199+ Free Series 27 Practice Questions

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Under GAAP, which financial statement provides a snapshot of a broker-dealer's financial position at a specific point in time?

Income Statement

Statement of Cash Flows

Balance Sheet

Statement of Changes in Equity

to track

2026 Statistics

Key Facts: Series 27 Exam

60-65%

First-Time Pass Rate

Industry estimate

69%

Passing Score

~100/145 questions

80-120 hrs

Study Time

Recommended

25%

Net Capital

Largest section

$235

Exam Fee

FINRA

3h 45m

Exam Duration

FINRA

The Series 27 exam has an estimated pass rate of 60-65% for first-time candidates. It requires 69% (approximately 100/145 questions) to pass in 3 hours 45 minutes. The exam covers five major functions: Financial Reporting (20%), Operations/GL (20%), Net Capital (25%), Customer Protection (20%), and Funding/Cash Management (15%). No prerequisites are required. Plan for 80-120 hours of study.

Sample Series 27 Practice Questions

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1Under GAAP, which financial statement provides a snapshot of a broker-dealer's financial position at a specific point in time?

A.Income Statement

B.Statement of Cash Flows

C.Balance Sheet

D.Statement of Changes in Equity

Explanation: The Balance Sheet (also called the Statement of Financial Position) provides a snapshot of a company's financial position at a specific point in time. It lists assets, liabilities, and equity. The Income Statement shows performance over a period, the Statement of Cash Flows shows cash movements over a period, and the Statement of Changes in Equity shows equity movements over a period.

2A broker-dealer's income statement shows revenues of $5,000,000 and expenses of $4,200,000 for the fiscal year. What is the firm's net income?

A.$800,000 profit

B.$800,000 loss

C.$9,200,000 profit

D.$200,000 profit

Explanation: Net income is calculated by subtracting total expenses from total revenues. In this case: $5,000,000 - $4,200,000 = $800,000 profit. When revenues exceed expenses, the result is a profit (positive net income).

3Which of the following is classified as a current asset on a broker-dealer's balance sheet?

A.Office building

B.Furniture and fixtures

C.Cash and cash equivalents

D.Goodwill

Explanation: Cash and cash equivalents are current assets because they are readily available and expected to be converted to cash or used within one year. Office buildings and furniture are fixed assets (property and equipment), while goodwill is an intangible asset. Current assets are those expected to be converted to cash or used within one year.

4A broker-dealer has the following: Assets of $10,000,000 and Liabilities of $6,500,000. What is the firm's stockholders' equity?

A.$16,500,000

B.$3,500,000

C.$6,500,000

D.$10,000,000

Explanation: Under the fundamental accounting equation (Assets = Liabilities + Stockholders' Equity), stockholders' equity equals Assets minus Liabilities. Therefore: $10,000,000 - $6,500,000 = $3,500,000. This represents the owners' residual interest in the assets after deducting liabilities.

5Under GAAP, when should revenue be recognized for a securities trade executed by a broker-dealer?

A.When the trade is executed (trade date)

B.When payment is received from the customer

C.When the securities are delivered to the customer

D.When the trade settles

Explanation: Under GAAP revenue recognition principles, broker-dealers generally recognize revenue on the trade date (when the transaction is executed), not the settlement date. This is because the earnings process is substantially complete at trade date, and the firm has a right to consideration.

6A broker-dealer's statement of cash flows shows cash used in operating activities of $500,000, cash provided by investing activities of $200,000, and cash provided by financing activities of $400,000. What is the net change in cash?

A.$100,000 increase

B.$100,000 decrease

C.$1,100,000 increase

D.$300,000 increase

Explanation: The net change in cash is the sum of cash flows from all three activities: Operating (-$500,000) + Investing (+$200,000) + Financing (+$400,000) = +$100,000. A positive result indicates an increase in cash during the period.

7Which accounting principle requires that assets be recorded at their original purchase price rather than their current market value?

A.Matching principle

B.Historical cost principle

C.Revenue recognition principle

D.Full disclosure principle

Explanation: The historical cost principle requires that assets be recorded at their original purchase price. This provides objective, verifiable evidence of value. While some assets may be written down for impairment, they are generally not written up to reflect market value increases under GAAP.

8A broker-dealer has proprietary securities valued at $2,000,000 on the balance sheet. Under GAAP, how should these trading securities be reported?

A.At historical cost

B.At the lower of cost or market

C.At fair market value with unrealized gains/losses in earnings

D.At amortized cost

Explanation: Trading securities (including proprietary positions held by broker-dealers) must be reported at fair market value on the balance sheet, with unrealized gains and losses included in earnings. This is because trading securities are held for short-term profit and fair value provides the most relevant information.

9What does FOCUS stand for in the context of broker-dealer regulatory reporting?

