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Finra SIE Exam Questions
- Topic 1: 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.
- Topic 2: Market Structure: This section of the exam measures the skills of Equity Market Specialists and covers the classification of financial markets, including the primary, secondary, third, and fourth markets. Candidates must demonstrate knowledge of electronic trading, over-the-counter (OTC) markets, and physical exchanges. One specific skill tested is differentiating between various market types and their operational mechanisms.
- Topic 3: 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 4: Understanding Trading, Customer Accounts, and Prohibited Activities: This section of the exam measures the skills of Securities Traders and focuses on different trading strategies, settlement processes, and corporate actions. Candidates must demonstrate knowledge of order types, including market, limit, stop, and good-til-canceled orders, as well as bid-ask spreads and discretionary versus non-discretionary trading.
- Topic 5: 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 6: 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.
Free Finra SIE Exam Actual Questions
Note: Premium Questions for SIE were last updated On Apr. 07, 2025 (see below)
Which of the following is the primary risk of using asset allocation models without periodic rebalancing?
Step by Step Explanation:
Rebalancing: Ensures that a portfolio remains aligned with its target allocation. Without rebalancing, outperforming assets can become overweighted, increasing exposure to specific risks.
Incorrect Options:
Inflation: Impacts purchasing power but isn't tied to rebalancing.
Marketability: Refers to liquidity and isn't linked to allocation models.
Interest Rate Risk: Relates to fixed-income investments and isn't directly addressed by allocation models.
SEC Investor Bulletin on Asset Allocation: SEC Asset Allocation.
A customer purchased 100 shares of Company XYZ common stock five years ago for $20.00 per share. Over the life of her investment, the customer received cash dividends of $2.00 per share, on which she paid total income taxes of $0.50 per share. She recently sold the stock for $30.00 per share. What is the customer's cost basis in each share of XYZ stock?
The cost basis of a stock represents the purchase price and does not include dividends received. Taxes paid on dividends also do not affect the cost basis.
Original purchase price per share = $20.00.
Dividends and taxes on dividends do not adjust the stock's cost basis.
A is correct because the cost basis remains $20.00.
B, C, and D incorrectly assume that dividends or taxes change the cost basis.
When are registered persons required to fulfill their Continuing Education (CE) Regulatory Element requirement?
FINRA's Continuing Education (CE) requirements include the Regulatory Element, which must be completed:
Within 120 days of the second anniversary of a registered representative's initial registration.
Every three years thereafter (changed to every two years as of 2023).
C is correct because registered persons must complete the CE Regulatory Element after their initial requirement and then every two years.
A and B are incorrect because CE is not required annually or semiannually.
D is incorrect because CE is not tied to customer complaints.
Which of the following responses best describes how member firms are required to retain electronic correspondence and internal communications of associated persons?
FINRA Rule 4511 requires member firms to retain records, including electronic communications, in a non-rewriteable, non-erasable format (often referred to as WORM: Write Once, Read Many). This ensures that records cannot be altered or deleted once stored.
D is correct because firms must store records in a tamper-proof format.
A, B, and C are incorrect because these formats do not guarantee compliance with the tamper-proof requirements set forth by FINRA and the SEC.
Which of the following account registration types is subject to probate upon the death of the account owner?
Accounts held individually are subject to probate, which is the legal process of administering the decedent's estate. Probate determines the distribution of assets according to the deceased's will or state intestacy laws.
A is correct because individual accounts require probate to transfer assets.
B is incorrect because irrevocable trusts bypass probate.
C is incorrect because TOD accounts allow direct transfer of assets to named beneficiaries without probate.
D is incorrect because JTWROS accounts transfer ownership to the surviving account holder automatically.
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