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Series 99 study materials
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Series 99 practice questions

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Question 1Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is the regular-way settlement cycle for trades in US exchange-listed equity securities?

  1. T+1 Correct answer.
  2. T+3
  3. Same business day
  4. T+2

Explanation

SEC Rule 15c6-1 requires regular-way settlement of most US securities transactions on the first business day after the trade date (T+1), a change that took effect in May 2024. T+2 was the prior standard, and T+3 was the standard before that.

Question 2Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is the maximum SIPC protection available to a customer of a failed broker-dealer?

  1. $250,000 total, including $100,000 of cash
  2. $500,000 total, including $250,000 of cash Correct answer.
  3. $500,000 of securities only; cash balances are not covered at all
  4. $1,000,000 total, including $500,000 of cash

Explanation

SIPC protects each customer up to $500,000 for securities and cash combined, with a sublimit of $250,000 on cash claims. The protection covers missing assets, not market losses.

Question 3Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under Regulation T, what is the initial margin requirement when a customer purchases common stock on margin?

  1. 30%
  2. 25%
  3. 75%
  4. 50% Correct answer.

Explanation

Regulation T sets the initial margin requirement for long purchases of marginable equity securities at 50% of the purchase price. The 25% figure is the FINRA maintenance requirement that applies after the initial purchase.

Question 4Knowledge Associated with the Securities Industry and Broker-dealer Operations

Which clearing agency acts as the central counterparty and guarantor for trades in US corporate equities?

  1. FICC
  2. DTC
  3. NSCC Correct answer.
  4. OCC

Explanation

NSCC provides central counterparty clearing, netting, and trade guarantee services for US equity and corporate bond transactions. DTC handles custody and book-entry settlement, OCC clears listed options, and FICC clears government and mortgage-backed securities.

Question 5Knowledge Associated with the Securities Industry and Broker-dealer Operations

Which rule requires a broker-dealer to furnish a customer with a written confirmation of each securities transaction at or before completion?

  1. SEC Rule 17a-4
  2. FINRA Rule 4512
  3. SEC Rule 15c3-3
  4. SEC Rule 10b-10 Correct answer.

Explanation

SEC Rule 10b-10 governs the content and timing of customer confirmations, requiring delivery at or before completion of the transaction. It specifies items such as price, capacity, and remuneration.

Question 6Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 17a-4, how long must most broker-dealer books and records be preserved, and how must they be accessible?

  1. Six years, with the first two years in an easily accessible place Correct answer.
  2. Seven years, with the first three years in an easily accessible place
  3. Three years, with the first year in an easily accessible place
  4. Two years, with the first six months in an easily accessible place

Explanation

Rule 17a-4 generally requires preservation for six years, with the first two years readily accessible. Certain records have shorter or longer periods depending on the record type.

Question 7Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is a buy-in in broker-dealer operations?

  1. A customer's purchase of additional shares to cover a short position
  2. An exchange auction conducted to set the opening price of a security
  3. A procedure for closing out a fail to deliver Correct answer.
  4. A broker-dealer's purchase of securities in the market to cover its own inventory shortfall

Explanation

A buy-in is the process by which a party that has not received securities it is owed closes out the fail by purchasing or borrowing the securities, with the cost typically charged to the failing party. It is a settlement risk control rather than a customer trading decision.

Question 8Knowledge Associated with the Securities Industry and Broker-dealer Operations

Which date determines which shareholders are entitled to receive a declared cash dividend?

  1. Ex-dividend date
  2. Payable date
  3. Declaration date
  4. Record date Correct answer.

Explanation

The record date is the date on which the corporation identifies the holders of record entitled to the dividend. Under T+1 settlement, the ex-dividend date is generally one business day before the record date.

Question 9Knowledge Associated with the Securities Industry and Broker-dealer Operations

Before executing a short sale in an equity security, what must a broker-dealer generally do under Regulation SHO?

