Free General Securities Representative Qualification Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the General Securities Representative Qualification Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A member emails the same written securities message to 24 retail investors during a 30-calendar-day period. Under FINRA Rule 2210, how is the message classified?

   1. A. Correspondence
   2. B. Retail communication
   3. C. Institutional communication
   4. D. Public appearance

   Answer: A

   Explanation: Rule 2210 defines correspondence as "any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period." An email to 24 retail investors meets that definition; the other categories use different audiences or formats.

   Reference: FINRA Rule 2210: Communications with the Public — Rule 2210(a)(2)

2. 2A firm promotes a day-trading strategy and is opening an account for a noninstitutional customer. When must it individually furnish the Rule 2270 risk disclosure?

   1. A. Before opening the account
   2. B. With the first monthly statement
   3. C. After the first day trade
   4. D. Only after a margin call

   Answer: A

   Explanation: FINRA Rule 2270 states the member may not open the account "unless, prior to opening the account, the member has furnished to each customer, individually, in paper or electronic form, the disclosure statement". This is a preopening disclosure.

   Reference: FINRA Rule 2270: Day-Trading Risk Disclosure Statement — Rule 2270(a)

3. 3Which of the following portfolio actions represents asset allocation?

   1. A. Dividing a portfolio among stock, bond, and cash categories
   2. B. Selecting several issuers within an existing stock allocation
   3. C. Changing bond maturities within an unchanged bond allocation
   4. D. Replacing one stock fund with another within the same stock allocation

   Answer: A

   Explanation: The SEC states, "Asset allocation involves dividing your investments among different assets, such as stocks, bonds, and cash." This identifies the portfolio mix across asset categories.

   Reference: SEC Asset Allocation and Diversification — What is asset allocation?

4. 4A member quotes an offer to sell a security at a stated price and stated conditions. What must be true when it makes that offer?

   1. A. It is prepared to sell at that price under those conditions.
   2. B. It may withdraw the offer after an inquiry without changing it.
   3. C. It has already completed a customer sale at that price.
   4. D. It will sell only if another dealer posts a matching offer.

   Answer: A

   Explanation: Rule 5220 prohibits a stated-price offer unless the member is "prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated". A firm offer must be executable on its stated terms.

   Reference: FINRA Rule 5220: Offers at Stated Prices — Rule 5220, main text

5. 5A member distributes a written market update only to institutional investors, with no reason to expect forwarding to retail investors. Which Rule 2210 category applies?

   1. A. Correspondence
   2. B. Retail communication
   3. C. Institutional communication
   4. D. Internal communication made only among member personnel

   Answer: C

   Explanation: The rule calls an institutional communication "any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member's internal communications." The specified recipients meet this audience condition.

   Reference: FINRA Rule 2210: Communications with the Public — Rule 2210(a)(3)

6. 6A member that promotes day trading wants to approve a noninstitutional customer's account for a day-trading strategy. What belief must reasonable diligence support?

   1. A. That the strategy is appropriate for that customer
   2. B. That the customer will earn a specified return
   3. C. That every day trade will be profitable
   4. D. That the customer has no other investments

   Answer: A

   Explanation: Rule 2130 requires the firm to "have reasonable grounds for believing that the day-trading strategy is appropriate for the customer." It identifies customer-specific facts for the determination, rather than any promised outcome.

   Reference: FINRA Rule 2130: Approval Procedures for Day-Trading Accounts — Rule 2130(b)

7. 7In discussing portfolio risk with a customer, what does risk tolerance describe?

   1. A. The customer's ability and willingness to lose capital for potential return
   2. B. The length of time until the customer expects to need the funds
   3. C. The cash available to the customer for near-term spending
   4. D. The past volatility of a security in the customer's portfolio

   Answer: A

   Explanation: The SEC defines risk tolerance as "your ability and willingness to lose some or all of your original investment in exchange for potentially greater returns." It is an investor characteristic, not an issuer or market statistic.

   Reference: SEC Asset Allocation and Diversification — Risk Tolerance

8. 8When a member supplies a securities quotation to another market participant, how should it identify the quote's nature under Rule 5220?

   1. A. Indicate whether the quote is firm or otherwise qualified
   2. B. Identify the quote's firmness only after a dealer accepts it
   3. C. Describe a qualified quote as firm until a trade occurs
   4. D. Describe a firm quote as subject until a trade occurs

   Answer: A

   Explanation: Rule 5220 supplementary material .01 says "every member has an obligation to correctly identify the nature of its quotations when they are supplied to others." This distinguishes firm from qualified quotes.

   Reference: FINRA Rule 5220: Offers at Stated Prices — Rule 5220 Supplementary Material .01

9. 9A member makes a written promotion available to 26 retail investors within a 30-calendar-day period. What is its Rule 2210 communication category?

   1. A. Correspondence
   2. B. Retail communication
   3. C. Institutional communication
   4. D. Internal communication

   Answer: B

   Explanation: Rule 2210 defines a retail communication as "any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period." Twenty-six recipients cross that boundary.

   Reference: FINRA Rule 2210: Communications with the Public — Rule 2210(a)(5)

10. 10A day-trading-promoting firm opened a noninstitutional customer's account based on the customer's written statement that they would not day trade. The firm later learns they are day trading. What does Rule 2130 require?

    1. A. Approve the account for day trading as soon as practicable, no later than ten days after learning
    2. B. Continue relying on the original agreement indefinitely
    3. C. Wait for the next annual account review
    4. D. Treat the account as institutional from that point

    Answer: A

    Explanation: Rule 2130 requires approval "as soon as practicable, but in no event later than 10 days following the date that such member knows that the customer is using the account for such a strategy." The original non-day-trading agreement cannot continue to control once the firm knows the actual use.

    Reference: FINRA Rule 2130: Approval Procedures for Day-Trading Accounts — Rule 2130(c)