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Comprehensive SIE Practice Exam Questions
with Solution
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 dis- tribution 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 officer
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
11.Company ABC announces a 20% stock dividend for its common share- holders. If a customer holds 1,
2 / 28 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend?: 1, 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 subsequently
reacquired by the corporation
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33.An investor owns 100 shares of XYZ common stock at the current market price of $50 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 misleading?: Literature providing 10-
year performance information to support pre- dictions of future performance
36.A savings account at a bank is guaranteed by which of the following entities?: 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 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
5 / 28 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)
50.Under FINRA rules, which of the following activities by a registered rep- resentative requires written
notification to her firm?: Driving part time for a transportation network company on weekends
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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 information 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 effective
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::
8 / 28 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
75.Which of the following outcomes are possible for the writer of a covered call option?: Profit limited and loss
limited
76.Which of the following products is considered a cheaper alternative to a mutual fund?: ETF
77.Which of the following would be considered the broadest market index?: -
Wilshire 5000
78.Which of the following is a banking product rather than a security?: Cer- tificate of deposit
79.All of the following investment companies carry investment risk to the holder EXCEPT:: Fixed UIT
80.The difference between the bid and ask prices is known as the:: Spread
81.Investors purchase real estate for:: Cash flow
82.Which of the following financial statements lists operating profit?: Income statement
83.A mutual fund can only consider itself no-load as long as it:: Does not carry a sales charge and does not charge
more than 25 basis points in annual 12b-1 fees
84.Which piece of legislation deals with the secondary market?: Securities Exchange Act of 1934
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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:: 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?: Preemp- tive 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
11 / 28 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
114. When a corporation goes public, it is issuing:: Common stock
115. Every publicly-traded corporation is required to have a transfer agent and a registrar. The primary
distinction between the two is:: The transfer agent ensures that dividend payments go out to all registered owners of record on the payable date.
116. Boards of Directors in the publicly-traded sphere are elected by corporate stockholders, using which of
the following methods?: any of the above are possible voting procedures
117. Call option contracts are considered to have intrinsic value:: when CMV exceeds exercise price
118. Reinvestment risk is least present in:: Zero coupon Treasury Bond
119. Accumulation units are most often associated with:: annuities
120. One of the most frequently issued money market instruments is commer- cial paper. Typically, this
investment has a maximum maturity:: of 270 days
121. Certain securities are marginable under Regulation T of the Securities & Exchange Act of 1934
except:: options
122. A customer wishes to liquidate 100 shares of ABC common at the market. If the current inside market
is 904.78 - 905.57, the client's transaction will occur disregarding commissions and other charges at: 904.
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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 con- trol of securities and introducing firms do not.
138. Pre-emptive Rights and Stock Warrants have a number of similarities. Which of the 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 advis- ers, one would find that:: All
of these
140. Keynesian economic theory deals with:: Controlling the economy through budget/government spending
and taxation policies
141. A significant number of public investors do not have a solid understand- ing 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 offering of new shares other than the initial public offering (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
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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 contract terms if the option is exercised.
145. All of the following are full disclosure documents used in the sale of securities with the exception
of:: Notice of Sale
146. Each member broker-dealer is required to have a principal executive monitoring the firm's adherence
to SRO as well as State and Federal laws and regulations, known as the firm's: CCO
147. In the industry, the term 'Blue Chip' most often is associated with:: stocks that consistently produce
income and modest growth over long periods of time
148. When a customer places a purchase order for an NYSE stock and the trade is reported at a price
which is different than the actual transaction price,: the client pays the price at which the trade was executed
149. Under what conditions, if any, may an agent of a broker-dealer share in the profits and losses of a
customer's account?: only if the sharing is in direct proportion to the financial contribution made by the agent to the account
150. Under the Internal Revenue Code as it pertains to traditional individ- ual retirement accounts
(IRA),: required minimum distributions must begin upon reaching age 72 years of age.
