Try 10 focused Series 26 questions on Personnel and Registration, with explanations, then continue with the full Securities Prep practice test.
Series 26 Personnel and Registration questions help you isolate one part of the FINRA outline before returning to a mixed practice test. The questions below are original Securities Prep practice items aligned to this topic and are not copied from any exam sponsor.
| Item | Detail |
|---|---|
| Exam | FINRA Series 26 |
| Official topic | Function 1 — Personnel Management Activities and Registration of the Broker-Dealer |
| Blueprint weighting | 14% |
| Questions on this page | 10 |
A Series 26 principal supervises registration administration and is reviewing a new hire’s request to be registered through CRD as an associated person with FINRA and in three states.
Exhibit: CRD charges assessed at submission (assume for this question)
To meet the principal’s responsibilities, what is the best next step before submitting the Form U4 in CRD?
Best answer: C
Explanation: The principal must ensure accurate registrations are filed in CRD and that $40 + $100 + (3 \times $60) is available to cover assessed fees.
A Series 26 principal is responsible for supervising the firm’s registration administration process in CRD, including reviewing/approving Form U4 submissions and ensuring the firm can pay CRD-assessed fees. Using the provided fee schedule, the required CRD funding is the U4 fee plus the FINRA fee plus three state fees.
A Series 26 principal’s personnel/registration administration responsibilities include overseeing accurate, timely filings and approvals in CRD (for example, Form U4 submissions), ensuring the correct jurisdictions are requested, and making sure the firm has processes to pay CRD-assessed charges so the filing can be completed.
Using the exhibit’s assumed fees, the funding needed is:
\[ \begin{aligned} \text{Total} &= 40 + 100 + (3 \times 60)\\ &= 40 + 100 + 180\\ &= 320 \end{aligned} \]The key control is principal review/approval of the CRD submission with sufficient funding to avoid a preventable processing failure.
A broker-dealer is considering hiring an experienced registered representative who will primarily sell mutual funds and variable annuities. Pre-hire screening shows two customer complaints in the past three years (one settled for $25,000 and one pending) alleging unsuitable variable annuity exchanges, and a personal bankruptcy filed 18 months ago. The applicant’s most recent Form U5 states the individual was “discharged” for alleged policy violations.
Which onboarding action would be INCORRECT under a risk-based supervisory approach?
Best answer: A
Explanation: Recent complaints, a discharge, and a recent bankruptcy require documented escalation and risk-based enhanced supervision rather than being waived as “already disclosed.”
The firm must treat recent complaints, termination language on a U5, and recent financial events as heightened onboarding risk indicators. A principal should ensure enhanced due diligence, documented escalation, and a tailored heightened supervision plan before the individual engages in sales activity. Simply relying on the fact that disclosures exist on CRD does not satisfy a risk-based onboarding obligation.
Risk-based onboarding requires the firm to identify red flags in a candidate’s regulatory, complaint, employment, and financial history and respond with documented controls proportional to the risk. Here, recent variable annuity exchange complaints, a discharge noted on Form U5, and a recent bankruptcy are all indicators that warrant escalation to compliance/registration, collection and review of underlying documentation, and a written heightened supervision plan targeted to the risk area (e.g., variable product replacements, pre-use review, and transaction approvals).
The incorrect action is to treat disclosure as a substitute for supervision; disclosures inform the firm’s assessment but do not eliminate the need to evaluate risk, decide whether additional conditions are required, and document the basis for the hiring decision and supervision structure.
A Series 26 principal is building the firm’s required annual compliance meeting for registered representatives who sell mutual funds and variable annuities. Which approach best aligns with the purpose of the annual compliance meeting and the topics it should typically cover for these businesses?
Best answer: A
Explanation: Annual compliance meetings are designed to reinforce firm procedures and regulatory expectations through risk-focused compliance training, interaction, and documented attendance.
The annual compliance meeting is intended to reinforce compliance obligations and firm supervisory procedures, not to serve as product marketing or a single-topic session. For mutual funds and variable products, the content should emphasize sales-practice risks and customer-protection controls such as Reg BI/suitability oversight, share-class/breakpoint practices, variable annuity replacement considerations, conflicts, communications, complaints, and record integrity. The firm should also document participation.
The annual compliance meeting is a supervisory training and communication control meant to promote a culture of compliance by reviewing the firm’s policies, regulatory expectations, and observed risk areas with registered persons, and by creating evidence that the discussion occurred. For investment company and variable product businesses, the meeting should typically cover high-risk sales-practice and disclosure areas (e.g., Reg BI/suitability, share-class selection and breakpoints, variable annuity exchanges/replacements and key cost features), as well as supporting controls (conflicts and compensation, communications with the public standards, complaint handling/escalation, and required documentation/recordkeeping). A live (or interactive) format with Q&A plus attendance tracking better aligns to the purpose than a product-focused session or a passive attestation-only approach.
