Free Series 24 Practice Questions with Answers

Correct answer: C. 30 days

A SAR must generally be filed within 30 calendar days of the date of initial detection of facts constituting the basis for filing. If no suspect is identified, the filing may be delayed for an additional 30 days to identify one, but the filing must occur no later than 60 days after the initial detection in that scenario — the base deadline itself is 30 days.

• A. Incorrect. 10 days is not the SAR filing deadline.
• B. Incorrect. 15 days is not the SAR filing deadline.
• C. Correct. 30 calendar days from initial detection is the standard SAR filing deadline.
• D. Incorrect. 60 days is the outer limit only when an extension is used to identify a suspect, not the base deadline.

• Source: 31 CFR 1023.320 (SARs by broker-dealers)

Correct answer: C. Records within the initial retention window must be kept in an 'easily accessible place,' and a facility requiring several business days' advance notice does not meet that standard

Order tickets fall under the general three-year retention period, with the first two years required to be kept in an 'easily accessible place.' A storage arrangement that imposes a multi-day advance-notice requirement before records can be produced does not satisfy that standard, regardless of the total retention period being otherwise correct, because 'easily accessible' has been interpreted to mean prompt, essentially same-day or next-day, retrievability -- not retrieval measured in business days.

• A. Rule 17a-4 doesn't require records to be stored onsite -- offsite and electronic storage are permitted, subject to accessibility standards during the initial retention window.
• B. Order tickets are not held to a six-year retention period under the applicable records rules -- the compliance issue here is accessibility, not an incorrect retention length.
• C. Correct. Records within the first two years of the retention period must be kept in an 'easily accessible place,' and a facility that requires several business days' advance notice before records can be retrieved does not meet that standard.
• D. The accessibility requirement isn't limited to electronically stored records -- it applies to required records generally during the initial retention window, including paper records held offsite.

• Source: SEC Rule 17a-4 (records to be preserved)

Correct answer: D. Simplified arbitration before a single arbitrator based on the parties' written submissions, unless a party requests a hearing

Claims of $50,000 or less, exclusive of interest and expenses, are eligible for simplified arbitration under the Code of Arbitration Procedure for Customer Disputes. A single arbitrator decides the case on the pleadings and documents submitted, without a hearing, unless a party specifically requests one. This streamlines small-dollar disputes while still preserving a party's right to request an in-person hearing if desired.

• A. A three-arbitrator panel with a mandatory in-person hearing is reserved for larger claims -- a $12,000 claim falls within the simplified arbitration threshold, which uses a single arbitrator and doesn't mandate a hearing.
• B. The FINRA Board of Governors doesn't decide individual customer arbitration claims, with or without a staff recommendation -- awards are issued by the arbitrator(s) assigned under the Code of Arbitration Procedure.
• C. FINRA's Code doesn't make mediation a mandatory gateway or condition the customer's arbitration on the firm's later consent -- mediation is voluntary and separate, and this claim proceeds through simplified arbitration.
• D. Correct. Claims within FINRA's simplified arbitration threshold (claims of $50,000 or less) are decided by a single public arbitrator based on the parties' pleadings and other submissions unless a party requests a hearing.

Correct answer: D. A guarantee that all identified vulnerabilities will be fully remediated before any regulatory deadline

Regulators expect a reasonably designed incident response plan to include defined roles/escalation, a process for assessing notification obligations, and evidence-preservation procedures. What is neither expected nor realistic is a 'guarantee' of full remediation by a fixed deadline — remediation timelines depend on the nature of the vulnerability, and no framework requires or permits a firm to promise a guaranteed outcome; plans are judged on reasonableness of design and execution, not on absolute guarantees.

• A. Defined roles and escalation procedures for identifying and containing an incident are a standard, reasonable element of an incident response plan.
• B. Assessing whether an incident triggers regulatory notification obligations under applicable law is a reasonable and expected element of an incident response plan.
• C. Preserving evidence and logs for post-incident analysis is a standard, reasonable element of an incident response plan.
• D. Correct — this is the outlier. No incident response plan can reasonably guarantee that all vulnerabilities will be fully remediated by a fixed regulatory deadline; that overstates what's achievable and isn't a realistic or required plan element.

