SIE Free Exam Questions and Answers PDF Updated on Sep-2026
Latest SIE Exam Dumps Recently Updated 412 Questions
NEW QUESTION # 157
A registered representative has identified a risky investment he feels is suitable for one of his customers. He has discussed the investment with the customer, and the customer agreed to purchase the security. Given the risk factors, the representative's firm requires the customer's signature on a form that reflects the customer understands the investment. The representative signs the form on behalf of the customer using a digital signature platform. The representative authenticates the signature using information that the customer had provided on the new account form when the account was opened two years ago. Which of the following statements best describes the permissibility of the representative's action?
- A. The representative's actions are permissible since the form is for internal use only by the representative' s firm.
- B. The representative's actions are impermissible since the representative is prohibited from signing on the customer's behalf.
- C. The representative's actions are permissible since the customer provided the information necessary to authenticate the digital signature.
- D. The representative's actions are impermissible since the information the representative used to authenticate the signature was two years old.
Answer: B
Explanation:
A registered representative may not sign a customer's name or apply a customer's digital signature on the customer's behalf, even if the customer verbally agreed to the transaction or previously provided identifying information. Choice C is correct because the prohibited conduct is the representative's act of signing for the customer. The issue is not whether the form is internal, whether the investment is suitable, or whether the authentication information was accurate. Customer signatures evidence customer review, consent, and acknowledgment. Allowing a representative to sign for the customer undermines books and records integrity and creates a false record. Choice A is incorrect because internal firm documents still must be accurate and authentic. Choice B is incorrect because possessing authentication information does not authorize the representative to impersonate the customer. Choice D is too narrow; the action would be impermissible even if the authentication information were current. The SIE outline includes falsifying or withholding documents, signatures of convenience, books and records, suitability, and prohibited activities related to account documentation. This falls directly under improper maintenance of records and falsification concerns.
Reference: Understanding Trading, Customer Accounts and Prohibited Activities; Prohibited Activities; Falsifying Documents; Books and Records.
NEW QUESTION # 158
Which of the following statements is true regarding the difference in treatment between common stock and preferred stock?
- A. Common stock is a lower priority compared to preferred stock under a bankruptcy proceeding.
- B. Common stock and preferred stock are treated the same under a bankruptcy proceeding.
- C. Common stock dividend payment is treated as a higher priority over that of preferred stock.
- D. Common stock and preferred stock are treated the same when it comes to payment of dividends.
Answer: A
Explanation:
Step by Step Explanation:
* Priority in Bankruptcy: Preferred stockholders have a higher claim on a company's assets than common stockholders during liquidation. Common stockholders are residual claimants.
* Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.
* Incorrect Options:
* A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.
* C: Common stock dividends are subordinate to preferred stock dividends.
References:
* SEC Guidance on Stockholder Rights: SEC Stock Rights.
NEW QUESTION # 159
Which of the following statements is true regarding American Depositary Receipts?
- A. American Depositary Receipts are not subject to political risk.
- B. American Depositary Receipts pay dividends in U.S. dollars.
- C. American Depositary Receipts offer a one-for-one conversion from U.S. shares to foreign shares.
- D. American Depositary Receipts are not subject to currency fluctuations.
Answer: B
Explanation:
American Depositary Receipts, or ADRs, represent ownership interests in shares of a foreign issuer and trade in U.S. markets in U.S. dollars. Dividends paid by the foreign issuer are converted by the depositary bank into
U.S. dollars before being distributed to ADR holders. Therefore, choice A is correct. ADRs are still subject to political risk because changes in the foreign issuer's home country, including political instability, capital controls, sanctions, or regulatory changes, may affect the issuer and the investment. Choice C is incorrect because ADR investors remain exposed to currency risk. Even though the ADR trades and pays dividends in
U.S. dollars, the value of the underlying foreign shares and dividends may be affected by exchange-rate movements. Choice D is incorrect because ADR ratios vary. One ADR may represent one foreign share, multiple shares, or a fraction of a share, depending on the ADR program. The SIE outline includes ADRs under equity securities and separately identifies currency, political, market, and other risks under investment risks. This question tests both product structure and international risk exposure. Reference: Section 2.1.1 Equity Securities, ADRs; Section 2.2 Investment Risks.
NEW QUESTION # 160
Which of the following statements concerning nonqualified deferred compensation plans is true?
- A. Such plans must be reviewed with the IRS.
- B. They are governed by ERISA rules.
- C. The deferred compensation must be held in escrow at a bank.