Which record most directly provides evidence that a Form U4 amendment was filed through CRD (i.e., submitted and time-stamped) for an associated person?
Best answer: C
Explanation: A CRD filing receipt/acknowledgment is the firm’s direct evidence of electronic submission and time-stamp of the Form U4 amendment.
For registration and personnel recordkeeping, firms should be able to evidence that required filings were actually made and when they were made. The CRD system’s submission/acknowledgment record is the most direct proof of an electronic Form U4 amendment being filed and time-stamped, supporting the firm’s documentation of updates and supervisory oversight.
A key expectation for registration and personnel recordkeeping is maintaining documentation that shows required registration filings and amendments were completed, including evidence of the filing event (submission and time-stamp) and related internal review/approvals and supporting documents as applicable. Because Form U4 and U4 amendments are filed electronically through CRD, the most reliable proof the firm can retain is the CRD system-generated confirmation (e.g., submission/acknowledgment/receipt) that shows the amendment was transmitted and recorded. Copies of forms, emails, or public-profile outputs may help corroborate information, but they do not substitute for a system record that evidences the actual filing and its timing. The takeaway is to retain source evidence of filings, not just downstream or informal indicators.
During a FINRA cycle exam, an OSJ supervisor is asked to produce the firm’s personnel/registration files for several associated persons. The firm can show that Forms U4 were submitted through Web CRD, but it cannot produce internal documentation showing when reportable events were escalated, who reviewed/approved the U4 amendments, or evidence that required updates were timely addressed. Under these facts, what is the most likely outcome for the firm?
Best answer: A
Explanation: If the firm cannot evidence required filings, updates, and approvals, it is exposed to recordkeeping and supervision findings and will be required to remediate controls.
Even when amendments are filed in Web CRD, the firm must maintain personnel/registration records that evidence how it identified, escalated, and approved required updates. Inability to produce that evidence is typically treated as a books-and-records and supervisory controls weakness. The likely consequence is an exam deficiency, required corrective action, and possible sanctions.
Broker-dealers must maintain complete, readily accessible personnel and registration records, including documentation that supports required registration filings and amendments (e.g., what triggered the update, when it was identified, and who reviewed/approved it under the firm’s procedures). If a firm can only point to the CRD submission but cannot evidence internal escalation, review, approvals, and timeliness, regulators typically view that as a breakdown in recordkeeping and the supervisory system.
Common remediation outcomes include:
The key takeaway is that “filed in CRD” does not replace the firm’s obligation to maintain supporting personnel records demonstrating supervision and compliance with its process.
A representative is placed on a heightened supervision plan due to a prior firm disclosure involving unsuitable mutual fund switching. The plan addendum requires the supervising principal to keep a dated review log showing each transaction reviewed, any exceptions found, the corrective action taken, and when issues must be escalated to the CCO.
Which heightened supervision plan element does this requirement most directly describe?
Best answer: B
Explanation: A required review log with exception tracking and a defined escalation path is the plan’s documentation and escalation component.
Heightened supervision plans should be specific about how supervision is evidenced and what happens when problems are detected. A dated log that captures reviews, exceptions, and corrective actions creates an audit trail. Specifying when to escalate issues to the CCO addresses escalation and follow-up expectations within the plan.
Heightened supervision is required or prudent when a representative presents elevated risk (for example, disciplinary history, complaints, terminations for cause, or patterns of problematic recommendations). A heightened supervision plan is typically a written addendum to WSPs tailored to the individual and should clearly state: what activities are covered, how monitoring will occur, how it will be documented, and how exceptions will be remediated and escalated.
A requirement to maintain a dated review log that records reviews performed, exceptions identified, and corrective actions taken is the core mechanism for demonstrating supervision occurred and for enabling follow-up. Adding a defined escalation path (for example, notifying the CCO when exceptions are unresolved or repetitive) is a key control to ensure timely management attention and remediation.
A Series 26 principal is updating training controls for the firm’s investment company and variable product business.
Exhibit: WSP excerpt — Training (IC/Variable Products)
Annual Compliance Meeting (held each calendar year)
Purpose: reinforce compliance culture; communicate regulatory and firm policy changes.
Audience: all registered persons who supervise or sell mutual funds or variable contracts.
Typical agenda topics: suitability/Reg BI reminders; share-class and breakpoint procedures;
VA exchanges/replacements and required disclosures; communications review standards;
complaint reporting and escalation.
Based on the exhibit, which interpretation is best supported regarding the annual compliance meeting’s purpose and typical topics?
Best answer: D
Explanation: The exhibit states the meeting’s purpose and lists agenda topics centered on IC/variable sales-practice supervision.
