Try 10 focused Series 99 questions on Broker-Dealer Operations, with explanations, then continue with the full Securities Prep practice test.
Series 99 Broker-Dealer Operations 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 99 |
| Official topic | Function 1 — Knowledge Associated with the Securities Industry and Broker-Dealer Operations |
| Blueprint weighting | 70% |
| Questions on this page | 10 |
A customer emails their registered representative asking to stop paper statements and confirmations and begin e-delivery to a new email address. The representative forwards the email to Operations and asks that the preference be changed today.
Which action best aligns with durable standards for establishing and maintaining customer delivery preferences (paper vs. e-delivery) while safeguarding NPI?
Best answer: C
Explanation: E-delivery changes should be made only after authenticating the requester, capturing affirmative consent, and keeping a record of the authorization and the updated delivery instruction.
Changing statement/confirmation delivery is a customer instruction that must be authenticated and documented. Moving from paper to e-delivery should be based on the customer’s affirmative consent and recorded in the firm’s systems so the preference is reliably applied going forward. This also helps prevent misdirection of sensitive account information during account takeover attempts.
Paper vs. e-delivery preferences are not just a “service” change; they control where sensitive account information is delivered. Operations should follow WSPs to (1) authenticate the requester using approved methods, (2) capture affirmative consent to e-delivery (and the specific delivery destination), and (3) retain an auditable record of the authorization and the effective change in the system of record.
Common durable controls include using a secure client portal (or recorded line with required authentication), limiting changes based solely on unverified emails, and generating a confirmation/notification of the change per firm procedures. The key is record integrity plus protection of customer information so delivery preferences are established and maintained consistently and defensibly.
During an internal audit, Operations is asked to show evidence that a daily exception report control is being performed as described in the firm’s procedures.
Exhibit: WSP excerpt and control evidence (snapshot)
WSP: Trade Correction Exception Report (Daily)
- Ops generates report by 9:30 a.m.
- Supervisor reviews and initials the log.
- Evidence retained in Supervision folder for 3 years.
Control Log (week of Jan 6)
Date Report saved? Reviewed by (initials)
Jan 6 Yes --
Jan 7 Yes --
Jan 8 Yes --
Based on the exhibit, which interpretation is best supported?
Best answer: A
Explanation: The WSP requires a supervisor review documented in a retained log, but the log shows no reviewer initials despite reports being saved.
WSPs define the supervisory process and the required evidence a firm must keep to demonstrate the control occurred. Here, the WSP explicitly requires a supervisor to review and initial the log, and to retain that evidence. The log shows the reports were saved but provides no documented supervisory review, creating a books-and-records gap tied to the supervisory control.
Books and records are how a firm proves (to itself and to regulators) that its supervisory controls were actually executed, and WSPs specify what supervision must occur and what documentation must be retained. In the exhibit, the WSP requires three elements: generate the report, have a supervisor review and initial the log, and retain evidence in a designated folder. The control log is the firm’s record of performance of that supervisory step; because the “Reviewed by” field is blank for all listed dates, the firm cannot demonstrate that the required supervisory review occurred, even though the reports were saved. The key takeaway is that a control is not just the task—it is also the contemporaneous, retained record that evidences it per the WSP.
An operations associate is comparing two inbound transfer requests:
Which workflow pairing is most appropriate?
Best answer: A
Explanation: IRAs at ACATS-participating broker-dealers are typically transferable via ACATS, while 401(k) plan rollovers from recordkeepers require non-ACATS rollover handling.
ACATS is the standard automated transfer process between ACATS-participating broker-dealers for eligible account types, including like-registered IRA-to-IRA transfers. A 401(k) is an employer plan at a plan administrator/recordkeeper, not a brokerage account at a delivering ACATS firm, so it is handled as a direct rollover using non-ACATS documentation and delivery of cash/securities.
The decisive differentiator is who holds the delivering account and whether the account is an ACATS-eligible brokerage account. A Roth IRA maintained at a broker-dealer that participates in ACATS is generally eligible for an ACATS transfer when the registration is like-for-like and no ownership changes are requested. By contrast, an employer-sponsored 401(k) is a retirement plan administered by a plan recordkeeper (not a delivering broker-dealer brokerage account), so the movement into an IRA is processed as a direct rollover outside of ACATS.
Operationally, this usually means:
The key takeaway is that “retirement account” alone does not determine ACATS eligibility; the delivering platform and account type do.
