FINRA Series 24 Practice Test

Answer choices

1. A. (B) Immediately escalating the matter to the compliance department for review and investigation.
2. B. (A) Accepting the recommendation if the customer signed a risk disclosure.
3. C. (C) Briefly reviewing the customer’s account history and the bond prospectus before proceeding.
4. D. (D) Documenting the recommendation and awaiting a formal complaint filing before further action.

Wrong-answer review

• B. (A) Accepting the recommendation if the customer signed a risk disclosure.: While customer consent is important, it does not negate the firm's responsibility to ensure suitability. A recommendation that contradicts a customer's stated risk tolerance requires further scrutiny, not automatic acceptance.
• C. (C) Briefly reviewing the customer’s account history and the bond prospectus before proceeding.: A brief review is inadequate given the potential for a significant suitability breach. Transaction supervision demands a more thorough investigation to determine if the recommendation was appropriate and compliant with regulatory requirements.
• D. (D) Documenting the recommendation and awaiting a formal complaint filing before further action.: Waiting for a formal complaint is a reactive measure, not a proactive supervisory approach. Transaction supervision requires identifying and correcting issues before they escalate to complaints.

Answer choices

1. A. Establish a comprehensive compliance program tailored to the state’s regulations
2. B. Conduct a thorough risk assessment of the new office’s operations
3. C. Verify the state’s regulatory requirements and obtain all necessary licenses
4. D. Implement a robust client onboarding process to ensure regulatory compliance

Answer choices

1. A. Wait for the scheduled settlement date to see whether the mismatch resolves itself.
2. B. Approve settlement using whichever instruction was entered most recently without verification.
3. C. Shift the review to market-abuse surveillance because multiple counterparties are involved.
4. D. Escalate the unmatched instruction immediately, verify the correct settlement details with the relevant parties, and monitor the exception through resolution.

Answer choices

1. A. Implementing a system for automated valuation analysis to ensure fair pricing.
2. B. Establishing a robust conflict-of-interest policy and procedures, including disclosure requirements and recusal protocols.
3. C. Conducting annual employee performance reviews focused on deal volume and revenue generation.
4. D. Developing a detailed marketing campaign for the firm's investment banking services to attract new clients.

Answer choices

1. A. Determine whether the third party's activities and transaction-based compensation would require broker-dealer registration and prohibit the payment if Rule 2040 would be violated.
2. B. Approve the payment if it is below a fixed dollar amount per referral.
3. C. Convert the payment to a gift card so it is governed only by Rule 3220.
4. D. Rely solely on customer disclosure of the referral fee.

Answer choices

1. A. Approve it based only on the marketing director's sign-off.
2. B. Use audience demographics as a substitute for compliance review.
3. C. Launch the campaign first and test investor reactions before reviewing the content.
4. D. Ensure the communication receives any required principal approval and that its content is fair, balanced, and not misleading under Rule 2210.

Answer choices

1. A. Investigate the applicant's good character, business repute, qualifications, and experience and use written procedures to verify the accuracy and completeness of Form U4 information within the rule's timeframe.
2. B. Treat filing Form U4 as eliminating the need for the member's own investigation.
3. C. Wait until after the representative has serviced customers before reviewing disciplinary history.
4. D. Rely exclusively on the applicant's résumé and current registration status.

Answer choices

1. A. Escalate the situation to senior management for further investigation and potential disciplinary action, ensuring a thorough review
2. B. Review the market maker’s mandate and trading strategy to determine if the volatility pause was appropriately implemented, but without immediate action
3. C. Immediately halt all trading activity in the security, potentially disrupting market liquidity
4. D. Instruct the market maker to continue trading, as long as the volatility pause remains in effect, minimizing disruption

Answer choices

1. A. Obtain general counsel's approval and treat that alone as satisfying Rule 2241.
2. B. Require unrelated ethics training but do not review the report or conflict.
3. C. Review the facts under Rule 2241, determine whether a material conflict exists, and ensure any required disclosure and research-control requirements are satisfied before distribution.
4. D. Disclose the event automatically as a conflict without determining whether the rule or firm policy requires it.

Answer choices

1. A. Require only refresher training before determining whether trading ahead occurred.
2. B. Promptly investigate the personal trading and customer order flow, preserve relevant records, and restrict activity as reasonably necessary while the review is conducted.
3. C. Review compensation instead of the suspicious trade sequence.
4. D. Ignore the pattern unless a customer complains.