Series 24 Practice Test Welcome to your Series 24 Practice Test 1. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities What is the required procedure if a registered representative wants to change their registration from one broker-dealer to another? The representative must cease all sales activities until the transfer is complete. The representative can continue sales at both broker-dealers until the transfer is approved. The representative must first deregister with FINRA before applying for new registration. The representative's new broker-dealer must file a Form U4 amendment with FINRA. None 2. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities Under FINRA rules, which of the following personnel must be fingerprinted when they are hired by a broker-dealer? Only those involved in sales. Any employee with access to cash or securities. Only the compliance and legal staff. Only registered representatives. None 3. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities What action must a broker-dealer take when a registered representative is subject to statutory disqualification? They must promote the individual to a non-customer facing role. They must terminate the individual's registration immediately. They must file a Form U5 within 30 days. They must sponsor the individual for requalification by examination. None 4. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities How often must a Broker-Dealer conduct a continuing education Regulatory Element program for registered persons? Biennially Annually Once every three years Monthly None 5. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities Which document must a broker-dealer update when there is a change in the supervisory structure? Written Supervisory Procedures (WSPs) The Business Continuity Plan Form BD Form U5 None 6. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities A broker-dealer must verify the accuracy of the information on a registered representative's Form U4 within how many days of filing? 10 days 30 days 15 days 20 days None 7. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities What is the primary purpose of conducting an annual compliance meeting for registered representatives? To discuss sales targets and financial goals. To ensure representatives are updated on regulatory changes and firm policies. To evaluate the financial performance of the firm. To plan strategic marketing initiatives. None 8. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities When must a broker-dealer notify FINRA about the hiring of a new Chief Compliance Officer (CCO)? Within 10 days of employment At the end of the fiscal year Within 30 days of the hiring date Immediately upon hiring None 9. Series 24: Supervision of Registration of the Broker-Dealer and Personnel Management Activities Which of the following is NOT a requirement for the registration of a new branch office of a broker-dealer? Notification of local authorities Registration with FINRA Filing of Form BR Approval from state securities regulators None 10. Series 24: Supervision of General Broker-Dealer Activities What is the minimum frequency at which a principal must conduct a review of all transactions relating to variable annuities? Quarterly Semi-annually Annually Monthly None 11. Series 24: Supervision of General Broker-Dealer Activities A principal is responsible for reviewing electronic correspondence. Which of the following is NOT required as part of this review process? Establishing guidelines for flagging specific types of messages for review Reviewing every electronic message sent and received Documenting the review process and findings Ensuring the system's capacity to archive and retrieve messages None 12. Series 24: Supervision of General Broker-Dealer Activities Which action is required when a customer account shows signs of excessive trading? Notify FINRA immediately Increase the commission charges Obtain written consent from the customer to continue trading Review the account for suitability and ensure appropriate supervisory procedures are in place None 13. Series 24: Supervision of General Broker-Dealer Activities In the case of a potential conflict of interest between a broker-dealer and a client, what must the supervisor ensure? The client is aware of all alternative products All trades are executed on a national exchange The conflict is disclosed in writing to all parties before proceeding The broker-dealer profits are maximized None 14. Series 24: Supervision of General Broker-Dealer Activities Which of the following is NOT a responsibility of a supervising principal regarding the retention of business communications? Ensuring communications are retained for a minimum of three years Confirming that all retained communications are easily accessible Monitoring the deletion of communications after one year Reviewing communications regularly for compliance with firm and regulatory guidelines None 15. Series 24: Supervision of General Broker-Dealer Activities What is a principal's first step when noticing irregularities in a registered representative's trading patterns? Terminate the representative immediately Conduct an internal investigation Report the representative to FINRA Ignore the irregularities as market-driven anomalies None 16. Series 24: Supervision of General Broker-Dealer Activities What must be established when a new brokerage firm is set up to ensure compliance with FINRA's supervision rules? A central office in each state of operation Written supervisory procedures Only senior managers with over 10 years of experience No need for ongoing compliance training programs None 17. Series 24: Supervision of General Broker-Dealer Activities Which of the following is a requirement for the annual review of a firm's compliance and supervisory procedures? It must be conducted by an external auditor It must be approved by all registered representatives It must include recommendations for changes if issues are found It must focus only on high-risk areas None 18. Series 24: Supervision of General Broker-Dealer Activities What is required when supervising the sales practices of registered representatives dealing with complex products? Ensuring they only sell products from the firm's pre-approved list Guaranteeing that they pass a separate exam for each type of product Providing training and ensuring understanding of the risks and features of the products Limiting sales to only the most experienced representatives None 19. Series 24: Supervision of General Broker-Dealer Activities When reviewing trade blotters, what must a principal specifically look for regarding non-exempt securities? Consistency in markups and markdowns Increase in dividend payouts Use of leverage in transactions Geographic distribution of securities None 20. Series 24: Supervision of General Broker-Dealer Activities What specific action is required from a supervising principal if a conflict of interest potentially impacts the objectivity of research reports? Disclose the conflict in the firm's annual report Ignore the conflict if the research is favorable Ensure the conflict is prominently disclosed in the research report Only disclose the conflict to the board of directors None 21. Series 24: Supervision of General Broker-Dealer Activities What is the minimum net capital requirement for a broker-dealer to qualify for carrying and clearing status? $100,000 $250,000 $500,000 $1,000,000 None 22. Series 24: Supervision of General Broker-Dealer Activities In the event of detecting fraudulent activities, what is the FIRST action a supervising principal should take? Inform all clients of the firm Conduct a thorough internal review Immediately report to the SEC Temporarily suspend trading activities None 23. Series 24: Supervision of General Broker-Dealer Activities When a customer complaint involves a complex investment product, what must the supervising principal