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Comprehensive SIE Practice Exam
Questions with Complete Solution (Pass
Assured)
1. The primary purpose of a syndicate desk in the context of an equity offering is to:: build an order
book and allocate the stock
2. Which of the following responses describes an advantage of index funds?: -
Lower management fees due to passive management of the fund
3. Which of the following comparisons best describes the essential difference between a primary
distribution and a secondary distribution?: A primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares.
4. The computation of dollar prices and accrued interest on municipal bonds is normally on
what calendar basis?: 30/
5. Direct participation programs (DPPs) provide:: exposure to non-correlated assets
6. Call protection is most valuable to a bond owner when bond prices are generally:: rising
7. Which of the following represents the effect of a stock split?: The price per share of common stock decreases
8. Stability in the value of a debt portfolio is greatest when:: maturities of the debt securities are short.
9. Which of the following actions is required of a broker-dealer's anti-money laundering (AML)
program?: Designating an AML compliance oflcer
10. Which of the following actions violates FINRA rules regarding selling away?-
: Engaging in private securities transactions without written prior consent of the employing BD
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11. Company ABC announces a 20% stock dividend for its common sharehold- ers. If a
customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend?: 1,200 shares at $41.
12. Roth 401(k) and Roth individual retirement account (IRA) plans share which of the
following features?: Qualified distributions are excluded from federal income tax
13. An associated person who is not a registered representative is permitted to engage in
which of the following activities?: Provide account opening forms to a new customer
14. The last transaction in XYZ 5.50s 2030 was at 102. This bond is selling at:: a premium
15. A registered representative (RR) who wants to place a mutual fund adver- tisement
must obtain written approval from which of the following parties?: A registered principal of the RR's firm
16. Under normal circumstances, a customer's letter of intent on a mutual fund purchase is
valid for what maximum period of time?: 13 months
17. To offer its shareholders a privilege to obtain its shares at a fixed price, which of the
following products does a corporation issue?: Rights
18. The call provision of a bond stipulates which of the following factors?: Call date and call price
19. A decline in the gross domestic product (GDP) must last for at least how many
quarters to be considered a recession?: 2 quarters
20. Regular way settlement on Treasury bonds is:: next business day
21. Which of the following statements is true regarding a customer account held as tenants in
common?: The ownership of the decedent's assets is governed by their will or state law.
22. Which of the following statements is true about treasury stock?: It is issued stock that has been
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32. Which of the following stakeholders has first claim priority in a Chapter 11 proceeding?:
Secured debt holders
33. An investor owns 100 shares of XYZ common stock at the current market price of $
per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be:: 50 shares at $100 per share
34. A registered representative is reviewing the following portfolio:
- 30% ABC Energy Company
- 30% XYZ Health Care Company
- 30% Exchange-traded fund (tracks the S&P 500)
- 10% Money market funds Which of the following risks is inherent in this portfolio?: Nonsystematic
35. Which of the following communications with the public is considered mis- leading?:
Literature providing 10-year performance information to support predictions of future performance
36. A savings account at a bank is guaranteed by which of the following enti- ties?: FDIC
37. All of the following risks apply to both foreign and domestic debt instru- ments
except:: exchange
38. The redemption value of an open-end investment company's shares is based on the::
NAV computed after the order is received
39. A registered representative (RR) wants to participate in a private securities transaction.
Which of the following actions must the RR take?: Send written notice to his supervisor outlining the activity and
5 / 30 compensation structure
40. A member of a stock exchange responsible for providing liquidity in a security by being
willing to buy and sell at all times is known as:: a market maker
41. In a period of low inflation and economic recession, the Federal Reserve is expected to
take which of the following actions?: Buy bonds in the open market
42. In the over-the-counter market, the term "spread" refers to the difference between the::
bid and asked prices
43. Which of the following statements is true regarding the concept of an annuity contract?:
The kind of annuity selected partly determines the payment amounts to the annuitant
44. When selling a fixed amount of a base currency to purchase a counter currency, which
of the following factors is primarily used to determine how much of the counter currency the customer will receive?: The spot exchange rate
45. If a market maker posts a quote of 10.00 - 10.10 [25×10], which of the following actions
is the market maker willing to take?: Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.
