Free FINRA Series Exam Questions That Helps Candidates Pass

Discretionary accounts require written authorization from the client and approval by a principal. Oral instructions are insufficient. Discretion applies to all account types, not just margin accounts. Gift rules are separate under FINRA Rule 3220. Series exams emphasize discretionary account rules due to the potential for abuse. Candidates must know requirements to avoid regulatory violations.

The Investment Advisers Act of 1940 governs firms providing investment advice for compensation. It requires registration with the SEC or state regulators, depending on assets under management. The Securities Act (A) governs new issues, the Exchange Act (B) regulates secondary markets, and SIPA (D) created SIPC. Series exams test candidates on which acts govern different industry participants.

The Municipal Securities Rulemaking Board (MSRB) creates rules for municipal dealers and advisors. The SEC oversees MSRB rules, and FINRA enforces them for broker-dealers. SIPC protects accounts, not rulemaking. Candidates must distinguish regulators’ roles for compliance knowledge.

Churning is excessive trading in a customer’s account by a representative to generate commissions without regard to client objectives. It violates FINRA rules and fiduciary responsibility. Options A, C, and D are legitimate practices if conducted appropriately. Candidates must recognize churning as unethical conduct subject to disciplinary action, fines, or license suspension.

A partnership agreement authorizes account activity and names partners with authority. Trust agreements (A), corporate charters (C), and margin disclosures (D) apply to other account types. Series exams stress proper documentation because it prevents unauthorized activity and ensures legal compliance.