Series 27

A Financial and Operations Principal and an Introducing Broker-Dealer Financial and Operations Principal must be responsible for performing the following duties: final approval and responsibility for the accuracy of financial reports submitted to any duly established securities industry regulatory body; final preparation of such reports; supervision of individuals who assist in the preparation of such reports; supervision of and responsibility for individuals who are involved in the actual maintenance of the member’s books and records from which such reports are derived; supervision and performance of the member’s responsibilities under all financial responsibility rules promulgated pursuant to the provisions of the Securities Exchange Act of 1934; overall supervision of and responsibility for the individuals who are involved in the administration and maintenance of the member’s back office operations; and any other matter involving the financial and operational management of the member.

These requirements do not apply to a member that is exempt from the requirement to designate a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal.

Principal Financial Officer and Principal Operations Officer

Each member must designate a Principal Financial Officer with primary responsibility for financial filings and those books and records related to such filings, and a Principal Operations Officer with primary responsibility for the day-to-day operations of the member’s business, including overseeing the receipt and delivery of securities and funds, safeguarding customer and member assets, calculation and collection of margin from customers and processing dividend receivables and payables and reorganization redemptions and those books and records related to such activities.

Each member that self-clears, or that clears for other members, must designate separate persons to function as Principal Financial Officer and Principal Operations Officer. Such persons may also carry out the other responsibilities of a Financial and Operations Principal and an Introducing Broker-Dealer Financial and Operations Principal as specified in paragraph (a)(4)(A) of Rule 1220. If such member is limited in size and resources, it may, pursuant to the Rule 9600 Series, request a waiver of the requirement to designate separate persons to function as Principal Financial Officer and Principal Operations Officer.

Each member that is an introducing member may designate the same person to function as Financial and Operations Principal (or Introducing Broker-Dealer Financial and Operations Principal), Principal Financial Officer and Principal Operations Officer.

Each person designated as a Principal Financial Officer or Principal Operations Officer, other than a person associated with a member that is exempt from the requirement to designate a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal, is required to register as a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal pursuant to paragraph (a)(4)(A) of Rule 1220.

The Financial Responsibility Rules

Rule 15c3-1, the net capital rule, requires a broker-dealer to maintain more than a dollar of highly liquid assets for each dollar of liabilities. If the broker-dealer fails, the rule helps to ensure that the broker-dealer has sufficient liquid assets to pay all liabilities to customers. These requirements help to protect customers from the consequences of the financial failure of a broker-dealer.

Rule 15c3-3, the customer protection rule, essentially requires a broker-dealer that maintains custody of customer securities and cash to segregate such securities and cash from the broker-dealer’s proprietary activities. By segregating customer securities and cash from a firm’s proprietary business activities, the rule increases the likelihood that customer assets will be readily available to be returned to customers if a broker-dealer fails. These requirements are designed to protect customer assets held at broker-dealers.

Rules 17a-3 and 17a-4 require a broker-dealer to make and maintain certain business records to assist the firm in accounting for its activities and to assist securities regulators in examining for compliance with the securities laws.

Rule 17a-11 requires a broker-dealer to give notice to the Securities and Exchange Commission (SEC) and other securities regulators when certain events occur, such as the firm’s net capital falling below its required minimum.

Except as provided in paragraphs (d)(1)(iii) and (iv) of Rule 17a-5, every broker or dealer registered under Section 15 of the Securities Exchange Act of 1934 must file annually a financial report; a compliance report or an exemption report; and, except as provided in paragraph (e)(1)(i) of the rule, a report prepared by an independent public accountant covering each report required to be filed under paragraphs (d)(1)(i)(A) and (B) of the rule. A compliance report is filed if the broker or dealer did not claim it was exempt from Rule 15c3-3 throughout the most recent fiscal year or the broker or dealer is subject to Rule 15c3-3(p). An exemption report is filed if the broker or dealer did claim it was exempt from Rule 15c3-3 throughout the most recent fiscal year and the broker or dealer is not subject to Rule 15c3-3(p).

The financial report must contain a Statement of Financial Condition, a Statement of Income, a Statement of Cash Flows, a Statement of Changes in Stockholders’ or Partners’ or Sole Proprietor’s Equity, and a Statement of Changes in Liabilities Subordinated to Claims of General Creditors. The statements must be prepared in accordance with U.S. generally accepted accounting principles and must be in a format that is consistent with the statements contained in Part II or Part IIA of Form X-17A-5, as applicable. The financial report must also contain supporting schedules that include, from Part II or Part IIA of Form X-17A-5, a Computation of Net Capital under Rule 15c3-1 and a Computation for Determination of Customer Reserve Requirements under Rule 15c3-3a, as applicable.