  1. Pre-borrow the entire quantity of shares before entering the order
  2. Confirm the security appears on the threshold securities list
  3. Obtain a locate or reasonable grounds to borrow Correct answer.
  4. File a Form SH with the SEC on the trade date

Explanation

Regulation SHO Rule 203(b) requires a broker-dealer to locate borrowable shares or have reasonable grounds to believe the security can be borrowed before effecting a short sale. A full pre-borrow is not required if a proper locate is obtained.

Question 10Knowledge Associated with the Securities Industry and Broker-dealer Operations

For a securities loan of US equity securities, what collateral does the borrower generally deliver to the lender?

  1. 140% of market value
  2. 50% of market value
  3. 100% of market value
  4. 102% of market value Correct answer.

Explanation

Market practice for US equity securities loans calls for collateral of 102% of the loaned securities' market value, marked to market daily, with additional collateral delivered if the value falls below 100%.

Question 11Knowledge Associated with the Securities Industry and Broker-dealer Operations

How often must a broker-dealer compute the reserve formula required by SEC Rule 15c3-3?

  1. Weekly Correct answer.
  2. Monthly
  3. Daily
  4. Quarterly

Explanation

Rule 15c3-3 requires the reserve formula computation to be made weekly as of the close of the last business day of the week, with any required deposit made by the second business day after the computation.

Question 12Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is the minimum net capital requirement under SEC Rule 15c3-1 for a broker-dealer that carries customer accounts?

  1. $5,000
  2. $250,000 Correct answer.
  3. $25,000
  4. $100,000

Explanation

Rule 15c3-1 requires a carrying broker-dealer to maintain minimum net capital of $250,000. The $5,000 minimum generally applies to introducing firms that do not hold customer funds or securities.

Question 13Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 11870, when must a delivering member complete a customer account transfer through ACATS?

  1. One business day after the instruction is validated
  2. Three business days after validation Correct answer.
  3. Ten business days after the instruction is validated
  4. Thirty calendar days after the instruction is validated

Explanation

Once the transfer instruction is validated, the delivering member must complete the transfer within three business days. The receiving member must submit the instruction promptly, and the carrying member must validate or take exception within three business days of receipt.

Question 14Knowledge Associated with the Securities Industry and Broker-dealer Operations

A customer sells 100 shares of XYZ at a loss on March 1 and buys 100 shares of XYZ on March 10. How is the loss treated for tax purposes?

  1. Fully deductible in the year of sale
  2. Deductible only if the replacement shares are later sold at a gain
  3. Deductible up to the $3,000 annual capital loss limit
  4. Disallowed as a wash sale Correct answer.

Explanation

The wash sale rule disallows a loss when substantially identical securities are purchased within 30 days before or after the sale. The disallowed loss is added to the basis of the replacement shares.

Question 15Knowledge Associated with the Securities Industry and Broker-dealer Operations

What minimum equity must a pattern day trader maintain in the account?

  1. $50,000
  2. $5,000
  3. $25,000 Correct answer.
  4. $2,000

Explanation

Under FINRA rules, an account designated as a pattern day trader must maintain minimum equity of $25,000 at the close of business on any day on which day trading occurs.

Question 16Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under the customer identification program requirements derived from the USA PATRIOT Act, when must a broker-dealer verify a new customer's identity?

  1. Within 30 calendar days of the first transaction
  2. Within a reasonable time after opening Correct answer.
  3. Only for accounts funded with more than $10,000
  4. Before the first trade in every account

Explanation

A broker-dealer must verify customer identity within a reasonable time after the account is opened, using documentary or non-documentary methods. Verification need not precede the first trade.

Question 17Knowledge Associated with the Securities Industry and Broker-dealer Operations

A broker-dealer determines that a customer matches an entry on OFAC's Specially Designated Nationals list. What must the firm do?

