Series 22 Scenario Practice Guide

How to approach Series 22 scenarios

The FINRA Series 22 exam tests whether a Direct Participation Programs Representative can reason through client situations, product features, offering documents, suitability concerns, disclosures, and required procedures. Scenario questions often include more facts than you need. Your job is not to react to the first familiar term, such as “tax benefits,” “limited partnership,” “income,” or “illiquid.” Your job is to decide what the representative should do based on the full situation.

Use a consistent reading sequence:

1. Identify who is involved.
2. Determine what stage the transaction is in.
3. Find the actual decision point.
4. Separate relevant facts from background facts.
5. Check suitability, authority, documentation, and disclosure.
6. Choose the answer that fits all material facts, not just one fact.

This guide is independent exam-preparation guidance and is not affiliated with FINRA or any exam owner.

Start by identifying the client, account, and role

Series 22 scenarios often turn on who has authority, whose objectives matter, and which party owes which duty.

Before looking at the answer choices, label the roles in the scenario.

Key roles to identify

• Customer or prospective investor: The person or entity considering the DPP investment.
• Registered representative: The person making a recommendation, explaining features, or processing documents.
• Broker-dealer or firm principal: The party responsible for supervisory review, approval, procedures, and recordkeeping.
• Sponsor, general partner, or program manager: The party operating or structuring the program.
• Limited partner or investor: The participant whose liability, voting rights, tax consequences, liquidity, and disclosures may be tested.
• Custodian, trustee, fiduciary, or authorized signer: The person or institution with authority over an account.
• Account owner versus interested party: A person may be named in the scenario but may not have authority to act.

A common scenario pattern is that the facts describe a persuasive person who is not the decision-maker. For example, a spouse, adult child, accountant, or business partner may discuss the investment, but the account owner or authorized fiduciary is the person whose consent, objectives, and documents matter.

Ask two role questions

• Whose money or account is affected?
• Who is legally or procedurally authorized to give instructions?

If the scenario involves a trust, retirement account, entity account, estate, partnership, or joint account, slow down. The best answer may involve verifying authority, reviewing account documents, obtaining proper signatures, or following firm procedures before acting.

Determine the transaction stage

The same fact can mean different things depending on timing. A customer saying “I want income from this program” means one thing before a recommendation, another thing during subscription paperwork, and another thing after distributions stop.

Identify where you are in the process.

Common Series 22 scenario stages

• Initial conversation: The representative is gathering facts and explaining general product characteristics.
• Recommendation stage: The representative is deciding whether a DPP is suitable for the customer.
• Offering document review: The investor is reviewing risks, fees, objectives, conflicts, and program terms.
• Subscription process: The customer is completing required forms and acknowledgments.
• Firm review: The application or recommendation requires supervisory or procedural review.
• Post-sale communication: The customer asks about distributions, valuations, tax reporting, transferability, or liquidity.
• Complaint or error situation: The representative must follow firm procedures rather than improvise.

When timing is unclear, look for verbs: recommends, solicits, signs, submits, approves, receives, complains, transfers, liquidates, asks, discloses. The verb usually points to the decision point.

Find the actual decision point

Many scenario questions are not asking, “What is true about DPPs?” They are asking, “What is the best next action in this specific situation?”

Before reading answer choices, state the decision point in your own words:

• “Is this recommendation suitable?”
• “What must be disclosed before the customer invests?”
• “Can the representative accept this instruction?”
• “What document or approval is needed?”
• “What should the representative say about tax treatment?”
• “What is the appropriate action when information is missing?”
• “Which feature of the program is most relevant to this customer’s objective?”

This prevents you from choosing a true statement that does not answer the question.

Decision point examples

If the scenario says the client needs near-term access to funds, the decision point is probably liquidity and suitability, not whether DPPs may offer potential tax benefits.

If the scenario says a customer wants to invest primarily because of expected deductions, the decision point may be risk disclosure, tax uncertainty, and suitability, not simply “DPPs can have tax-related features.”

If the scenario says paperwork is incomplete, the decision point is likely documentation or firm procedure, not the investment merits of the program.

Build a quick DPP fact map

Direct participation program scenarios often combine product structure, tax language, and investor objectives. Keep a short mental map of the major fact categories.

Product and structure facts

Look for:

• Type of program, such as real estate, oil and gas, equipment leasing, or another pass-through program.
• Public or private offering context, if provided.
• Role of sponsor, general partner, manager, or program operator.
• Use of proceeds.
• Anticipated holding period.
• Leverage, if mentioned.
• Fees, compensation, conflicts, or expense allocations.
• Distribution policy and whether distributions are projected or conditional.
• Transfer restrictions or limited secondary market.
• Investor rights, voting rights, and management limitations.