As of October 2026, the annual reports under paragraph (d) of Rule 17a-5 must be filed not more than sixty calendar days after the end of the fiscal year of the broker or dealer.

FINRA member firms are required to compose and submit Financial and Operational Combined Uniform Single (FOCUS) reports to FINRA pursuant to Rule 17a-5.

Series 27 and Series 28

The Introducing Broker-Dealer Financial and Operations Principal registration has its own qualification examination, the Series 28, the Introducing Broker-Dealer Financial and Operations Principal Exam. The Series 28 assesses the competency of an entry-level principal to perform their job as a financial and operations principal in an introducing broker-dealer that does not carry customer accounts or hold customer funds or securities.

Covered supervisory activities for the Series 27 include back office operations; preparation and maintenance of a member firm’s books and records; and compliance with financial responsibility rules that apply to self-clearing broker-dealers and market makers. Covered supervisory activities for the Series 28 include back office operations; preparation and maintenance of a member firm’s books and records; and compliance with financial responsibility rules that apply to fully disclosed broker-dealers that do not hold customer funds and securities and do not carry customer accounts.

As of October 2026, broker-dealers that have a minimum net capital requirement of two hundred fifty thousand dollars and municipal securities brokers that have a minimum net capital requirement of one hundred fifty thousand dollars under Rule 15c3-1 must pass the Series 27 exam. All other broker-dealers are permitted to take the Series 28 exam, which is an abbreviated version of the Series 27.

Qualifying for the Registration

Each person seeking to register as a Financial and Operations Principal must, prior to or concurrent with such registration, pass the Financial and Operations Principal qualification examination. Each person seeking to register as an Introducing Broker-Dealer Financial and Operations Principal must, prior to or concurrent with such registration, pass the Financial and Operations Principal qualification examination or the Introducing Broker-Dealer Financial and Operations Principal qualification examination.

Under Rule 1210, each person engaged in the investment banking or securities business of a member must be registered with FINRA as a representative or principal in each category of registration appropriate to his or her functions and responsibilities as specified in Rule 1220, unless exempt from registration pursuant to Rule 1230. Such person is not qualified to function in any registered capacity other than that for which the person is registered, unless otherwise stated in the rules.

Passing the Securities Industry Essentials (SIE) Exam alone does not qualify an individual for registration with FINRA. To be eligible for registration with FINRA, an individual must pass an applicable representative or principal qualification examination as specified in Rule 1220 and satisfy all other applicable prerequisite registration requirements.

Candidates must be associated with and sponsored by a FINRA member firm or other applicable self-regulatory organization (SRO) member firm to be eligible to take FINRA principal-level qualification exams. The Series 27 does not have a corequisite exam.

What the Exam Covers

As of October 2026, the Series 27 consists of 145 multiple-choice items, which are distributed among five major job functions. The time allowed is three hours and forty-five minutes.

Function 1, Financial Reporting, has 25 items. Function 2, Operations, General Securities Industry Regulations, and Preservation of Books and Records, has 42 items. Function 3, Customer Protection, has 24 items. Function 4, Net Capital, has 41 items. Function 5, Funding and Cash Management, has 13 items.

Function 1: Financial Reporting

The first task is to prepare and review accuracy of financial statements. The knowledge listed includes general accounting requirements, with generally accepted accounting principles (GAAP) named in parentheses, including relevant Financial Accounting Standards Board (FASB) statements, with valuation, mark to market, revenue recognition, fair value measurement, accruals, and categorizing assets and liabilities named in parentheses; preparation and maintenance of general ledger and sub-ledgers; preparation of trial balance; risk assessment, including Material Associated Persons (MAPs); reporting of financing transactions, with borrow, repurchase, and stock loan named in parentheses; financial statement disclosures; and affiliate transactions and expense sharing agreements.

The second task is to compile, review and file FOCUS and supplemental reports. The knowledge listed includes regulatory classification and recognition of specific assets and liabilities, revenue and expenses; timing and method of filing FOCUS reports; and form custody.

The third task is to manage, complete and file audited financials and other reports with appropriate regulatory bodies and jurisdictions. The knowledge listed includes internal control structure including compliance over the financial responsibility rules; SEC reporting and filing requirements; role of external auditors; timing of filing of audited financial statements and other reports; and Securities Investor Protection Corporation (SIPC) filing requirements.

