Series 34 common mistakes
Series 34 · Understand the traps and how to avoid them.
Computes pip value using 0.0001 on every pair, including USD/JPY and other JPY-quoted pairs, and then values the result in the wrong currency leg.
The 0.0001 convention is the example used in nearly every introductory explanation, so it gets memorized as universal; under time pressure the candidate skips the step of checking the pair's quotation convention and never notices the answer choices differ by a factor of 100.
What to do instead
Before touching the calculator, write one line: 'JPY-quoted pairs = 0.01; all other pairs = 0.0001.' Then get the pip value in the quote currency first, and only then convert to U.S. dollars using the appropriate rate. Do three practice problems each in EUR/USD, USD/JPY and USD/CHF until the check is automatic.
Reads a two-sided quote left-to-right as if the first number is what the customer receives, and answers spread questions without stating which side of the market the dealer is quoting.
Quotes are written dealer-bid first, dealer-offer second, but candidates subconsciously read them the way they read any other number pair; the exam's distractors are built precisely around the reversed answer.
What to do instead
Restate every quote out loud in a fixed sentence: 'The dealer bids X and offers Y, so a customer selling receives X and a customer buying pays Y.' Compute the spread only after that sentence is written down.
Labels every non-spot currency transaction a futures contract, or treats a spot, forward, swap and option as interchangeable when asked which one is executed off-exchange with a retail customer.
Candidates carry over equities/futures vocabulary from other licenses and assume 'off-exchange' means 'not allowed' or 'means futures,' instead of distinguishing the product types and their regulatory treatment.
What to do instead
Build a four-row table - spot, outright forward, swap, option - with columns for settlement timing, whether it is off-exchange retail forex or exchange-traded, and who may offer it to a retail customer. Rehearse one worked example per row.
Applies the 2% (50:1) security deposit figure to every currency pair, including non-major pairs and precious metals, and to positions a customer is already holding at a loss.
50:1 is the most repeated leverage number in study summaries, so it crowds out the two-tier structure of the rule; candidates also compute the deposit against account equity instead of against the notional position value.
What to do instead
Memorize the two tiers explicitly: 2% of notional for major currencies and 5% for all others, and be able to say which currencies count as majors. On every problem, write notional = units x current rate, then apply the percentage, then compare the result to equity.
Treats a click-through or verbal 'I understand' as satisfying the requirement to deliver and obtain the signed risk disclosure, or assumes the disclosure can be sent with the first confirmation after trading begins.
In practice many firms on-board electronically, so candidates import the assumption that delivery timing is flexible; the rule ties the acknowledgment to account opening, not to the first trade.
What to do instead
Fix the timeline in memory: disclosure delivered and acknowledged at or before account opening, before any transaction. On scenario questions, look for the word 'signed' or 'acknowledged' and reject any answer that places delivery after the first order.
Assumes an introducing broker or an associated person may accept the customer's wire transfer, or answers that customer funds may be held by any registered entity serving the account.
In other parts of the securities world intermediaries routinely handle checks, so candidates transfer that pattern to retail forex without checking which registration category is permitted to hold customer money.
What to do instead
Learn it as a hard pairing: the dealer that carries the account holds the funds; the introducing or soliciting party does not. On any question involving receipt of customer funds, first name the entity and ask whether it is the counterparty to the trade.
States the record retention period as three years, or gives the total period without the requirement that the early portion be kept readily accessible.
Three years and five years are both familiar numbers from other regulatory regimes, and the two-part structure of the retention rule is easy to collapse into a single number.
What to do instead
Memorize it as one sentence with two numbers: total retention period and the shorter window during which records must be readily accessible. Write that sentence on the scratch sheet at the start of the exam and reuse it for every recordkeeping question.
Approves marketing copy that implies low risk, uses hypothetical or simulated performance without labeling, or suggests past results indicate future performance, treating the review as a marketing rather than a compliance decision.
The language sounds like ordinary advertising, and candidates judge it by whether it is 'misleading' in a general sense rather than against the specific prohibitions on promissory or risk-free claims and unlabeled hypothetical results.
What to do instead
Screen every promotional item against three fixed questions: does it promise or imply a result, does it understate risk, and is any performance shown hypothetical or unlabeled. If any answer is yes, the item cannot go out, regardless of how mild the wording seems.
Fails to flag a scenario in which an associated person exercises discretion over a customer account without written authorization and firm approval, or in which customer funds are directed to a third party outside the carrying dealer.
The scenario is buried in narrative detail and the candidate focuses on the trading outcome rather than the control failure; discretion without documentation and third-party fund routing are exactly the red flags the question is testing.
What to do instead
Read every fact pattern once purely for control issues before considering profitability or suitability: who authorized this, who is holding the money, and is there a document. Any missing document on discretion or any off-account fund flow is the answer.
Applies a suitability analysis to a clearly unsolicited customer-directed order, or waives suitability entirely because the customer 'insisted' on a high-leverage strategy.
Candidates remember 'suitability matters' as a slogan and never learn that the analysis attaches to recommended transactions; conversely, a customer's insistence feels like consent, so the recommendation side of the conversation is ignored.
What to do instead
Classify first: recommended or unsolicited. If recommended, run the suitability check on the customer's objectives, experience and financial resources before evaluating leverage. A customer's request does not convert a recommendation into an unsolicited order, and does not remove the firm's obligation.