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UPDATED FINRA SIE Exam Questions & Answer

NEW QUESTION # 90
A registered representative must complete which of the following activities when entering a discretionary trade?

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

Answer: B

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 correctbecause marking the order ticket ensures compliance with supervisory requirements.
* Ais incorrect because discretionary authority is not limited to market orders.
* Cis incorrect as discretionary trades do not require pre-approval for each trade but require prior written authorization.
* Dis incorrect because discretionary authority allows the RR to decide on price and timing without specific customer instructions.

NEW QUESTION # 91
Publicly traded limited partnership interests are typically considered:

• A. Mutual funds
• B. Fixed-income securities
• C. Equity securities
• D. Derivative investments

Answer: C

Explanation:
Step by Step Explanation:
* Publicly Traded Limited Partnerships (PTPs): Represent ownership stakes, which categorize them as equity securities. PTPs often involve sectors like real estate or energy.
* Incorrect Options:
* A: Mutual funds are pooled investment vehicles, not partnerships.
* C: Fixed-income securities are debt instruments like bonds.
* D: Derivatives include options or futures, not ownership stakes.
References:
* SEC Guidance on Publicly Traded Partnerships: SEC PTPs.

NEW QUESTION # 92
Which of the following entities settles broker-to-broker equity, listed corporate and municipal bond, and unit investment trust (UIT) transactions in the U.S. equities markets?

• A. National Securities Clearing Corporation (NSCC)
• B. Federal Reserve
• C. FINRA
• D. SEC

Answer: A

Explanation:
Step by Step Explanation:
* National Securities Clearing Corporation (NSCC): A subsidiary of the Depository Trust & Clearing Corporation (DTCC), the NSCC handles the clearance and settlement of broker-to-broker equity, corporate bond, municipal bond, and UIT transactions.
* Incorrect Options:
* A: The SEC oversees regulatory compliance but does not settle trades.
* B: FINRA is a self-regulatory organization, not a clearing entity.
* C: The Federal Reserve manages monetary policy and banking but is not involved in securities settlement.
References:
* DTCC Overview of NSCC: DTCC NSCC.

NEW QUESTION # 93
An investor owns 100 shares of a company's stock and is very interested in electing a particular individual to the board of directors of the corporation. There are 20 individuals running to fill 10 board seats. If the corporation uses the cumulative voting method, what is the maximum number of votes the investor is permitted to cast for this particular director?

• A. 1,000 votes
• B. 100 votes
• C. 2,000 votes
• D. 50 votes

Answer: A

Explanation:
In cumulative voting, shareholders can allocate all their votes to a single candidate. The total number of votes is calculated by multiplying the number of shares owned by the number of seats available:
* Total votes = 100 shares × 10 seats =1,000 votes.
* The investor can allocate all votes to one candidate.
* C is correctbecause cumulative voting allows all votes to be concentrated.

NEW QUESTION # 94
The formation of an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans is known as:

• A. Hypothecation
• B. Claim processing
• C. Securitization
• D. Loan processing

Answer: C

Explanation:
Step by Step Explanation:
* Securitization: The process of pooling financial assets, such as mortgage loans, and creating asset- backed securities that investors can buy.
* Incorrect Options:
* B: Hypothecation refers to pledging assets as collateral.
* C & D: Loan and claim processing are administrative terms, not related to the creation of securities.
References:
* SEC Guidance on Asset-Backed Securities: SEC ABS Info.

NEW QUESTION # 95
Under the Investment Company Act of 1940, which of the following products are considered redeemable securities?

• A. Short-term paper
• B. Master limited partnerships
• C. Shares issued by a closed-end investment company
• D. Shares of unit investment trusts (UITs) purchased through a public offering

Answer: D

Explanation:
Redeemable securities are those that can be sold back to the issuer.
* D is correctbecause unit investment trusts (UITs) issue redeemable securities.
* Cis incorrect because closed-end fund shares are traded on secondary markets, not redeemable.
* AandBdo not meet the definition of redeemable securities.

NEW QUESTION # 96
SEC regulations permit a company to issue securities exempted from registration requirements of the Securities Act of 1933 under which of the following conditions?