A.Financial Operations Combined Uniform Statement

B.Financial and Operational Combined Uniform Single Report

C.Firm Operations Consolidated Uniform Statement

D.Federal Oversight of Combined Uniform Statements

Explanation: FOCUS stands for Financial and Operational Combined Uniform Single Report. This is the standardized monthly or quarterly financial report that broker-dealers must file with FINRA and the SEC. It provides regulators with current information on the firm's financial condition.

10A broker-dealer carrying customer accounts and proprietary positions must file FOCUS reports how frequently?

A.Annually

B.Quarterly only

C.Monthly

D.Weekly

Explanation: Broker-dealers that carry customer accounts or proprietary positions must file FOCUS reports monthly. Firms that do not carry customer accounts or proprietary positions may file quarterly. The monthly reporting ensures regulators have timely information on firms with significant customer or proprietary activities.

About the Series 27 Exam

The Series 27 qualifies principals to supervise the financial and operations functions of a broker-dealer. It covers financial reporting, general ledger operations, net capital requirements, customer protection, and funding/cash management. This exam is essential for Financial and Operations Principals (FINOPs) responsible for ensuring regulatory compliance with SEC and FINRA financial rules.

Questions

145 scored questions

Time Limit

3 hours 45 minutes

Passing Score

69%

Exam Fee

$235 (FINRA)

Series 27 Exam Content Outline

20%

Financial Reporting

GAAP accounting, FOCUS reports, audited financial statements, and SEC financial reporting requirements

20%

Operations, General Ledger, and Regulatory Requirements

SEC Rules 17a-3 and 17a-4, general ledger operations, recordkeeping, and back-office functions

25%

Net Capital Requirements

SEC Rule 15c3-1, net capital computation, haircuts, subordinated debt, and early warning notifications

20%

Customer Protection

SEC Rule 15c3-3, reserve formula computation, possession and control, and custody requirements

15%

Funding, Cash Management, and Margin

Securities lending, repos, cash/stock movements, margin requirements, and settlement

How to Pass the Series 27 Exam

What You Need to Know

Passing score: 69%
Exam length: 145 questions
Time limit: 3 hours 45 minutes
Exam fee: $235

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

Series 27 Study Tips from Top Performers

1Master SEC Rule 15c3-1 - understand net capital computation, aggregate indebtedness, and minimum requirements

2Study SEC Rule 15c3-3 thoroughly - know the reserve formula computation and possession/control requirements

3Practice haircut calculations for proprietary positions and customer accounts

4Understand FOCUS report structure and filing requirements (monthly, quarterly, annually)

5Know the difference between tentative net capital, net capital, and excess net capital

6Study SEC Rules 17a-3 and 17a-4 - recordkeeping and retention requirements

7Understand subordinated debt agreements and their impact on net capital

8Learn securities lending mechanics, repo transactions, and buy-in procedures

9Master margin requirements under Regulation T and FINRA rules

10Practice early warning notification thresholds and required actions

Frequently Asked Questions

What is the Series 27 exam?

The Series 27 is FINRA's Financial and Operations Principal Qualification Examination. It qualifies individuals to act as Financial and Operations Principals (FINOPs) at broker-dealers, supervising financial reporting, net capital compliance, customer protection, and operations. The exam is essential for those responsible for ensuring regulatory compliance with SEC and FINRA financial rules.

What is the Series 27 pass rate?

The Series 27 exam has an estimated pass rate of 60-65% for first-time test-takers. The exam has 145 questions (135 scored + 10 unscored pretest) with a 69% passing score (approximately 100 correct answers), taken over 3 hours 45 minutes. The technical nature of the content, particularly net capital calculations and reserve formula computations, contributes to the pass rate.

What are the prerequisites for the Series 27?

There are no formal prerequisites for taking the Series 27 exam. Unlike some other FINRA exams, you do not need to pass the SIE first. However, the exam is typically taken by individuals with accounting, finance, or operations experience. To become registered, you must be associated with a FINRA member firm.

How long should I study for Series 27?

Plan for 80-120 hours of study over 8-12 weeks. Focus on understanding SEC Rule 15c3-1 (Net Capital) and SEC Rule 15c3-3 (Customer Protection), as these represent nearly half the exam. Practice net capital computations, haircut calculations, and reserve formula computations extensively. Complete at least 200 practice questions and score 80%+ consistently before scheduling your exam.

What is the difference between Series 27 and Series 28?

The Series 27 is for broker-dealers that carry customer accounts or hold customer funds/securities (introducing or clearing firms). The Series 28 is a shorter version for introducing firms that do not hold customer funds or securities. The Series 27 has 145 questions over 3h 45m, while the Series 28 has 55 questions over 1h 30m. Both cover similar topics but the Series 27 goes into more depth.

What are the main topics on the Series 27?

The main topics are: Financial Reporting (20%), Operations and General Ledger (20%), Net Capital Requirements (25%), Customer Protection (20%), and Funding/Cash Management (15%). The exam tests your knowledge of GAAP accounting, SEC rules 17a-3, 17a-4, 15c3-1, and 15c3-3, as well as securities lending, repos, and margin requirements.