  1. Close the account and return the assets to the customer
  2. Block the assets and report to OFAC Correct answer.
  3. File a suspicious activity report and freeze the assets for 24 hours
  4. Notify FINRA and continue normal operations

Explanation

OFAC regulations require the firm to block the property of a designated person and report the blocking to OFAC, generally within 10 business days. The assets may not be returned or transferred without authorization.

Question 18Knowledge Associated with the Securities Industry and Broker-dealer Operations

What does Regulation S-P require a broker-dealer to give customers with respect to nonpublic personal information?

  1. Notice only at account opening, with no ongoing obligation
  2. An annual privacy notice only when the firm shares information with its affiliated companies
  3. A privacy notice with an opt-out for sharing with nonaffiliated third parties Correct answer.
  4. Opt-in consent before any information is shared with a service provider

Explanation

Regulation S-P requires clear and conspicuous notice of privacy policies and practices and a reasonable opportunity to opt out before nonpublic personal information is disclosed to nonaffiliated third parties, subject to exceptions.

Question 19Knowledge Associated with the Securities Industry and Broker-dealer Operations

What does FINRA Rule 4370 require of a member firm's business continuity plan?

  1. Maintain a backup data center within 50 miles of its primary site
  2. File a copy of the plan with FINRA each year
  3. Review the plan at least annually Correct answer.
  4. Test the plan every quarter and file results with FINRA

Explanation

FINRA Rule 4370 requires a written business continuity plan, designation of emergency contacts, and review of the plan at least annually with updates as necessary.

Question 20Knowledge Associated with the Securities Industry and Broker-dealer Operations

What does a broker-dealer's duty of best execution require?

  1. Seek the most favorable terms reasonably available Correct answer.
  2. Guarantee the best price available at any time during the trading day
  3. Execute every customer order on the primary listing exchange
  4. Route all customer orders to the venue with the lowest fees

Explanation

Best execution requires a member to use reasonable diligence to ascertain the best market for the security and obtain terms for the customer that are as favorable as possible under prevailing market conditions, considering price, speed, likelihood of execution, and other factors.

Question 21Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 15c3-3, how often must a broker-dealer physically examine (count) customer securities it holds?

  1. Quarterly, with each count announced to the clearing firm in advance
  2. Monthly, always on the last business day of the calendar month
  3. Twice each fiscal year, at least one unannounced Correct answer.
  4. Once during each fiscal year, on a date announced in advance to all customers

Explanation

Rule 15c3-3 requires a securities count at least twice during each fiscal year, with at least one count conducted on an unannounced basis. The count helps verify that customer securities are actually held as required.

Question 22Knowledge Associated with the Securities Industry and Broker-dealer Operations

During the distribution of a new equity issue, what is the maximum permissible stabilizing bid under Regulation M?

  1. A stabilizing bid at or below the offering price Correct answer.
  2. Short sales of the new issue to depress the aftermarket price
  3. Purchases at any price above the offering price to support the market
  4. Allocations to accounts that agree to buy additional shares later

Explanation

Rule 104 of Regulation M permits stabilizing bids but prohibits them from being entered at a price higher than the offering price. Stabilizing is intended to prevent or retard a decline in the market price, not to raise it.

Question 23Knowledge Associated with the Securities Industry and Broker-dealer Operations

When a customer exercises an equity option, how does OCC assign the exercise to clearing members with short positions?

  1. On a first-in, first-out basis among clearing members
  2. To the clearing member with the largest short position in the series
  3. To the member that most recently sold the option in the series
  4. Randomly among members with short positions Correct answer.

Explanation

OCC assigns exercise notices to clearing members carrying short positions in the series on a random basis. The clearing member then allocates the assignment among its customers according to its own procedures, often also random or by established method.

Question 24Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under MSRB Rule G-15, what must a customer confirmation for a municipal securities transaction disclose about the dealer's role?

