Series 24 – General Securities Principal Exam Supervision & Principal Oversight 2

Question 1

When reviewing customer correspondence, a principal finds an email where a rep promises a client guaranteed returns. What action should be taken?

Accepted Answer

Correct the communication and address the violation with the rep

Answer

Guaranteeing returns violates FINRA rules; the principal must correct the communication and take disciplinary action with the representative.

Question 2

A branch manager fails to supervise a registered rep who churns customer accounts. Under FINRA rules, the branch manager may be subject to:

Accepted Answer

Supervisory liability for the violations

Answer

Branch managers bear supervisory liability when they fail to reasonably supervise registered representatives, regardless of direct knowledge.

Question 3

Which of the following is NOT a characteristic of an effective supervisory control system under FINRA Rule 3120?

Accepted Answer

Guaranteeing zero customer complaints

Answer

No supervisory system can guarantee zero complaints; effective controls focus on testing, identifying weaknesses, and reporting to management.

Question 4

A General Securities Principal is reviewing trading activity and notices a pattern of late-day mutual fund switching. This may indicate:

Accepted Answer

Late trading or market timing

Answer

Late-day mutual fund switching is a hallmark of market timing or late trading, both of which are prohibited practices the principal must investigate.

Question 5

Under FINRA rules, how long must a firm retain records of its supervisory review of customer account activity?

Accepted Answer

3 years

Answer

FINRA requires firms to retain records of supervisory reviews for at least three years, with two years in an accessible location.

Series 24 – General Securities Principal Exam Practice Test