FINRA SIE Test Registration, SIE Sample Questions Answers

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FINRA SIE Exam Syllabus Topics:

Topic	Details
Topic 1	Understanding Products and Their Risks: This section of the exam measures the skills of Investment Analysts and examines different financial products and associated risks. Candidates must understand equity securities, including common stock, as well as debt instruments such as Treasury securities and mortgage-backed securities.
Topic 2	Overview of the Regulatory Framework: This section of the exam measures the skills of Compliance Officers and evaluates knowledge of self-regulatory organization (SRO) requirements, including registration and continuing education for associated persons. Candidates must understand the distinction between registered and non-registered individuals and the requirements for maintaining industry qualifications.
Topic 3	Employee Conduct and Reportable Events: This section of the exam measures the skills of Financial Compliance Specialists and covers regulatory expectations regarding employee conduct and disclosure requirements. Candidates must be familiar with Form U4 and Form U5, as well as reporting obligations for outside business activities and political contributions.
Topic 4	Regulatory Entities, Agencies, and Market Participants: This section of the exam measures the skills of Financial Regulatory Analysts and covers the structure, authority, and jurisdiction of key regulatory bodies overseeing financial markets. The SEC's role in enforcing securities regulations is assessed, along with the authority of self-regulatory organizations such as FINRA and MSRB. Candidates must also understand the functions of other financial regulators, including the Department of the Treasury and state regulatory agencies. One key skill evaluated is identifying the jurisdictional scope of different financial regulators.

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FINRA SIE Sample Questions Answers | Exam SIE Practice

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FINRA Securities Industry Essentials Exam (SIE) Sample Questions (Q313-Q318):

NEW QUESTION # 313
Which of the following types of investment companies raise money by issuing a fixed number of shares through an initial public offering (IPO), actively manage their portfolios and trade their shares on a stock exchange?

A. Variable annuities
B. Open-end funds
C. Unit investment trusts (UITs)
D. Closed-end funds

Answer: D

Explanation:
The description matches closed-end funds, making choice B correct. Closed-end investment companies raise capital by issuing a fixed number of shares, typically through an IPO (or subsequent offerings in some cases).
After the initial issuance, investors generally buy and sell shares of the closed-end fund in the secondary market, most commonly on a stock exchange, at market prices determined by supply and demand. Closed-end funds are typically actively managed, though some may follow rules-based strategies.
This differs from open-end mutual funds (choice A), which continuously issue and redeem shares directly with investors at net asset value (NAV) (plus/minus applicable sales charges). Open-end funds do not have a fixed number of shares; the number of shares outstanding changes every day as investors purchase and redeem. Variable annuities (choice C) are insurance products with subaccounts that resemble mutual funds, but they are not investment companies that issue exchange-traded shares via an IPO. UITs (choice D) do issue redeemable units and have a defined portfolio, but they are not actively managed-the portfolio is generally fixed, and the UIT terminates on a stated date.
A key SIE concept embedded here is that closed-end funds often trade at a premium or discount to NAV, unlike open-end funds that transact at NAV. The exchange-traded nature also means investors may pay brokerage commissions and face bid-ask spreads, and their execution price depends on market trading- important distinctions in cost and liquidity compared to open-end funds.

NEW QUESTION # 314
A registered representative (RR) owns 500 shares of a thinly traded security. A customer of the firm calls the RR to place a sell order for 10,000 shares of the same security. The RR sells his shares before entering the customer's order to sell. Which of the following activities has the RR just engaged in?

A. Insider trading
B. Front running
C. Selling away
D. Market manipulation

Answer: B

Explanation:
Step by Step Explanation:
* Front Running Definition: Occurs when a broker executes a personal trade ahead of a customer's order to profit from the anticipated market movement.
* Thinly Traded Security: Front running is particularly impactful in low-liquidity securities.
* Other Options:
* Selling Away: Involves unapproved securities transactions outside the employing firm.
* Insider Trading: Involves trading on material non-public information.
* Market Manipulation: Encompasses activities like wash trading or spoofing, not specific to this scenario.
:
FINRA Rule 5270 (Front Running of Block Transactions): FINRA Rule 5270.

NEW QUESTION # 315
A registered representative must complete which of the following activities when entering a discretionary trade?

A. Only exercise discretion over market orders
B. Receive instructions from the customer as to the price at which to buy or sell a security
C. Indicate that discretion was exercised on the order ticket to be identified for supervisory review
D. Obtain authorization from the customer before each discretionary order is entered

Answer: C

Explanation:
FINRA Rule 3260 requires that discretionary trades be approved by the customer in writing and reviewed by the supervising firm. The order ticket must indicate that discretion was exercised to ensure proper oversight.
* B is correct because marking the order ticket ensures compliance with supervisory requirements.
* A is incorrect because discretionary authority is not limited to market orders.
* C is incorrect as discretionary trades do not require pre-approval for each trade but require prior written authorization.
* D is incorrect because discretionary authority allows the RR to decide on price and timing without specific customer instructions.
Reference: FINRA Rule 3260 (Discretionary Accounts)

NEW QUESTION # 316
If a bond is selling at a premium, which of the following statements is true?

A. Current value is less than par value.
B. YTM is less than coupon rate.
C. Coupon rate is less than current yield.
D. Coupon rate is less than yield to maturity (YTM).

Answer: B

Explanation:
The correct answer is D, YTM is less than coupon rate. When a bond is selling at a premium, it means the bond's market price is above its par value. This occurs when the bond's coupon rate is higher than prevailing market interest rates, making the bond more attractive to investors.
Step-by-step, premium bond relationships follow a consistent pattern:
* Coupon rate > Current yield > Yield to maturity (YTM)
This happens because investors are paying more than par value for the bond but will only receive par at maturity. The excess paid (premium) reduces the overall return, causing the YTM to be the lowest yield measure.
Choice A is incorrect because a premium bond has a market value greater than par, not less. Choice B is incorrect because the coupon rate is always higher than current yield for premium bonds. Choice C is incorrect because the coupon rate is also higher than YTM, not lower.
Thus, the defining characteristic of a premium bond is that its yield to maturity is less than its coupon rate, making Answer D correct.

NEW QUESTION # 317
Beta coefficient is a measure of:

A. The volatility of an individual stock relative to the broad stock market.
B. The liquidity of an individual stock relative to the sector average.
C. The volatility of the broad stock market.
D. Only the upside participation of an individual stock.

Answer: A

Explanation:
The beta coefficient measures the sensitivity of a stock's returns relative to the overall market (usually the S&P 500). A beta of:
* 1.0indicates the stock moves in line with the market.
* Greater than 1.0suggests the stock is more volatile than the market.
* Less than 1.0suggests the stock is less volatile.
* D is correctbecause beta specifically compares the volatility of a stock to the market.
* Ais incorrect as beta does not measure the market's volatility.
* Bis incorrect as beta considers both upside and downside movements.
* Cis incorrect as beta does not measure liquidity.

NEW QUESTION # 318
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