  1. Whether the dealer acted as principal or agent Correct answer.
  2. The identities of both parties to the transaction
  3. The dealer's cost basis in the securities
  4. The names of the underwriters in the issue

Explanation

MSRB Rule G-15 requires the confirmation to disclose the capacity in which the dealer acted, among other items such as price, yield, and remuneration. Customers are entitled to know whether the firm traded as principal or agent.

Question 25Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 15c3-3, how must fully paid and excess margin customer securities be held?

  1. Pledged to a bank to finance the firm's inventory
  2. Commingled with firm proprietary securities in a street-name account
  3. Loaned to other broker-dealers to generate revenue
  4. In a segregated account free of liens Correct answer.

Explanation

The Customer Protection Rule requires fully paid and excess margin securities to be held in a segregated account for the exclusive benefit of customers, free of any lien or charge. They may not be used to finance firm activities or commingled with proprietary positions.

Question 26Knowledge Associated with the Securities Industry and Broker-dealer Operations

A customer buys 100 shares of a listed US stock in a regular-way transaction on Monday, with no market holiday during the week. Under the standard settlement cycle for US equities, when is the trade scheduled to settle?

  1. Tuesday Correct answer.
  2. Wednesday
  3. Monday
  4. Friday

Explanation

US equity trades settle on a T+1 basis, so a regular-way trade executed on Monday settles on Tuesday, assuming no holiday. The trade date is Monday, but settlement occurs one business day later.

Question 27Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under Regulation T, what is the initial margin requirement for a customer purchase of $20,000 of margin-eligible stock?

  1. 50% ($10,000) Correct answer.
  2. 100% ($20,000)
  3. 25% ($5,000)
  4. 75% ($15,000)

Explanation

Regulation T sets the initial margin requirement for margin-eligible securities at 50% of the purchase price. A $20,000 purchase therefore requires $10,000 in margin.

Question 28Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is the maximum total protection provided by SIPC for a customer in a separate capacity, including any cash sublimit?

  1. $1,000,000
  2. $500,000 Correct answer.
  3. $100,000
  4. $250,000

Explanation

SIPC protects up to $500,000 per customer in a separate capacity, including a $250,000 sublimit for cash. The $250,000 figure is the cash portion, not the total limit.

Question 29Knowledge Associated with the Securities Industry and Broker-dealer Operations

What is the maximum annual value of gifts that a registered representative may give to an employee of another FINRA member without violating FINRA's gift rule?

  1. $50
  2. $100 Correct answer.
  3. $500
  4. $250

Explanation

FINRA Rule 3220 limits gifts to $100 per person per year. Gifts above that amount can create a recordkeeping and supervisory issue.

Question 30Knowledge Associated with the Securities Industry and Broker-dealer Operations

Which order instructs the broker to buy or sell only at a specified price or better?

  1. Limit order Correct answer.
  2. Market order
  3. Stop order
  4. Not-held order

Explanation

A limit order sets the maximum purchase price or minimum sale price acceptable to the customer. It will not execute at a worse price unless the customer changes the order.

Question 31Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA trade reporting rules, within what period must a member report an execution in a TRACE-eligible corporate bond?

  1. Within 15 minutes Correct answer.
  2. By the end of the day
  3. Within 1 hour
  4. Immediately

Explanation

TRACE-eligible corporate bond transactions must generally be reported within 15 minutes of execution. Prompt reporting supports price transparency in the bond market.

Question 32Knowledge Associated with the Securities Industry and Broker-dealer Operations

Which organization writes rules governing municipal securities dealers, subject to SEC approval?

  1. The SEC
  2. OCC
  3. The MSRB Correct answer.
  4. FINRA

Explanation

The Municipal Securities Rulemaking Board writes rules for municipal securities dealers, and the SEC approves those rules. FINRA and other regulators enforce compliance with MSRB rules.

Question 33Knowledge Associated with the Securities Industry and Broker-dealer Operations

A sell stop order becomes which type of order when the stop price is reached?

  1. Not-held order
  2. Market order Correct answer.
  3. Stop limit order
  4. Limit order

Explanation

A sell stop order is triggered when the stop price is reached and then becomes a market order. It is designed to limit losses once a specified price level trades.

