FINRA SIE Practice Test| 75
Questions| With Complete
Solutions
Course
SIE
Here are all 10 FINRA SIE Practice Test Questions with Complete Solutions:
Q1. Which of the following best describes a 'primary market' transaction?
A) An investor sells shares to another investor on the NYSE B) A company issues new shares to
raise capital through an IPO C) A broker executes a trade on behalf of a customer D) A
government bond is resold in the open market
✅ Answer: B Explanation: Primary market transactions involve the issuance of new securities
directly from the issuer to raise capital. An IPO is a classic example. Secondary market
transactions occur between investors without proceeds going to the issuer.
Q2. Under FINRA rules, what is the maximum period for an initial membership
application (IMA) review?
A) 30 days B) 60 days C) 180 days D) 1 year
✅ Answer: C Explanation: FINRA rules allow up to 180 days for the review of an initial
membership application. During this time FINRA evaluates the firm's business plan, financials,
and personnel.
Q3. Which of the following securities is EXEMPT from SEC registration under the
Securities Act of 1933?
A) Common stock of a publicly traded company B) Municipal bonds issued by a state
government C) Corporate bonds issued by a Fortune 500 company D) ADRs traded on a national
exchange
✅ Answer: B Explanation: Municipal securities (issued by state and local governments) are
exempt from SEC registration under the Securities Act of 1933. They are still subject to anti-
fraud provisions, but do not require the full registration process.
,Q4. A customer wants to speculate that interest rates will rise. Which of the following
positions would best achieve this objective?
A) Buy Treasury bonds B) Buy Treasury bond futures C) Short Treasury bond futures D) Buy
Treasury bond call options
✅ Answer: C Explanation: When interest rates rise, bond prices fall. Shorting Treasury bond
futures profits when bond prices decline (i.e., when rates rise). Buying bonds or call options on
bonds would lose value if rates rise.
Q5. Which SRO (Self-Regulatory Organization) oversees broker-dealers in the United
States?
A) The Federal Reserve B) The SEC C) FINRA D) The FDIC
✅ Answer: C Explanation: FINRA is the primary SRO that oversees broker-dealers in the
U.S. The SEC is the government regulator that oversees FINRA, but FINRA itself directly
regulates member firms and their registered representatives.
Q6. A bond is trading at a premium. This means the bond's coupon rate is:
A) Lower than the current yield B) Equal to the yield to maturity C) Higher than the current
market interest rate D) The same as the par value
✅ Answer: C Explanation: A bond trades at a premium when its coupon rate is higher than
prevailing market interest rates. Investors pay more than par value because the bond pays a
higher interest rate than new bonds being issued.
Q7. Which of the following is considered a 'non-cash' compensation item that is generally
prohibited under FINRA rules?
A) A $20 gift card from a vendor B) Salary paid to a registered representative C) Training and
education expenses approved by the member firm D) A $150 gift basket from a client
✅ Answer: D Explanation: FINRA Rule 3220 limits non-cash gifts to $100 per person per
year. A $150 gift basket exceeds this limit and would be prohibited. Nominal gifts under $100,
firm-approved training, and normal salaries are permissible.
Q8. What does the term 'Regulation T' govern?
, A) Insider trading activity B) The amount of credit brokers can extend to customers for
purchasing securities C) Reporting requirements for large trades D) Customer complaint
procedures
✅ Answer: B Explanation: Regulation T, issued by the Federal Reserve, governs the extension
of credit by brokers and dealers. Currently, it requires customers to deposit at least 50% of the
purchase price of securities bought on margin.
Q9. Which of the following is an example of a 'selling away' violation?
A) A registered rep sells mutual funds approved by their firm B) A registered rep recommends a
stock listed on the NYSE C) A registered rep sells a private placement without notifying or
getting approval from their firm D) A registered rep charges a higher commission than usual
✅ Answer: C Explanation: 'Selling away' occurs when a registered representative conducts
securities transactions outside the scope of their firm's knowledge and approval. This is a serious
violation that can result in termination and regulatory action.
Q10. Under the Securities Exchange Act of 1934, which of the following must register with
the SEC?
A) Investment advisers with fewer than 15 clients B) Hedge funds with under $150 million in
assets C) Broker-dealers conducting business with the public D) Insurance companies selling
annuities
✅ Answer: C Explanation: The Securities Exchange Act of 1934 requires broker-dealers who
conduct business with the public to register with the SEC. This act also created the SEC itself
and established rules governing secondary market trading.
Q11. Which of the following is NOT a money market instrument?
A) Treasury bills B) Commercial paper C) Common stock D) Certificates of deposit
✅ Answer: C Explanation: Common stock is an equity security, not a money market
instrument. Money market instruments are short-term debt securities with maturities of one year
or less, including T-bills, commercial paper, and CDs.
