Series 24 Vocabulary You Must Know

📚 Series 24 Vocabulary You Must Know

The Series 24 exam, also called the General Securities Principal Qualification Exam, requires a strong grasp of supervisory concepts and compliance terminology. To pass, you must be fluent in FINRA rules, registration procedures, disciplinary actions, and operational responsibilities. Below is a list of must-know vocabulary terms you’re likely to encounter on the exam.

🔐 Regulatory & Registration Terms

• FINRA (Financial Industry Regulatory Authority) – The self-regulatory organization responsible for overseeing broker-dealers and enforcing compliance with securities laws.
• Form U4 – Uniform application for securities industry registration. Used to register individuals with FINRA and state regulators.
• Form U5 – Filed when a registered individual leaves a firm. Discloses the reason for termination.
• CRD (Central Registration Depository) – FINRA’s system for maintaining licensing and registration information on individuals and firms.
• Statutory Disqualification – A condition that prohibits an individual from associating with a FINRA member firm without special approval.

📑 Supervision & Compliance

• OSJ (Office of Supervisory Jurisdiction) – A designated office responsible for key supervisory functions such as reviewing trades, handling customer complaints, and approving new accounts.
• WSPs (Written Supervisory Procedures) – Required policies and procedures that describe how a firm supervises its business and personnel.
• Heightened Supervision – Enhanced oversight imposed on individuals with a history of misconduct or regulatory issues.
• Annual Compliance Meeting – A yearly requirement for all registered representatives to review compliance policies.
• Branch Office vs. Non-Branch Office – A branch is any location where securities business is conducted regularly. Non-branch locations include administrative offices.

📈 Trading & Market Rules

• Best Execution – The obligation to seek the most favorable terms for a customer’s order under prevailing market conditions.
• Front Running – Illegal practice of trading ahead of a client’s order for personal gain.
• Marking the Close – Manipulating a stock’s closing price by executing trades near the end of the trading day.
• Interpositioning – Placing a third party between a broker-dealer and the market to generate unnecessary commissions.
• Trade Reporting Facility (TRF) – A system for reporting OTC trades in Nasdaq and listed securities.

🔍 Customer Accounts & Communication

• Suitability – The requirement that investment recommendations must be appropriate based on the client’s financial profile and objectives.
• Know Your Customer (KYC) – The rule that requires firms to collect and verify essential information about new clients.
• Customer Complaints – Any written grievance from a client regarding service or performance. Must be retained for four years and reported as required.
• Discretionary Account – An account where the registered rep has authority to make trades without the client’s prior approval.
• Correspondence vs. Retail Communication – Correspondence is sent to 25 or fewer clients in 30 days; retail communication is sent to more than 25.

⚖️ Disciplinary & Regulatory Actions

• Code of Procedure (COP) – FINRA’s formal process for handling violations of its rules and imposing disciplinary actions.
• Code of Arbitration – FINRA’s process for resolving disputes between firms and/or clients through binding arbitration.
• Form BD – Uniform form used by broker-dealers to register with FINRA and the SEC.
• CE Program (Continuing Education) – Ongoing regulatory education, including Regulatory Element and Firm Element requirements.
• Taping Rule – Requires firms employing a high percentage of reps from expelled firms to tape record phone conversations for heightened supervision.

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