Question 34Knowledge Associated with the Securities Industry and Broker-dealer Operations

A customer has a long margin position in 1,000 shares of ABC with a current market value of $50,000 and a debit balance of $30,000. What is the minimum maintenance margin requirement under FINRA Rule 4210?

  1. $15,000
  2. $30,000
  3. $12,500 Correct answer.
  4. $25,000

Explanation

FINRA Rule 4210 generally requires maintenance margin of 25% of the long market value for long stock positions. Here, 25% of $50,000 is $12,500.

Question 35Knowledge Associated with the Securities Industry and Broker-dealer Operations

A customer is considered a pattern day trader if the customer executes how many day trades within five business days in a margin account, provided those trades exceed 6% of total trades?

  1. Two or more day trades
  2. Six or more day trades
  3. Ten or more day trades
  4. Four or more day trades Correct answer.

Explanation

The pattern day trader definition generally requires four or more day trades within five business days, and those trades must exceed 6% of the customer's total trades in that period unless the firm treats the customer as a pattern day trader.

Question 36Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 4512, what must a member do regarding a trusted contact person for a natural person customer's account?

  1. Require annual written consent
  2. Make reasonable efforts to obtain the name and contact information Correct answer.
  3. Verify identity under the CIP
  4. Obtain a signed power of attorney

Explanation

FINRA Rule 4512 requires members to make reasonable efforts to obtain the name and contact information of a trusted contact person for natural person customers. The trusted contact is intended to help address issues such as diminished capacity or potential fraud.

Question 37Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 4530, by when must a member report quarterly statistical information about customer complaints to FINRA?

  1. 30 days after quarter end Correct answer.
  2. 45 days after quarter end
  3. 15 days after quarter end
  4. 10 days after quarter end

Explanation

FINRA Rule 4530 requires quarterly reporting of customer complaint statistics within 30 days after the end of each calendar quarter. The report covers specified complaint information and related statistics.

Question 38Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under Regulation Best Interest, the care obligation requires a broker-dealer to have a reasonable basis to believe a recommendation is in the customer's best interest, which includes understanding what?

  1. The firm's compensation schedule
  2. The customer's tax return
  3. The product's risks, rewards, and costs Correct answer.
  4. The issuer's credit rating only

Explanation

The care obligation requires the broker-dealer to understand the potential risks, rewards, and costs associated with a recommendation. That understanding supports a reasonable basis for believing the recommendation is in the retail customer's best interest.

Question 39Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA rules, how often must members report short interest in equity securities to FINRA?

  1. Weekly
  2. Quarterly
  3. Monthly
  4. Twice each month Correct answer.

Explanation

FINRA requires members to report short interest twice each month, generally as of the settlement date of the 15th and the last business day of the month. This reporting supports transparency regarding short selling activity.

Question 40Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under MSRB Rule G-37, a dealer that makes a political contribution to a municipal issuer official may not engage in municipal securities business with that issuer for how long?

  1. 4 years
  2. 1 year
  3. 2 years Correct answer.
  4. 6 months

Explanation

MSRB Rule G-37 imposes a two-year prohibition on municipal securities business with an issuer after certain political contributions to issuer officials. The rule is designed to prevent pay-to-play practices.

Question 41Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 2330, before a member submits a deferred variable annuity application to the issuing insurance company, who must review and approve the transaction?

  1. A registered options principal
  2. The issuer's underwriter
  3. A registered principal Correct answer.
  4. The customer's attorney

Explanation

FINRA Rule 2330 requires a registered principal to review and approve a deferred variable annuity transaction before the application is submitted to the issuer. The review considers suitability, product features, and costs.

Question 42Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 144, what is the minimum holding period for restricted securities of a reporting issuer before an affiliate may sell them?

