Series 28 study guide
Series 28 · Work through your exam, one topic at a time.
The Series 28 - formally the Introducing Broker-Dealer Financial and Operations Principal Qualification Examination - is a FINRA qualification exam for individuals who will serve as the financial and operations principal (FINOP) of a broker-dealer that introduces its accounts to a clearing firm rather than clearing and carrying customer accounts itself. Because an introducing firm does not hold customer securities, the FINOP's work centers on the firm's own books: computing net capital, preparing and filing financial reports, maintaining the customer protection reserve computation and segregation records that flow from it, keeping the required books and records, and building the supervisory and internal control framework around those processes. The Series 28 study guide has 5 sections and about 1,847 words.
01Financial Reporting: FOCUS Reports, Annual Audits, and Early-Warning Notices
The FOCUS report (Form X-17A-5) is the core financial filing. Part I carries the net capital computation and aggregate indebtedness; Part II/IIA carries the balance sheet, income statement, and supporting schedules.
332 words, about 2 min02Net Capital: The Two Tests, Allowable Assets, and Haircuts
Rule 15c3-1 requires a broker-dealer to maintain net capital at or above an absolute minimum and to keep aggregate indebtedness (AI) within 15 times net capital, a 15:1 ratio equivalent to net capital of at least 6 2/3% of AI. The absolute minimum is 5,000 for a firm that does not hold customer funds or securities and 50,000 for a firm that does.
300 words, about 2 min03Customer Protection: The Reserve Formula and Possession or Control
Rule 15c3-3 requires a firm that holds customer funds or securities to protect them. Customer securities must be in the firm's possession or control, meaning fully paid and excess-margin securities are kept safe, and customer cash must be backed by a deposit in a special reserve bank account for the exclusive benefit of customers, the PAB.
331 words, about 2 min04Recordkeeping and Internal Controls: Make, Keep, and Protect
Rule 17a-3 tells a firm which books and records to create; Rule 17a-4 tells how long to keep them. Core records include the blotter, general and customer ledgers, order tickets, confirmations and statements, customer account documents such as new account cards and margin agreements, correspondence and communications, and complaint files.
293 words, about 1 min05Operations, Supervision, and Financial Responsibility
An introducing broker opens and services customer accounts but does not carry them. A written agreement with a carrying broker allocates responsibilities: the carrying firm holds assets, clears and settles trades, sends confirmations and statements, and extends margin credit; the introducing broker handles order entry, customer service, and supervision.
591 words, about 3 min