Series 24 Cheatsheet — High-Yield Concepts & Decision Traps

Series 24 is “principal reflexes.” Most questions are: what should the firm/principal do next to control risk, follow WSPs, document decisions, and protect customers/market integrity?

Series 24 at a glance

• Items (reference): 150
• Time (reference): 225 minutes
• Pace target: ~1:30 per question

Exam map (quick priorities)

• Function 1 — Supervision of Registration of the Broker-Dealer and Personnel Management Activities — 6%
• Function 2 — Supervision of General Broker-Dealer Activities — 30%
• Function 3 — Supervision of Retail and Institutional Customer-Related Activities — 21%
• Function 4 — Supervision of Trading and Market Making Activities — 21%
• Function 5 — Supervision of Investment Banking and Research — 22%

“Best answer” checklist (Series 24 style)

1. What business line is this? registration/personnel vs operations vs customer sales practice vs trading vs IB/research.
2. What control should exist? WSP, approval, surveillance, exception report, escalation path, documentation.
3. What is the highest-risk failure mode? customer harm, market manipulation, AML issue, disclosure gap, recordkeeping failure.
4. What is the defensible action? stop/hold if needed, escalate to compliance/legal, document and remediate.
5. What record must be created? approval, evidence of review, customer disclosures, complaint log, supervisory notes.

Function 1 (6%) – Registration + personnel (quick hits)

• Broker-dealer and office registration: know the concept that firms and locations must be properly registered and supervised.
• Hiring/registration/CE: qualification exams and registration updates are process-driven; the exam rewards “verify status, file/update, document.”

Function 2 (30%) – General broker-dealer activities (highest ROI)

WSPs, supervisory controls, and BCP

• WSPs define how the firm supervises. If the stem says “no procedure exists,” the best answer is usually create/implement/test one.
• Supervisory controls: independent testing, exception reporting, escalation and remediation.
• BCP: identify critical functions, backups, communications plan, and how the firm continues operations (concept).

Conduct supervision and compensation conflicts

• Outside activities, gifts, referral arrangements, and compensation can create conflicts. The safe answer: disclose, approve, supervise, document.
• “Too good to be true” marketing or compensation usually triggers enhanced supervision and restrictions.

Books, records, and retention

• If it is not documented, it did not happen (exam mindset).
• Correct answers often include: retain records, keep them accessible, and follow retention schedules and WSPs.

Financial responsibility and customer protection (concept)

• Net capital and customer protection are firm stability and customer asset protection themes (high level).
• If a scenario suggests capital stress or custody issues, the safest answer is usually halt risky activity, notify/escalate, and remediate.

Function 3 (21%) – Customers: accounts, communications, recommendations

Account opening and maintenance

• KYC/CIP/AML/OFAC themes: obtain required information, verify identity, monitor and update.
• Privacy and information protection: follow procedures; restrict access; document disclosures (high level).

Communications with the public and telemarketing

• Communications must be fair and balanced; avoid exaggerated, promissory, or misleading statements.
• Principal approvals and recordkeeping are frequent test points (ad vs correspondence vs institutional communication - concept).

Recommendations (Reg BI / suitability mindset)

• Best answer often turns on: customer profile + costs + reasonably available alternatives + disclosure of conflicts.
• Common trap: focusing on product features while ignoring costs, liquidity, time horizon, and risk tolerance.

Function 4 (21%) – Trading and market making supervision

Order handling and market access controls

• Controls should prevent unauthorized or risky access (pre-trade controls, limits, supervision).
• If the stem implies a control was bypassed, the correct answer is rarely “override”; it’s usually block, escalate, and fix the control.

Surveillance and prohibited practices (high level)

• Watch for manipulation themes: spoofing/layering, marking the close, wash sales, rumor-driven trading, insider information handling.
• Correct answers emphasize: surveillance alerts, investigation, restricted lists, and documentation.

Clearance, settlement, and close-outs

• Many questions reduce to: identify a break, correct it promptly, and document/notify as required.

Function 5 (22%) – Investment banking and research supervision

Due diligence and offering workflow (high level)

• Timeline discipline matters: diligence -> documentation -> communications -> pricing -> closing.
• If information is missing or inconsistent, the safest step is verify and escalate (do not “assume”).

Offering communications

• Marketing materials must align with disclosures; avoid selective/misleading statements.
• Approvals and record retention are common test points.

Research supervision (high level)

• Conflicts and independence: control interactions between investment banking and research; ensure required disclosures.
• Correct answers emphasize: policies, restricted lists, pre-publication review processes, and documentation.

Common miss patterns (what to fix first)

• Choosing an answer that “solves the problem” but skips the required supervision step (approval, WSP, documentation).
• Confusing “what a rep can do” with “what a principal must supervise and record.”
• Treating communications issues as minor; Series 24 often rewards conservative “revise/approve/retain” choices.
• Failing to recognize when to stop activity and escalate (AML red flags, manipulation cues, custody/capital concerns).

Glossary (fast definitions)

• BCP: business continuity plan.
• CIP/KYC/AML: identity and monitoring controls (concept).
• Reg BI: best interest framework for recommendations (high level).
• WSP: written supervisory procedures.