ensure in the handling of the complaint? The complaint is resolved within 24 hours The response includes an offer of financial compensation The complaint handler has specific knowledge of the product All communications are handled via email only None 24. Series 24: Supervision of General Broker-Dealer Activities What is the supervisory requirement regarding the approval of new advertising materials? Approval by the marketing department Approval by a registered principal Approval by all partners of the firm No approval is necessary if reused from previous campaigns None 25. Series 24: Supervision of General Broker-Dealer Activities Which of the following is a requirement for the supervision of discretionary accounts? Daily review of all discretionary decisions Annual performance reviews of discretionary accounts Prior written authorization from the customer A new discretionary order form for each transaction None 26. Series 24: Supervision of General Broker-Dealer Activities In supervising the handling of IPO shares, what must a principal ensure regarding allocations? IPO shares are only allocated to institutional investors Allocations are made based on a first-come, first-served basis Allocations do not favor insiders or related parties All clients receive an equal share None 27. Series 24: Supervision of General Broker-Dealer Activities What should be the supervisory approach when monitoring trades that could potentially manipulate market prices? Focus solely on trades by high-profile clients Report all trades directly to the SEC without review Monitor for patterns that deviate from normal trading activities Ignore unless direct complaints are received None 28. Series 24: Supervision of General Broker-Dealer Activities What compliance issue must be considered when a broker-dealer is expanding its operations internationally? Adherence to U.S. tax laws only Ignoring foreign regulatory requirements Ensuring compliance with both U.S. and foreign regulations Implementing the lowest standard of regulatory requirements None 29. Series 24: Supervision of General Broker-Dealer Activities How should a principal handle the supervision of sales literature regarding newly offered mutual funds? Approve literature that highlights potential returns only Ensure the literature is balanced, presenting both risks and rewards Distribute literature without a review if it is produced by the fund Only use literature that has been used in previous successful launches None 30. Series 24: Supervision of General Broker-Dealer Activities Regarding the supervision of brokers' external business activities, what is required? Only report activities that generate over $10,000 Review and approve all external business activities Supervision is only required for activities related to finance External activities do not need to be reported None 31. Series 24: Supervision of General Broker-Dealer Activities What should a supervising principal focus on when evaluating the effectiveness of the firm's Anti-Money Laundering (AML) program? Frequency of transactions Size and scale of the firm Employee training and compliance audits Number of transactions flagged as suspicious None 32. Series 24: Supervision of General Broker-Dealer Activities When overseeing a high-risk client's account, what is an essential supervisory action? Increasing the trading limits Conducting more frequent account reviews Consulting with the client on each trade Removing restrictions on complex instruments None 33. Series 24: Supervision of General Broker-Dealer Activities What is required of a principal when a new regulation affecting trading practices is announced? Wait for industry feedback before taking action Update training programs and supervisory procedures promptly Make minimal changes to existing procedures Focus only on high-volume traders None 34. Series 24: Supervision of General Broker-Dealer Activities What is a principal's duty regarding the surveillance of trading that might influence the market closing price? It is primarily the responsibility of the exchange Monitor end-of-day trading activities for patterns of manipulation Surveillance should be outsourced to avoid conflicts of interest No specific surveillance is required for end-of-day trading None 35. Series 24: Supervision of General Broker-Dealer Activities In the context of supervising derivative transactions, what specific aspect must a principal be vigilant about? Ensuring all derivative transactions are margin based Verifying the physical delivery of underlying assets Understanding and assessing the risk associated with each transaction Confirming all derivatives are listed on major exchanges None 36. Series 24: Supervision of General Broker-Dealer Activities What supervisory practice is essential when a broker-dealer introduces algorithmic trading strategies? Reducing the frequency of trade supervision Ensuring algorithms are tested for compliance with market conduct rules Allowing algorithms to self-correct without manual oversight Focusing only on profitability metrics None 37. Series 24: Supervision of General Broker-Dealer Activities When supervising the sale of leveraged ETFs, what specific information must be provided to clients? The potential for unlimited losses The historical performance of similar ETFs Detailed explanations of leverage risks and costs Assurance of higher returns due to leverage None 38. Series 24: Supervision of General Broker-Dealer Activities What role does a principal play in managing conflicts of interest in a broker-dealer environment? They should prioritize firm profits over resolving conflicts They should ensure conflicts are disclosed and managed according to regulatory requirements They are only required to manage conflicts that result in customer complaints Conflicts of interest should be handled by the legal department alone None 39. Series 24: Supervision of General Broker-Dealer Activities How must a principal supervise the activities of a broker-dealer operating across multiple branches? By frequently visiting each branch By assigning different rules based on the branch size By implementing uniform supervisory practices across all branches Supervision is only required for the main branch None 40. Series 24: Supervision of General Broker-Dealer Activities Regarding the retention of email communications, what is the minimum requirement under FINRA rules? Retain all emails for at least 3 years Retain emails for 1 year Only retain emails related to transactions Emails need not be retained if documented elsewhere None 41. Series 24: Supervision of General Broker-Dealer Activities What supervisory procedure should be implemented when a broker-dealer offers margin trading to clients? Clients should be allowed unlimited margin Supervise and assess the suitability of margin for each client Only offer margin trading to institutional clients Margin trading does not require supervision None 42. Series 24: Supervision of General Broker-Dealer Activities In the event of a regulatory audit, what is the expected role of a supervising principal? To provide minimal information to regulators To ensure all requested documentation is available and compliant To direct regulators to speak only with legal counsel To delay the audit until the firm can ensure compliance None 43. Series 24: Supervision of General Broker-Dealer Activities What is a critical supervisory consideration when a broker-dealer uses sub-custodians for holding client assets? Ensuring sub-custodians are based in the same country Regular auditing of sub-custodian compliance and security measures Allowing sub-custodians to set their own regulatory standards Using sub-custodians that offer the lowest fees None 44. Series 24: Supervision of General Broker-Dealer Activities When supervising the handling of sensitive client information, what measure is crucial? Sharing information only within the firm Limiting