• Source: SEC Regulation S-P (17 CFR 248.30)

Correct answer: C. Notify the issuer and announce the impending release through a major news service at least two business days beforehand

Rule 5131(d)(2) requires lock-up agreements to provide that, at least two business days before the release or waiver for an officer or director, the lead manager will notify the issuer and announce the impending release through a major news service. This gives the market advance notice of potential supply.

• A. The rule requires advance notice to the issuer and the market, not an after-the-fact filing with FINRA.
• B. The announcement must precede the release by two business days, not coincide with the first sale.
• C. Correct: advance notice to the issuer and a news service announcement at least two business days ahead are required.
• D. Syndicate approval and a prospectus supplement are not the mechanism the rule prescribes.

Correct answer: D. $300,000

After the first 12 months, the basic method limits aggregate indebtedness to 15 times net capital, so the ceiling is 15 x $120,000 = $1,800,000. Subtracting the current $1,500,000 leaves $300,000 of capacity.

• A. This applies a 20-to-1 ratio, which is not the rule; the limit is 15-to-1.
• B. The firm's current ratio is 12.5 to 1, below the 15-to-1 limit, so capacity remains.
• C. This is the total permitted aggregate indebtedness, not the additional amount available after the existing $1,500,000.
• D. Correct: 15 x $120,000 = $1,800,000 maximum, less $1,500,000 outstanding, leaves $300,000.

• Source: SEC Rule 15c3-1 (net capital requirements)

Correct answer: C. Content is evaluated according to its function (e.g., static versus interactive content); if it constitutes a communication with the public under Rule 2210, it is subject to applicable content standards, retention requirements, and supervisory review.

FINRA guidance makes clear that business-related content posted on personal social media accounts is not exempt from communications rules simply because the account is personal; the content is evaluated based on its function and audience (e.g., a static, unchanging post is treated like other retail communications; interactive, real-time posts have their own supervisory framework), and, where applicable, must be retained and supervised.

• A. Incorrect -- personal ownership of the account does not exempt business-related content from applicable communications rules; the platform being non-firm does not remove the firm's obligations.
• B. Incorrect -- an outright prohibition is not the general rule, and FINRA does not grant account-by-account exceptions; supervision and content standards apply instead of a ban.
• C. Correct — this reflects FINRA's functional, content-based approach to social media supervision.
• D. Incorrect -- supervisory obligations for a representative's communications turn on the function of the content, not on whether that representative holds an OSJ manager title.

Correct answer: C. 120 days

FINRA's registration rules permit a person designated by a member firm to function in a principal capacity for a limited period — up to 120 days — before passing the applicable principal-level qualification examination, subject to conditions such as prior representative-level registration and firm supervision during the interim. This accommodates legitimate business needs (e.g., an unexpected vacancy) without requiring the exam to be passed on day one. Choices A and B understate the permitted window, and choice D incorrectly assumes there is no accommodation at all.

• A. 30 days is shorter than the actual grace period FINRA allows for an unexpected principal vacancy before the exam must be passed.
• B. 90 days understates the window — FINRA's rule for this scenario permits a longer period before the qualification exam must be completed.
• C. Correct. FINRA permits a representative designated to fill an unanticipated principal vacancy to function in that capacity for up to 120 days before passing the required principal qualification exam.
• D. This overstates the restriction — FINRA does allow temporary functioning in the principal capacity, for up to 120 days, precisely to accommodate unexpected vacancies like this one.

Correct answer: B. Consider the costs of the recommendation and reasonably available alternatives in light of the customer's investment profile

Reg BI's Care Obligation requires a broker-dealer to exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs of a recommendation and reasonably available alternatives, and to have a reasonable basis to believe it is in the customer's best interest given the customer's investment profile. Cost is an explicit, required factor -- it cannot be ignored even though it need not be the only or determinative factor. Choices A, C, and D each substitute a narrow or self-interested shortcut for the required cost/alternatives analysis.