An operations associate receives an internal ticket from a trader: “Please reissue today’s customer confirmation for the ABC Corp bond trade as agency (not principal) and remove the markup disclosure. Customer called and is upset.” The original confirmation shows: 50 bonds, price 101.250, capacity = principal, settlement date, and a disclosed markup with a total net amount.
What is the primary operational risk/red flag that should drive the next control step?
Best answer: C
Explanation: Changing capacity and removing disclosed remuneration would make the confirmation inconsistent with the executed trade and could evidence an improper attempt to alter required transaction details.
Trade confirmations are books-and-records evidence of what was executed, including security, quantity, price, capacity (principal/agent), remuneration (commission/markup/markdown), and net amount. A request to reissue a confirmation to change capacity and remove markup disclosure is a red flag for altering transaction facts rather than processing a legitimate correction. The appropriate control is to investigate and reconcile to the trade record before any reissue.
A customer confirmation is intended to memorialize the actual transaction terms and the firm’s role in the trade. Key confirmation fields such as security identifier, trade/settlement dates, quantity, price (or yield), capacity (principal vs. agent), disclosed remuneration (commission/markup/markdown), and the net amount collectively evidence what the customer agreed to and what the firm did. When someone asks operations to change capacity and remove a markup disclosure solely because a customer is upset, the primary red flag is that the confirmation (and potentially the firm’s records) may be improperly altered to misstate the transaction. The control response is to compare the request to the order/execution record and the firm’s trade blotter, follow formal correction/rebill procedures, and escalate per WSPs if the requested change is not supported by the underlying trade.
Which statement best describes a riskless principal transaction and how it affects capacity reporting and customer disclosure?
Best answer: A
Explanation: In riskless principal, the firm fills the customer order with an offsetting trade and reports principal capacity while disclosing compensation as a markup/markdown (not a commission).
Riskless principal means the firm executes an offsetting market trade to fill the customer order and does not take meaningful market risk. Even though the firm is “flat” economically, the trade is reported in principal capacity. On the customer confirmation, the firm discloses it acted as riskless principal and shows compensation as a markup/markdown rather than a commission.
Trading capacity describes whether the broker-dealer acted as an agent for the customer or as a counterparty to the customer. In a riskless principal transaction, the firm executes an offsetting purchase or sale to fill the customer order (typically contemporaneously) and is economically neutral, but it still acts as the customer’s counterparty.
Operationally this drives two key outputs:
The common pitfall is treating “no market risk” as “agency,” even though the firm is on the other side of the customer trade.
A broker-dealer is moving required books and records (including email and customer account documentation) to a third-party cloud records-retention vendor. Which statement about the firm’s vendor controls is INCORRECT?
Best answer: B
Explanation: The broker-dealer retains responsibility for compliant record retention and must conduct ongoing oversight of the vendor.
When a broker-dealer outsources record retention, it does not outsource regulatory responsibility. The firm should perform due diligence up front, set clear contract expectations (access, retention, auditability, and exit planning), and continuously monitor the vendor’s performance and controls. Therefore, a “set it and forget it” approach based only on vendor assurances is not acceptable.
Outsourcing record retention is a control and governance decision: the broker-dealer remains accountable for creating, preserving, and producing required records in a usable format upon request. As a result, vendor management should cover three areas tied directly to recordkeeping risk: due diligence (e.g., review the vendor’s security and operational controls, financial condition, and ability to meet retention/immutability and retrieval needs), contract expectations (e.g., clear SLAs, data ownership, access for the firm and regulators, incident notification, audit rights, and termination/portability), and ongoing monitoring (e.g., periodic control reviews and testing that records can be promptly retrieved and accurately reproduced). The key takeaway is that initial vetting is not a substitute for continuous oversight once records are being retained externally.
A broker-dealer clears through NSCC and uses Continuous Net Settlement (CNS). U.S. equity regular-way settlement is T+1.
Exhibit: Trade blotter (all CNS-eligible, same CUSIP)
Trade date: August 12, 2025
Symbol Side Quantity
XYZ BUY 8,000
XYZ SELL 4,500
XYZ BUY 3,000
XYZ SELL 2,000
What will be the firm’s single CNS settlement obligation for XYZ, and on what date will it settle?
Best answer: D
Explanation: CNS nets all compared trades to one position per CUSIP per settlement date, and T+1 from August 12 is August 13 with a net buy of 4,500 shares.
