What Is the Series 27 Exam and How Does It Work?

The Series 27 Exam is a critical step for individuals aiming to become Financial and Operations Principals (FINOPs) within the securities industry. It ensures candidates possess the necessary knowledge of financial responsibility rules, recordkeeping requirements, and regulatory standards.

Prerequisites and Sponsorship

To become a Financial and Operations Principal, candidates must secure sponsorship from a FINRA-member firm. Sponsorship indicates the firm’s endorsement of the candidate’s qualifications and involves filing a Form U4 with FINRA. This form collects personal, professional, and disciplinary history to ensure compliance with regulatory standards.

Candidates should have a foundational understanding of the securities industry, often gained through experience or education in finance, accounting, or related fields. Knowledge of the Securities Exchange Act of 1934 and rules set by the SEC and FINRA is highly advantageous.

Exam Structure

The Series 27 Exam evaluates a candidate’s ability to manage the financial and operational responsibilities of a FINOP. It consists of 145 multiple-choice questions, with a time limit of 225 minutes. The exam includes questions ranging from basic knowledge to complex analytical scenarios, such as identifying discrepancies in financial statements or calculating financial ratios like the current ratio.

Scenario-based questions simulate real-world challenges, requiring candidates to navigate regulatory frameworks and assess compliance effectively.

Core Topic Areas

The Series 27 Exam focuses on key areas essential for the role of a Financial and Operations Principal.

Financial Reporting

This section emphasizes the preparation and analysis of financial statements in accordance with GAAP. Candidates must demonstrate expertise in creating balance sheets, income statements, and cash flow statements. Knowledge of SEC Rule 17a-5, which mandates the filing of quarterly and annual financial reports by broker-dealers, is essential.

Net Capital Calculations

Candidates are tested on the SEC’s Net Capital Rule (Rule 15c3-1), which ensures broker-dealers maintain adequate financial stability. This involves calculating net capital by deducting liabilities from allowable assets and applying haircuts to securities.

Regulatory Compliance

This area covers adherence to the Securities Exchange Act of 1934 and FINRA rules, including Rule 3110 on supervision and Rule 4511 on recordkeeping. Candidates must also understand anti-money laundering regulations, enabling them to identify suspicious activities and implement effective compliance programs.

Passing Standards

To pass the Series 27 Exam, candidates must score at least 70%, correctly answering 102 of the 145 questions. Questions are weighted by importance, with topics like financial reporting and net capital calculations carrying greater significance. FINRA uses psychometric techniques to ensure each exam version maintains consistent difficulty.

Retaking the Exam

Candidates who do not pass must wait 30 days before retaking the exam. After three consecutive failures, the waiting period extends to 180 days. During this time, candidates should reassess their study strategies and focus on weaker areas using updated materials, practice exams, and targeted training.

Career Opportunities

Passing the Series 27 Exam opens pathways to a specialized career in the securities industry. FINOPs are employed by broker-dealers, investment firms, and clearinghouses, where they oversee financial records and ensure compliance with SEC and FINRA regulations. They also collaborate with senior management to align operational efficiency with regulatory standards.

The expertise gained from the Series 27 Exam can lead to roles in consulting or advisory positions, such as assisting firms with compliance challenges or regulatory audits. These skills are also applicable to roles in risk management, internal audit, or executive positions like Chief Financial Officer (CFO).