Series 27 License: Responsibilities, Exam, and Compliance
Sep 25, 2025
·
13 min read
Contents
The Series 27 license is a regulatory requirement for Financial and Operations Principals (FINOPs) at broker-dealers. It authorizes individuals to oversee a firm’s financial reporting, capital adequacy, and operational compliance under the SEC and the Financial Industry Regulatory Authority (FINRA). For fintechs entering the broker-dealer space, this license is often a pivotal early step.
This article explains what the Series 27 license covers, how the exam works, and what responsibilities a FINOP must manage. It also highlights common compliance challenges, misconceptions, and recent enforcement trends that matter to fintech founders, lawyers, and compliance officers.
Along the way, we’ll compare Series 27 with Series 28, explore how outsourcing the FINOP role works in practice, and provide insights for firms expanding globally. The goal is to give you a clear, practical understanding of Series 27 compliance and how it fits into the broader operational strategy of a regulated financial services firm.
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013. If you need assistance with compliance or fintech regulations, click here.
What Is the Series 27 License?
The Series 27 license qualifies an individual to serve as a Financial and Operations Principal (FINOP) at a broker-dealer. This role is required under the Securities and Exchange Commission (SEC) and FINRA rules to maintain the firm’s financial integrity, from regulatory filings to capital monitoring. Without a FINOP, a broker-dealer cannot operate legally in the US.
Role of the Financial and Operations Principal (FINOP)
A FINOP is responsible for the financial reporting, recordkeeping, and capital compliance of the broker-dealer. In practice, this means:
Approving and filing Financial and Operational Combined Uniform Single (FOCUS) reports with regulators.
Supervising books and records in line with SEC rules.
Monitoring net capital to confirm the firm meets minimum requirements.
Overseeing reserve calculations and customer protection obligations when applicable.
The FINOP is effectively the financial compliance officer of the firm, working closely with auditors, regulators, and senior management. In many fintech broker-dealers, the Chief Financial Officer (CFO) or operations lead with a Series 27 license fulfills the FINOP function.
Why Broker-Dealers and Fintechs Need a Series 27
Every broker-dealer must have at least one Series 27 or Series 28 registered principal, depending on its business model. Full-service and clearing firms require a Series 27, while some limited-purpose introducing firms may use a Series 28 instead.
For fintech founders, the FINOP is both a regulatory requirement and a strategic necessity. They help bridge innovation with compliance by translating business activity into financial rules. Early engagement with a qualified FINOP can prevent costly missteps that can halt growth, such as capital deficiencies or late filings.
Series 27 Exam Overview
The Series 27 exam is the path to becoming a registered Financial and Operations Principal. Here are all the details you need to know about this regulatory exam:
Exam Structure and Format
The exam consists of 145 scored questions, with an additional 10 unscored trial questions. Candidates have three hours and 45 minutes to complete it. All questions are multiple-choice and cover scenarios that a FINOP would encounter in daily operations. The test is administered electronically at authorized centers or through remote proctoring.
Content Areas and Key Topics Tested
The Series 27 exam content reflects the core functions of a FINOP. Key areas include:
Financial Reporting and FOCUS Filings: Preparation, accuracy, and deadlines.
Net Capital Rules: Calculations, monitoring, and reporting obligations.
Customer Protection Requirements: Reserve formula and custody considerations.
Books and Records: Maintenance and supervision in line with SEC Rule 17a-3/4.
General Operations: Back-office processes, margin requirements, and settlement.
Together, these domains test whether a candidate can apply rules to real-world financial operations.
Passing Score, Cost, and Enrollment Requirements
The passing score for the Series 27 exam is 69%. As of 2025, the exam fee is $175. Candidates must be sponsored by a FINRA member firm (a broker-dealer) and cannot register for Series 27 on their own.