• A. Choosing the share class that maximizes the rep's own compensation is precisely the conflict of interest the Care Obligation is designed to prevent, and competitiveness is not a permissible basis for recommendation.
• B. The Care Obligation requires the firm and rep to weigh costs against reasonably available alternatives in light of the customer's investment profile before recommending, which is exactly what's described.
• C. Merely confirming prior mutual fund purchases says nothing about the current recommendation's cost or suitability relative to alternatives, and does not satisfy the Care Obligation.
• D. Limiting analysis only to proprietary products fails to consider reasonably available alternatives, which the Care Obligation requires.

• Source: SEC Regulation Best Interest (17 CFR 240.15l-1)

Correct answer: A. Within 15 minutes of the time of execution, the current standard reporting timeframe

FINRA amended its trade reporting rules to shorten the TRACE reporting window for most corporate bond transactions from 15 minutes down to 1 minute after execution. Candidates studying from older materials may still recall the 15-minute standard, but the current rule requires the faster 1-minute reporting for the large majority of eligible transactions (limited exceptions may still apply in specific circumstances). It should not be confused with the 10-second window that applies to equity trade reporting.

• A. Correct. 15 minutes remains the current TRACE reporting standard for most corporate bond transactions. The SEC approved a FINRA amendment to shorten this to 1 minute, but FINRA announced in Feb. 2025 that it would not set an effective date and is preparing a revised filing after industry pushback — the 1-minute rule has never taken effect.
• B. Incorrect — this describes a rule change that was approved but never activated. FINRA paused the 1-minute requirement in Feb. 2025; 15 minutes remains the current standard.
• C. End-of-day reporting is far looser than the current TRACE requirement, which operates on a near-real-time basis.
• D. 10 seconds is the equity trade reporting standard, not the TRACE corporate bond standard, which remains 15 minutes.

Correct answer: A. Designate an appropriately qualified principal and add municipal procedures to the WSPs before the first sale

Rule 3110 requires a supervisory system and written procedures reasonably designed for each type of business the firm conducts, including designating an appropriately registered principal. New products or business lines should be covered by procedures before activity begins.

• A. Correct: supervision, a qualified principal, and written procedures must exist before the new business starts.
• B. Waiting for a later inspection leaves the new business unsupervised in the meantime.
• C. The annual certification does not substitute for procedures covering the new business.
• D. Waiting for a complaint is reactive and does not satisfy the duty to supervise in advance.

• Source: FINRA Rule 3110 (Supervision)

Correct answer: A. Filing is not mandatory below $5,000, but the firm may file voluntarily and keeps safe-harbor protection

A broker-dealer must file a SAR when a transaction or pattern involves or aggregates at least $5,000 and the firm knows, suspects, or has reason to suspect it is suspicious. Below that amount a filing is not mandatory, but the firm may file voluntarily and the safe harbor still applies.

• A. Correct: the mandatory threshold is $5,000, and voluntary filings below it are protected by the safe harbor.
• B. Mandatory filing is tied to the $5,000 threshold and is not triggered at any amount.
• C. The $10,000 figure is the currency transaction report threshold, not the SAR threshold.
• D. The safe harbor covers voluntary filings; it is not forfeited by filing below the threshold.

• Source: 31 CFR 1023.320 (SARs by broker-dealers)

Correct answer: C. Preserve existing records, avoid false backdating, disclose gaps appropriately and remediate controls

Records must be preserved and produced truthfully. Fabricating or backdating approvals or altering logs can create more serious violations than the original gap, which should be disclosed and remediated.

• A. Backdating is falsification regardless of whether customers were harmed.
• B. Selective production is not a complete, truthful response to a regulatory request.
• C. Correct: preserve records, disclose gaps appropriately and fix the control weakness.
• D. Altering an audit log destroys record integrity and is a serious violation.

• Source: SEC Rule 17a-4 (records to be preserved)

Correct answer: C. 4 years

FINRA Rule 4513 requires each member to maintain a separate, central file of written customer complaints, indexed by the associated person's name, and to preserve that file for a period of not less than four years. This is a firm-specific recordkeeping obligation layered on top of the general books-and-records retention scheme.

• A. Two years understates the retention period required by Rule 4513 for the central complaint file.
• B. Three years understates the retention period required by Rule 4513 for the central complaint file.
• C. Rule 4513 requires member firms to preserve their central file of written customer complaints, indexed by associated person, for a period of not less than four years.
• D. Six years overstates the retention period specifically required by Rule 4513 for the complaint file.