Under CNS, NSCC nets a member’s buys and sells in the same security into one net deliver/receive obligation for the settlement date. Here, total buys of 11,000 shares minus total sells of 6,500 shares equals a net receive of 4,500 shares. With T+1 settlement, trades done August 12, 2025 settle August 13, 2025.
CNS is NSCC’s process that consolidates (nets) a member’s CNS-eligible trades in the same security into a single net position for each settlement date, instead of settling trade-by-trade. This netting reduces the number of deliveries/receipts and means settlement exceptions and fails are managed at the net level (a fail reflects the remaining net deliver/receive obligation).
For the blotter:
Key takeaway: CNS replaces multiple gross deliveries/receipts with one net deliver/receive obligation for that day’s settlement.
A broker-dealer’s operations team is supporting the quarterly best execution review after surveillance flagged several equity orders that were trade-reported late and then corrected with “as/of” reports. The Best Execution Committee asks operations to provide records that evidence whether the executions were reasonably priced versus the market at the time the orders were handled.
What is the best next step?
Best answer: B
Explanation: Best execution monitoring is evidenced by linking order handling and routing/execution records to contemporaneous market data (e.g., NBBO) for execution-quality review.
To evidence best execution monitoring, operations must be able to show how orders were handled (receipt, routing, execution, and any re-routes) and compare those events to contemporaneous market conditions. The most direct operational next step is to gather time-sequenced order and execution/routing records and match them to NBBO quote data for execution-quality analysis and documentation.
Best execution review relies on reconstructing what happened to the order and whether the outcome was reasonable under the market conditions at that time. Late trade reporting and “as/of” corrections affect reporting timeliness, but they do not by themselves demonstrate execution quality. Operations supports the review by producing an audit trail of order handling (order receipt time, routing decisions, venues, execution times/prices, and any modifications) and then pairing it with market data (e.g., NBBO at relevant timestamps) so the firm can evaluate price improvement, effective spread, and venue performance and document the supervisory review. The key control is the ability to link internal order/execution records to contemporaneous quotes, not to adjust trade reports to “fit” internal timestamps.
A customer mails a physical stock certificate and a signed LOA (with a valid medallion signature guarantee) requesting the certificate be deposited into her individual cash account. Per firm WSPs, Operations performs a Securities Information Center (SIC) inquiry on all certificate deposits over $25,000; the inquiry returns a “HIT” showing the certificate number was reported stolen. The customer calls asking that the deposit be completed today.
What is the single best next action?
Best answer: B
Explanation: A SIC “hit” is a lost/stolen alert, so the firm should not process or return the certificate and must report possession to SIC per its controls.
A SIC inquiry “hit” is a high-risk red flag indicating the certificate has been reported lost, missing, stolen, or counterfeit. Operations should stop the transfer, secure the certificate, escalate per WSPs, and report the firm’s possession of the security to SIC so the record is updated and the item is handled as potentially stolen.
Firms use SIC inquiries and reporting to prevent the transfer of certificates that have been reported lost, missing, stolen, or counterfeit. When an inquiry returns a “hit,” Operations should treat the certificate as suspect and avoid any action that could facilitate an improper transfer or tip the certificate back into circulation.
Appropriate handling generally includes:
The key control is to stop processing and update SIC/records, rather than depositing, returning, or destroying the certificate.
A customer submits a physical certificate for ABC Corp common stock registered in her name and requests that the shares be re-registered into her revocable trust. Operations wants the customer to authorize the transfer without signing (endorsing) the back of the certificate itself.
Which item best matches the document used for this purpose?
Best answer: D
Explanation: A stock power is a separate assignment form that authorizes transfer of ownership of a stock certificate without endorsing the certificate.
A stock power is used to assign/transfer ownership of a certificated equity in registered form via a separate document rather than endorsing the certificate. The issuer’s transfer agent relies on properly executed transfer paperwork to cancel the old registration and re-register the shares to the new owner (here, the trust).
For a certificated security held in registered form, ownership changes are effected by the issuer’s transfer agent, which maintains the official record of registered owners and processes transfers by cancelling the old certificate/registration and issuing (or book-entry registering) the new one. To instruct that transfer, the registered owner can sign a separate “power” form instead of signing the back of the certificate.
A medallion signature guarantee is an authentication of the signature for transfer purposes, not the assignment document itself.
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