Q12. An investor who buys a put option has the right to:
A) Buy shares at the strike price before expiration B) Sell shares at the strike price before
expiration C) Receive dividends on the underlying stock D) Vote at shareholder meetings
Questions| With Complete
Solutions
Course
SIE
Here are all 10 FINRA SIE Practice Test Questions with Complete Solutions:
Q1. Which of the following best describes a 'primary market' transaction?
A) An investor sells shares to another investor on the NYSE B) A company issues new shares to
raise capital through an IPO C) A broker executes a trade on behalf of a customer D) A
government bond is resold in the open market
✅ Answer: B Explanation: Primary market transactions involve the issuance of new securities
directly from the issuer to raise capital. An IPO is a classic example. Secondary market
transactions occur between investors without proceeds going to the issuer.
Q2. Under FINRA rules, what is the maximum period for an initial membership
application (IMA) review?
A) 30 days B) 60 days C) 180 days D) 1 year
✅ Answer: C Explanation: FINRA rules allow up to 180 days for the review of an initial
membership application. During this time FINRA evaluates the firm's business plan, financials,
and personnel.
Q3. Which of the following securities is EXEMPT from SEC registration under the
Securities Act of 1933?
A) Common stock of a publicly traded company B) Municipal bonds issued by a state
government C) Corporate bonds issued by a Fortune 500 company D) ADRs traded on a national
exchange
✅ Answer: B Explanation: Municipal securities (issued by state and local governments) are
exempt from SEC registration under the Securities Act of 1933. They are still subject to anti-
fraud provisions, but do not require the full registration process.
,Q4. A customer wants to speculate that interest rates will rise. Which of the following
positions would best achieve this objective?
A) Buy Treasury bonds B) Buy Treasury bond futures C) Short Treasury bond futures D) Buy
Treasury bond call options
✅ Answer: C Explanation: When interest rates rise, bond prices fall. Shorting Treasury bond
futures profits when bond prices decline (i.e., when rates rise). Buying bonds or call options on
bonds would lose value if rates rise.
Q5. Which SRO (Self-Regulatory Organization) oversees broker-dealers in the United
States?
A) The Federal Reserve B) The SEC C) FINRA D) The FDIC
✅ Answer: C Explanation: FINRA is the primary SRO that oversees broker-dealers in the
U.S. The SEC is the government regulator that oversees FINRA, but FINRA itself directly
regulates member firms and their registered representatives.
Q6. A bond is trading at a premium. This means the bond's coupon rate is:
A) Lower than the current yield B) Equal to the yield to maturity C) Higher than the current
market interest rate D) The same as the par value
✅ Answer: C Explanation: A bond trades at a premium when its coupon rate is higher than
prevailing market interest rates. Investors pay more than par value because the bond pays a
higher interest rate than new bonds being issued.
Q7. Which of the following is considered a 'non-cash' compensation item that is generally
prohibited under FINRA rules?
A) A $20 gift card from a vendor B) Salary paid to a registered representative C) Training and
education expenses approved by the member firm D) A $150 gift basket from a client
✅ Answer: D Explanation: FINRA Rule 3220 limits non-cash gifts to $100 per person per
year. A $150 gift basket exceeds this limit and would be prohibited. Nominal gifts under $100,
firm-approved training, and normal salaries are permissible.
Q8. What does the term 'Regulation T' govern?
, A) Insider trading activity B) The amount of credit brokers can extend to customers for
purchasing securities C) Reporting requirements for large trades D) Customer complaint
procedures
✅ Answer: B Explanation: Regulation T, issued by the Federal Reserve, governs the extension
of credit by brokers and dealers. Currently, it requires customers to deposit at least 50% of the
purchase price of securities bought on margin.
Q9. Which of the following is an example of a 'selling away' violation?
A) A registered rep sells mutual funds approved by their firm B) A registered rep recommends a
stock listed on the NYSE C) A registered rep sells a private placement without notifying or
getting approval from their firm D) A registered rep charges a higher commission than usual
✅ Answer: C Explanation: 'Selling away' occurs when a registered representative conducts
securities transactions outside the scope of their firm's knowledge and approval. This is a serious
violation that can result in termination and regulatory action.
Q10. Under the Securities Exchange Act of 1934, which of the following must register with
the SEC?
A) Investment advisers with fewer than 15 clients B) Hedge funds with under $150 million in
assets C) Broker-dealers conducting business with the public D) Insurance companies selling
annuities
✅ Answer: C Explanation: The Securities Exchange Act of 1934 requires broker-dealers who
conduct business with the public to register with the SEC. This act also created the SEC itself
and established rules governing secondary market trading.
Q11. Which of the following is NOT a money market instrument?
A) Treasury bills B) Commercial paper C) Common stock D) Certificates of deposit
✅ Answer: C Explanation: Common stock is an equity security, not a money market
instrument. Money market instruments are short-term debt securities with maturities of one year
or less, including T-bills, commercial paper, and CDs.
Q12. An investor who buys a put option has the right to:
A) Buy shares at the strike price before expiration B) Sell shares at the strike price before
expiration C) Receive dividends on the underlying stock D) Vote at shareholder meetings