151. The agency in charge of maintaining a list of individuals and institutions for which opening a
brokerage account may be prohibited or restricted is known as:: OFAC
152. In order for a registered representative to maintain their securities license on an ongoing basis, which of
the following properly states the CE require- ments?: passing a regulatory element CE exam at the end of each year.
153. When an agent engages in securities activities outside the scope of their broker-dealer,: the agent is in
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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 economists 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, com- panies 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 place- ment
168. When the US dollar weakens,: exports to foreign countries tend to increase
169. One of the primary risks associated with mortgage backed securities is prepayment risk. This tends
to present itself when: the Fed reduces interest rates
170. Among the most significant differences between an open-end investment management company and a
unit investment trust is that:: the UIT has a fixed portfolio and the open end company does not.
171. Single stock, or single sector, risk is more generally in the category described as:: non-
systematic risk
172. Diversification is a very effective way for an investor to mitigate:: business risk
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173. Many folks living across the country choose to participate in their state's 529 college savings plan.
These investment programs are generally referred to by FINRA as:: municipal fund securities
174. As interest rates rise, which of the below will change the least in price?-
: T-bills
175. Your client wishes to make a substantial investment in a mutual fund your firm is offering. In order to
qualify for a reduced sales load, they sign a letter of intent which gives them:: 13 months to comply with the breakpoint level
176. Choose from among the below ratings the one which is the higher credit rating in the speculative
category as defined by Standard & Poors rating service would be:: BB+
177. The security instrument most often associated with enabling a US in- vestor to facilitate trading in
foreign stock is:: ADR
178. The writer of an option contract is said to have:: a short option position
179. Absent exceptional circumstances, NASDAQ trades during business hours are reported within::
10 seconds of the trade
180. An NYSE listed corporation has outstanding preferred stock with a cumu- lative provision and a $5.
annual dividend. If the earnings over the past two years have led to the Board of Directors declaring a $3. 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
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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 mandat- ed percentage 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 normal operations infeasible
193. A candidate who fails the SIE exam three times and has waited the
six-month moratorium period is preparing to take the exam for the fourth time. Which of the following is true?: The candidate will have to wait another six-months if the exam is failed on the 4th try.
194. Front-running refers to the practice of:: Trading ahead of a customer's block order
195. Registered persons must complete the regulatory element of their con- tinuing education no later
than:: at the end of each year
196. Of the following, which is the correct definition for open market opera- tions?: When the Fed buys and
sells U.S. treasury bonds on the secondary market
197. Which of the following investors would be most subject to inflation risk?-
: Bill, whose portfolio is composed primarily of U.S. Treasury bonds
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198. At withdrawal, pre-tax contributions and earnings in a traditional IRA are:: Taxed at the
investor's ordinary income rate
199. A particular issuer of bonds chooses to engage a managing underwriter under a negotiated, firm-
commitment underwriting contract. The underwriter chooses to sell the bonds using a selling group rather than a syndicate. Who bears the financial risk of unsold bonds?: The managing underwriter
200. Which of the following pay interest on a semiannual basis?: Treasury bonds
201. Which act's main purpose does NOT include keeping the investing public fully informed when a
security is being introduced in the primary market?: The Uniform Securities Act
202. Which of the following is true of the cooling-off period?: A preliminary prospectus (red herring) may
be submitted during this time.
203. If a bond is purchased at $910 (a discount), which of the following has the most advantageous yield?:
Yield to Call
204. Which of the following agencies is backed by the full faith and credit of the federal government?:
GNMA
205. Which of the following are required disclosures of a margin agreement before trading can be
initiated?: d. A & B
206. Barbara is a 56 year old that just lost her sanitation job and is needing to withdraw money from one
of her retirement accounts to make due. Which account would be best to withdraw from at the current time?: 457(b)
207. A recent high school principal retiree is receiving money monthly from his pension. He also has a
deferred compensation account in addition to his pension as a means for discretionary income but does not need the funds right now. He is moving around some mutual funds in his portfolio and is curious when at the earliest he