46. No-load mutual funds may have lower expense ratios than load mutual funds for which of
the following reasons?: No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points
47. Under FINRA rules, noncash compensation connected with the sale of variable
contracts includes all of the following items except:: commissions
48. A customer has a cash balance in her account together with long positions in several
securities. She has made no securities transactions in the account during the past 18 months. How often must the firm send her an account statement?: Quarterly
49. Under Rule 144A, an issuer of restricted stock is permitted to sell to which of the
following investors?: Qualified institutional buyers (QIBs)
7 / 30 securities?: American Depositary Receipts (ADRs)
60. What is the cost basis of an inherited mutual fund?: The net asset value (NAV) of the shares when the
owner dies
61. When is interest on Treasury notes paid?: Semiannually
62. A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100
shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration?: $
63. The owner of which of the following products is most exposed to inflation- ary risk?:
Treasury bonds
64. At the time of issuance, which of the following securities normally has the longest period
to expiration?: Warrants
65. Which of the following products is adversely impacted if the issuer's credit rating is
downgraded?: Exchange-traded notes (ETNS)
66. Which of the following Form U4 reportable events results in a statutory
disqualification?: A felony conviction for a driving under the influence (DUI) charge
67. A customer is an officer of a company that is involved in some significant changes. All of
the following items are examples of corporate affairs that could be considered insider information if the customer shares them with his registered representative except:: declared stock dividends
68. Under SEC Regulation S-P (Consumer Privacy), which of the following infor- mation must a
firm include in its customer privacy and opt-out notices?: The policies to protect the security of nonpublic information
69. A broker-dealer is permitted to accept payment for a new issue from a new customer when
the:: registration is ettective
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70. When a broker-dealer charges a commission on a securities transaction, it has acted as::
an agent
71. A firm is a participant in a public offering. To sell a substantial amount of the
securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are:: prohibited as fraudulent and manipulative
72. Upon expiration, all in-the-money S&P 100 Index call options are settled by the delivery
of which of the following?: Cash
73. A married couple who earned income that exceeded $300,000 in each of the prior two
years and reasonably expects the same for the current year is:: an accredited investor
74. Under a system of statutory voting, a common stockholder has as many votes for each
vacancy on the board of directors as the number of:: shares owned by the stockholder
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89. An individual would be barred from association with a FINRA member firm for which of the
following?: Conviction of a securities-related misdemeanor 9 years ago
90. How long are shelf registrations with the SEC good for?: Three years
91. When a stop order is triggered, what does it become?: Market order
92. Which of the following securities is issued below the CMP of the stock and has intrinsic
value at issuance?: Rights
93. When market interest rates go up, a bond's:: CY goes up
94. What risk do DPPs have that makes it harder for the investor to retrieve their funds?:
Liquidity risk
95. Which law covers the registration of mutual funds?: Investment Company Act of 1940
96. What document is given to an investor who purchases a municipal bond?-
: Oflcial statement
97. Which of the following securities is a form of T-bond where the coupon and principal
payments are detached from the bond itself and sold separately?: - STRIPS
98. Failing to make a customer aware of an upcoming quantity discount avail- able through a
mutual fund is:: A breakpoint sale and is prohibited
99. The computation of dollar prices and accrued interest on corporate bonds is normally on
what calendar basis?: 30/
100. The main function of a market maker in the context of an equity offering is to:: Buy and
sell the shares at quoted bid and ask prices.
101. A bond owner benefits from a sinking fund provision when bond prices are generally::
11 / 30 falling.
102. The sensitivity of a debt portfolio to changes in interest rates is measured by:: duration.
103. Which of the following actions violates FINRA rules regarding outside business
activities?: Receiving compensation from another entity without notifying the employing BD
104. Company DEF announces a 10% stock dividend for its common share- holders. If a
customer holds 500 shares at $40.00, what is the new price and number of shares following the payment of the stock dividend?: 550 shares at $36.
