Series 24 Practice Questions (2026) — Free Sample Questions with Answers

Answer: D

File notice within 24 hours and continue normal business: Incorrect. A 24-hour notice applies to early-warning levels, such as net capital below 120% of the minimum ($300,000 here); $240,000 is an actual deficiency.

Report the deficiency on its next FOCUS report: Incorrect. Waiting for the next FOCUS filing ignores the immediate notice requirement.

Restore capital within 10 business days, then notify regulators: Incorrect. No cure period is allowed before notice; notice is due the same day.

Notify the SEC and FINRA the same day and stop doing business: Correct. Under SEA Rule 17a-11(b), a firm whose net capital falls below the minimum must give notice to the SEC and its DEA that same day. Under Rule 15c3-1 it may not continue a securities business while deficient.

A net capital deficiency requires same-day notice and cessation of business; early-warning levels require notice within 24 hours.

Answer: C

1. Exclude business entertainment: the representative hosted and attended the dinner, so the $250 is not a gift.
2. Exclude the logo pen: promotional items of nominal value bearing the firm's logo do not count.
3. Value the tickets at the higher of cost or face: $110 paid exceeds $80 face, so $110.
4. Gifts counted: $45 + $110 = $155.
5. Remaining under the $300 limit: $300 − $155 = $145.

$0: Incorrect. This counts the dinner, but business entertainment hosted by the representative is not a gift under Rule 3220.

$139: Incorrect. This counts the logo pen, but promotional items of nominal value displaying the firm's logo are excluded.

$145: Correct. Only the book ($45) and the tickets count. Tickets are valued at the higher of cost or face value, so $110. Total $155, leaving $300 − $155 = $145 under Rule 3220.

$175: Incorrect. This values the tickets at face ($80) instead of the higher $110 cost.

Rule 3220 caps gifts at $300 per person per year; tickets count at the higher of cost or face, while hosted entertainment and nominal logo items are excluded.

Answer: A

Approve or disapprove; if approved, supervise it as a firm trade: Correct. Under Rule 3280(c), when the representative will receive selling compensation, the member must approve or disapprove in writing. If approved, the transaction must be recorded on the firm's books and supervised as if executed for the firm.

Acknowledge the notice in writing; no ongoing supervision is required: Incorrect. Written acknowledgment, possibly with conditions, is the treatment for transactions without selling compensation; the 5% fee makes the full approval-and-supervision regime apply.

Treat it as an outside business activity needing only prior notice: Incorrect. Selling securities away from the firm is a private securities transaction under Rule 3280, not merely an outside business activity under Rule 3270.

Approve it and leave supervision of the sales to the sponsor: Incorrect. Once the firm approves a compensated private securities transaction, Rule 3280(c) requires the firm itself to record and supervise it as its own; that duty cannot be handed to the sponsor.

Rule 3280: with selling compensation the firm approves or disapproves and, if approved, records and supervises the transaction as its own; without compensation it acknowledges in writing and may impose conditions.

Answer: B

Inspect by video, documenting why travel was impractical: Incorrect. Documented remote inspections were allowed under temporary relief that has expired; only pilot participants may inspect remotely now.

Inspect on-site, because the firm is not a pilot participant: Correct. Firms that do not participate in the Rule 3110.18 pilot (which runs to June 30, 2027) may not inspect remotely and must conduct on-site inspections of each location due.

Inspect remotely, as allowed for non-supervising branches: Incorrect. Outside the Rule 3110.18 pilot, no category of branch office, including non-supervising branches, may be inspected remotely; the three-year cycle still requires an on-site inspection.

Inspect remotely if the branch manager certifies compliance: Incorrect. A manager's certification is not a substitute for an independent inspection and does not permit remote inspection.

Remote inspections are available only to firms in the Rule 3110.18 pilot (through June 30, 2027); other firms inspect on-site.

Answer: D

Approve it if the assistant documents all testing in work papers: Incorrect. Thorough documentation does not cure the conflict; the inspector is still supervised by the branch manager.

Have the branch manager perform it, since he is a principal: Incorrect. Rule 3110(c)(3) specifically bars the branch office manager from inspecting his own branch.

Approve it if the OSJ principal countersigns the inspection report: Incorrect. A countersignature adds review but leaves the inspection itself conducted by someone the branch manager supervises.

Assign a principal from outside the branch's supervisory chain: Correct. Rule 3110(c)(3) requires procedures preventing conflicts that compromise inspections; the branch manager and persons he supervises should not inspect the branch. A 40-office firm cannot claim it is too limited in size, so an independent principal should do it.