The fourth task is to file regulatory notifications as necessary. The knowledge listed includes specific regulatory notifications, with capital infusions, withdrawals, early warning notifications, hindsight deficiencies, change of external auditors, independent public accountants, books and records not current, and electronic filings named in parentheses; appropriate response to regulatory inquiries, with audits, market movement, securities fails, and short interest named in parentheses; and timing and method of filing regulatory notifications.

The fifth task is to disclose regulatory and operational impact of material or unusual transactions. The knowledge listed includes market, liquidity and credit risks; trade and settlement requirements, with marketability named in parentheses; identification of unexpected gains or losses on transactions, trading above limits; and financial statement disclosures, with contingencies, guarantees, and off-balance sheet items named in parentheses.

Function 2: Operations, Regulations and Books and Records

The first task is to manage and review general operations functions. The knowledge listed is clearance, settlement and delivery, and confirmations.

The second task is to prepare and preserve financial records to ensure accuracy and completeness of internal financial documents. The knowledge listed includes general ledger and sub-ledgers; stock records and trade blotters; central repository for records; business continuity plans; reconciling to third-party statements; records management policy; and records documenting internal risk management controls.

The third task is to demonstrate understanding of fundamental regulatory and industry knowledge. The knowledge listed includes qualifications and registration requirements; business conduct; gifts and gratuities; anti-money laundering; arbitration and hearing procedures; supervisory responsibilities; and insider trading regulations.

Function 3: Customer Protection

The first task is to determine, obtain and maintain possession or control of customer securities. The knowledge listed includes the purpose of a stock record, with ownership and location given in parentheses; control and non-control locations; and privacy and confidential treatment of customer information.

The second task is to prepare customer reserve computation. The knowledge listed includes accounts listed under Regulation T, with cash, margin, and non-purpose loans named in parentheses; identification and classification of customer and noncustomer accounts; stock record allocation; concentration of margin debits and underlying securities; other credits, with bank overdraft named in parentheses; unsecured and partly secured accounts; aging of open transactions and suspense balances; and frequency of computation.

The third task is to prepare proprietary account of a broker-dealer (PAB) reserve computation. The knowledge listed includes identification and classification of correspondent balances, with clearing deposit named in parentheses; stock record allocation; concentration of margin debits and underlying securities; other credits, with suspense items, overdrafts, and dividends and interest payable on PAB accounts named in parentheses; excluded items, with commissions payable named in parentheses; unsecured and partly secured accounts; aging of open transactions and suspense balances; and frequency of computation.

The fourth task is to establish, maintain and fund the reserve bank account. The knowledge listed includes documentation and requirements for accounts for the exclusive benefit of customers; qualified deposits and qualified institutions; and documentation and requirements for PAB Reserve Bank Accounts.

The fifth task is to determine and monitor claim for exemption under the Customer Protection Rule. The knowledge listed is exemptions and proper transmission of customer assets.

Function 4: Net Capital

The first task is to determine minimum net capital requirement. The knowledge listed includes net capital requirements of brokers and dealers, with introducing and carrying named in parentheses; basic method versus alternative method; and treatment of different products, with stocks, bonds, derivatives, and reverse repurchase agreements named in parentheses.

The second task is to calculate aggregate indebtedness. The knowledge listed includes distinction between cash liabilities and deferrals; and exclusions from aggregate indebtedness, with approved subordinated loans named in parentheses.

The third task is to review trial balance to determine allowable and non-allowable assets. The knowledge listed includes assets not readily convertible into cash; nonmarketable securities; and aging and collateralization of receivables.

The fourth task is to determine adjustments to net worth. The knowledge listed includes deferred taxes; discretionary liabilities; guarantees of loans; and subordinated liabilities.

The fifth task is to review operational reports to determine other deductions. The knowledge listed includes fail charges; margin deficits; secured financing charges, with repurchase transactions and securities lending named in parentheses; and other charges, with suspense, fidelity bond deductible, unconfirmed trades, and security differences named in parentheses.

The sixth task is to apply the appropriate haircut deduction to individual products. The knowledge listed includes product knowledge for applicable haircut charges; ready market, undue concentration; open contractual commitments; definitions under the Securities Exchange Act of 1934, with exempt securities, banks, broker, government securities, and municipal securities named in parentheses; and control or restricted securities.

The seventh task is to compute net capital in compliance with Rule 15c3-1 under the Securities Exchange Act of 1934. The knowledge listed includes moment-to-moment compliance; ratios for withdrawals of capital; consolidations with subsidiaries and affiliates; and business curtailment.