- D. A failure of the business could lead to nonpayment of the deferred compensation.
Answer: D
Explanation:
Nonqualified deferred compensation (NQDC) plans allow employees to defer income until a future date.
* D is correct because NQDC funds remain part of the company's general assets, which creditors may claim if the company goes bankrupt.
* A is incorrect as NQDC plans are not subject to ERISA rules.
* B is incorrect because these plans do not require IRS review.
* C is incorrect as NQDC assets are not required to be held in escrow.
Reference: IRS Code Section 409A
NEW QUESTION # 161
A registered representative is positive about the prospects of Company ABC, a publicly traded corporation.
He wants to send an email to his customers about the company's stock. Which of the following statements in that email is prohibited?
- A. "The stock has paid a quarterly dividend for the past 20 years."
- B. "According to the attached research report, our firm has rated the stock a strong Buy."
- C. "ABC has recently changed management. The new chief executive officer has 12 years of experience in ABC's industry."
- D. "There is strong demand for ABC stock, and it will hit $50 per share, a 20% increase, by May of this year."
Answer: D
Explanation:
Communications with the public must be fair, balanced, and not misleading. A registered representative may not make exaggerated, unwarranted, promissory, or predictive statements that imply certainty about future market performance. Choice D is prohibited because it states that the stock "will hit $50 per share" by a specific month. That is a definitive price prediction and creates an improper guarantee-like impression about future performance. Choice A is a factual historical statement if accurate. Choice B references a firm research rating and may be permissible if the research report is properly approved and included with appropriate disclosures. Choice C provides factual information about management experience and is not inherently prohibited if accurate and not misleading. The SIE outline includes communications with the public, general requirements, prohibited manipulative or deceptive devices, and suitability/best interest communications. It also lists FINRA Rule 2210, Communications with the Public, and SEC antifraud provisions as relevant rules.
The central rule is that sales communications may discuss opinions and facts, but they cannot promise or guarantee a specific future price. Reference: Section 3.2.5 Communications with the Public; FINRA Rule
2210; Section 3.3 Prohibited Activities.
NEW QUESTION # 162
Which of the following security types is frequently offered to the public as part of a package or unit that also includes a fixed income obligation?
- A. Common stock
- B. Options
- C. Preferred stock
- D. Warrants
Answer: D
Explanation:
Step by Step Explanation:
* Warrants: Are often issued alongside fixed-income securities, such as bonds, to enhance their appeal to investors. Warrants give the holder the right to purchase company stock at a specific price in the future.
* Incorrect Options:
* Options: Not typically bundled with fixed-income securities.
* Common and Preferred Stock: Usually issued separately, not as part of a package with bonds.
:
SEC Guide on Warrants: SEC Warrants Information.
NEW QUESTION # 163
Which of the following documents must a firm provide to a customer upon the purchase of a mutual fund?
- A. A third-party research report
- B. The firm's annual report
- C. The fund's prospectus
- D. The statement of additional information
Answer: C
Explanation:
When a customer purchases shares of an open-end investment company (a mutual fund), the firm must provide the fund's prospectus-either delivered with the transaction or made available in a manner permitted by the applicable delivery rules. The prospectus is the primary disclosure document designed to inform investors about the fund's investment objectives, strategies, risks, fees and expenses, management, and other essential features. Because mutual funds are regulated investment companies, investors must receive standardized disclosures so they can evaluate what they are buying and understand ongoing costs such as the expense ratio, sales charges (if any), and potential distribution/service fees.
Choice B is incorrect because a firm's annual report is about the broker-dealer's business (and even if the fund has an annual report, that is not the required purchase-delivery document in the way the prospectus is).
Choice C is incorrect because a third-party research report may be helpful but is not a required disclosure document for mutual fund purchases. Choice D is incorrect because the Statement of Additional Information (SAI) contains expanded details that supplement the prospectus, but it is typically available upon request rather than being the standard document that must be delivered to complete a sale.
For SIE purposes, you should remember the hierarchy: the prospectus is the central investor disclosure document for registered offerings and packaged products like mutual funds. It provides the material information investors need, and delivery obligations support the principle of full and fair disclosure rather than merit-based approval by regulators. The SIE content outline emphasizes disclosures, costs, and investor protections related to investment company products, including the role of offering documents and required information for purchasers.
NEW QUESTION # 164
Which of the following statements is true regarding 529 savings plans?
- A. There are income limitations for contributing to a 529 savings plan.
- B. 529 contributions are tax deductible in all states.
