Series 27 Practice Questions (2026) — Free Sample Questions with Answers

Answer: C

1. Withdrawal as a share of excess NC: $750,000 ÷ $3,000,000 = 25%.
2. FINRA 4110(c)(2) (carrying or clearing firm): over 10% in 35 rolling days, so prior written FINRA approval.
3. 15c3-1(e)(1): over 20% but not over 30% in 30 days, and above the $500,000 de minimis, so notice within 2 business days after.
4. 15c3-1(e)(2): stated as met, so the withdrawal is not prohibited.

Notice to the SEC and FINRA within 2 business days after payment only: This covers 15c3-1(e)(1)(ii) but misses FINRA 4110(c)(2), which requires prior approval for a carrying firm's withdrawal over 10% of excess NC.

Notice to the SEC and FINRA at least 2 business days before payment: Advance notice under 15c3-1(e)(1)(i) applies only above 30% of excess NC in 30 days; 25% calls for after-the-fact notice.

Prior written FINRA approval and notice within 2 business days after: Correct. The dividend is 25% of excess NC: over FINRA 4110(c)(2)'s 10% (35 rolling days) for a carrying firm, so prior approval is needed; and over 20% but not 30% under 15c3-1(e)(1), with more than $500,000, so notice is due within 2 business days after.

No filing, because withdrawals of earned profits are not restricted: The profits exception is in 4110(c)(1) (the one-year rule for contributed equity); it does not override 4110(c)(2) or 15c3-1(e).

For a carrying firm, check FINRA 4110(c)(2) (over 10% of excess NC in 35 days needs prior approval) as well as 15c3-1(e)(1) (over 30% needs notice 2 business days before; over 20% needs notice 2 business days after; $500,000 de minimis).

Answer: B

1. Total assets: $420,000 + $260,000 + $610,000 + $50,000 = $1,340,000.
2. Total liabilities: $310,000 + $90,000 + $200,000 subordinated loan = $600,000 (a subordinated loan is still a GAAP liability).
3. Net income not yet closed: $520,000 revenue − $340,000 expenses = $180,000.
4. Equity: $150,000 common stock + $410,000 beginning retained earnings + $180,000 = $740,000.
5. Check: $1,340,000 − $600,000 = $740,000.

$560,000: Uses only common stock and beginning retained earnings; the month's net income of $180,000 has not been closed into equity.

$740,000: Correct. Equity is common stock $150,000 + beginning retained earnings $410,000 + net income $180,000 ($520,000 − $340,000), which also equals total assets $1,340,000 less liabilities $600,000. Under GAAP the subordinated loan is a liability, even though it is added back for net capital.

$940,000: Treats the $200,000 subordinated loan as equity; it is a liability on the GAAP balance sheet and is only allowable as a capital addition in the net capital computation.

$1,080,000: Closes revenue into equity but ignores the $340,000 of expenses.

Ownership equity on an unclosed trial balance is beginning equity plus period income (revenue less expense); subordinated loans remain liabilities under GAAP and are added back only in the net capital computation.

Answer: B

1. Settlement: regular way T+1, so Friday, October 16.
2. Days on a 30/360 basis from July 1: July 30 + August 30 + September 30 + October 15 (through the 15th) = 105 days.
3. Annual interest: $100,000 × 6% = $6,000.
4. Accrued interest: $6,000 × 105/360 = $1,750.00.

$1,733.33: Counts 104 days, accruing only up to the trade date; interest runs up to (but not including) the settlement date.

$1,750.00: Correct. Corporate bonds use a 30/360 basis: from July 1 up to but not including the October 16 settlement date is 30 + 30 + 30 + 15 = 105 days; $100,000 × 6% × 105/360 = $1,750.00.

$1,758.90: Uses actual days over 365 (107/365), the convention for Treasuries, not corporate bonds.

$1,766.67: Counts 106 days, wrongly including the settlement date itself.

Accrued interest runs from the last coupon date up to but not including settlement; corporate and municipal bonds use 30/360, Treasuries actual/actual.

Answer: C

1. Adjusted bank balance: $907,000 − $118,000 outstanding checks + $52,000 deposit in transit = $841,000.
2. Adjusted book balance: $842,000 − $3,000 service charges + $2,000 interest = $841,000.
3. The balances agree, so the ledger should show $841,000 after booking the two bank items.

$789,000: Adjusts the bank balance for outstanding checks but omits the deposit in transit.

$839,000: Books the service charge but not the $2,000 interest credit.

$841,000: Correct. Bank side: $907,000 − $118,000 + $52,000 = $841,000. Book side: $842,000 − $3,000 + $2,000 = $841,000. The two agree.

$842,000: This is the unadjusted ledger balance; the bank charges and interest credit must still be booked.

Reconcile both sides: timing items (outstanding checks, deposits in transit) adjust the bank balance; items the bank has recorded but the firm has not (fees, interest) are booked to the ledger.

