TheorySIE
Practice Test
1525+ SIE practice questions with explanations. Study modes, progress tracking, works offline.
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30 free SIE questions
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SIE
When a corporation announces that it is seeking additional equity capital through a sale of additional authorized but unissued shares,
Correct — D. The ‘trick’ with this question is that anytime a company is selling NEW previously unissued shares from their Authorized shares maximum, those shares are NEW ---- Primary distribution means the shares being sold are NEW, never before issued, not previously owned by anyone. -
SIE
Which of the following is TRUE regarding the primary market?
Correct — C. The primary market is where securities are sold to the investing public through issuer transactions. It is regulated by the Securities Act of 1933. The NYSE is an example of a secondary market where price is determined by supply and demand. -
SIE
When did the Congress establish the Securities & Exchange Commission (SEC)?
Correct — C. Congress established the Securities & Exchange Commission (SEC) in 1934. -
SIE
The smallest portion of an underwriting spread is the:
Correct — A. The manager's fee is the amount received by the managing underwriter for each security sold by any brokerage firm involved in the offering. The manager's fee is the smallest portion of the underwriting spread. -
SIE
Which of the following is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate?
Correct — B. Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. -
SIE
Which of the following is the formula to determine "exercise settlement amount"?
Correct — C. Rule no 4210. Margin requirements<br/><br/>The difference between the aggregate exercise price and the "aggregate current index value" is referred to as the "exercise settlement amount" (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation). -
SIE
As defined by Standard & Poors rating service, which of the following is the higher credit rating in the speculative category?
Correct — D. Ratings for investment grade are terminated at BBB. Below that are speculative grade ratings. BB+ would be the higher speculative rating from among these answers. Ba1 is a rating by Moody, not S&P. -
SIE
Which of the following is involved in a customer investment profile?<br/><br/>I. Liquidity needs<br/><br/>II. Risk tolerance<br/><br/>III. Customer's marital status<br/><br/>IV. Investment objectives
Correct — C. Rule no 211. Suitability<br/><br/>Based on the data gathered through the member's or associated person's reasonable diligence to ascertain the customer's investment profile, the member or associated person must have a reasonable basis to believe that the recommended transaction or investment strategy involving a security or securities is suitable for the customer. <br/><br/>Age, other investments, financial situation and needs, tax status, investment goals, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information a customer may disclose to a member or associated person in connection with such recommendation are all included in a customer's investment profile. -
SIE
Which of the following mutual fund shares offer breakpoints for large dollar investments?
Correct — A. Class A shares of mutual funds charge sales charges on purchases (front-end load). Since investors pay sales charges when they buy shares, only class A shares may offer breakpoints. -
SIE
Restrictions for stockholders may include:
Correct — B. A restriction would, generally, not include unpleasant consequences for the stockholders. However, there may be a clause the allows the preferred stockholder to become a member of the Board of Directors. -
SIE
Which of the following does the phrase "Blue Chip" relate to?
Correct — B. When the phrase blue chip stocks is used, consider the well-known, long-standing businesses that frequently outperform the market. These are nearly all listed on the NYSE. -
SIE
Which of the following is an example of a put option?
Correct — A. A put option is the right, but not an obligation, to sell stock at a set exercise price.<br/><br/>This is usually exercised if the market prices falls below the exercise price in the options contract.<br/><br/>The right to buy stock at a set price is a call option.<br/><br/>And any special instructions like do not buy or sell until the price reaches a certain level are examples of stop and limit orders, which is unrelated to options. -
SIE
A corporation has issued a single bond having successive maturity dates set from 2020 through 2030. This is known as what type of bond?
Correct — B. Serial maturity bonds are all issued at one time and mature in successive years. Note that there is no "series" maturity type. -
SIE
All of the following are true about hedge funds EXCEPT:
Correct — D. Hedge funds are not subject to the Investment Company Act of 1940 since they are exempt from SEC registration. Hedge funds are exempt since they are issued as private placements. However, advisers of hedge funds must be registered with the SEC according to the Investment Advisers Act of 1940. -
SIE
Money market securities are not considered as which of the following?
Correct — A. ADRs indicate ownership (equity) in foreign stocks while 'money market' consists of short term debt instruments only, hence, ADRs are not debt. -
SIE
Which of the below best defines a short call?
Correct — A. Short call refers to writing a call, which obliges the investor to sell 100 shares of the stock at the exercise price if it is executed. -
SIE
XYZ Corporation is guaranteeing a debt issue for the IHG Company. Regarding these bonds, which of the following is TRUE?
Correct — C. These are guaranteed bonds where the value of the guarantee is only as good as the financial strength (good faith and credit) of the company making the guarantee—in this case, XYZ Corporation. Because these bonds are backed by the good faith and credit of XYZ and not by any tangible asset, they are unsecured debt instruments. Always remember that even though the word "guaranteed" is used to describe such issues, the bonds are unsecured debt. -
SIE
Which of these is a qualification of an accredited hedge fund investor?
Correct — C. In addition to net worth, an accredited investor must have significant knowledge of investing, and a set annual income determined by the country of residence. -
SIE
The <code>_____</code> is how much an investor is willing to pay for a share of stock.
Correct — D. The bid price shown on the quote states how much an investor will pay to purchase that stock order through the brokerage. -
SIE
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting which of the following?<br/><br/> I. Member’s capital accounts<br/><br/> II. Member’s income<br/><br/> III. Member’s liability<br/><br/> IV. Member’s assets
Correct — D. FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents. -
SIE
Taj has purchased a bond that has a $1000 par value. Because interest rates have risen, this bond was priced at a discount when Taj bought it.<br/><br/>How much did Taj pay for the bond?