Do not assume details that are not in the question. If the scenario supplies offering-specific terms, use those terms.

Investor facts

Look for:

• Investment objective, such as income, growth, tax considerations, diversification, or speculation.
• Time horizon.
• Liquidity needs.
• Risk tolerance.
• Financial condition.
• Income, net worth, concentration, or investment experience if provided.
• Tax sensitivity, but only as one factor.
• Need for current cash flow.
• Age, employment status, dependents, or expected future expenses, if relevant.
• Existing portfolio exposure to illiquid or alternative investments.

The more the scenario emphasizes limited resources, short time horizon, high liquidity need, or inability to bear loss, the more carefully you should test suitability.

Process facts

Look for:

• Has the representative gathered enough customer information?
• Has the customer received required offering materials?
• Are subscription documents complete?
• Has the customer acknowledged key risks?
• Is a principal, supervisor, or firm review required by procedure?
• Is the representative making a recommendation or merely providing factual information?
• Is the communication fair, balanced, and not misleading?
• Is the customer asking for legal or tax advice outside the representative’s role?

Process facts often determine the best answer even when the investment itself might be suitable for some investors.

Separate relevant facts from distractors

Scenario questions may include real-world details that feel important but do not affect the decision. Your task is to decide which facts are material.

Usually relevant in Series 22 scenarios

• Client objective and time horizon.
• Liquidity need.
• Risk tolerance and ability to bear loss.
• Concentration in one product, sector, or illiquid investment.
• Tax motivation and whether tax advice is being requested.
• Program risks, fees, conflicts, and offering terms.
• Whether projected benefits are guaranteed or uncertain.
• Whether required documents are delivered, completed, or approved.
• Authority of the person giving instructions.
• Whether a recommendation is being made.

Often background unless tied to the question

• A customer’s casual interest in a sector.
• A familiar product name without specific terms.
• Prior investment success in unrelated securities.
• A high income figure without information about liquidity needs or risk capacity.
• A desire for “tax benefits” without supporting suitability facts.
• A representative’s confidence in the sponsor without required disclosure and review.
• A customer’s urgency, unless it affects procedure or suitability.

A useful habit is to mark each fact as one of three types:

• Decision fact: Directly affects the correct action.
• Context fact: Helps you understand the setting but does not decide the answer by itself.
• Distractor fact: True or interesting, but not needed for the best answer.

Check authority and documentation before investment merit

In finance scenarios, the best answer often comes before the investment analysis. If the person lacks authority, documents are incomplete, or firm review has not occurred, the representative cannot shortcut the process because the investment sounds appropriate.

Authority questions to ask

• Is the person giving instructions the account owner?
• If not, is there documented authorization?
• Does the account type require a fiduciary, trustee, custodian, or authorized signer?
• Are there multiple owners whose consent may be needed?
• Is the representative relying on a third party without verifying authority?
• Does the scenario involve a power of attorney, entity resolution, trust document, or custodial relationship?

If authority is uncertain, the defensible answer is usually to verify authority and follow firm procedures before accepting instructions.

Documentation questions to ask

• Has the customer received the relevant offering materials?
• Are subscription documents complete and accurate?
• Are required acknowledgments or disclosures obtained?
• Has the firm gathered sufficient customer profile information?
• Is principal or supervisory review required before acceptance?
• Are changes to forms properly initialed, corrected, or resubmitted according to procedure?
• Is the representative documenting the basis for the recommendation?

The exam often rewards the answer that respects process. A representative should not fill gaps with assumptions, ignore missing signatures, or treat incomplete paperwork as a minor administrative issue.

Read suitability facts in layers

Suitability in a DPP scenario is rarely based on a single fact. A wealthy customer may still have a short time horizon. A tax-sensitive customer may still need liquidity. A sophisticated investor still needs fair disclosure. A high-income customer may still be overconcentrated.

Use a layered approach.

Layer 1: Is the product type broadly consistent with the objective?

DPPs may be associated with income potential, pass-through tax features, participation in a specific business activity, or long-term investment exposure. But a broad match is not enough.

Ask:

• Does the stated objective align with the program’s stated objective?
• Are the benefits projected, conditional, or uncertain?
• Is the customer seeking something the program cannot reasonably provide, such as guaranteed liquidity or guaranteed income?

