FINRA Series 26 Investment Company Principal Practice Test

The Series 26 is required for any individual who will be directly supervising the activities of representatives engaged in the underwriting, distribution, or trading of investment company securities (e.g., mutual funds, UITs) and variable contracts (variable annuities and variable life insurance). This includes Compliance Principals, Office of Supervisory Jurisdiction (OSJ) Branch Managers overseeing these activities, and other designated principals responsible for approving advertising, customer accounts, and transactions in these products.

Candidates must be associated with and sponsored by a FINRA member firm. While there is no formal prerequisite exam, most candidates already hold the Series 6 (Investment Company and Variable Contracts Products Representative) or Series 7 (General Securities Representative) license, as the Series 26 tests supervisory knowledge over the activities these representatives perform. Passing the Securities Industry Essentials (SIE) exam is also a common foundational step.

The Series 26 is a limited principal license with a specific focus on investment company products and variable contracts. The Series 24 is a broader General Securities Principal license that allows supervision of all investment banking and securities activities, including corporate securities, direct participation programs, and municipal securities. A firm may require a Series 24 for a broader management role, while a Series 26 is sufficient for principals focused exclusively on mutual funds and variable products.

The exam consists of 110 multiple-choice questions (100 scored, 10 unscored pretest questions) to be completed in 2 hours and 45 minutes. A score of 70% or higher is required to pass. Content is drawn from five major areas: Supervisory Responsibilities and Written Procedures, Branch Office Supervision, Compliance and Regulatory Requirements, Investment Company Products Supervision, and Variable Products and Retirement Plans Supervision. Questions heavily emphasize application of rules to practical supervisory scenarios.

Candidates must have a commanding knowledge of the Investment Company Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934, and relevant FINRA rules, particularly the 3000 (Supervision) series, 2210 (Communications with the Public), and 4510 series (Books and Records). Understanding rules specific to variable annuities (e.g., Rule 2821) and retirement plans (e.g., ERISA considerations) is also critical.