access to those who need it for their role Storing all information in a single, central database Periodic deletion of all outdated client information None 45. Series 24: Supervision of General Broker-Dealer Activities What supervisory actions should be taken regarding the personal trading activities of employees to prevent conflicts of interest? Allow employees to freely engage in personal trading Regularly review and pre-approve personal trading activities Only review trading activities of senior employees Prohibit personal trading entirely None 46. Series 24: Supervision of General Broker-Dealer Activities When adjusting supervisory practices due to changes in market conditions, what is a principal's primary concern? Maximizing firm profitability regardless of market conditions Ensuring practices remain compliant and appropriate for current market conditions Reducing the frequency of compliance checks during stable market periods Ignoring minor compliance issues during volatile market periods None 47. Series 24: Supervision of General Broker-Dealer Activities What is required of a supervising principal when an external whistleblower reports a potential violation within the broker-dealer? Dismiss the report if it comes from outside the firm Investigate the claim thoroughly and document the findings Report the whistleblower to regulatory authorities Only act if the whistleblower is an employee None 48. Series 24: Supervision of General Broker-Dealer Activities When a principal discovers that a broker under their supervision has made unauthorized speculative trades in a client's conservative account, what is the appropriate supervisory response? Transfer the client to another broker Immediately suspend the broker and investigate the trades Cover any financial losses and ignore the trades Reward the broker if the trades are profitable None 49. Series 24: Supervision of General Broker-Dealer Activities What action should a supervising principal take when they notice an increase in errors in trade execution reports at one of the firm's branches? Ignore the errors as long as they are not client complaints Implement additional training and monitoring at the branch Close the branch Decrease the volume of trades allowed for that branch None 50. Series 24: Supervision of General Broker-Dealer Activities In the case of supervising high-frequency trading (HFT) operations, what is a critical focus area for the principal? Ensuring each trade is manually confirmed Maximizing the volume of trades per second Monitoring for patterns of manipulative trading behavior Eliminating all trading risks None 51. Series 24: Supervision of General Broker-Dealer Activities How should a supervising principal respond when they find that a broker has repeatedly failed to disclose necessary risk information to clients? Provide a written warning to the broker Require the broker to attend ethics training Review and possibly restrict the broker's activities Promote the broker to ensure better compliance None 52. Series 24: Supervision of General Broker-Dealer Activities What must a supervising principal ensure regarding the handling of stop orders during periods of high market volatility? That stop orders are not used That clients are advised against placing stop orders That brokers clearly explain the risks associated with stop orders That all stop orders are converted to market orders None 53. Series 24: Supervision of General Broker-Dealer Activities When a new regulatory guideline is issued regarding client communications, what is the first step a principal should take? Ignore the guideline until a second notice is received Immediately train all staff on the new guideline Review and possibly update the firm's communication policies Send a summary of the guideline to clients None 54. Series 24: Supervision of General Broker-Dealer Activities What is required from a supervising principal when integrating new technology that supports trading activities? Let IT departments handle all aspects of the integration Ensure the technology is compliant with regulatory standards Focus solely on the cost-effectiveness of the technology Implement the technology without testing None 55. Series 24: Supervision of Retail and Institutional Customer-Related Activities What must a supervisor do when they detect that a discretionary account has transactions not suitable for the client's investment profile? Report to FINRA immediately Review the client's investment profile and discuss the matter with the account manager Request the client to revise the investment profile Ignore as discretionary accounts allow for any trades None 56. Series 24: Supervision of Retail and Institutional Customer-Related Activities When overseeing the trading activities in a retail brokerage, which action should a supervisor take to comply with best execution requirements? Routinely review trading algorithms Only allow trades during market hours Limit trading to a specific list of approved brokers Increase trading limits for preferred clients None 57. Series 24: Supervision of Retail and Institutional Customer-Related Activities In supervising the communications of registered representatives with the public, what must a supervisor ensure regarding social media use? Posts are pre-approved by compliance Employees use personal accounts for business purposes Content shared is unrelated to finance All posts are deleted after 30 days None 58. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is a key consideration when supervising sales of complex financial products to retail clients? Ensuring that only high-net-worth individuals are targeted Confirming that clients understand the risks associated with the products Prioritizing sales over client suitability Limiting the amount of information provided to avoid client confusion None 59. Series 24: Supervision of Retail and Institutional Customer-Related Activities A supervisor notices that a registered representative recommends only products from one issuer despite better available alternatives. What should the supervisor do first? Ignore as long as the products are not inferior Investigate the reasons behind the biased recommendations Encourage the representative to continue with current practices Increase the variety of products offered by other issuers None 60. Series 24: Supervision of Retail and Institutional Customer-Related Activities How should a supervisor react to reports of potentially manipulative trading practices within their supervised area? Monitor the situation to confirm before taking any action Immediately suspend the trading activities in question Conduct an internal investigation to verify the practices Report the activity to regulatory authorities without verification None 61. Series 24: Supervision of Retail and Institutional Customer-Related Activities In supervising the use of margin accounts, what is essential for the supervisor to monitor? The interest rate charged on borrowed funds Frequent changes in the margin requirements Client usage and potential for margin calls The tax implications of trading on margin None 62. Series 24: Supervision of Retail and Institutional Customer-Related Activities If an internal audit identifies a pattern of non-compliance with trade documentation in a department, what should the supervisor's immediate action be? Reprimand the employees involved Review and enhance training programs Ignore the findings if profits are high Change the audit company None 63. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is a supervisor's role in handling conflicts of interest in client transactions? Encourage employees to manage these independently Ensure conflicts are disclosed and managed according to regulatory standards Cover up conflicts to maintain client trust Focus solely on profitability regardless of conflicts None 64. Series 24: Supervision of Retail and Institutional Customer-Related Activities What must a supervisor consider when approving advertisements for new investment products? The attractiveness of the advertisement Compliance with regulatory standards for truthfulness and clarity The number of competitors' advertisements The potential revenue from the advertised product None 65. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is the supervisor's responsibility regarding the oversight of electronic communications concerning client transactions? Ensure all communications are deleted after transaction completion Monitor and ensure compliance with data protection laws Only review communications that lead to complaints Allow unrestricted access to electronic communications by all employees None 66. Series 24: Supervision of Retail and Institutional Customer-Related Activities In situations where a registered representative is involved in outside business activities, what is the supervisor's best course of action? Encourage the representative to prioritize these activities Ensure that such activities are fully disclosed and do not conflict with firm interests Suspend the representative to prevent potential conflicts Allow the activities without any disclosure to avoid bureaucracy None 67. Series 24: Supervision of Retail and Institutional Customer-Related Activities When supervising the handling of sensitive client data, what is the priority for a supervisor? Ensure data is accessible to all staff for operational efficiency Store all data on external drives to prevent server issues Ensure adherence to strict data security protocols Share data freely within the firm to facilitate client management None 68. Series 24: Supervision of Retail and Institutional Customer-Related Activities How should a supervisor handle the introduction of a new technology platform for trading? By prioritizing speed over security By ensuring all relevant staff are trained and understand the platform By limiting access to senior traders only By using the platform without formal testing None 69. Series 24: Supervision of Retail and Institutional Customer-Related Activities What approach should a supervisor take when a pattern of late reporting of trades by a representative is observed? Overlook the pattern if the representative is otherwise performing well Train the representative on the importance of timely reporting Immediately fire the representative Increase the representative's trading limits as a challenge None 70. Series 24: Supervision of Retail and Institutional Customer-Related Activities In the context of supervising retail and institutional customer-related activities, what is a supervisor's responsibility regarding the handling of customer complaints? Ignore complaints unless they escalate to regulatory authorities Record and investigate each complaint thoroughly, ensuring appropriate resolution Discourage clients from lodging complaints to avoid regulatory scrutiny Forward all complaints directly to the firm's legal department for resolution None 71. Series 24: Supervision of Retail and Institutional Customer-Related Activities When supervising the activities of registered representatives, what is essential for a supervisor to monitor to detect potential violations? The number of clients served by each representative The frequency of office meetings held by representatives The representatives' adherence to dress code policies The representatives' adherence to regulatory and firm policies and procedures None 72. Series 24: Supervision of Retail and Institutional Customer-Related Activities When supervising customer accounts, what should a supervisor do if they suspect unauthorized trading? Ignore the suspicion to avoid conflict with the representative Immediately report the suspicion to regulatory authorities Investigate the suspicion and take appropriate action, including informing senior management Confront the client directly without involving other parties None 73. Series 24: Supervision of Retail and Institutional Customer-Related Activities What should a supervisor ensure regarding the handling of client funds by registered representatives? Allow representatives full discretion over the use of client funds Regularly audit client funds to ensure compliance with regulations Segregate client funds from firm funds and monitor for misappropriation Use client funds for firm expenses to improve profitability None 74. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is a key consideration for a supervisor when overseeing the opening of new customer accounts? Streamlining the process by minimizing documentation requirements Verifying the identity of each customer and ensuring suitability of account types Encouraging representatives to open as many accounts as possible Allowing representatives to open accounts without client consent None 75. Series 24: Supervision of Retail and Institutional Customer-Related Activities How should a supervisor handle instances where a registered representative fails to disclose potential conflicts of interest? Ignore the oversight if the representative generates significant revenue Inform clients directly about the conflicts Investigate the oversight and take appropriate disciplinary action Provide additional compensation to the representative to mitigate conflicts None 76. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is a supervisor's primary responsibility regarding the supervision of trading activities within the firm? Maximizing profits through aggressive trading strategies Monitoring for compliance with regulatory requirements and internal policies Limiting trading activities to reduce market volatility Encouraging representatives to engage in speculative trading None 77. Series 24: Supervision of Retail and Institutional Customer-Related Activities When supervising the handling of client orders, what should a supervisor ensure regarding order execution? Prioritizing orders from high-net-worth clients over others Execution of orders at the best available prices in a timely manner Delaying order execution to take advantage of market fluctuations Executing orders only during specific market hours None 78. Series 24: Supervision of Retail and Institutional Customer-Related Activities In the context of supervising retail and institutional customer-related activities, what should a supervisor do when a representative engages in unauthorized trading? Ignore the behavior if it generates profits for the firm Notify the representative's direct manager but take no further action Investigate the unauthorized trading and take appropriate disciplinary action Encourage the representative to continue the unauthorized trading to meet targets None 79. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is a supervisor's responsibility regarding the supervision of client communications by registered representatives? Allowing representatives full discretion over client communications Monitoring and approving client communications to ensure compliance with regulations Discouraging representatives from communicating with clients to avoid liability Ignoring client communications unless they lead to complaints None 80. Series 24: Supervision of Retail and Institutional Customer-Related Activities When supervising the marketing and promotional materials used by representatives, what is the primary concern of the supervisor? The aesthetic quality of the materials Ensuring all materials are approved for compliance with advertising regulations The cost-effectiveness of the marketing campaigns The speed at which materials are produced and distributed None 81. Series 24: Supervision of Retail and Institutional Customer-Related Activities How should a supervisor approach the review of electronic communications related to trading? Randomly select communications to review for compliance Only review communications flagged by clients Systematically review all