Series 39 common mistakes
Series 39 · Understand the traps and how to avoid them.
Treating the general partner, the sponsor, the program manager and the dealer-manager as one party, and attributing the fiduciary duty to the entity that is merely distributing the units.
Offering memoranda use 'sponsor,' 'general partner,' 'program manager' and 'dealer-manager' loosely and often describe affiliated entities in the same paragraph, so candidates match on the label rather than on the function described in the question stem.
What to do instead
Before answering, sketch a four-box map: general partner (manages the program and owes the fiduciary duty to the limited partners), sponsor (organizer, often a GP affiliate), program manager (day-to-day operations), dealer-manager and selling group (distribution only, no fiduciary duty to the LPs). Identify which box the question is actually asking about, then answer.
Running organization-and-offering expenses and underwriting compensation together into a single total when testing a DPP offering against the limits of FINRA Rule 2310.
Both are paid out of gross offering proceeds and both appear in the same 'use of proceeds' table of the offering document, so they read as one cost pool.
What to do instead
Keep two separate running totals and know which items fall in each bucket: organization-and-offering expenses (legal, accounting, printing, qualification and filing fees, wholesaling costs) versus underwriting compensation (commissions, finder's fees, non-accountable expense allowances, due-diligence reimbursement). Test each bucket against its own cap rather than against a combined figure, and flag any item whose classification would flip the offering over a limit.
Analyzing a DPP recommendation only against the customer's stated risk tolerance and investment objective, without sizing the illiquidity, the tax position and the concentration against the rest of the customer's holdings.
Suitability training is built around liquid equity and fund questions where a ready market is assumed, so the DPP's defining feature - no secondary market and a multi-year hold - gets silently skipped.
What to do instead
Apply a fixed four-part test to every DPP recommendation: (1) does the customer have any foreseeable liquidity need inside the program's projected life, (2) what percentage of liquid net worth the subscription represents, (3) whether the customer's tax position actually benefits from the program's deductions and credits, and (4) whether the investment horizon matches the program's stated term. Answer only after all four are addressed.
Clearing a DPP sales piece that shows projected cash distributions or estimated tax savings in the same visual style as historical performance, treating the review as a check on tone rather than a check on prohibited content.
Sponsor-produced marketing decks are polished and present projections in charts that look identical to performance charts, so the principal reads for 'is this misleading overall' instead of scanning for the specific prohibited claims.
What to do instead
Screen every DPP communication for a fixed list: any projection of tax consequences, any guarantee or assurance of distributions, any implication that a distribution is 'covered' or 'safe,' any claim that the program suits all investors, and omission of the speculative and illiquid risk disclosure. Confirm required FINRA filings are made and that principal approval is documented before use.
Approving an associated person's outside sale of another sponsor's DPP units as a routine outside business activity, without determining whether it is actually a private securities transaction.
Outside business activities and private securities transactions are governed by different rules with different approval, notice and recordkeeping consequences, and DPP sales away from the firm can fall into either category depending on compensation.
What to do instead
Ask three questions before signing anything: is compensation involved, is the registered representative effecting transactions for customers, and has the firm been asked to participate. If compensation and transactions are both present, treat it as a private securities transaction requiring prior written notice, a written approval or disapproval, and records of the transaction - not a simple outside-activity disclosure.
Concluding that supervision has been satisfied because the principal personally reviews a sample of trades each month, even where there are no written supervisory procedures, no designated supervisory responsibilities and no annual compliance meeting on record.
Candidates memorize 'the principal must supervise' and equate visible daily review with compliance, without connecting supervision to the documentary requirements the exam actually tests.
What to do instead
Anchor every supervision answer to the paper trail: written supervisory procedures, designations of supervisory responsibility, an annual compliance meeting, periodic office inspections, and records evidencing the reviews performed. When a question asks what is missing from a fact pattern, look first for the absent record rather than for an absent act.
Answering rule-identification questions with the correct concept but the wrong rule number, or choosing an answer because the rule number 'looks familiar.'
The 2000-series and 3000-series rules cover overlapping subject matter and candidates learn the concepts without ever anchoring them to numbers.
What to do instead
Build and rehearse a one-page number map before the exam: 2010 (standards of commercial honor), 2020 (manipulative or deceptive devices), 2111 (suitability), 2210 (communications with the public), 2310 (direct participation programs), 3110 (supervision), 3280 (private securities transactions), 4511 (books and records). Recite the number before reading the answer choices.
Treating firm-level and individual-level registration as a single requirement - assuming FINRA membership or registration covers state notice filings, or that a state license covers the DPP offering itself.
Both are called 'registration,' both are handled by the same compliance staff, and both generate similar-looking paperwork.
What to do instead
Separate the layers explicitly: SEC and FINRA govern the firm's membership, the associated person's licensing and conduct; each state's securities law governs offers made to its residents. A DPP offering requires both a federal exemption analysis and state qualification or notice filings, while the individual requires the correct registration categories. Answer whichever layer the question names, and never let one substitute for the other.
Valuing DPP interests sitting in the firm's inventory at the offering or subscription price when computing net capital.
The units have a stated price on paper, so candidates plug that price in as 'market value' and skip the deduction that applies to securities without a ready market.
What to do instead
Treat DPP interests as non-marketable: deduct them in full from net capital, or apply a haircut only where a documented, permitted independent valuation exists. Never use the subscription price as current market value, and check whether the position is firm inventory, an underwriting commitment or a customer item, since the treatment differs.
Conflating the customer protection reserve computation with the net capital computation, for example deducting the special reserve bank account deposit from net capital or using the net capital excess to size the reserve deposit.
Both are 'financial responsibility' calculations performed on the same reporting cycle and both use words like 'reserve,' 'deficiency' and 'deposit,' so they blur into one formula in recall.
What to do instead
Keep them in separate mental compartments: net capital tests the firm's liquidity against its liabilities; the customer protection rule tests whether customer securities and cash are segregated, with the required deposit going into a separate bank account and not acting as a net capital deduction. Also remember that notification obligations begin at the early warning level above the minimum requirement, not only when a deficiency actually exists.