCorrect answer: A

Recommendations should have a reasonable basis and be evaluated in light of the customer’s investment profile and the security’s relevant features and risks. A product label, prior purchase, or offering document alone does not establish that a particular recommendation is appropriate.

Question 5

A firm’s annual review shows that its written supervisory procedures do not address a newly adopted business practice involving customer referrals through social media. What should the firm do?

  1. AEvaluate the activity’s risks and update procedures and training as appropriate before relying on them to supervise the practice.
  2. BContinue the practice unchanged because the annual review did not identify customer losses.
  3. CTreat the activity as outside the firm’s supervision because it occurs on a social platform.
  4. DDelete references to the practice from the review to avoid creating additional obligations.
Show answerCorrect answer: A

Written supervisory procedures should address the firm’s actual business activities and associated risks. When a practice changes or a gap is identified, the firm should assess the exposure and revise controls and training as needed; the platform used does not eliminate supervisory responsibility.

Question 6

A member firm receives a subpoena seeking records relating to a customer account. What is the most appropriate initial step for the firm?

  1. ASend all requested records directly to the requesting party without review
  2. BPromptly refer the subpoena to the firm’s designated legal or compliance personnel for review and response
  3. CNotify the customer that the firm will not respond unless the customer consents
  4. DDestroy records that are not routinely maintained in paper form
Show answerCorrect answer: B

A subpoena should be handled through the firm’s established legal and compliance process so the firm can assess its scope, validity, deadlines, and any applicable confidentiality or preservation requirements. The firm should not ignore it, destroy responsive records, or disclose information without appropriate review.

Question 7

A principal reviewing a representative’s trading notices a pattern of frequent in-and-out transactions in a customer’s account, with substantial costs and no apparent change in the customer’s objectives. What is the best next step?

  1. AAssess the activity in context, review suitability and customer impact, and document supervisory follow-up
  2. BAssume the activity is acceptable because every trade was authorized
  3. CWait until the account has a net loss before reviewing it
  4. DIncrease the trading frequency to determine whether the pattern continues
Show answerCorrect answer: A

Frequent trading can raise concerns about excessive activity and customer harm even when individual orders were authorized. The principal should evaluate relevant facts such as account objectives, trading costs, turnover, and customer circumstances, then document and escalate the review as appropriate.

How to use this practice test

Access is free. Each session presents up to 20 random questions from the available 50-question Series 24 bank, with results shown after the session. Use the scenarios to practice selecting a defensible supervisory response, then review any missed decisions involving escalation, documentation, transaction correction, or procedure updates.

Preparation tips

  • For suspected customer-signature falsification or unauthorized disclosure, identify the immediate containment and escalation steps before considering later discipline or remediation.
  • Practice tracing a customer recommendation from its documented basis through principal review, including whether the rationale is recorded before the recommendation is made.
  • Compare possible responses to an order-entry error discovered before execution; distinguish correcting the order from documenting and reviewing the error.
  • For subpoenas and third-party data processors, identify what records or customer information are involved and which firm controls must be assessed before action.
  • Review how annual supervisory procedure assessments should incorporate new business practices, such as customer referrals through social media.
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