• Source: FINRA Rule 4513 (Records of Written Customer Complaints)

Correct answer: D. It need not notify customers, but should document its reasonable investigation and the basis for the determination

The 2024 Regulation S-P amendments require customer notice after unauthorized access to sensitive customer information unless the firm determines, after a reasonable investigation, that the information has not been and is not reasonably likely to be used in a manner resulting in substantial harm or inconvenience. The firm should document the investigation and its basis.

• A. The 30-day notice duty applies when the harm standard is not met; here the firm made a documented no-harm determination.
• B. FINRA does not pre-approve a firm's harm determination.
• C. The 72-hour period applies to service provider notices to the firm, not to customer notices.
• D. Correct: a documented reasonable investigation supporting a no-harm finding removes the customer notice requirement.

• Source: SEC Regulation S-P (17 CFR 248.30)

Correct answer: D. An employee of a FINRA member broker-dealer

FINRA Rule 5130 generally prohibits the sale of new issue equity securities to 'restricted persons,' which includes broker-dealers and their employees, absent an applicable exemption. Investment companies registered under the Investment Company Act of 1940, physicians as ordinary retail customers, and charitable endowments are not restricted persons and may purchase new issues. The rule targets those with the ability to direct order flow or influence allocations — industry insiders — not the general investing public.

• A. Being a physician does not make a retail customer a restricted person; Rule 5130 restrictions are based on industry affiliation, not profession or income.
• B. Registered investment companies are specifically exempted from restricted-person status under Rule 5130.
• C. Charitable organizations are generally within an exemption under Rule 5130, not treated as restricted persons.
• D. Employees of FINRA member broker-dealers are restricted persons under Rule 5130 because of the conflict-of-interest concern with insiders receiving favorable new-issue allocations.

Correct answer: C. 120% of its minimum net capital requirement

Rule 17a-11 requires firms to give early warning notice to their DEA (and the SEC) before net capital problems become severe, including when net capital falls below 120% of the firm's minimum dollar requirement. This gives regulators advance notice ahead of an actual net capital deficiency (falling below 100%, which triggers immediate cessation of business).

• A. Incorrect. Falling below 100% of the minimum is an actual net capital deficiency, not the early warning threshold.
• B. Incorrect. 110% is not the specified early warning threshold under Rule 17a-11.
• C. Correct. 120% of the minimum net capital requirement is the early warning threshold under Rule 17a-11.
• D. Incorrect. 150% is not a threshold used under Rule 17a-11's early warning provisions.

• Source: SEC Rule 17a-11 (notification provisions)

Correct answer: B. Reject the unsupported guarantees and require balanced, substantiated claims with appropriate risk disclosure before dissemination.

Public communications must be fair, balanced and not misleading. A guarantee of principal and a fixed annual return is inconsistent with a credit-sensitive portfolio with variable distributions, and fine-print caveats cannot cure it.

• A. A modest-sounding yield does not make an unsupported guarantee of principal and returns acceptable.
• B. Rejecting the guarantees and requiring substantiated, balanced claims with risk disclosure meets the fair-and-balanced standard.
• C. A short posting period does not cure misleading claims; the content is still public communication.
• D. Targeting retirees makes a misleading guarantee more harmful, not acceptable.

Correct answer: C. 30 days

FINRA rules require a member firm to file an amendment to Form U4 no later than 30 days after the firm learns of the facts or circumstances giving rise to the need for the amendment. This keeps the Central Registration Depository current with material changes such as disclosable events, address changes, or outside business activities. The other time periods do not correspond to the standard U4 amendment deadline.

• A. 10 days understates the standard Form U4 amendment filing window.
• B. 15 days understates the standard Form U4 amendment filing window.
• C. A member firm must file a Form U4 amendment within 30 days of learning of a fact or circumstance requiring the change.
• D. 60 days overstates the standard Form U4 amendment filing window.

Correct answer: B. Surveillance and timely margin calls or liquidations consistent with applicable requirements and agreements

Margin supervision requires monitoring accounts, especially concentrated volatile ones near maintenance, and issuing timely calls or liquidating as regulations and the margin agreement require.

