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Comprehensive SIE Practice Exam
Questions with Verified 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)
2 / 34 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
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
4 / 34 closing purchase
30. Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town
in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal secu- rities business of the firm, he is permitted to make an additional contribution of up to what amount?: $
31. In which of the following situations is an employee of a public company permitted to
trade upon information without violating insider trading laws?: An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected.
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
$50 per share. If XYZ conducts a 1-for-2 reverse stock split, the in- vestor'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
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- 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 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 secu- rity 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
7 / 34 written notification to her firm?: Driving part time for a transportation network company on weekends
51. Which of the following security types provides investors with a stated matu- rity date, a
floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis?: Variable rate demand note
52. Which of the following investments are generally traded according to their average life
rather than their stated maturity dates?: Asset-backed securities
53. Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens
and closes which of the following positions?: The same stock in a cash account without paying for the stock in full
54. Blue-sky laws are regulated by which of the following entities?: State securities regulators
55. A company announces a tender offer to its shareholders with the intent to buy a
maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investor's shares will the company purchase?: 1,
56. Which of the following statements is true about all U.S. government agency issues?: They are
exempt from registration under the Securities Act of 1933
57. Which of the following actions is required when a firm receives cash in excess of $10,
from one customer in one business day?: File a Currency Transaction Report (CTR)
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58. FinCEN accomplishes its mission to safeguard the financial system from the abuses of
financial crime, including terrorist financing and money laundering, by enforcing:: the Bank Secrecy Act
59. Under the Securities Act of 1933, registration is required for which of the following
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 inflationary 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
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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?: Certificate 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 state- ment
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
85. Which open market activity is defined as a central bank purchasing bonds and securities
in the open market?: Quantitative easing
86. All of the following are types of economic theories EXCEPT:: Eflcient market hypoth- esis
87. Which stock can be expected to rise rapidly in a period of economic expan- sion?: Growth
11 / 34 stock
88. All of the following would be profitable in a rising market EXCEPT:: Inverse ETFs
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
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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
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.
14 / 34 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.
123. A market maker is obligated: to maintain and honor firm quotes during trading hours
124. The spread between bid and offer: typically gets narrower as the volume increases
125. The so-called 5% policy pertains to: mark ups on retail OTC transactions excepting new issues
126. The principal difference between a selling syndicate and a selling group would be::
commitment
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
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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 cus- tomers 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 securi- ties with the
17 / 34 exception of:: Notice of Sale
146. Each member broker-dealer is required to have a principal executive mon- itoring 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 individual 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.
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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
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
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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
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 investor 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
