What is a 'Registered Principal'

A registered principal is a licensed securities dealer who is also empowered to oversee operational, compliance, trading and sales personnel. To become a Registered Principal, individuals must possess relevant basic securities licenses, as well as an additional general securities principal license (Series 24) for the additional responsibilities.

Breaking Down 'Registered Principal'

In the context of a brokerage firm, a Registered Principal would oversee the sales and trading functions, supervise an investment firm's regulatory compliance or its overall operations. Permitted activities include trading, market making, underwriting and advertising (sales and advertising literature must be approved by a principal prior to use). Individuals involved in investment banking may also be required to be Registered Principals. The Financial Industry Regulatory Authority (FINRA), as well as other regulatory bodies, requires individuals to pass the Series 24 exam (on top of the usual exams required for broker-dealers, such as the Series 7) before they can become a Registered Principal. Those who wish to be Registered Options Principals (ROP) will need to pass the FINRA Series 4 Exam.

Registered Principal Responsibilities

The privileges extended to Registered Principals come with significant responsibility, even to the point of legal liability in the case of mistakes and misdeeds. Some of the additional responsibilities include timely and accurate filings with state and federal agencies, as well as self-regulatory organizations (SRO), maintaining minimum net capital for their firm or branch, paying processing fees and making sure that employees' licenses are appropriate and current.

Registered Principal: The Series 24

As noted, passing FINRA's Series 24 exam, also known as the General Securities Principal Qualification Examination (GP), is required to be a Registered Principal. The exam consists of 160 questions (10 of which are unscored and randomly placed throughout the test) and candidates are given 3 hours and 45 minutes to complete it. A score of 70% is required to pass. The exam covers five main job functions:

  • Function 1: Supervision of registration of broker-dealer and personnel management activities (9 questions)
  • Function 2: Supervision of general broker-dealer activities (45 questions)
  • Function 3: Supervision of retail and institutional customer-related activities (32 questions)
  • Function 4: Supervision of trading and market making activities (32 questions)
  • Function 5: Supervision of investment banking and research (32 questions)

Registered Principal candidates must pass one of the following exam in order to take the Series 24: Series 7; Series 17; Series 37; Series 38; Series 57; Series 62; Series 79; Series 82. (In the case of the Series 57, the candidate will receive the Trader Principal (TP) designation instead of the General Principal upon passing the Series 24).

 

 

 

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