The sponsoring firm must file a Form U4 (Uniform Application for Securities Industry Registration or Transfer) in FINRA’s Central Registration Depository (CRD) to request the Series 27 exam on your behalf. The Series 27 does not require the Securities Industry Essentials (SIE) exam or other licenses as a prerequisite. Candidates can sit directly for the Series 27 once sponsored.
Once approved, candidates have 120 days to schedule and take the exam. It can be taken at a Prometric testing center or remotely via online proctoring.
See also:
Series 27 vs. Series 28: Key Differences
Some firms may have to choose between Series 27 and Series 28, depending on their structure. The differences are summarized below:
Feature | Series 27 | Series 28 |
|---|---|---|
Scope | Full-service and clearing broker-dealers | Limited introducing broker-dealers |
Minimum Net Capital | Firms with higher capital requirements (≥ $250,000 for most) | Firms with lower capital requirements (< $250,000) |
Exam Length | 145 questions; 3h 45m duration | 95 questions; 2h 45m |
Responsibilities | Full financial and operational oversight | Narrower scope; Limited to supervising firms that are not self-clearing, not carrying customer funds, and not underwriting firm-commitment deals. |
Series 27 is typically required for fintech firms that anticipate complex activities, such as underwriting, custody of client assets, or higher net capital thresholds. Choosing the wrong license can create compliance problems as business activities expand.
Need help with broker-dealer compliance?
Fill out the form below and our experts will get back to you.
Responsibilities of a Series 27 FINOP
A Financial and Operations Principal is accountable for the broker-dealer’s financial health and its compliance with SEC and FINRA financial responsibility rules. Therefore, holding the Series 27 license comes with significant obligations:
Financial Reporting and FOCUS Filings
A FINOP approves and submits the firm’s FOCUS reports (Financial and Operational Combined Uniform Single reports). These filings summarize balance sheet, income statement, and net capital data and are due monthly or quarterly, depending on firm size. Regulators rely on these filings to monitor solvency, so accuracy and timeliness are non-negotiable.
Books and Records Supervision
Broker-dealers must maintain detailed records under SEC Rule 17a-3 and 17a-4. The FINOP is responsible for overseeing the integrity of these books and records, including ledgers, journals, and transaction logs. In practice, this involves supervising the finance staff or outsourced providers who prepare daily records.
Net Capital Compliance and Monitoring
The Net Capital Rule (SEC Rule 15c3-1) requires broker-dealers to maintain minimum capital based on their business model. The FINOP monitors capital daily, calculates deductions for illiquid or unsecured assets, and prevents withdrawals that could cause deficiencies. A misstep here can lead to enforcement action or even suspension of the firm.
Customer Protection Requirements
For firms holding customer assets, the FINOP supervises compliance with SEC Rule 15c3-3 (Customer Protection Rule). Even introducing firms that do not hold funds must file related attestations, which still fall under FINOP oversight. This includes:
Calculating and maintaining the reserve account
Segregating customer funds
Documenting custody arrangements
Back-Office Operations Oversight
The FINOP supervises operational processes that directly affect financial compliance, such as trade settlement, margin lending, and the safeguarding of securities. This role connects finance and operations, requiring visibility into daily workflows that could alter financial exposure.
Liaison with Regulators and Auditors
During FINRA or SEC examinations, the FINOP is the point of contact for questions about financials. They also coordinate with independent auditors on the annual audit. A FINOP’s signature carries regulatory weight, so their direct involvement in filings and audits is expected.
Common Compliance Challenges with Series 27
The responsibilities tied to the Series 27 license are clear in theory but more complex in practice. Fintech broker-dealers often encounter challenges when applying these rules to fast-moving business models. Below are some of the most frequent issues FINOPs and their firms face:
Net Capital Miscalculations and Risks
The Net Capital Rule requires daily monitoring, and even small errors can create large problems. Misclassifying assets, missing a deduction, or allowing withdrawals that reduce capital below minimums can all trigger deficiencies.