- C. Assets are transferable to another 529 savings plan tax-free if the new beneficiary is a family member of the current beneficiary.
- D. The account beneficiary has control over the assets in a 529 savings plan.
Answer: C
Explanation:
529 savings plans are state-sponsored education savings accounts that offer tax-advantaged growth. Key features include:
* Contributions are not federally tax deductible (some states offer state-level deductions).
* No income limitations for contributions.
* The account owner, not the beneficiary, controls the plan.
* Assets can be transferred tax-free to another family member's 529 plan.
* D is correct because tax-free rollovers are allowed for family members of the current beneficiary.
* A is incorrect as contributions are not universally tax deductible.
* B is incorrect as there are no income limitations for contributing.
* C is incorrect because the account owner, not the beneficiary, controls the assets.
Reference: IRS Publication 970: Tax Benefits for Education
NEW QUESTION # 165
Which of the following is considered nonpublic information?
- A. Customer's name
- B. Customer's address
- C. Customer's net worth
- D. Customer's telephone number
Answer: C
Explanation:
Step by Step Explanation:
* Nonpublic Information: A customer's net worth is nonpublic personal information that requires confidentiality under Regulation S-P.
* Incorrect Options:
* A, B, and D: Names, addresses, and phone numbers may be public unless linked to specific financial or personal details.
References:
* SEC Regulation S-P (Privacy of Consumer Financial Information): SEC Regulation S-P.
NEW QUESTION # 166
In performing fundamental analysis of an equity, which of the following elements should an investor consider?
- A. Resistance and support levels
- B. Moving average
- C. Chart patterns
- D. Financial statements
Answer: D
Explanation:
Fundamental analysis focuses on evaluating a company's underlying business and financial condition to estimate its intrinsic value. The most direct and essential inputs for fundamental analysis are the company's financial statements, which is why C is correct. Financial statements-primarily the balance sheet, income statement, and cash flow statement-help an investor assess profitability, financial strength, leverage, liquidity, and cash generation. From these statements, investors can derive ratios and measures such as earnings growth, profit margins, debt-to-equity, current ratio, and operating cash flow trends, all of which help evaluate whether the stock is undervalued or overvalued relative to the company's fundamentals.
Choices A, B, and D are all technical analysis concepts, not fundamental analysis. Chart patterns (A) and resistance/support levels (D) are based on historical price behavior and market psychology. A moving average (B) is a technical indicator that smooths price data to identify trends and potential entry/exit signals. While technical tools can be used by traders, they do not analyze the company's earnings capacity, competitive position, or financial stability.
On the SIE, the distinction is commonly tested:
* Fundamental analysis = company/industry/economic factors and financial statement evaluation
* Technical analysis = price/volume patterns and indicators
If the question asks what an investor should consider for fundamental analysis, you should immediately look for items tied to the company's business performance and financial health-most directly, financial statements.
NEW QUESTION # 167
Which of the following information must be disclosed on a confirmation?
- A. Compensation the firm pays to the registered representative
- B. Total trading volume in that security on trade day
- C. The trading price range for the day
- D. Whether the firm is acting as principal or agent on the trade
Answer: D
Explanation:
A customer confirmation must disclose whether the broker-dealer acted as principal or agent in the transaction. Trade capacity is a key disclosure because it tells the customer whether the firm executed the trade from or for its own account, or whether it acted as an intermediary for the customer. Choice C is correct.
If the firm acts as agent, it generally charges a commission. If it acts as principal, it buys from or sells to the customer and may earn a markup or markdown. Choice A is incorrect because the daily trading price range is not a standard required confirmation disclosure. Choice B is incorrect because total trading volume for the security is not required on the customer confirmation. Choice D is incorrect because representative-specific compensation is not the general required confirmation disclosure stated in this question. The SIE outline includes customer confirmations, trade capacity, principal versus agency trading, commissions, markups, and books and records requirements. It also lists SEC Rule 10b-10 and FINRA Rule 2232 on customer confirmations. Reference: Section 3.1.1 Orders and Strategies; Section 3.2.4 Books and Records; SEC Rule
10b-10; FINRA Rule 2232.
NEW QUESTION # 168
For purposes of confidentiality, a customer wants to open an account designated by number only. The registered representative must:
- A. Not open the account because it is a violation of SEC rules.
- B. Not open the account because it is a violation of the USA PATRIOT Act.
- C. Obtain the customer's most recent tax returns.
- D. Obtain a signed statement from the customer accepting ownership of the account.
