Investment Company and. Variable Contracts Products Principals (Series 26) Practice Exam

How frequently must home office inspections be conducted by an SRO?

1. Annually

2. Every 2 years

3. Every 3 years

4. Every 5 years

The correct answer is: Every 2 years

The frequency of home office inspections conducted by a Self-Regulatory Organization (SRO) is mandated to occur every two years. This requirement is in place to ensure that broker-dealers are adhering to regulatory standards and maintain compliance within their operations, even when they are functioning outside of a traditional office environment. Regular inspections help protect investors by ensuring that firms are carrying out their responsibilities appropriately and by identifying any areas that may require improvement. Annual inspections would be excessive and could impose undue burdens on firms, while inspections every three or five years would not provide sufficient oversight in a fast-evolving financial landscape. Thus, the two-year interval strikes a balance between the need for oversight and the operational realities of broker-dealers working from home offices.