communications to ensure adherence to policies Allow representatives to self-review their communications None 82. Series 24: Supervision of Retail and Institutional Customer-Related Activities What action should a supervisor take when they notice a pattern of misrepresentation in the sales practices of a registered representative? Increase the sales targets of the representative to offset the risk Conduct a detailed review and provide retraining or disciplinary action as necessary Transfer the representative to another department Offer incentives to the representative to alter their sales tactics None 83. Series 24: Supervision of Retail and Institutional Customer-Related Activities In the supervision of derivative products trading, what is a critical aspect for the supervisor to monitor? The physical delivery of the underlying assets The speculative nature of all trades Compliance with risk management and suitability policies Ensuring all trades are profitable None 84. Series 24: Supervision of Retail and Institutional Customer-Related Activities When a new regulation is introduced affecting client advisory services, what is the supervisor's first step? Wait for industry feedback before taking any action Inform all staff and ensure understanding and compliance Seek legal advice on avoiding compliance Reduce the scope of advisory services offered None 85. Series 24: Supervision of Retail and Institutional Customer-Related Activities How should a supervisor handle a situation where a registered representative consistently fails to follow know-your-customer 'KYC' guidelines? Ignore the issue as long as the representative generates revenue Offer a bonus to encourage better compliance Apply disciplinary measures and retrain the representative Decrease the representative's client base as a precaution None 86. Series 24: Supervision of Retail and Institutional Customer-Related Activities What is required of a supervisor when a conflict of interest arises between the firm's interests and a client's interests? Prioritize the firm's interests Resolve the conflict in favor of the client's best interest Document the conflict but take no further action Encourage the representative to handle the conflict independently None 87. Series 24: Supervision of Trading and Market Making Activities In market making activities, what is the primary responsibility of a supervisor when managing a trader who continuously fails to update bid-ask spreads according to market conditions? Re-train the trader on market fundamentals Terminate the trader's employment Ignore as long as overall profitability is not affected Temporarily suspend the trader's market making ability None 88. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they discover a trader engaging in front running customer orders? Monitor the trader's future transactions more closely Report the activity to FINRA and take disciplinary action Advise the trader informally to cease such activities Assess whether the front running was profitable before deciding on action None 89. Series 24: Supervision of Trading and Market Making Activities Which of the following is the most appropriate action for a supervisor when a trader consistently fails to meet the required spread quota? Issue a formal warning and monitor the trader's performance Decrease the trader's base salary Re-assign the trader to another department Provide performance coaching and possibly adjust the quota None 90. Series 24: Supervision of Trading and Market Making Activities What is the required procedure if a discrepancy is found in the record of executed trades versus reported trades by a trader? Immediately report to the trade surveillance committee Conduct an internal audit of the specific trader's transactions Ignore unless the discrepancy recurs Adjust the trader's records to match the reported trades None 91. Series 24: Supervision of Trading and Market Making Activities What is the appropriate supervisory response when proprietary trading results consistently deviate significantly from risk management guidelines? Review and adjust the trading strategies and risk parameters Increase the risk limits to accommodate new trading levels Dismiss the trader responsible for the deviations Approve the deviations as long as they are profitable None 92. Series 24: Supervision of Trading and Market Making Activities If a trader uses non-public information to influence market prices, what is the first action a supervisor should take? Consult with the legal department for appropriate action Reprimand the trader to discourage future incidents Review the profitability of the trades before deciding Ignore the issue unless the trader repeats the offense None 93. Series 24: Supervision of Trading and Market Making Activities What must a supervisor do if they detect an anomaly in algorithmic trading patterns that could suggest manipulative practices? Shut down the trading algorithm immediately Analyze the trading patterns with the IT department Report the anomaly to regulatory authorities without further investigation Wait to see if the anomaly corrects itself None 94. Series 24: Supervision of Trading and Market Making Activities In the context of market making, how should a supervisor respond to consistent complaints from customers about slippage in their trade executions? Investigate the execution processes and compliance with best execution standards Tell customers that slippage is a normal part of trading Reduce the trader's bonus based on customer satisfaction Ignore the complaints as long as the firm remains profitable None 95. Series 24: Supervision of Trading and Market Making Activities When a trading error occurs that affects multiple accounts, what should be the first step a supervisor takes? Determine the extent of the impact and correct the error Notify all affected clients immediately Disciplinary action against the trader who made the error Cover the losses using the firm's funds without notifying clients None 96. Series 24: Supervision of Trading and Market Making Activities What is the most appropriate supervisory action if a supervisor finds that a trader has been misleading clients about the potential returns of certain trades? Immediately suspend the trader pending further investigation Offer the clients a discount on future trades Document the incident and provide corrective training Reassign the trader to another department without client contact None 97. Series 24: Supervision of Trading and Market Making Activities How should a supervisor handle a situation where a trader is consistently not adhering to the firm's established trading limits? Adjust the limits to better align with the trader's strategies Implement stricter monitoring and reporting requirements for the trader Immediately report the trader to regulatory authorities Encourage other traders to adopt similar strategies if profitable None 98. Series 24: Supervision of Trading and Market Making Activities In response to discovering unauthorized trading activities, what is the initial step a supervisor must take? Reprimand the trader involved Confirm the details and scope of the unauthorized activities Notify the affected clients immediately Adjust the trading strategy to include the unauthorized activities None 99. Series 24: Supervision of Trading and Market Making Activities When a trading pattern suggests potential wash trading, what should the supervisor's first response be? Disregard as long as it does not affect the firm's net positions Initiate an internal investigation to confirm the activities Encourage the trader to continue if it enhances liquidity Report to the SEC as a precautionary measure None 100. Series 24: Supervision of Trading and Market Making Activities If a supervisor observes a pattern of trade allocations favoring certain accounts over others, what is the most appropriate course of action? Dismiss the issue unless client complaints arise Redistribute the favorable trades evenly among all clients Conduct a thorough review of trade allocation practices Increase incentives for traders to balance future allocations None 101. Series 24: Supervision of Trading and Market Making Activities What action is required when a supervisor identifies that traders are not maintaining adequate documentation of their trade justifications? Overlook minor documentation errors if trades are profitable Mandate immediate retraining on compliance and documentation requirements Reduce the traders' trading limits until documentation improves Promote the traders to encourage better performance None 102. Series 24: Supervision of Trading and Market Making Activities In the scenario where a trader executes trades that consistently cause significant market impact, what should the supervisor do? Instruct the trader to increase the size of the trades further Ignore the impact as long as the trades are within risk limits Analyze the trades to determine if they violate market manipulation rules Congratulate the trader for their aggressive market stance None 103. