Function 2: General Broker-Dealer Activities
The largest function on the exam — 45 of 150 scored items. It covers the supervisory system itself, the conduct and pay of associated persons, product approval, discipline and disputes, books and records, and financial responsibility. The PrepPass Series 24 Study Guide teaches this function in depth, with the rule text, worked examples and a chapter quiz.
The supervisory system
Every member needs a supervisory system and written procedures reasonably designed to achieve compliance, designated principals, registered OSJs and branches, and an annual compliance meeting. OSJs and supervising branches are inspected at least annually and other branches at least every three years. Rule 3120 requires testing of the controls, and Rule 3130 an annual CEO certification of compliance processes.
Associated persons and compensation
Outside business activities need prior written notice; private securities transactions for compensation need written approval and firm supervision. Loans with customers are allowed only in listed relationships, most with written approval. Since March 30, 2026 the FINRA gift limit for employees of other firms is $300 per person per year.
Products, discipline and disputes
Firms perform reasonable-basis diligence before offering products and follow product rules such as the deferred variable annuity review in Rule 2330. Rule 4530 requires reports to FINRA within 30 calendar days of listed events and quarterly complaint statistics. Industry disputes must be arbitrated, and customers can require arbitration.
Books, records and financial responsibility
Blotters and ledgers are kept six years; most other records three years; complaint records four years. Net capital minimums depend on the firm's business, with early-warning notices at 120% of the minimum. Rule 15c3-3 protects customer securities and cash, and margin follows Regulation T and FINRA Rule 4210, which adopted intraday margin standards effective June 4, 2026.
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