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Series 26 Example Questions

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Sample Questions


1)

A broker-dealer requesting registration must fill out an application with the Commission containing all necessary information and documentation. The Commission will then proceed in which of the following ways?

I. Within 30 days, grant such registration to broker-dealer II. Within 45 days, grant such registration to broker-dealer III. Within 30 days, institute proceedings to determine whether registration should be denied Within 45 days, institute proceedings to determine whether registration should be denied

A ) II and III
B ) I and IV
C ) I and III
D ) II and IV

See Answer

Answer: The Best Answer is D

Feedback: The Commission has 45 days from the date of filing an application to either grant registration to broker-dealer, or institute proceedings to determine whether registration should be denied. The proceedings will include notice as to grounds for denial, as well as an opportunity for a hearing. After such proceedings, the Commission will either grant or deny a broker-dealer's registration.


2)

All of the following are true of customer complaints and disputes EXCEPT:

A ) One of the firm’s principals must maintain a file of complaints
B ) They must be responded to by a firm principal in writing within 10 days
C ) Clients may not appeal arbitration decisions to the Federal court system
D ) Disputes are handled under the FINRA Code of Arbitration

See Answer

Answer: The Best Answer is B

Feedback: A member firm's principal should follow up on customer complaints in a timely manner, but no specific time frame is given. However, if the complaint moves into arbitration, a response to FINRA requests is required. Moreover, U4 and U5 forms must be updated with customer complaint information in a timely manner.


3)

All of the following must submit fingerprints under Rule 17f-2 EXCEPT:

A ) A registered representative
B ) A firm’s principal
C ) The cashier at a local branch office
D ) A local branch's computer technician

See Answer

Answer: The Best Answer is D

Feedback: Clerical and "ministerial" staff can receive exemptions from being fingerprinted under Rule 17f-2 if they are not directly involved in the sales process or the handling of client assets.


4)

A customer must be sent or given a confirmation at or before settlement with all of the following information EXCEPT:

A ) Markups/mark-downs on NASDAQ securities if acting as principal
B ) Commission on trade, if acting as an agent
C ) Which market the trade was executed in
D ) Whether the broker acted in a dual agency capacity

See Answer

Answer: The Best Answer is C

Feedback: SEC Rule 10b-10 is concerned with commissions, markups, and mark-downs, but not the market or exchange that the security is traded on. Rule 10b-10 is also concerned with the capacity of the broker-dealer - if it acted as agent, principal or in a dual-agency capacity


5)

Shoestring Discount Stock Jocks owns no shares of stock in any exchange-traded companies. In its efforts to execute a buy order for your account, they would be acting as a:

A ) Dealer
B ) None of the choices listed
C ) Broker-dealer
D ) Broker

See Answer

Answer: The Best Answer is D

Feedback: According to the Act of 1934, a broker-dealer can take either side in a trade. A dealer may sell stock they hold in inventory to you at a markup. A broker holds no inventory; they charge a commission for finding a person or company willing to sell the stock to you. Another name for a broker in this instance is "agent."


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