Answer: D
Explanation:
A numbered account is permitted if the firm maintains proper ownership records and obtains the required customer acknowledgment. The account may be identified internally or on certain documents by number for confidentiality, but the broker-dealer must still know the customer's true identity and maintain appropriate books and records. The registered representative must obtain a signed statement from the customer accepting ownership of the numbered account. Choice D is correct. Choice A is incorrect because numbered accounts are not categorically prohibited under SEC rules. Choice B is incorrect because anti-money laundering and customer identification obligations do not prohibit all numbered accounts; they require the firm to identify and verify the customer. Choice C is incorrect because tax returns are not the required document for opening a numbered brokerage account. The SIE outline includes anti-money laundering, customer account information, books and records, privacy, and customer protection topics. It also lists FINRA Rule 3250, Designation of Accounts, and FINRA Rule 4512, Customer Account Information, as relevant rules. The technical issue is confidentiality without anonymity: the firm may use a number, but it must document beneficial ownership.
Reference: Section 3.2.3 AML; Section 3.2.4 Books and Records; FINRA Rules 3250 and 4512.
NEW QUESTION # 169
According to FINRA rules, under which of the following circumstances, if any, is a member firm permitted to send gifts to a registered representative of another member firm?
- A. Under no circumstances
- B. When no single gift exceeds $100 in value and the maximum value of all gifts per year equals $250
- C. When no single gift exceeds $100 and there is no limit on the number of gifts
- D. When the value of all gifts during a period of one year does not exceed $100
Answer: D
Explanation:
Step by Step Explanation:
* FINRA Rule 3220: This rule limits gifts to $100 per person annually to prevent conflicts of interest.
* Aggregate Limit: There is no provision for exceeding the $100 annual limit, regardless of the number of gifts.
* Purpose: The rule ensures that gifts do not influence decisions or create unethical relationships.
References:
* FINRA Rule 3220 (Influencing or Rewarding Employees of Others): FINRA Rule 3220.
NEW QUESTION # 170
A market maker typically trades in which of the following capacities?
- A. Fiduciary
- B. Broker
- C. Principal
- D. Agent
Answer: C
Explanation:
A market maker typically trades as principal. Acting as principal means the firm buys and sells securities for its own account and stands ready to provide liquidity by quoting bid and ask prices. The market maker buys at the bid and sells at the ask, earning the spread as compensation for committing capital and assuming inventory risk. Choice C is correct. An agent or broker acts on behalf of a customer and generally earns a commission rather than trading from inventory. Although a firm can act in different capacities in different transactions, the defining role of a market maker is principal trading. "Fiduciary" describes a legal standard of care, often associated with investment advisers, not the trading capacity of a market maker. The SIE outline identifies traders and market makers as market participants and also requires candidates to understand trade capacity, including principal versus agency. This question tests that distinction directly: brokers arrange trades for others, while dealers and market makers trade for their own accounts. Reference: Section 1.1.4 Market Participants and Their Roles; Section 3.1.1 Orders and Strategies.
NEW QUESTION # 171
Which of the following statements is a characteristic of a government bond fund?
- A. Government bond funds are diversified.
- B. If interest rates fall, the net asset value (NAV) of the fund will likely drop as well.
- C. The value of the fund is not guaranteed by the government or any federal agency.
- D. Dividend/interest payments will be the same each month.
Answer: C
Explanation:
Step by Step Explanation:
* Government Bond Funds: Invest in government-backed securities, but the value of the fund itself is not guaranteed by the government, as these funds are subject to market risks.
* Incorrect Options:
* A: Diversification depends on the fund's investment strategy.
* B: Interest/dividend payments may fluctuate.
* C: If interest rates fall, NAVs typically rise, not drop.
References:
* SEC Guidance on Mutual Funds: SEC Government Bond Funds.
NEW QUESTION # 172
A summary prospectus for a mutual fund must contain which of the following information?
- A. Fund's portfolio holdings
- B. Control persons and principal owners of the fund
- C. Investment objectives
- D. Projected return
Answer: C
Explanation:
Step by Step Explanation:
* Summary Prospectus Content: Must include key information such as the fund's investment objectives, risks, fees, and past performance. This helps investors make informed decisions.
* Incorrect Options:
* A: Projected returns are speculative and not included in the prospectus.
* C & D: Detailed portfolio holdings and control persons are included in the full prospectus, not the summary.
References:
* SEC Rule 498 (Summary Prospectuses): SEC Prospectus Requirements.
NEW QUESTION # 173
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