These mistakes are not uncommon in startups juggling new business lines and limited staff. Enforcement actions often cite miscalculations as the root cause of serious violations.
Reporting Deadlines and Accuracy Issues
Regulatory filings such as FOCUS reports have strict deadlines. Missing one or submitting inaccurate data is a common compliance failure. Late or incorrect filings can signal control weaknesses to regulators, often leading to exam findings or fines. For smaller firms, the challenge lies in balancing limited resources with the level of detail required in financial reporting.
Outsourced FINOP Pitfalls and Best Practices
Many fintech broker-dealers use an outsourced FINOP rather than hiring in-house. While this can be cost-effective and bring experienced oversight, problems arise when firms fail to integrate the FINOP into daily operations.
Regulators have flagged cases where external FINOPs lacked sufficient access to records or were spread too thin across multiple firms. Best practice is to establish clear procedures, give full access to financial data, and maintain regular communication.
Evolving Fintech Business Models and Regulatory Gaps
Innovative models, such as combining crypto custody with securities or offering alternative assets, create gray areas. Rules like the Net Capital and Customer Protection requirements were not designed with digital assets in mind.
FINOPs must interpret how existing rules apply to new activities, often in consultation with regulators or auditors. For fintech founders, this means building compliance into product design rather than addressing it after launch.
Misconceptions About the Series 27 License
As mentioned before, the Series 27 license is highly specialized, but it is also frequently misunderstood. Founders and even experienced compliance teams sometimes confuse its scope or underestimate when it is required. Below are some of the most common misconceptions:
Series 24 vs. Series 27 Responsibilities
A Series 24 license covers general supervision of broker-dealer activities, such as sales and trading. It does not extend to financial and operational oversight.
Only a Series 27-qualified FINOP can take responsibility for net capital, FOCUS filings, and compliance with financial responsibility rules. Firms often need both licenses, with one principal supervising sales and another managing financial compliance.
When Series 28 Applies
Some firms qualify to use a Series 28 FINOP instead of a Series 27. This option is limited to introducing broker-dealers with lower capital requirements, usually under $250,000.
If the firm plans to engage in underwriting, custody of client assets, or other higher-risk activities, the Series 27 license is required. Choosing incorrectly can result in a mismatch between business model and regulatory expectations.
Can a FINOP Serve Multiple Firms?
Yes, one person can hold the FINOP role for more than one broker-dealer. However, the obligations do not change based on whether the position is full-time or part-time. A FINOP remains accountable for every firm they supervise. Regulators scrutinize situations where a single FINOP is spread across too many firms, questioning whether meaningful oversight is possible.
See also:
What Happens if a FINOP Leaves
If a FINOP resigns or becomes unavailable, the firm must act quickly because a gap in FINOP coverage can halt business operations until the position is filled.
Broker-dealers cannot operate indefinitely without a qualified FINOP in place. FINRA may allow a temporary designation for a limited time, but it expects firms to either have a backup plan or quickly appoint another licensed principal.
Recent Developments and Enforcement Trends
The regulatory environment for broker-dealers continues to evolve, and Series 27 FINOPs must adapt. Here are recent changes and trends that fintech founders and compliance officers should be aware of:
FINRA’s Continuing Education Changes
Starting in 2023, FINRA shifted from a three-year cycle to annual continuing education (CE) for all registered principals, including Series 27 FINOPs. Each year, they must complete the Regulatory Element by December 31 to keep their license active. Firms must also provide ongoing Firm Element training tailored to their business model.
Enforcement Actions Against Firms and FINOPs
Regulators have increased focus on individual accountability. FINOPs have faced fines, suspensions, and even bars when firms submitted inaccurate FOCUS reports or failed to maintain required net capital.
For instance, FINRA fined a firm $1.5 million for long-running failures in net capital and customer reserve compliance. The firm’s calculations led to deficiencies as high as $60 million, given that they filed dozens of inaccurate FOCUS reports over several years. In such cases, both the firm and the designated FINOP were held responsible.