Layer 2: Can the customer tolerate the major risks?

DPP scenarios often involve:

• Limited liquidity.
• Long holding periods.
• Business, operational, commodity, real estate, leasing, or sector-specific risks.
• Possible lack of an active secondary market.
• Uncertain distributions.
• Possible loss of principal.
• Tax complexity and potential changes in tax treatment.
• Conflicts or fees that must be understood.

If the client cannot tolerate one of the central risks, an otherwise attractive feature does not make the recommendation suitable.

Layer 3: Is the investment appropriately sized?

Concentration is a key fact pattern. Even if a DPP is suitable in concept, a large allocation to an illiquid or sector-specific product may be inappropriate for a customer who needs diversification or access to funds.

Ask:

• How much of the customer’s net worth or investable assets is involved?
• Is the customer adding to an already concentrated position?
• Is the program correlated with the customer’s business, employment, or real estate exposure?
• Would the investment impair the customer’s ability to meet known expenses?

Layer 4: Has the representative explained limitations clearly?

A recommendation is not defensible if the customer is relying on incomplete or misleading expectations.

Look for whether the representative has addressed:

• Illiquidity.
• Risk of loss.
• Uncertain income or distributions.
• Fees and expenses.
• Sponsor or manager conflicts.
• Tax uncertainty and the need for independent tax advice when appropriate.
• Transfer restrictions.
• The difference between projected results and guarantees.

Treat tax clues carefully

Series 22 scenarios may mention deductions, depletion, depreciation, passive income or loss concepts, tax credits, or pass-through features. Do not jump from “tax benefit” to “suitable.”

Use three rules:

1. Tax features are part of the analysis, not the whole analysis. The customer’s liquidity, risk tolerance, time horizon, and concentration still matter.

2. Representatives should not overstate tax benefits. If the scenario uses words like “guaranteed,” “certain,” “risk-free,” or “shelter all income,” treat that as a disclosure and communication issue.

3. Complex tax questions call for appropriate professional advice. If a customer asks how the investment will affect their personal tax return, the safer answer is usually to explain general features and recommend consultation with a qualified tax adviser, rather than giving personalized tax advice beyond the representative’s role.

A strong answer will often say, in effect: disclose the tax-related feature accurately, avoid guarantees, consider suitability, and recommend independent tax advice where appropriate.

Evaluate disclosure clues

DPP scenarios often test whether the investor is being given a balanced understanding of the investment. Watch for one-sided presentations.

Disclosure facts that matter

A representative should be alert to:

• Statements that emphasize tax advantages without discussing risk.
• Projections presented as if they are guaranteed.
• Sponsor track record presented without limitations.
• Distributions described as income without clarifying possible sources if relevant.
• Fees, expenses, compensation, or conflicts omitted from the discussion.
• Liquidity restrictions minimized or ignored.
• Offering documents not provided before investment.
• Customer misunderstanding of limited partner rights or management control.

If the scenario asks what the representative should do before the sale, the best answer may be to provide or review required disclosures, correct misleading impressions, or ensure the customer understands material risks.

Match the answer to the full scenario

When you read the answer choices, avoid asking, “Is this statement true?” Ask, “Is this the best action for this fact pattern?”

Use this answer-choice test

For each answer, ask:

• Does it address the actual decision point?
• Does it respect customer authority and firm procedure?
• Does it account for liquidity, risk, time horizon, and concentration?
• Does it avoid guarantees or unsupported projections?
• Does it handle tax matters appropriately?
• Does it use the information given without inventing missing facts?
• Is it the most complete and defensible response?

The best answer is often moderate and procedural: gather missing information, disclose material risks, obtain required documents, verify authority, submit for review, or decline to recommend if suitability is not supported.

Recognize common answer patterns

This is not a list of traps; it is a way to classify answer choices quickly.

Strong answer patterns

Look for answers that:

• Require gathering missing customer information before recommending.
• Emphasize suitability based on the customer’s full profile.
• Require delivery or review of offering documents.
• Correct misleading statements about income, tax benefits, or guarantees.
• Verify authority before accepting instructions.
• Follow firm procedures for approval, supervision, errors, or complaints.
• Refer personal tax or legal questions to appropriate professionals.
• Explain that DPPs may be illiquid and long term.
• Treat projections as uncertain and dependent on program performance.