105. The last transaction in ABC 6s 2030 was at 98. This bond is selling at:: a discount.
106. Under normal circumstances, a customer's breakpoint sale on a mutual fund purchase is
prohibited unless:: the customer receives both prior written disclosure and consent from the BD
107. To allow its shareholders to maintain their proportionate ownership in the company,
which of the following products does a corporation issue?: Preemptive rights
108. The yield to call of a bond is calculated by assuming that the bond will be redeemed on::
the call date that results in the lowest yield.
109. Regular way settlement on corporate bonds is:: second business day (skip day).
110. Which of the following considerations should a registered representative explain to a
customer when recommending a Coverdell Education Savings Account (ESA)?: The income eligibility restrictions to contribute to the account
111. The term 'disclaimer' is most often associated with: The fact that the government cannot guarantee
the accuracy of the information in a prospectus
112. In most cases, Federal Securities Laws:: Supersede State securities laws
113. Which of the following are NOT considered money market securities?: ADRs
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127. Stabilizing is a term generally used in Wall Street to refer to the practice of:: maintaining a
market price at or near the POP of a new issue for the sole purpose of protecting the stock from decline during a new ottering.
128. Regulation SHO severely restricts short selling during the cooling offer period of a
follow-on offering. Which of the below is true?: an investor may buy the new issue shares on the ottering so long as any short sale has been covered at least one business day prior to the ettective date.
129. The maximum coverage offered per separate customer under SIPC insur- ance was set by
Congress at:: $500,000 for securities and cash combined
130. Recommending a limited partnership DPP investment to a customer would be a
defendable recommendation for a client:: any of the above
131. Exercise of an equity put option involves the writer:: buying the underlying instrument at the strike price
132. The hours of operation of the Chicago Board Options Exchange are:: 8:30 am to 3:00 pm CT
133. A customer complaint is formally defined as a:: any written communication from a customer or legal rep of
a customer regarding an allegation of a violation of one or more securities rules or federal regulations
134. The least liquidity in the securities shown below would be found:: in securities traded on the Pink
Quote system
135. Sweeteners as that term is used in the investment banking community refers to issue
enhancements which include:: any of the above
136. Which of the following investment instruments trades on an exchange at a market price
NOT directly related to its net asset value?: closed-end investment company
137. Among the differences between an introducing broker-dealer and a clear- ing carrying
broker-dealer is that clearing firms:: Maintain possession and control of securities and introducing firms do not.
138. Pre-emptive Rights and Stock Warrants have a number of similarities. Which of the
14 / 30 below represent characteristics these products have in com- mon?
I. Each has a fixed price at which the holder may purchase shares of the issuer's common
stock.
II. The fixed exercise price for both products is initially set at a level below the current market
value of the common stock.
III. These products are tradable on securities exchanges
IV. Both have relatively short-term expiration dates: I and III
139. When reviewing the definitions of broker-dealers and investment advisers, one would find
that:: All of these
140. Keynesian economic theory deals with:: Controlling the economy through budget/govern- ment spending and
taxation policies
141. A significant number of public investors do not have a solid understanding of how
common stock is offered to the public. Two methods are the secondary offering and the follow-on offering. Which of the below are true statements regarding these methods?: A follow-on is an ottering of new shares other than the initial public ottering (IPO).
142. FINRA has promulgated various rules and procedures pertaining to the operation of
broker-dealers and departments within member firms. The M&A Department:: Creates the firm's procedures pertaining to Merger and Acquisition activity
143. Mitigation of the risk of loss in a bearish market can be achieved by customers
with vulnerable long stock positions placing:: Sell stop orders
144. All investors with short option positions:: Have a contractual obligation to perform in accordance with the
16 / 30 immediately in your own account prior to placing the client's order.: this is known as front-running and is prohibited
155. That most basic tenet of a suitability determination is the:: know your customer rule
156. Making cold calls to prospects in accordance with the telemarketing con- sumer protection
act may only be done:: between 8 am and 9 pm in the prospect's time zone
157. A customer of a brokerage firm must receive a customer account state- ment with
which of the following frequencies?
