Series 27 in FINRA Exams

The Series 27 is the Financial and Operations Principal Qualification Examination administered by the Financial Industry Regulatory Authority. Passing it qualifies you to serve as a Financial and Operations Principal, known as a FINOP, at a broker-dealer. Every broker-dealer that carries customer accounts or holds customer funds must designate a licensed FINOP. Without one, the firm cannot legally operate in the United States.

Think of the FINOP as the chief financial compliance officer of the brokerage.

What a FINOP Actually Does

The Financial and Operations Principal is responsible for the financial health and regulatory compliance of the broker-dealer's operations. The job involves four core responsibilities.

• Financial reporting: Approving and filing the Financial and Operational Combined Uniform Single report, known as the FOCUS report, with the Securities and Exchange Commission and the Financial Industry Regulatory Authority. This report summarizes the firm's balance sheet, income, and net capital position.
• Net capital compliance: Monitoring daily net capital under Securities Exchange Act Rule 15c3-1. If the firm's net capital falls below required minimums, the FINOP must notify regulators immediately.
• Customer protection: Overseeing the firm's compliance with the Customer Protection Rule, Securities Exchange Act Rule 15c3-3, which governs the segregation of customer assets from firm assets.
• Books and records: Supervising the integrity of the firm's financial records under Securities Exchange Act Rules 17a-3 and 17a-4.

Who Qualifies to Take It

There is no corequisite exam required to take the Series 27, which makes it different from most Financial Industry Regulatory Authority principal exams. However, most candidates come through the Series 7 pathway because the Series 27 role is typically paired with other principal functions at the firm. You must be associated with and sponsored by a Financial Industry Regulatory Authority member firm, which files a Form U4 on your behalf.

The Exam Structure

The Series 27 exam consists of 145 multiple-choice questions across five job function areas. You have three hours and 45 minutes to complete it. The passing score is 70%. The exam fee charged by the Financial Industry Regulatory Authority is $120.

The five content areas are financial reporting and recordkeeping, regulatory reporting, operations and fundamentals, customer protection rules and disclosures, and supervisory and management activities. The operations and fundamentals section carries the largest weighting.

Series 27 vs. Series 28

The Series 28 is the introducing broker-dealer version of the same Financial and Operations Principal license. It covers a narrower set of rules appropriate for firms that do not hold customer accounts or settle their own trades. The Series 28 exam has 95 questions instead of 145 and takes less time to prepare for. If your firm is a self-clearing broker-dealer or holds customer funds, you need the Series 27, not the Series 28.

Preparing typically requires 80 to 100 hours of study. The material covers Generally Accepted Accounting Principles, Financial Accounting Standards Board statements, Securities Exchange Act regulations, and Financial Industry Regulatory Authority rules. Unlike most securities licensing exams, the Series 27 is heavily quantitative and formula-based.

Sources:

• https://www.finra.org/registration-exams-ce/qualification-exams/series27
• https://www.innreg.com/blog/series-27-license-guide
• https://smartasset.com/investing/series-27
• https://finrapracticetests.com/series-27/