What Is the Series 26?

The Series 26 is a securities exam and license entitling the holder to supervise those who sell mutual funds, variable annuities, and variable life insurance. More broadly, the Series 26 entitles the holder to register as a limited principal who supervises and manages sales activities covering the following: redeemable securities registered under the Investment Company Act of 1940, such as mutual funds, variable contracts, and insurance premium funding programs issued by insurance companies.

Key Takeaways

  • The Series 26 exam is required for those who will supervise agents or brokers transacting in variables products and mutual funds.
  • The exam, issued by FINRA, consists of 120 questions in three substantive topic areas.
  • If you pass this exam, you are able to register as a limited principal for a registered investment company.

Understanding the Series 26

The purpose of the Series 26—also known as the Investment Company and Variable Contracts Products Principal Qualification Examination—is to safeguard the investing public by assessing the knowledge and competency of entry-level Investment Company and Variable Contracts Products Principals. The Series 26 Exam is administered by the Financial Industry Regulatory Authority (FINRA).

In order to sit for the Series 26 exam, which costs $100, a candidate must be associated with and sponsored by a FINRA member firm and must have already passed either the Investment Company and Variable Contracts Products Representative (Series 6), or General Securities Representative (Series 7) exams. As well, candidates must also pass the Securities Industry Essentials (SIE).

Series 26 Structure and Content

The exam consists of 120 questions, 10 of which are unscored and randomly distributed throughout the test. Candidates are allocated 2 hours and 45 minutes to complete the exam, which is conducted via computer. A passing score is 70%. There is no penalty for guessing, so candidates should answer every question.

For more information, see FINRA's Investment Company and Variable Contracts Products Principal Qualification Examination (Series 26) Content Outline.

Function 1: Personnel Management Activities and Registration of the Broker-Dealer (16 questions)

  • Part 1: Conducts personnel management activities and administers the registration of the broker-dealer and associated persons in the Central Registration Depository (CRD) System by filing, updating or amending appropriate documents.
  • Part 2: Provides training and education on securities industry structure, rules and regulations, product characteristics, and firm policies.

Function 2: Supervises Associated Persons and Oversees Sales Practices (49 questions)

  • Part 1: Monitors, supervises and documents the sales activities of associated persons to achieve compliance with securities industry rules and regulations and firm policies and provides feedback regarding product knowledge and performance.
  • Part 2: Monitors, reviews, and approves communications with the public to achieve compliance with securities industry rules, regulations, filing requirements, and firm policies.
  • Part 3: Supervises recommendations and the handling of customers’ accounts and transactions for appropriate disclosures concerning products, sales charges, risks, services, costs, fees, and delivery of disclosure and legal documents.
  • Part 4: Supervises compliance with FINRA’s cash and non-cash compensation rules.
  • Part 5: Reviews and approves or prohibits outside the business and personal financial activities of associated persons.
  • Part 6: Takes action, as necessary, regarding the conduct of associated persons and addresses violations or potential violations of securities industry rules and regulations and firm policies and procedures.

Function 3: Oversees Compliance and Business Processes of the Broker-Dealer and its Offices (45 questions)

  • Part 1: Supervises the firm’s operational processes for compliance with regulatory requirements related to the opening and ongoing maintenance of customer accounts.
  • Part 2: Monitors, identifies and reports suspicious activities consistent with regulatory and firm requirements and verifies that documentation is retained and filed.
  • Part 3: Develops, implements and tests the adequacy of internal controls and monitors business activities for compliance with regulatory and reporting requirements.
  • Part 4: Performs required office inspections to verify compliance with regulatory requirements and firm policies and procedures.
  • Part 5: Proper handling, resolution and required regulatory reporting of customer complaints.
  • Part 6: Supervises introduction, maintenance and reporting requirements of products or business lines and financial responsibility compliance.