  1. One year
  2. Two years
  3. Six months Correct answer.
  4. Three years

Explanation

For restricted securities of a reporting issuer, Rule 144 generally requires a six-month holding period. After that period, an affiliate must still comply with the rule's other conditions, including current public information and volume limitations.

Question 43Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 5320, a member holding an unexecuted customer limit order to buy at $20 must not do which of the following?

  1. Display the order in its quote
  2. Buy the security for its own account at $19.95 Correct answer.
  3. Route the order to another market center
  4. Execute the customer order at $19.90

Explanation

FINRA Rule 5320 generally prohibits a member from trading ahead of a customer limit order at a price that would satisfy the customer's order. Buying for the firm's own account at $19.95 when the customer order is at $20 would violate that protection.

Question 44Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 10b-10, a customer confirmation for a securities transaction must disclose which of the following?

  1. Whether the member acted as agent or principal Correct answer.
  2. The firm's net capital ratio
  3. The customer's account equity
  4. The representative's employment history

Explanation

Rule 10b-10 requires a confirmation to disclose whether the broker-dealer acted as agent for the customer or as principal for its own account. The confirmation must also include other material transaction terms.

Question 45Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 2210, retail communications must be based on principles of fair dealing and good faith, which means they must be:

  1. Guaranteed to produce stated returns
  2. Fair and balanced and not misleading Correct answer.
  3. Limited to institutional investors
  4. Approved by the SEC before use

Explanation

FINRA Rule 2210 requires communications with the public to be fair and balanced and not misleading. It also imposes principal approval, recordkeeping, and content standards depending on the type of communication.

Question 46Knowledge Associated with the Securities Industry and Broker-dealer Operations

A broker-dealer subject to the aggregate indebtedness standard under SEC Rule 15c3-1 must maintain net capital of at least what fraction of aggregate indebtedness?

  1. 1/20 (5%)
  2. 1/10 (10%)
  3. 1/8 (12.5%)
  4. 1/15 (6.67%) Correct answer.

Explanation

Under the aggregate indebtedness standard, net capital must be at least one-fifteenth of aggregate indebtedness, which corresponds to a maximum ratio of 15 to 1. Many firms are instead subject to the alternative net capital standard.

Question 47Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 4513, how long must a member keep records of written customer complaints?

  1. Six years
  2. Four years Correct answer.
  3. Indefinitely
  4. Two years

Explanation

FINRA Rule 4513 requires records of written customer complaints to be retained for four years. The records support supervisory review and regulatory examination of complaint handling.

Question 48Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 15c3-5, a broker-dealer with market access must establish which of the following before executing a trade?

  1. Pre-trade financial and regulatory risk controls Correct answer.
  2. A written customer suitability statement
  3. A minimum account equity of $25,000
  4. A guarantee against losses

Explanation

SEC Rule 15c3-5, the market access rule, requires broker-dealers with market access to establish and maintain risk management controls, including pre-trade financial and regulatory controls. These controls are intended to prevent erroneous orders and violations of regulatory requirements.

Question 49Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under FINRA Rule 2264, when must a member furnish the options disclosure document to a customer?

  1. At or before account approval Correct answer.
  2. Once every five years
  3. Only when requested by the customer
  4. Only after the first options trade

Explanation

FINRA Rule 2264 requires the options disclosure document to be furnished at or before the time the customer's account is approved for options trading and before the first options transaction. It explains the risks and characteristics of standardized options.

Question 50Knowledge Associated with the Securities Industry and Broker-dealer Operations

Under SEC Rule 15g-9, before effecting the first solicited transaction in a penny stock for a customer, a broker-dealer must do which of the following?

  1. Obtain a signed suitability statement and customer agreement Correct answer.
  2. Obtain SEC pre-approval
  3. Deliver a prospectus
  4. Verify accredited investor status

Explanation

SEC Rule 15g-9 requires the broker-dealer to approve the customer's account for penny stock transactions and obtain a signed suitability statement and written agreement before the first solicited transaction. The customer must also receive a risk disclosure document.