Correct — D. A bond that is priced below the par value is said to be priced at a discount. -
SIE
Which of the following regarding income is TRUE?
Correct — A. While someone’s salary or bonus would be earned income, investment income is that which is earned from one’s investments. Sometimes called portfolio income, it would include dividends, interest, and capital gains derived from the sale of securities. -
SIE
100 common shares of ABC are being liquidated by a customer at the market. If the inner market is currently between 904.78 and 905.57, the client’s transaction will occur disregarding commissions and other charges at:
Correct — D. The price at which a client's liquidation (sell) order will be executed is the best (inside) bid. -
SIE
An investor has held shares of a mutual fund for 8 months and receives a long-term capital gains distribution.<br/><br/>How is the distribution taxed to the investor?
Correct — D. Although the investor has held the fund for 1 year or less, distributions received from the fund are taxed based on how long the fund held the securities before selling them. Therefore, the investor may claim the distributions as long term gains. -
SIE
In terms of front running, which of the following is/are not true?<br/><br/>I. A broker or trader who makes deals just before a large, unpublicized order in an effort to acquire a competitive advantage is known as front-running.<br/><br/>II. Because it makes use of private information that is not generally available, front-running is illegal and unethical.<br/><br/>III. The price of an asset can be affected by front running.<br/><br/>IV. Front running is a legal practice and Brokers and dealers benefit greatly from front running.
Correct — C. According to FINRA rule no 5270. Front Running of Block Transactions<br/><br/>This rule is applicable to orders that are made to be executed for any account in which the member or anyone connected to the member has an interest, any account for which the member or anyone connected to the member exercises investment discretion, or for the accounts of the member's customers or affiliates who have been given such material, non-public market information by the member or anyone connected to the member.<br/><br/>No member or person connected to a member shall cause the execution of an order to buy or sell a security or a related financial instrument if the member or person connected to a member causing the execution of the order has material, non-public market information regarding an impending block transaction in the security, the related financial instrument, or the security underlying the related financial instrument before information regarding the impending block transaction becomes public. -
SIE
Each Member must update its plan when necessary and must periodically review the plan and keep a record of the review. Your firm should distribute and explain the following except? <br/><br/>I. maintain copies of the plan at one or more off-site locations that are readily accessible to key employees <br/><br/>II. communicate the essential parts of the plan to all employees <br/><br/>III. the contact essential parties for identifying ways to minimize financial impact <br/><br/>IV. the plan to key employees
Correct — D. Each Member must update its plan when necessary and must periodically review the plan and keep a record of the review. Your firm should distribute and explain the plan to key employees, communicate the essential parts of the plan to all employees, and maintain copies of the plan at one or more off-site locations that are readily accessible to key employees. -
SIE
Upon application for registration as a registered representative to ensure that any criminal past might be discovered by the employing firm, the Securities and Exchange Commission (SEC) requires
Correct — D. A fingerprint card is required to be filed with the U.S. Attorney General to ensure that any criminal past that might result in statutory disqualification from association with a member firm is discovered. -
SIE
Which of the following is not required information that must be included in the U4?
Correct — C. The form U4 is required to be filled out during the hiring process and there is U5 for the termination process. It requires basic clerical information like name, address, and any known aliases along with the aforementioned information. <br/><br/>Any changes to this information needs to be reported within 30 days of the change. -
SIE
Hiro owns a financial services company. Many of his salespeople take financial advisors and investors out for meals and events. In order to stay compliant with FINRA Rule 3222, Hiro needs to <code>_____</code>.
Correct — D. FINRA Rule 3222 says that each company needs a written policy on business entertainment that stresses the importance of keeping business entertainment expenses reasonable. -
SIE
CTFC Regulation 5.10 (ii.c) states that FDMs must establish and maintain internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities including systems and policies for supervising, monitoring, reporting and reviewing trading activities in which of the following?<br/><br/> I. securities<br/><br/> II. forex transactions<br/><br/> III. futures contracts<br/><br/> IV. commodity options
Correct — C. CTFC Regulation 5.10 (ii.c) – establishing and maintaining internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities, including systems and policies for supervising, monitoring, reporting and reviewing trading activities in forex transactions, securities, futures contracts, commodity options, forward contracts and financial instruments; policies for hedging or managing risks created by trading activities or supervising accounts carried for affiliates, including a description of the types of reviews conducted to monitor positions; and policies relating to restrictions or limitations on trading activities.
SIE sample questions
Tap any question below to reveal the answer and a plain-English explanation.
Understanding Trading Customer Accounts The _____ is how much an investor is willing to pay for a share of stock.
A. Ask
B. Quote
C. Spread
D. Bid ✓
Correct — D. The bid price shown on the quote states how much an investor will pay to purchase that stock order through the brokerage.
Overview Regulatory Framework Each Member must update its plan when necessary and must periodically review the plan and keep a record of the review. Your firm should distribute and explain the following except? I. maintain copies of the plan at one or more off-site locations that are readily accessible to key employees II. communicate the essential parts of the plan to all employees III. the contact essential parties for identifying ways to minimize financial impact IV. the plan to key employees
A. II, III, & IV
B. I, II, & III
C. II, III, & IV
D. I, II, & IV ✓
Correct — D. Each Member must update its plan when necessary and must periodically review the plan and keep a record of the review. Your firm should distribute and explain the plan to key employees, communicate the essential parts of the plan to all employees, and maintain copies of the plan at one or more off-site locations that are readily accessible to key employees.
Understanding Trading Customer Accounts FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting which of the following? I. Member’s capital accounts II. Member’s income III. Member’s liability IV. Member’s assets
A. I, II, & III
B. I, II, & IV
C. II, III, & IV
D. All of the above ✓
Correct — D. FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents.
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