Function 5: Funding and Cash Management

The first task is to manage and review margin activity, excesses and deficits. The knowledge listed includes margin requirements, with Regulation T and SRO and industry rules named in parentheses; margin calls; customer account balances; processing customer checks and securities; day-trading requirements; stock loan and stock borrowed; repurchases and reverse repurchases; responsibilities of clearing and introducing firms; maintenance of credit; liquidation of accounts; restrictions of the withdrawals of cash and/or securities from an account; concentration of margin debits; initial daily and intra-day margin calculations; corporate actions and reorganizations; reconciliation of processing accounts, with money and control location account, dividend reinvestments, and mutual funds processing named in parentheses; and balancing purchase and sale (P&S) statements.

The second task is to assess a firm’s regulatory funding for business operations. The knowledge listed is subordinations and secured demand notes.

Retaking a Failed Examination

As of October 2026, any person who fails to pass a qualification examination prescribed by FINRA is permitted to take that examination again after a period of fifteen calendar days has elapsed from the date of such person’s last attempt to pass that examination, except that any person who fails to pass an examination three or more times in succession within a two-year period is prohibited from again taking that examination until a period of sixty calendar days has elapsed from the date of such person’s last attempt to pass that examination. These waiting periods apply to the SIE and the representative and principal examinations specified under Rule 1220.

Exam Relevance

The Securities Industry Essentials examination content outline does not name the Series 27 or any principal qualification examination. Topic 3.2.4, Books and Records and Privacy Requirements, under 3.2, Customer Accounts and Compliance Considerations, in Section 3, Understanding Trading, Customer Accounts and Prohibited Activities, lists books and records retention requirements; confirmations and account statements; holding of customer mail; business continuity plans (BCP); customer protection and custody of assets; and privacy requirements, with Regulation S-P named in parentheses and nonpublic personal information, confidentiality of information, privacy notifications, and safeguard requirements listed beneath it.

The SEC Rules and Regulations listed for Section 3 include 17a-3, Records to be Made by Certain Exchange Members, Brokers and Dealers, and 17a-4, Records to be Preserved by Certain Exchange Members, Brokers and Dealers. Candidates should check the current outline before the examination.

Common Misunderstandings

The Series 27 is the only qualification examination for a financial and operations principal. The Introducing Broker-Dealer Financial and Operations Principal registration may be reached by passing the Series 28, and all other broker-dealers are permitted to take the Series 28 exam, which is an abbreviated version of the Series 27.

The Series 27 is mainly a sales supervision exam. The exam measures the degree to which each candidate possesses the knowledge needed to perform the critical functions of a financial and operations principal, including the financial responsibilities, rules and recordkeeping requirements of broker-dealers.

The Series 27 is open to anyone, like the SIE. Candidates must be associated with and sponsored by a FINRA member firm or other applicable SRO member firm to be eligible to take FINRA principal-level qualification exams.

Passing the SIE qualifies an individual to hold a principal registration. Passing the SIE alone does not qualify an individual for registration with FINRA.

The Series 27 requires a corequisite exam. The Series 27 does not have a corequisite exam.

The Principal Financial Officer and the Principal Operations Officer are always the same person. Each member that self-clears, or that clears for other members, must designate separate persons to function as Principal Financial Officer and Principal Operations Officer.

The exam covers only net capital. The exam consists of 145 multiple-choice items distributed among financial reporting; operations, general securities industry regulations, and preservation of books and records; customer protection; net capital; and funding and cash management.

A Financial and Operations Principal only prepares reports. The duties include supervision of and responsibility for individuals involved in the actual maintenance of the member’s books and records, and overall supervision of and responsibility for individuals involved in the administration and maintenance of the member’s back office operations.

Key Points to Retain

The Series 27 is the Financial and Operations Principal Qualification Exam.

A Financial and Operations Principal is responsible for final approval of the accuracy of financial reports, supervision of the member’s books and records and back office operations, and the member’s responsibilities under all financial responsibility rules.

Each member must designate a Principal Financial Officer and a Principal Operations Officer, and a member that self-clears or clears for other members must designate separate persons.

Rule 15c3-1 is the net capital rule, and Rule 15c3-3 is the customer protection rule.

The exam is organized into financial reporting; operations, general securities industry regulations, and preservation of books and records; customer protection; net capital; and funding and cash management.

Candidates must be associated with and sponsored by a member firm, and the Series 27 does not have a corequisite exam.

The Series 28 is the abbreviated examination for the Introducing Broker-Dealer Financial and Operations Principal.

As of October 2026, the retake waiting period is fifteen calendar days, or sixty calendar days after three or more failures in succession within a two-year period.

The Securities Industry Essentials examination content outline does not name the Series 27, and Topic 3.2.4 covers books and records retention requirements and customer protection and custody of assets.