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they notice that a trader is deliberately delaying the execution of client orders to benefit from price movements? Monitor the situation to determine if it happens repeatedly Adjust the execution algorithm to prevent future delays Initiate disciplinary proceedings against the trader Increase surveillance on all traders to prevent such behavior None 104. Series 24: Supervision of Trading and Market Making Activities In cases where a supervisor finds out about unauthorized speculative trading by a trader, what is the most immediate response? Reevaluate the firm's risk management strategies Record the incident for future reference Suspend the trader to investigate the breach Assess the impact on market conditions before taking action None 105. Series 24: Supervision of Trading and Market Making Activities When it is discovered that a trader has not been adhering to the SEC's Fair Dealing Rule in executing client orders, what is the most effective response? Schedule training sessions for all traders on regulatory compliance Implement automated systems to monitor adherence Reassign the trader to a non-trading role Review and enhance compliance protocols None 106. Series 24: Supervision of Trading and Market Making Activities What is required of a supervisor when they observe that traders are using outdated market data for decision-making? Schedule immediate system upgrades Organize a meeting to discuss the potential impacts Overlook the issue if it does not impact overall profitability Train traders on the importance of using current data None 107. Series 24: Supervision of Trading and Market Making Activities When a trader consistently fails to report all required transaction details to the trade reporting facility, what is the correct supervisory action? Implement a more robust compliance monitoring system Apply a financial penalty to the trader for non-compliance Conduct a review of all the trader's past reports Both A and C None 108. Series 24: Supervision of Trading and Market Making Activities What action should a supervisor take if they detect that a trader is engaging in "painting the tape" to create a misleading appearance of trading activity? Monitor the trader's activities to gather more evidence Report the activity to the compliance department and regulatory authorities Warn the trader informally to cease the activity Review the firm's trading policies to understand the lapse None 109. Series 24: Supervision of Trading and Market Making Activities When it is discovered that a trader has falsified trade documentation to hide losses, what is the most critical action for the supervisor? Implement more stringent trade documentation protocols Report the trader to the compliance department for further action Arrange for an immediate audit of all recent trades by the trader Offer the trader a chance to explain the discrepancies None 110. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they discover that a trader has been engaging in unauthorized after-hours trading? Disregard the actions as long as they do not affect the firm's opening positions Monitor the trader's activities for a short period to gather more information Immediately suspend the trader and review all after-hours trades Encourage the trader to limit after-hours activities to urgent situations None 111. Series 24: Supervision of Trading and Market Making Activities How should a supervisor react to finding out a trader is not segregating client assets as required by regulation? Immediately retrain the trader on proper asset segregation Review all client accounts managed by the trader for further non-compliance Issue a formal warning and increase supervision Report the non-compliance to the compliance officer and initiate an audit None 112. Series 24: Supervision of Trading and Market Making Activities If a supervisor finds that a trader is using a high-risk strategy not approved by the firm, what should be the immediate action? Document the strategy for review by the risk management team Allow the strategy temporarily to see if it yields high returns Order the trader to cease using the strategy immediately Discuss the strategy in a team meeting to evaluate its risks and benefits None 113. Series 24: Supervision of Trading and Market Making Activities What is the correct supervisory response when a trader is found to have repeatedly ignored stop-loss orders set by clients? Reevaluate the electronic trading systems for faults Conduct an interview with the trader to understand the reasons Issue a disciplinary action and retrain the trader on adherence to client instructions Increase the frequency of compliance audits on all trading activities None 114. Series 24: Supervision of Trading and Market Making Activities What is the recommended supervisory action if a pattern of late reporting of trades is observed among traders? Send reminders about timely reporting requirements Overlook the issue if the trades are profitable Conduct training sessions on the importance of timely reporting Initiate an audit of all recent trades and enforce compliance None 115. Series 24: Supervision of Trading and Market Making Activities Which of the following is the most appropriate action for a supervisor when a trader consistently fails to meet the required spread quota? Issue a formal warning and monitor the trader's performance Decrease the trader's base salary Re-assign the trader to another department Provide performance coaching and possibly adjust the quota None 116. Series 24: Supervision of Trading and Market Making Activities What must a supervisor do if they detect an anomaly in algorithmic trading patterns that could suggest manipulative practices? Shut down the trading algorithm immediately Analyze the trading patterns with the IT department Report the anomaly to regulatory authorities without further investigation Wait to see if the anomaly corrects itself None 117. Series 24: Supervision of Trading and Market Making Activities How should a supervisor handle a situation where a trader is consistently not adhering to the firm's established trading limits? Adjust the limits to better align with the trader's strategies Implement stricter monitoring and reporting requirements for the trader Immediately report the trader to regulatory authorities Encourage other traders to adopt similar strategies if profitable None 118. Series 24: Supervision of Trading and Market Making Activities When it is discovered that a trader has not been adhering to the SEC's Fair Dealing Rule in executing client orders, what is the most effective response? Schedule training sessions for all traders on regulatory compliance Implement automated systems to monitor adherence Reassign the trader to a