The exhibit describes an annual meeting designed to reinforce compliance and communicate regulatory and firm policy updates. It also lists high-level topics tailored to mutual funds and variable contracts, such as suitability/Reg BI, share-class and breakpoint procedures, VA exchanges/replacements and disclosures, communications standards, and complaint escalation.
Annual compliance meetings are intended to strengthen a firm’s compliance culture by ensuring associated persons understand current regulatory expectations and the firm’s policies and procedures for the products they sell and supervise. For investment company and variable product lines, the content typically focuses on recurring sales-practice and supervision risk areas reflected in the exhibit:
The key takeaway is that these meetings are compliance-focused training and reinforcement, not market commentary or a substitute for other CE programs.
An OSJ principal reviews a monthly mutual fund surveillance report and sees one customer made five purchases of $9,900 in the same fund family over two weeks. The fund’s next breakpoint is $50,000, and the firm’s WSPs require representatives to evaluate rights of accumulation (including householding) and offer a letter of intent (LOI) when appropriate, with documentation in the account file. The LMS shows the firm recently made breakpoint/ROA/LOI training “optional.”
Which is the primary supervisory risk/red flag the principal should address?
Best answer: B
Explanation: The pattern suggests customers may be denied breakpoint discounts if reps aren’t trained to disclose and document ROA/LOI decisions.
Multiple purchases just below a known breakpoint, combined with optional breakpoint training, creates a clear risk that representatives will not evaluate, disclose, and document available breakpoint discounts through rights of accumulation and LOIs. The principal’s core concern is a sales-practices and training control gap that can lead to overcharges and unsuitable share-class/sales-charge outcomes.
Breakpoint discounts are a core mutual fund sales-charge concept that firms must supervise through training, procedures, and evidence of review. When a customer’s activity clusters just below a breakpoint, it is a practical red flag for breakpoint discount failures: representatives may not be asking about rights of accumulation (including householding) or offering a letter of intent to reach a higher breakpoint, and they may fail to document the analysis. Making breakpoint/ROA/LOI training optional increases the likelihood of inconsistent disclosures and weak documentation, undermining a firm’s ability to demonstrate it took reasonable supervisory steps. The appropriate response is to treat this as a training-and-supervision control issue and remediate with required training, clearer WSP expectations, and surveillance/exception follow-up with documented outcomes.
A member firm is onboarding an experienced registered representative who will sell mutual funds and variable annuities. The U4 has been drafted in Web CRD and is in the “principal attestation required” queue.
Exhibit: Web CRD draft U4 alerts
Item 14I Customer Complaint: YES
Disclosure detail: MISSING (no dates, product, or allegation)
Item 14K Bankruptcy: YES
Disclosure detail: MISSING (no case number or discharge date)
Firm policy prohibits any solicitation until registration filings are complete and accurate. As the Series 26 principal responsible for registration administration, what is the best next step?
Best answer: B
Explanation: The principal must ensure U4 disclosures are complete and accurate before attesting and submitting the filing in Web CRD.
A Series 26 principal’s registration-administration responsibility includes reviewing and attesting to the accuracy and completeness of Form U4 information submitted through Web CRD. When required disclosure details are missing, the filing should be corrected before the principal attests and submits it. This also supports the firm’s control that sales activity does not begin until registrations are properly processed.
The core responsibility being tested is the principal’s oversight of accurate registration filings in Web CRD. Before attesting to a Form U4, the principal should confirm that “yes” answers to disclosure questions have complete, specific disclosure details (e.g., dates, allegations, case identifiers) so the filing is not misleading or incomplete. If items are missing, the proper workflow step is to return the draft for completion (and retain evidence of the review), then attest and submit the U4 only after the information is accurate. Allowing solicitation before the registration filing is properly completed undermines registration controls and creates supervision and compliance risk. The key takeaway is that principal attestation is not a formality—it is an accountability step tied to the accuracy of CRD submissions.
Which statement is most accurate regarding a Series 26 principal’s supervision of product training materials for mutual funds and variable contracts?
Best answer: D
Explanation: Supervisors must have controls to ensure training stays aligned to current prospectus/contract terms and firm policies, with evidence of review and updates.
A Series 26 principal is expected to supervise a process that keeps training materials current and consistent with offering documents and firm policies. This typically includes documented periodic reviews, version control, and prompt updates when product disclosures or WSPs change. It also includes retiring obsolete content so representatives are not trained on outdated information.
Supervisory expectations for training focus on having a reasonable, repeatable control that prevents outdated or inconsistent guidance from being used by associated persons. Because offering documents (e.g., mutual fund prospectuses/SAIs and variable contract prospectuses) and firm WSPs can change, the principal should ensure training is reviewed, updated as needed, and that the firm can evidence the review (date, approver, version). A practical approach includes:
Relying solely on vendors or “one-and-done” approval undermines the principal’s supervisory responsibility.
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