Weak answer patterns

Be cautious with answers that:

• Recommend based only on tax benefits.
• Recommend based only on income potential.
• Ignore liquidity needs.
• Ignore missing signatures or incomplete documents.
• Allow third-party instructions without documented authority.
• Treat projections as guarantees.
• Suggest the representative can provide personal tax advice without limitation.
• Minimize fees, conflicts, or risks because the sponsor is reputable.
• Assume all high-income investors are suitable for illiquid products.

Short practice walkthroughs

Example 1: Liquidity versus tax motivation

A customer in a high tax bracket is interested in a real estate DPP because a colleague mentioned possible tax advantages. The customer also plans to use most available savings for a home purchase next year.

Decision point: Is the investment suitable, and what should the representative do next?

Relevant facts:

• Tax motivation is relevant but not decisive.
• Near-term liquidity need is highly relevant.
• DPPs may involve limited liquidity and long holding periods.
• The customer may not be able to tie up funds.

Most defensible direction: The representative should not recommend the investment solely for potential tax benefits. The answer should focus on suitability, liquidity, risk disclosure, and possibly gathering more information or explaining why the investment may not fit the stated need.

Example 2: Third-party instruction

A customer’s accountant calls the representative and says the customer wants to invest in a DPP before year-end for tax reasons. The accountant asks the representative to submit the subscription documents immediately.

Decision point: Can the representative act on the accountant’s instruction?

Relevant facts:

• The accountant may be influential but may not have account authority.
• The customer’s objectives and suitability information must be confirmed.
• Subscription documents and required disclosures must be handled properly.

Most defensible direction: Verify authority and communicate with the customer or authorized person according to firm procedure. Do not submit documents based solely on an unauthorized third-party instruction.

Example 3: Income projection

A representative tells a retiree that a DPP is expected to make regular distributions and therefore is a good substitute for a guaranteed income product.

Decision point: Is the communication and recommendation appropriate?

Relevant facts:

• Expected distributions are not the same as guaranteed income.
• Retiree status may indicate income need and lower tolerance for uncertainty, depending on other facts.
• DPPs may involve illiquidity and risk of loss.
• The representative must avoid misleading statements.

Most defensible direction: Correct the statement, disclose that distributions and principal are subject to program risks, evaluate suitability, and avoid presenting the DPP as a guaranteed income substitute.

Example 4: Missing information

A customer wants to invest a large amount in an oil and gas program. The account form does not show liquid net worth, investment experience, risk tolerance, or time horizon.

Decision point: What should happen before accepting the investment?

Relevant facts:

• Customer information is incomplete.
• The investment may involve sector-specific risk and illiquidity.
• The representative needs a reasonable basis for the recommendation and proper documentation.

Most defensible direction: Gather and document the missing customer information, provide required disclosures, and follow firm review procedures before accepting or recommending the investment.

Final review checklist for Series 22 scenarios

Use this checklist during practice until it becomes automatic.

First read

• Who is the customer?
• Who is giving instructions?
• What type of account is involved?
• What DPP or program type is being discussed?
• What stage is the transaction in?

Decision point

• Is the issue suitability?
• Is it disclosure?
• Is it documentation?
• Is it authority?
• Is it tax communication?
• Is it firm procedure?
• Is it post-sale service, transfer, valuation, or complaint handling?

DPP suitability facts

• Objective?
• Time horizon?
• Liquidity need?
• Risk tolerance?
• Ability to bear loss?
• Concentration?
• Tax motivation?
• Need for income?
• Understanding of illiquidity and risks?

Process facts

• Offering materials provided?
• Subscription documents complete?
• Required signatures obtained?
• Authority verified?
• Firm approval or review completed?
• Communication fair and balanced?
• Tax or legal advice handled appropriately?

Answer selection

• Eliminate answers that ignore the main risk.
• Eliminate answers that skip required process.
• Eliminate answers that overpromise.
• Eliminate answers that rely on one attractive feature.
• Choose the answer that best protects the customer, follows procedure, and fits the full fact pattern.

Practice method for final review

For each Series 22 scenario you practice, write a one-line summary before answering:

“This is a [suitability/disclosure/documentation/authority/tax/procedure] question because [specific fact].”

Then choose the answer only after identifying the decision point. Review missed questions by asking whether you misread the role, overlooked a constraint, assumed a missing fact, or answered a general product question instead of the scenario’s actual question.

Next, use topic drills for weak areas such as DPP structure, subscription documentation, suitability, tax-related communications, and investor disclosures. Then move into timed mixed scenario practice and full mock exams so you can apply the same decision sequence under exam conditions.