Inspections must be independent of the location: not the branch manager or anyone he supervises, unless the firm is so limited in size that it documents why no alternative exists.

Answer: B

Approve it if the contest is described in the firm's Form CRS: Incorrect. Disclosure alone does not satisfy Reg BI for sales contests tied to specific securities within a limited period; they must be eliminated.

Reject it, because Reg BI requires eliminating such contests: Correct. Reg BI's conflict of interest obligation requires firms to identify and eliminate sales contests, quotas, bonuses and non-cash compensation based on sales of specific securities or types of securities within a limited period.

Approve it if each prize stays within the annual gift limit: Incorrect. The gift limit governs gifts to others' employees; it does not authorize product-specific sales contests.

Approve it if every contest sale is reviewed for suitability: Incorrect. Transaction review mitigates risk but does not satisfy the requirement to eliminate this type of contest.

Under Reg BI, product-specific, time-limited sales contests, quotas, bonuses and non-cash compensation must be eliminated, not merely disclosed or mitigated.

Answer: C

1. Turnover rate = total purchases ÷ average equity.
2. Six-month turnover: $750,000 ÷ $200,000 = 3.75.
3. Annualize: 3.75 × (12 ÷ 6) = 7.5.
4. Compare: a turnover above about 6 (or an annualized cost-equity ratio above about 20%) is a common red flag for excessive trading. Here costs are $21,000 ÷ $200,000 × 2 = 21%.

3.75: Incorrect. This is the six-month turnover ($750,000 ÷ $200,000), not annualized.

6.0: Incorrect. This divides by ending equity ($250,000) instead of average equity.

7.5: Correct. Turnover = purchases ÷ average equity = $750,000 ÷ $200,000 = 3.75 for six months, which annualizes to 7.5. A turnover above about 6 is commonly treated as a red flag for excessive trading under Rule 2111 and Reg BI.

13.5: Incorrect. This adds sales to purchases; turnover uses purchases only.

Annualized turnover = purchases ÷ average equity, scaled to 12 months; high turnover and cost-equity ratios flag possible churning under the quantitative suitability and Reg BI care obligations.

Answer: A

Correspondence, reviewed under the firm's own procedures: Correct. Correspondence is a written communication distributed to 25 or fewer retail investors within any 30-calendar-day period. Only retail recipients are counted, so 22 retail investors makes it correspondence, subject to review but not pre-approval.

A retail communication that needs pre-approval: Incorrect. This counts all 37 recipients; institutional investors do not count toward the 25-retail-investor threshold.

An institutional communication; no review: Incorrect. A communication counts as institutional only if it goes solely to institutional investors; this one also reached retail investors.

A retail communication filed within 10 business days: Incorrect. It is not a retail communication, and post-use filing applies to certain retail communications such as fund advertising.

Count only retail recipients: 25 or fewer within 30 days is correspondence; more than 25 makes it a retail communication.

Answer: B

1. Trade 1 (TRACE, 15 min): 10:05:00 to 10:17:30 = 12 min 30 s, on time.
2. Trade 2 (equity, 10 s): 10:15:02 to 10:15:31 = 29 s, late.
3. Trade 3 (TRACE, 15 min): 10:42:00 to 10:56:50 = 14 min 50 s, on time.
4. Trade 4 (equity, 10 s): 11:05:12 to 11:05:20 = 8 s, on time.

Trade 1: Incorrect. Trade 1 was reported 12 minutes 30 seconds after execution, within the 15-minute TRACE deadline; it looks late only if the 10-second equity rule is wrongly applied.

Trade 2: Correct. FINRA Rules 6380A/6380B: OTC equity trades are reported within 10 seconds; Trade 2 took 29 seconds (10:15:02 to 10:15:31), so it was late.

Trade 3: Incorrect. Trade 3 took 14 minutes 50 seconds, just inside the 15-minute TRACE deadline.

Trade 4: Incorrect. Trade 4 was reported 8 seconds after execution, within the 10-second equity deadline.

Apply the deadline for each security type: 10 seconds for OTC equity trades and 15 minutes for TRACE corporate bond trades.

Answer: C

Pemberton's CEO certifying the controls each year: Incorrect. The annual review and certification under 15c3-5(e) is by the broker-dealer's own CEO, and a customer certification cannot replace firm control.

A daily post-trade review of Pemberton's credit usage: Incorrect. Post-trade surveillance is required as a supplement, but credit and erroneous-order controls must operate pre-trade.

