What Is the Series 27?

The term Series 27 refers to a securities license that entitles the holder to prepare and manage the books and recordkeeping of a member firm. In order to obtain the Series 27 license, a professional must pass the Series 27 exam, also known as the Financial and Operations Principal Qualification (FN) exam. The exam is administered by the Financial Industry Regulatory Authority (FINRA) and assesses the competency of entry-level FN candidates to perform their job.

Key Takeaways

  • The Series 27 is a securities license that entitles the holder to prepare and manage the books and recordkeeping of a member firm.
  • Chief financial officers and chief operating officers generally hold Series 27 licenses.
  • In order to get a Series 27 license, a professional must pass the Series 27 or the Financial and Operations Principal Qualification exam.

Understanding the Series 27

Financial professionals must be licensed in order to sell investments and other securities. FINRA administers a number of different licenses. Individuals are required to hold certain licenses based on the nature of their position, the kind of compensation they receive, and the type of services they provide for the firm. So someone who sells securities needs a certain license while a compliance officer needs a different license.

Anyone who holds the Series 27 license may act as a financial and operations principal, and is able to perform the following:

  • bookkeeping and recordkeeping
  • back office duties
  • comply with any and all financial responsibility rules

Holding the Series 27 essentially allows individuals to act as a member firm's chief financial officer (CFO) or chief operating officer (COO).

In order to get a Series 27 license, professionals must pass the corresponding exam. This exam—called the Financial and Operations Principal Qualification Examination or the FN exam—assesses the knowledge of entry-level principals who want to become financial and operations principals. It covers topics such as statutory rules surrounding broker-dealer responsibilities including recordkeeping requirements, as well as items covered under the Securities Investor Protection Act of 1970.

Special Considerations

The Series 27 exam is given on a computer. Candidates can take a tutorial on how to take the exam before actually doing so. There's also a Series 27 study outline which features sample questions. Reference materials are not allowed on exam day, but test-takers are given scratch paper and basic electronic calculators as some of the exam's questions involve calculations.

The exam consists of 145 multiple-choice questions, as well as 10 unscored pretest questions randomly distributed throughout the test. Test-takers should answer every question. as there is no penalty for guessing. Candidates have three hours and 45 minutes to complete the test. A passing score is 69% and there are no prerequisites for taking the Series 27 exam. Candidates must be associated with a FINRA member firm to take the exam. The cost for the Series 27 Exam is $120.

There are no prerequisites for taking the Series 27 exam, although test-takers should be associated with a FINRA member firm.

Here's how the exam is broken up:

  • Function 1: Financial Reporting with 25 questions
  • Function 2: Operations, General Securities Industry Regulations, and Preservation of Books and Records with 42 questions
  • Function 3: Customer Protection with 24 questions
  • Function 4: Net Capital with 41 questions
  • Function 5: Funding and Cash Management with 13 questions

Series 27 vs. Series 28

The Series 27 and Series 28—also known as the Introducing Broker/Dealer Financial and Operations Principal Examination—are both required by FINRA for individuals who prepare and maintain the books of and records of member firms as required under securities industry rules and regulations.

The Series 27 covers brokers-dealers that have a minimum net capital requirement of $250,000 and municipal securities brokers with a minimum net capital requirement of $150,000 under SEC Rule 15c3-1. The Series 28 license, on the other hand, is an abbreviated version of the series 27. Broker-dealers that don't meet the Series 27 thresholds listed above may use the Series 28.