Learn the possession, reserve, and exemption logic behind the customer-protection function on the Series 27 exam.
The third Series 27 chapter centers on customer protection. This is where the FINOP proves that the firm knows where customer securities are, when reserve computations are required, how customer and PAB balances are classified, and when exemptions from the Customer Protection Rule are available. These questions are highly testable because they combine definitions, calculations, and operating judgment.
Read this chapter as the custody-and-reserve layer of the firm. Start with possession and control, then move through customer and PAB reserve computations, reserve bank accounts, and exemption logic. Most mistakes in this chapter come from mixing customer, PAB, and noncustomer concepts or from missing the operational consequences of classification errors.
Series 27 section lessons
Use these section lessons as the main reading path for this Series 27 function. They keep FINOP calculations, filings, custody controls, and escalation decisions tied to the exact exam workflow.
Study Series 27 customer reserve computation concepts, including customer versus noncustomer classification, free credit balances, margin debits, aged balances, computation cycles, and correction of reserve input errors.
Study Series 27 PAB reserve computation concepts, including proprietary accounts of broker-dealers, correspondent balances, stock-record allocation, concentration, excluded items, aged balances, and misclassification controls.
Study Series 27 reserve bank account controls, qualified deposits, bank acknowledgments, PAB reserve accounts, withdrawal restrictions, funding exceptions, and reserve account evidence.