Pre-trade controls that only Northgate can set and adjust: Correct. SEA Rule 15c3-5(d): the broker-dealer with market access must keep its financial and regulatory risk controls under its direct and exclusive control; the customer cannot set or change them, though third-party technology may be used if the firm controls it.

A written promise that Pemberton will not exceed limits: Incorrect. A customer promise does not satisfy Rule 15c3-5; the broker-dealer must itself maintain and control the pre-trade risk controls.

Under the market access rule, the broker-dealer must apply pre-trade credit, capital and erroneous-order controls that are under its direct and exclusive control, reviewed and certified annually by its CEO.

Answer: D

The proprietary trade was smaller than the order: Incorrect. There is no size-based exception for the proprietary trade; trading ahead at a price that would satisfy the customer order is prohibited regardless of its size.

The firm filled the customer order 90 seconds afterward: Incorrect. Filling the customer order later does not cure trading ahead; the member must execute the customer order at the same or better price before or with its own trade.

The proprietary trader sat on a different desk in the branch: Incorrect. The no-knowledge exception (5320.02) requires effective internal controls such as information barriers, not merely a different desk.

The customer got written disclosure and did not opt in: Correct. FINRA Rule 5320.01: for institutional accounts and orders of 10,000 shares or more (unless worth under $100,000), a member that gives clear written disclosure at account opening and annually, with a meaningful chance to opt in, may trade ahead if the customer does not opt in.

Trading ahead of a held customer order is permitted only within a 5320 exception, such as disclosed institutional or large-order handling without an opt-in, no-knowledge with information barriers, or riskless principal.

Answer: C

immediately, since it was not a manager or co-manager.: Incorrect. The manager or co-manager limit appears only in Rule 2241(b)(2)(I)(ii), the 3-day secondary-offering quiet period; the IPO quiet period in (b)(2)(I)(i) covers any member that participated as an underwriter or dealer.

3 days after the offering date.: Incorrect. Three days is the quiet period for managers and co-managers of a secondary offering, not an IPO.

10 days after the offering date.: Correct. FINRA Rule 2241(b)(2)(I)(i): the member must not publish research on the issuer for a minimum of 10 days following the date of an IPO if it "has participated as an underwriter or dealer in the initial public offering"; a selling-group dealer has participated as a dealer.

40 days after the offering date.: Incorrect. Forty days was the superseded NASD Rule 2711 quiet period for managers and co-managers.

Rule 2241 quiet periods: at least 10 days after an IPO for any member that participated as an underwriter or dealer, at least 3 days after a secondary offering for managers and co-managers, and none for EGC offerings. Securities Act offering rules apply separately.

Answer: C

1. Identify restricted persons: Owner 1 (portfolio manager) and Owner 2 (broker-dealer associated person). Owners 3 and 4 are not restricted.
2. Restricted total: 4% + 5% = 9%.
3. 9% is at or below the 10% de minimis limit, so the account is not restricted and may buy the full allocation.
4. The eligibility representation is 4 months old, within the 12-month requirement.

None, because restricted persons own interests in it: Incorrect. Any restricted ownership does not bar the account; the de minimis exemption covers restricted interests up to 10%.

Only the share for its 91% unrestricted owners: Incorrect. Carving out restricted interests is an alternative, but under the de minimis exemption no carve-out is needed.

The full allocation, as restricted owners hold 10% or less: Correct. FINRA Rule 5130(c)(4): an account is not restricted if restricted persons own 10% or less of its beneficial interests. Owners 1 (portfolio manager) and 2 (broker-dealer personnel) are restricted: 4% + 5% = 9%. The representation is within 12 months.

The full allocation, but only with a new representation now: Incorrect. A representation obtained within the prior 12 months is sufficient; a new one is not required before each sale.

An account whose restricted persons hold 10% or less in total may buy new issues without a carve-out, based on a representation obtained within the prior 12 months.

Answer: A

Online ads seen out of state, with sales only in Ohio: Correct. Rule 147A permits out-of-state incorporation and offers that reach out-of-state persons (such as internet advertising), as long as sales are made only to in-state residents.

Selling up to 20% of the offering to out-of-state residents: Incorrect. Every sale under Rule 147A must be to an in-state resident; there is no out-of-state allowance.

Relying on Rule 147 as well despite its Delaware charter: Incorrect. Rule 147 requires the issuer to be organized in the state; a Delaware company can use only Rule 147A.

Letting buyers resell to out-of-state persons right away: Incorrect. For 6 months from the sale, resales may be made only to in-state residents.

Rule 147A allows an out-of-state charter and out-of-state offers, but sales and 6-month resales stay in-state; Rule 147 also requires in-state organization and in-state offers.