non-trading role Review and enhance compliance protocols None 119. Series 24: Supervision of Investment Banking and Research Which of the following is NOT a responsibility of a principal regarding the supervision of research analysts? Reviewing and approving research reports before publication. Ensuring that research analysts do not report to investment banking personnel. Assigning research analysts to cover specific industries or companies. Directly negotiating the compensation of research analysts based on specific investment banking transactions. None 120. Series 24: Supervision of Investment Banking and Research What must a supervisor in investment banking ensure regarding the quiet periods following an IPO? Research reports are issued immediately after the IPO to support stock pricing. A blackout period is enforced during which no research reports are published about the issuer. Research reports must criticize the management if the IPO performs below market expectations. Trading of the IPO stock is restricted to institutional investors only. None 121. Series 24: Supervision of Investment Banking and Research In managing conflicts of interest in investment banking, which of the following is NOT an accepted practice? Allowing investment bankers to review and suggest changes to research reports before publication. Implementing information barriers between investment banking and research departments. Documenting the procedures that ensure research analyst independence. Regular training sessions for research analysts on handling potential conflicts of interest. None 122. Series 24: Supervision of Investment Banking and Research When must a supervising principal sign off on a research report before its release? Only if the research report is on the company's own stock. Whenever the research report includes a change in rating or price target. If the report includes a first-time rating or coverage initiation of a company. Only when the research report includes information about an upcoming IPO. None 123. Series 24: Supervision of Investment Banking and Research What is required under FINRA rules when a research analyst is involved in a road show for an IPO? The research analyst must prepare a separate report to be distributed at the road show. The research analyst is required to disclose personal holdings in the IPO. Research analysts are prohibited from participating in road shows. The research analyst must be supervised by a compliance officer during the road show. None 124. Series 24: Supervision of Investment Banking and Research How should a supervisor handle potential conflicts of interest disclosed by a research analyst regarding a family member working at a covered company? Ignore the disclosure if the family member is not in a high-ranking position. Restrict the analyst from covering any companies where conflicts exist. Require that the analyst disclose the conflict in all reports on the company. Allow the analyst to continue coverage with periodic reviews of their work. None 125. Series 24: Supervision of Investment Banking and Research Under FINRA regulations, what is an essential element of training for new research analysts in investment banking? Technical analysis of stock trends. Regulations concerning the confidentiality of investment banking transactions. Sales techniques for pitching investment products. The basics of personal finance management. None 126. Series 24: Supervision of Investment Banking and Research Which of the following practices is recommended to maintain the independence of research analysts from investment banking influences? Research analysts should report directly to the head of investment banking. Compensation for research analysts should be linked to specific investment banking transactions. Physical separation of research department and investment banking areas. Allow investment bankers to have input on which companies are covered in research reports. None 127. Series 24: Supervision of Investment Banking and Research What should be the supervisory response if a research analyst receives an offer to participate in a pitch meeting for a potential IPO? Allow participation to gain first-hand information. Permit attendance but only in a passive, observational capacity. Decline the offer to prevent conflicts of interest. Require the analyst to disclose any opinions formed during the meeting in subsequent reports. None 128. Series 24: Supervision of Investment Banking and Research How should a supervisor address the issue of a research analyst who wants to engage in a public appearance discussing securities? Prohibit all public appearances to avoid potential conflicts of interest. Allow the analyst to make public appearances without restrictions. Require that the analyst discloses their affiliation with the firm and any relevant conflicts of interest. Supervise and approve the content of all public communications beforehand. None 129. Series 24: Supervision of Investment Banking and Research Which statement best reflects the supervision required over dual-role employees working in both investment banking and research departments? Supervision is not required if the employee maintains confidentiality. Specific procedures must be in place to handle potential conflicts of interest. Dual roles are prohibited under all circumstances. Employees can freely share information between departments to promote synergy. None 130. Series 24: Supervision of Investment Banking and Research When dealing with third-party research providers, what is a supervisory requirement? To ensure third-party researchers are financially compensated by the subjects they cover. To maintain a contractual relationship that ensures independence from the covered companies. To allow third-party researchers to directly communicate with investment bankers. To supervise third-party researchers as internal employees. None 131. Series 24: Supervision of Investment Banking and Research What is required to maintain the integrity of research when a firm is both underwriting an IPO and issuing research on the IPO issuer? Immediate publication of research reports following the IPO. Ensuring that research reports on the IPO issuer are only issued after the quiet period. Coordinating research report releases with the marketing efforts of the IPO. Allowing unrestricted access between the underwriting and research teams. None 132. Series 24: Supervision of Investment Banking and Research What action is required by a supervisor if a research report on a company is to be issued shortly after the company has announced a merger or acquisition? Accelerate the publication to coincide with the market reaction. Review and potentially revise the report to reflect the new business landscape. Proceed with publication without review, maintaining the original analysis and conclusions. Delay the report until the company's competitors have also issued their responses. None 133. Series 24: Supervision of Investment Banking and Research Which of the following is a required practice when a firm prepares to publish a research report on a company for which it has also performed significant investment banking services in the past year? The report must omit any mention of the investment banking relationship. The relationship must be prominently disclosed at the beginning of the report. The research must be approved by the CEO of the investment banking client. Investment bankers must be given the opportunity to review the report before publication. None 134. Series 24: Supervision of Investment Banking and Research In the case of an analyst covering a high-profile IPO, what is the supervisory requirement for managing non-public information obtained during the research process? Share the information with the firm's institutional clients to gain competitive advantage. Keep the information confined within the research team until the IPO is publicly