Answer: D

a systems administrator with access to the firm's original books and records: Must be fingerprinted: regular access to original books and records removes the exemption.

a mailroom clerk who opens and logs incoming customer checks: Must be fingerprinted: regularly handling or processing customer monies removes the exemption.

a sales assistant who solicits customer orders by telephone: Must be fingerprinted: persons engaged in the sale of securities are always covered.

a receptionist who neither sells nor handles securities, funds or records: Correct. Exempt: a person who does not sell securities, has no regular access to securities, funds or original books and records, and supervises no one who does need not be fingerprinted.

Rule 17f-2 requires fingerprinting of partners, directors, officers and employees unless they do not sell securities, have no regular access to securities, funds or original records, and supervise no one who does.

Answer: A

He must requalify by exam or obtain a waiver, since over two years have passed without MQP: Correct. A qualification lapses two years after termination unless the person is in the MQP, and the MQP election must be made within two years of termination.

He can re-register without an exam, because qualifications last five years after termination: Five years is the maximum MQP period; without the election, the normal two-year lapse applies.

He can elect the MQP now and complete the continuing education he missed: A late MQP election is allowed only within two years of termination; that window closed in January 2026.

He can re-register without an exam once he completes the current Regulatory Element: Regulatory Element content does not revive a lapsed qualification.

Exam qualifications lapse two years after a registration ends; the MQP (elected at U5 filing or within two years) can extend that to five years with annual CE.

Answer: A

1. Ridgeline Bank (affiliate): excluded → $0.
2. Upland Trust: 15% × $60 million = $9 million cap; $14 million on deposit → $9 million counts.
3. Westmark Bank: 15% × $200 million = $30 million cap; $10 million counts in full.
4. Countable cash = $19 million, so the firm is $11 million short of its $30 million requirement.

$19 million: Correct. Cash at the affiliated bank is excluded entirely; Upland counts only to 15% of its equity ($9 million); Westmark's $10 million is under its $30 million limit. $0 + $9 million + $10 million = $19 million.

$24 million: Excludes the affiliate correctly but counts all $14 million at Upland, ignoring the 15%-of-equity cap.

$31 million: Applies the 15% cap but counts the $12 million at the affiliated bank, which must be excluded in full.

$36 million: Counts every deposit in full, ignoring both the affiliate exclusion and the 15% cap.

Reserve cash at an affiliated bank never counts; at other banks it counts only up to 15% of that bank's equity capital.

Answer: C

1. Total credits: $4,200,000 + $800,000 + $1,500,000 + $700,000 + $300,000 = $7,500,000.
2. Item 10: secured margin debits $5,000,000 (the $200,000 unsecured debits are excluded); less the Note E(3) 1% reduction ($50,000) = $4,950,000.
3. Item 11 securities borrowed for customer shorts $900,000 + Item 12 fails to deliver of 30 days or less $400,000 (the 45-day fail is excluded) → total debits $6,250,000.
4. Required deposit = $7,500,000 − $6,250,000 = $1,250,000.

$1,052,000: Includes the $200,000 unsecured debits in Item 10 (then reduced by 1%); Exhibit A excludes unsecured accounts and accounts doubtful of collection.

$1,200,000: Omits the Note E(3) 1% reduction of the Item 10 customer debit balances.

$1,250,000: Correct. Credits $7,500,000 − debits $6,250,000 = $1,250,000. Only the Item 10 margin debits are reduced by 1% under Note E(3): $5,000,000 × 99% = $4,950,000, plus $900,000 of borrows and $400,000 of fails to deliver.

$1,263,000: Takes 1% of all debit items ($6,300,000); Note E(3) reduces only the Item 10 customer debit balances, not stock borrowed or fails to deliver.

Item 10 excludes unsecured and doubtful accounts and is the only line Note E(3) cuts by 1%; Item 12 counts only fails to deliver of 30 days or less.

Answer: D

1. Net worth $3,000,000 + subordinated loan $1,000,000 = $4,000,000.
2. Less non-allowable assets $600,000 → $3,400,000.
3. Less excess fidelity deductible: $150,000 − 10% × $1,000,000 = $50,000 → tentative net capital $3,350,000.
4. Less haircuts $450,000 → net capital $2,900,000.
5. Requirement: greater of $250,000 or 6⅔% × $9,000,000 = $600,000.
6. Excess net capital = $2,900,000 − $600,000 = $2,300,000.

$1,300,000: Omits the add-back of the $1,000,000 satisfactory subordinated loan.

$2,180,000: Measures the excess over 120% of the requirement (the 17a-11 early-warning level) instead of over the requirement itself.

$2,200,000: Deducts the whole $150,000 deductible; only the $50,000 above 10% of coverage is charged.

$2,300,000: Correct. Net capital $2,900,000 − requirement $600,000 (6⅔% × $9,000,000, above the $250,000 minimum) = $2,300,000.

Work in order: net worth, add subordinations, subtract non-allowables and other deductions to reach tentative net capital, subtract haircuts, then compare with the requirement.

