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86-51 Automation of Test Administration for the Financial and Operations Principal Examination

TO: All NASD Members and Other Interested Persons


The Qualifications Committee of the NASD Board of Governors is pleased to announce that starting on August 1, 1986, the Financial and Operations Principal Examination (Series 27) will be administered on the PLATO system. Currently, Series 27 is administered as a written examination on the third Saturday of each month at the same time as the Series 7 program. The last written administration of Series 27 tests will be July 19, 1986. Beginning in August, the Series 27 test will be administered daily on an appointment basis through the Control Data Education Center Network.

All new applicants for registration as Financial and Operations Principals will be enrolled for testing on the PLATO system beginning July 15, 1986. Candidates who apply for registration as Financial and Operations Principals before July 15, and who are holding open admission tickets for the Series 27 exam, will also be enrolled on the PLATO system.

The structure of the Series 27 exam will remain the same:

1. 85 multiple-choice questions covering applicable rules and statutory provisions relating to broker-dealer financial responsibility and recordkeeping.
2. A series of questions that require candidates to perform net capital and reserve account calculations pursuant to SEC Rules 15c3-l and 15c3-3 based on financial information in a hypothetical firm's trial balance.

Delivery of the multiple-choice questions on the PLATO system is the same as for the other PLATO-administered examinations. However, new software has been developed for the computation section which requires more interaction between the candidates and the PLATO system. At the beginning of this section, candidates will be given a brief introductory lesson to familiarize them with the procedures for performing the required calculations.

For each computation, the candidate will be shown a trial balance on the computer terminal from which to select appropriate accounts. Once selected, these accounts will be highlighted, and upon completion of this process, the accounts will be summarized, and the candidate will be given the option of either storing the answer or taking adjustments, deductions or "haircuts" on any account prior to storing the answer.

Net capital must be computed using the standard method ratio of aggregate indebtedness to net capital. The net capital computation must be done by calculating (1) total assets, (2) total liabilities and net worth, and (3) "haircuts" and other deductions from net worth. The total testing time is three hours, with two hours allowed for the multiple-choice section and one hour for the computation section. Although candidates may opt to take either the multiple-choice section or the computation section first, both sections must be completed at one session. One score will be given at the end of the test.

The study outline for the Financial and Operations Principal Examination is available from the NASD Executive office as well as NASD District offices at a cost of $5.

* * * * *

The Qualifications Committee is pleased to announce this additional automated testing service in keeping with the Association's goal of providing the most efficient registration and qualification system possible. Questions regarding this notice should be directed to Carole Hartzog, NASD Qualifications Department, at (202) 728-8141.


Frank J McAuliffe
Vice President


David M. Underwood, Chairman
Underwood, Neuhaus & Co., Inc.

Thomas J. Asher, Robinson-Humphrey Company, Inc.
Bruce Avedon, Carillon Investments, Inc.
Judith Belash, Goldman, Sachs & Co.
Lewis W. Brothers, Jr., Virginia Division of Securities
John F. Cogan, Jr., The Pioneer Group, Inc.
Larry D. Hayden, Hayden Financial Management, Inc.
John G. Higgins, Kidder Peabody & Co., Incorporated
Thomas J. McAllister, Connecticut Mutual Financial Services, Inc.
Glenn R. Oxner, Tryon Securities Corp.
Allan Pessin, Salomon Brothers
Bill T. Wall, Stern Brothers & Co., Inc.

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