launched. Release the information in a research note to all clients immediately. Use the information to advise the investment banking team on pricing strategies for the IPO. None 135. Series 24: Supervision of Investment Banking and Research What are the supervisor's responsibilities when a research analyst plans to issue a report on a company where there is a known forthcoming regulatory action that could impact the company's stock? Ensure that the report waits until the regulatory action is public. Advise the analyst to ignore the regulatory action in the report to maintain neutrality. Have the analyst include a speculative section about potential outcomes of the regulatory action. Verify that any mention of the regulatory action is based on public information and appropriately disclaimed. None 136. Series 24: Supervision of Investment Banking and Research Under what condition should a supervisor intervene to prevent the publication of a research report? If the report could potentially cause a short-term decrease in the stock's price. When the research might conflict with the firm's other financial interests. If the report includes material non-public information inadvertently. Whenever the report diverges from the consensus view within the firm. None 137. Series 24: Supervision of Investment Banking and Research What supervisory actions are required when transitioning a research analyst from covering one industry to another? Immediate reassignment without additional training. Comprehensive retraining in the new industry before reassignment. A brief overview of key companies in the new industry. No specific actions as long as the analyst agrees to the change. None 138. Series 24: Supervision of Investment Banking and Research What supervisory practices are essential when a research report is about to downgrade a major client of the investment banking division? Ensure that the downgrade is based solely on substantial evidence and research. Coordinate the timing of the downgrade with the client to minimize impact. Provide advance notice to senior management within the client company. Modify the report to lessen the severity of the downgrade. None 139. Series 24: Supervision of Investment Banking and Research What is the supervisor's responsibility when an analyst wants to change a stock rating based on a recent personal investment in the stock? Encourage transparency and allow the change if it aligns with the firm's overall views. Prohibit the change to avoid any appearance of conflict of interest. Require the analyst to disclose their personal investment in the report. Review the basis for the rating change independently before approval. None 140. Series 24: Supervision of Investment Banking and Research What is the required action when a supervisor discovers that a research analyst has accepted travel accommodations from a company under coverage to attend a corporate event? Require the analyst to reimburse the company for the travel expenses. Disclose the acceptance of travel accommodations in the next research report. Prohibit any future reports on the company by the analyst to avoid a conflict of interest. Document the incident and ensure no favorable bias appears in subsequent reports. None 141. Series 24: Supervision of Investment Banking and Research In the case where proprietary research is leaked prior to publication, what is the supervisor's best course of action? Proceed with the scheduled release to avoid creating undue market impact. Investigate the leak, identify the source, and address the breach of confidentiality. Delay the release until market conditions stabilize. Revise the research to include the impact of the leak. None 142. Series 24: Supervision of Investment Banking and Research How should a supervisor respond when an analyst frequently changes ratings on companies based on market rumors rather than solid research? Encourage the analyst to continue if the ratings changes increase trading volumes. Overlook the practice as long as the changes are profitable. Implement stricter review processes for rating changes. Promote the analyst for adaptive strategies in dynamic market conditions. None 143. Series 24: Supervision of Investment Banking and Research What is the supervisor's role in overseeing communications between research analysts and the media? Ensure all communications are pre-approved by the legal department. Allow analysts free communication to enhance the firm's visibility. Monitor and record all analyst interactions with the media. Only allow senior analysts to speak with the media. None 144. Series 24: Supervision of Investment Banking and Research What must be included in a supervisor's checklist when ensuring compliance with the Global Research Analyst Settlement? Confirmation that analysts receive bonuses based on investment banking performance. Verification that research is disseminated internally before being sent to clients. Assurance that research analysts and investment bankers are strictly segregated. Procedures allowing investment bankers to alter research content before publication. None 145. Series 24: Supervision of Investment Banking and Research What actions are necessary when a research analyst is offered a board position at a company they cover? Accept if the position is unpaid. Decline to avoid any conflicts of interest. Accept and disclose this in all future research reports. Consult with legal advisors before making a decision. None 146. Series 24: Supervision of Investment Banking and Research When new regulations mandate enhanced transparency in research report disclosures, what initial steps should the supervisor take? Update the firm's compliance manuals and train all research staff on the new requirements. Wait to see how competitors implement the changes before making any adjustments. Minimize disclosure to preserve the firm's proprietary methodologies. Dispute the regulations through industry channels. None 147. Series 24: Supervision of Investment Banking and Research If a supervisor discovers that confidential financial projections have been used in a research report without authorization, what is the immediate step to take? Reprimand the analyst responsible for the inclusion. Withdraw the report from circulation and correct the oversight. Ensure all future reports undergo stricter compliance checks. Both B and C. None 148. Series 24: Supervision of Investment Banking and Research How should a supervisor handle potential conflicts of interest disclosed by a research analyst regarding a family member working at a covered company? Ignore the disclosure if the family member is not in a high-ranking position. Restrict the analyst from covering any companies where conflicts exist. Require that the analyst disclose the conflict in all reports on the company. Allow the analyst to continue coverage with periodic reviews of their work. None 149. Series 24: Supervision of Investment Banking and Research How should a supervisor address the issue of a research analyst who wants to engage in a public appearance discussing securities? Prohibit all public appearances to avoid potential conflicts of interest. Allow the analyst to make public appearances without restrictions. Require that the analyst discloses their affiliation with the firm and any relevant conflicts of interest. Supervise and approve the content of all public communications beforehand. None 150. Series 24: Supervision of Investment Banking and Research Under what condition should a supervisor intervene to prevent the publication of a research report? If the report could potentially cause a short-term decrease in the stock's price. When the research might conflict with the firm's other financial interests. If the report includes material non-public information inadvertently. Whenever the report diverges from the consensus view within the firm. None 1 out of 150 Time is Up! Time's up