Answer: C

1. Treasury bill (< 3 months): 0%.
2. Treasury note (5 to < 10 years): 4% × $2,000,000 = $80,000.
3. Corporate bond (3 to < 5 years): 6% × $500,000 = $30,000.
4. Cumulative nonconvertible preferred: 10% × $200,000 = $20,000.
5. Common stock (3+ market makers): 15% × $400,000 = $60,000.
6. Limited-market stock (2 market makers): 40% × $50,000 = $20,000. Total $210,000.

$195,000: Haircuts the corporate bond at the 3% Treasury rate for 3–5 years instead of the 6% corporate rate.

$197,500: Haircuts the 2-market-maker stock at 15%; a stock with only one or two market makers takes 40%.

$210,000: Correct. $0 + 4% × $2,000,000 ($80,000) + 6% × $500,000 ($30,000) + 10% × $200,000 ($20,000) + 15% × $400,000 ($60,000) + 40% × $50,000 ($20,000) = $210,000.

$220,000: Haircuts the qualifying cumulative nonconvertible preferred at 15% instead of 10%.

Match each product to its own schedule: Treasuries 0–6%, nonconvertible debt 2–9%, qualifying preferred 10%, other equities 15%, limited market 40%.

Answer: B

1. M: collateral exceeds debit → $0.
2. N: $40,000 − $25,000 = $15,000 deficit, no call → $15,000.
3. P: $30,000 deficit less call outstanding 3 business days → $0.
4. R: $8,000 deficit; call outstanding 7 business days cannot be applied → $8,000.
5. S: $6,000 unsecured → $6,000. Total = $29,000.

$21,000: Applies Account R's call as well; only calls outstanding 5 business days or less reduce a deficit.

$29,000: Correct. Rule 15c3-1(c)(2)(iv)(B) measures each deficit after application of calls for margin, marks to market or other required deposits that are outstanding 5 business days or less. Deficits: N $15,000 + R $8,000 (its 7-day call cannot be applied) + S $6,000 = $29,000; P's deficit is offset by its 3-day call, and M is fully secured.

$59,000: Ignores all margin calls, including P's 3-day call, which may be applied against its deficit.

$96,000: Deducts the full debit of every under-secured account instead of only the unsecured deficit.

Under 15c3-1(c)(2)(iv)(B), deduct the deficit in each unsecured or partly secured account after applying only the margin calls outstanding 5 business days or less; older calls give no offset.

Answer: A

Pledging firm-owned inventory for a bank loan and using the proceeds to pay unsecured payables: Correct. A loan adequately collateralized by securities carried long by the firm is excluded from AI under (c)(1)(i), so replacing unsecured payables with it lowers AI.

Drawing on an unsecured bank line of credit to pay the accrued employee bonuses now: Swaps one AI liability for another; an unsecured bank loan is still AI.

Selling part of the firm's inventory and holding the sale proceeds in its bank account: This may cut haircuts and raise net capital, but it does not change any liability, so AI is unchanged.

Converting accrued bonuses into unsecured demand notes payable to the employees: Demand notes are still unsubordinated money liabilities included in AI.

AI falls only when an included liability is paid off or replaced by an excluded one, such as debt secured by firm securities or a satisfactory subordination.

Answer: A

1. Included: accounts payable $400,000 + accrued bonuses $300,000 + expense-sharing payable $200,000 = $900,000.
2. Excluded: collateralized bank loan (c)(1)(i), subordinated loan (c)(1)(x), deferred taxes (c)(1)(xiii).
3. AI ratio = $900,000 ÷ $150,000 = 600%.

600%: Correct. AI = $400,000 + $300,000 + $200,000 = $900,000; $900,000 ÷ $150,000 = 600%.

666.7%: Includes the $100,000 deferred tax liability, which (c)(1)(xiii) excludes from AI.

1,600%: Includes the $1,500,000 subordinated loan, which (c)(1)(x) excludes from AI.

1,933.3%: Includes the bank loan secured by firm-owned securities carried long, which (c)(1)(i) excludes.

AI is total money liabilities less the (c)(1) exclusions, chiefly secured borrowings against firm inventory, satisfactory subordinations and deferred taxes.

Answer: C

1. Market value: 2,000 × $4.00 = $8,000.
2. Price under $5: requirement = greater of $2.50 × 2,000 = $5,000 or 100% × $8,000 = $8,000.
3. Maintenance requirement: $8,000.

$2,400: Applies 30% of market value, which is the standard only for short stock trading at $5 or more.

$5,000: Uses $2.50 per share alone; for stock under $5 the requirement is the greater of $2.50 per share or 100% of market value.

$8,000: Correct. For a short stock under $5, the requirement is the greater of $2.50 per share ($5,000) or 100% of market value ($8,000), so $8,000.

$10,000: Uses $5.00 per share, the per-share floor for short stock trading at $5 or more.

Short stock maintenance: under $5, the greater of $2.50 per share or 100% of MV; $5 and up, the greater of $5.00 per share or 30% of MV.