• A. The firm cannot promise to avoid liquidation; the margin agreement allows forced sales to protect the firm.
• B. Correct: monitor and act promptly on calls or liquidations under regulatory and house requirements.
• C. Shortfalls must be addressed within required time frames, not deferred to a statement or tax date.
• D. Customer tenure does not waive regulatory or house margin requirements.

Correct answer: C. For the rest of the day and the next day, short sales may not be displayed or executed at or below the national best bid unless exempt

Rule 201 is triggered when an NMS stock declines 10% or more from the prior day's close. Once triggered, the price test restriction applies for the remainder of that day and the following day, blocking short sales at or below the current national best bid unless an exemption applies.

• A. Rule 201 is a price test, not a timed trading halt.
• B. Short sales remain permitted at prices above the national best bid; they are not banned outright.
• C. Correct: the restriction covers the rest of the trigger day and the next day, at or below the national best bid.
• D. The restriction does not end at the close of the trigger day; it carries through the following day.

Correct answer: A. Annually; annually; at least every three years

Rule 3110(c)(1) requires every OSJ, and every branch office that supervises one or more non-branch locations, to be inspected at least annually, while every other (non-supervisory) branch office must be inspected at least every three years. Firms may apply a risk-based schedule that inspects some qualifying locations more frequently, but these are the required minimums, and both supervising-branch categories share the same annual floor -- it is not just the OSJ that gets the annual cycle.

• A. Correct. Under Rule 3110(c), OSJs must be inspected annually, non-OSJ branches that supervise one or more non-branch locations must also be inspected annually, and branch offices that don't supervise other locations must be inspected at least every three years.
• B. A uniform three-year cycle understates the frequency required for OSJs and supervising non-OSJ branches, which must be inspected annually.
• C. This correctly separates OSJ/supervising-branch inspections (annual) from non-supervisory branches, but it wrongly assigns a three-year cycle to the non-OSJ branch that supervises other locations — that category also requires annual inspection, same as an OSJ.
• D. A uniform two-year cycle doesn't match Rule 3110(c)'s framework, which requires annual inspection for OSJs and supervising branches and a three-year cycle only for non-supervisory branches.

Correct answer: D. Every two calendar years

Rule 3310(c) requires annual, calendar-year independent testing, but a member that does not execute transactions for customers or otherwise hold customer accounts, such as a proprietary trading firm, must test every two calendar years.

• A. Annual testing is the general rule, but this firm qualifies for the longer period.
• B. The rule is stated on a calendar-year basis, not in 18-month intervals.
• C. Three years exceeds the longest interval permitted.
• D. Correct: firms without customer accounts or customer transactions test every two calendar years.

• Source: FINRA Rule 3310 (Anti-Money Laundering Compliance Program)

Correct answer: D. Original entries of all purchases and sales of securities, receipts and deliveries of securities, and receipts and disbursements of cash

The blotter (or other records of original entry) required under Rule 17a-3 chronologically records securities purchases and sales, receipts and deliveries of securities, and receipts and disbursements of cash, among other original-entry items. It is a foundational books-and-records document distinct from complaint logs, correspondence files, or compliance certifications.

• A. Incorrect. Complaint records and the firm's responses are governed separately (e.g., under Rule 4530), not by the blotter.
• B. Incorrect. CEO and principal compliance certifications relate to Rule 3130, not the blotter.
• C. Incorrect. Correspondence, incoming or outgoing, is a separate books-and-records category with its own retention rules.
• D. Correct. This is the definition of the blotter/record of original entry under Rule 17a-3.

• Source: SEC Rule 17a-3 (records to be made)

Correct answer: B. The condition is prohibited; a member may not condition a settlement on the customer's consent to, or non-opposition to, expungement

FINRA Rule 2081 prohibits a member or associated person from conditioning a settlement on the customer's agreement to consent to, or not oppose, a request to expunge customer dispute information. The rule protects the integrity of the public disclosure record.

• A. Disclosure to the arbitrators does not cure the prohibited condition.
• B. Correct: Rule 2081 bars conditioning a settlement on consent to or non-opposition to expungement.
• C. Representation by counsel does not make the condition permissible.
• D. The rule has no payment-size or payer exception, so who funds the extra amount does not make the condition permissible.