I. Monthly if there has been any activity in the account
II. Monthly
III. Weekly if there has been any activity in the account
IV. A minimum of at least quarterly: I and IV
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158. United States government budgetary and taxation policies are best de- scribed as::
fiscal policy
159. When one of the individuals in an account opened as Tenants in Common dies, their
share of the account:: goes to their estate
160. Regulation S-P principally deals with:: protection of privacy and identity information of clients
161. All states have a securities Administrator whose job it is to enforce the securities
laws of their state. All Administrators are part of an organization known as:: NASAA
162. When a commercial bank elects to borrow short-term, often overnight, loans from
another commercial bank, these loans are done at an interest rate known as the:: fed funds rate
163. The US economy has traditionally performed in a way described by econ- omists and
analysts as the business cycle. When an economy that has been operating at peak efficiency begins to slow down, which phase of the cycle is the economy entering?: contraction
164. It is not unusual for a broker-dealer to fill a customer order for an NYSE stock as
principal out of inventory in lieu of wiring it to the floor the exchange.- : this is a 3rd market transaction
165. Though there are numerous business sectors in the US economy, compa- nies generally
fall into three distinct categories:: cyclical; defensive; growth
166. In the business of underwriting, when a firm adopts a firm commitment, it is acting
as a:: dealer
167. Not all corporate securities offerings are required to be registered with the SEC. An
offering done under Regulation D is often called:: a private placement
168. When the US dollar weakens,: exports to foreign countries tend to increase
19 / 30 provision and a $5.00 annual dividend. If the earnings over the past two years have led to the Board of Directors declaring a $3.00 preferred dividend two years ago and a $2.00 dividend last year, in order that a common dividend may be paid for the current year:: Preferred stockholders must be paid $10 per share
181. When the term 'shelf registration' is used, it typically refers to:: Registering securities with the SEC
and selling part of the registered securities immediately and reserving the remaining securities for sale at a later time.
182. When institutional investment managers open brokerage accounts at sev- eral clearing
broker-dealers, those clearing broker-dealers process the trans- actions and have the back-office clearing and processing handled through a single broker-dealer. This firm is identified in the SEC and FINRA regulations as a:: Prime broker
183. When a Board declares a cash dividend, the order of dates beginning with that
announcement date is:
I. Declaration date
II. Payment date
III. Record date
IV. Ex-dividend date: I, IV, III, II
184. A market maker is quoting a stock at 23.15 - 23.30. If the firm fails to honor its quote for
at least one round lot on both sides of the market,: It will be guilty of a backing away violation.
185. When investors put their capital at risk, they rely upon the input and advice of their
financial advisors, persons associated with a broker-dealer who have been trained in the field of investments and investment risks. As a concept, hedging has its primary purpose:: Mitigating maximum potential loss.
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186. NASDAQ market makers wishing to increase the ADTV (average daily trad- ing volume) they
handle in those stocks:: May pay other brokerage firms to direct trades in those issues to the market maker for execution.
187. A client of yours purchased 1000 shares of RAL common stock on Monday, February 11th in
a cash account at a CMV of $115 per share. The next day the stock moves to $128 on a very favorable news report and the client places an order to sell the 1000 shares at the market. On the Reg. T payment date the client has not paid for the purchase and asks that liquidation proceeds be used to cover the cost of the purchase.: This is free-riding, a violation of Reg. T
188. A short call is:: An option contract where the investor has a contractual obligation, for the duration of the contract, to deliver
the underlying instrument at the strike price upon exercise.
189. Allowable ways to qualify for a breakpoint when purchasing front-end load mutual funds
include:
I. Exchange or conversion privilege with a fund family
II. Reinvesting dividends and/or capital gains distributions under an LOI.
III. 13 month LOI
IV. ROA — rights of accumulation: III and IV
190. Each of the below business enterprises exhibit flow-through of tax and related
consequences except:: C corp
191. Depreciation write-offs represent which of the following?: An IRS mandated per- centage allowable
annual non-cash charge against revenues.
192. Every FINRA member firm must have in place a Business Continuity Plan which
addresses:: How customers of the firm will be able to access their accounts and assets during a disaster or pandemic which has made
