The Series 24 is intended to prepare an individual for supervising sales staff, to raise an awareness of the intricacies involved in supervising client accounts and to explain investment-banking activities. However, there are a few items that your Series 24 studies and a passing grade on the exam will not prepare you for, and those items can comprise a great portion of your daily tasks. In this article, we'll run through these items and give you a heads up before you embark on your new career.

Playing Judge And Jury
While the Series 24 exam may test a principal on the rules regarding supervision and the "dos and don'ts" of trading in a client's account, it does absolutely nothing to prepare that person for a role as judge and jury in settling arguments between brokers over a variety of issues.


Brokers and advisors frequently argue with each other. These arguments can be over something as simple as the commissions being paid by a client on certain transactions or accounts. Another frequent sticking point is identifying exactly which broker/advisor a client might belong to, especially in cases where a cold caller with no allegiance to either broker may have made the initial contact.

Other problems that you will probably witness throughout the years include:

  • Arguments over who should pay a cold caller. The conclusion to this argument varies depending on the firm.
  • Disagreements over the timing and distribution of commission checks
  • Discrepancies in expense accounts
  • Arguments over who should pay if a broker or advisor fills out a transaction ticket incorrectly (the firm or the broker)? For this one, the broker traditionally pays.
  • And finally, personal and personnel issues (such as relationships and opinions) that have a way of arising no matter where you work.
Unfortunately, there are no standard operating procedures for these scenarios. The parties involved simply must make their case - much like in a court of law - and the Series 24 must render a verdict.

In short, when it comes to being a "24," there is much more to the job than simply knowing the rules. In fact, when it comes down to it, diplomacy and the ability to deal with people are probably the two most important traits that every principal should have.

Willingness to Step in
Principals aren't desk jockeys. In fact, there are times when a broker or advisor will be out of the office and will ask the principal to speak with his or her clients. In other instances, the principal may be forced to speak with one of the broker's clients to mediate a conflict between the two parties.


This isn't easy. In fact, it can be very time consuming and often requires a significant amount of patience and, at the risk of sounding repetitive, requires great diplomacy skills. However, it is also something that all principals must be willing and able to do - and often on short notice.

To be clear, the Series 24 exam cannot and does not teach individuals these skills. Rather they are learned "on the job."

Acting as an Enforcer
Like a good soldier, a principal's job isn't to make policy, but to enforce it. This means that the principal must not only be aware of the rules regarding supervision and the ins and outs of acceptable sales practices, but he or she must also be ready, willing and able to compel those under him or her to accept and implement those accepted practices. In other words, the principal is the enforcer.


To be certain, this doesn't mean sitting behind a desk sending emails or drafting inter-office memos. It means investigating, asking questions, probing the staff for information on sales activities, reviewing communications (written and verbal) and generally playing the part of an investigative cop. Many principals don't realize what the word "supervision" really means, nor do they appreciate what it entails until they have actually taken the job.

Incidentally, another major difficulty that many principals encounter is that at one point or another in their careers they may be required to turn in their comrades for rule infractions and, in some cases, terminate them. This is one of the most difficult and emotionally trying parts of the job.

Principals Set the Tone
Once an individual becomes a principal, his or her abilities as a manager and a motivator (not as a salesperson) take center stage. The simple fact is that if a principal is a good manager and is disciplined, the sales staff will follow her lead. However, if the 24 is not a good manager and is unable to impart her knowledge to the staff, commissions and money lines will suffer - and the entire department and or the firm might make less money. It's that serious!


Babysitting Difficult Employees
Most 24s assume that the bulk of their time will be spent conducting sales meetings, recruiting and retaining new brokers/advisors, helping advisors build out their money lines and ensuring that the sales staff is adhering to FINRA rules.


However, no matter how savvy the bulk of their charges are, principals are always managing even the most mundane tasks. That is, like it or not, a large chunk of a principal's time will be allocated toward managing the staff's work habits, (ie: scolding brokers/advisors for being tardy to work and educating them about phone and email courtesies).

Again, most principals are surprised by the fact that they are and forever will be asked to act as a father or a mother to staff that is under them. Clearly, the Series 24 exam cannot prepare them for these responsibilities.

Safe from Arbitration?
Because principals are not typically commission-generating employees (unlike traditional brokers or advisors) they often assume that their days of arguing with clients and arbitration hearings are over. Not so. In fact, one merely needs to peruse the FINRA website (more specifically the "Search a Broker/Firm" section) to see that when an arbitration proceeding is initiated, the broker at the center of the dispute isn't usually the only target. In fact, the firm and the supervising principal are usually named in the action in conjunction with the offending broker as a matter of course.


This is a bitter pill for many principals to swallow, as it implies that they could be on the hook personally, should any of their sales staff violate FINRA rules or defraud their customers in any way. Not surprisingly, the preparation materials and the Series 24 exam itself make little mention of this fact.

The Bottom Line
Passing the Series 24 and becoming a principal should be seen as an honor. After all, it signifies that the individual has a deep-rooted knowledge of the securities industry and the wherewithal to manage a sales staff. However, candidates might not be fully prepared for some parts of the job - even if they ace the exam.




comments powered by Disqus
Trading Center