Impact of Digital Assets and Alternative Products
Fintech broker-dealers handling crypto or alternative assets face unique challenges. Current rules often treat digital assets as non-allowable for net capital, reducing their value in calculations to zero. FINOPs must apply conservative interpretations and, in some cases, seek regulatory guidance before expanding into new asset classes.
Technology and Automation in Financial Operations
Automation tools now help with net capital monitoring, FOCUS report generation, and reconciliations. While useful, they are not a substitute for oversight. FINOPs remain accountable for verifying calculations, reviewing system outputs, and confirming that automated tools accurately reflect regulatory requirements.
Global Context of the Series 27
The Series 27 license is US-specific, tied directly to SEC and FINRA regulations. However, global fintech firms often need to understand how this requirement compares with equivalent roles in other markets.
See also:
Why the License Is US-Specific
The Series 27 exists because US broker-dealers operate under strict financial responsibility rules, including the Net Capital and Customer Protection rules. These rules are unique to the US framework. Other countries have similar requirements, but they use different exams and designations.
Comparable Roles in EU, UK, and Other Jurisdictions
European Union: Under MiFID II, investment firms must appoint compliance and finance officers responsible for safeguarding client assets and maintaining regulatory capital. These roles mirror the FINOP’s duties, but without a single exam like Series 27.
United Kingdom: The Financial Conduct Authority (FCA) requires firms to designate approved persons, such as the Chief Finance Officer, under Senior Management Function 2 (SMF2). This role involves capital adequacy and financial reporting oversight, similar in scope to a FINOP.
Other Jurisdictions: Markets like Singapore, Hong Kong, and Australia require licensed individuals for finance and operations functions, though each has its own regulatory structure.
Considerations for Global Fintech Firms Expanding into the US
Appointing a Series 27 FINOP is an added step for globally licensed fintech firms when expanding into the US. A FINRA-registered Series 27 principal must still be in place. That is because global experience does not replace the Series 27 requirement, even if a firm has an FCA-approved person in the UK or a Markets in Financial Instruments Directive II (MiFID II) finance officer in the EU.
Passing the exam and being registered with FINRA are mandatory before the firm can operate as a broker-dealer in the US. In practice, global firms often adopt a dual structure:
Their international finance officer continues to oversee consolidated reporting, group capital requirements, and cross-border strategy.
A US-based Series 27 FINOP focuses specifically on SEC and FINRA rules, such as net capital and customer protection compliance.
This arrangement helps align global oversight with US-specific obligations. It often reduces risk in practice, since the Series 27 FINOP can interpret how unique business models, like tokenized assets or multi-currency products, fit into the US regulatory standards. For fintech founders, this means budgeting early for a dedicated US FINOP function rather than assuming existing staff abroad can fill the role.
Final Takeaways
The Series 27 license defines how a broker-dealer manages financial compliance. A qualified FINOP is responsible for filings, net capital monitoring, customer protection, and recordkeeping, all under the scrutiny of SEC and FINRA rules.
For fintech founders, treating the Series 27 as a central part of your compliance framework helps align innovation with regulatory expectations. And as business models evolve, building the right FINOP structure from the start allows firms to scale responsibly in the US and abroad.
At InnReg, we specialize in helping fintech firms structure and manage their FINOP obligations. Whether through outsourced FINOP support or integrated compliance programs, our team brings deep regulatory expertise and fintech-focused experience to bridge the gap between fast-moving innovation and strict regulatory requirements.
Talk to our experts today and get outsourced FINOP support tailored to your business.
How Can InnReg Help?
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013.
We are especially effective at launching and scaling fintechs with innovative compliance strategies and delivering cost-effective managed services, assisted by proprietary regtech solutions.
If you need help with broker-dealer compliance, reach out to our regulatory experts today:
Published on Sep 25, 2025
Last updated on Sep 25, 2025
Related Articles
Featured LinkedIn Posts