• A. Offerings sold with no more than 40 accredited investors
• B. Offerings sold inside of the U.S. to non-U.S. persons
• C. Offerings with no more than 35 non-accredited investors and an unlimited number of accredited investors
• D. Offerings sold with an aggregate price exceeding $5 million

Answer: C

Explanation:
Step by Step Explanation:
* Regulation D (Rule 506(b)): Allows offerings to an unlimited number of accredited investors and up to
35 non-accredited investors, provided certain disclosure requirements are met.
* Incorrect Options:
* A: Refers to Regulation S, which governs offshore offerings, not domestic exemptions.
* B: There is no 40-investor limit in Regulation D.
* C: The $5 million limit applies to Rule 504, not Rule 506(b).
References:
* SEC Regulation D: SEC Regulation D.

NEW QUESTION # 97
Which of the following rates is subject to the most frequent changes?

• A. Prime
• B. Call loan
• C. Federal funds
• D. Discount

Answer: C

Explanation:
The federal funds rate, which is the interest rate banks charge each other for overnight loans, changes frequently due to daily fluctuations in bank reserves and market conditions.
* D is correctas it is the most sensitive to short-term market forces.
* A,B, andCchange less frequently.

NEW QUESTION # 98
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. Selling away
• B. Front running
• C. Market manipulation
• D. Insider trading

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.
References:
* FINRA Rule 5270 (Front Running of Block Transactions): FINRA Rule 5270.

NEW QUESTION # 99
An associated person at a member firm receives a complaint from a customer involving allegations of forgery.
Once the complaint is received, which of the following actions is required?

• A. The member firm must have a principal review the complaint and determine if the forgery occurred before filing a report with FINRA.
• B. The member firm must report the event promptly to FINRA.
• C. The member firm is not required to report the event to FINRA but must maintain a file of the complaint for four years.
• D. The member firm must complete arbitration to resolve the complaint with the customer before filing a report with FINRA.

Answer: B

Explanation:
Step by Step Explanation:
* FINRA Rule 4530: Requires member firms to report certain events, including allegations of forgery, to FINRA promptly.
* Incorrect Options:
* Option B: Maintaining a record does not substitute for required reporting.
* Option C: Arbitration isn't required before reporting.
* Option D: Reporting is mandatory irrespective of internal investigations.
References:
* FINRA Rule 4530 (Reporting Requirements): FINRA Rule 4530.

NEW QUESTION # 100
A customer owns 100 shares of ABC with a current market value of $5.00 per share. The company undergoes a 1-for-2 reverse split of the stock. Which of the following statements is true of the customer's holdings and the price of the stock?

• A. The customer will have 1,000 shares at $0.50 per share.
• B. The customer will have 50 shares at $10.00 per share.
• C. The customer will have 200 shares at $2.50 per share.
• D. The customer will have 100 shares at $5.00 per share.

Answer: B

Explanation:
Step by Step Explanation:
* Reverse Split Calculation: A 1-for-2 reverse split reduces the number of shares by half while doubling the price per share.
* Pre-Split Holdings: 100 shares at $5.00 = $500.
* Post-Split Holdings: 50 shares at $10.00 = $500.
* Incorrect Options: The total value remains unchanged; only the number of shares and price per share adjust.
References:
* FINRA Corporate Actions Guidance: FINRA Reverse Splits.

NEW QUESTION # 101
Offering 403(b) tax-sheltered annuity accounts to which of the following groups is permissible?

• A. Volunteer workers
• B. Small business owners
• C. Active duty military personnel
• D. Employees of a nonprofit hospital

Answer: D

NEW QUESTION # 102
Which of the following terms describes an offer to purchase some or all shareholders' shares in a corporation, usually at a premium to the market price?

• A. Redemption
• B. Tender
• C. Stock split
• D. Class action

Answer: B

Explanation:
Step by Step Explanation:
* Tender Offer Definition: A tender offer is an offer to purchase a certain number of shares from shareholders, typically at a price above the current market value. This is often part of mergers, acquisitions, or corporate takeovers.
* Stock Split: A stock split increases the number of shares but decreases the price per share without affecting the total value of an investor's holdings.
* Redemption: Redemption refers to the repayment of a bond or preferred stock at maturity or at a predetermined date.
* Class Action: A class action is a lawsuit filed by a group of people with similar grievances.
References:
* SEC Rule 14e on tender offers: SEC Tender Offers.

NEW QUESTION # 103
When is a newly registered person subject to the Continuing Education Regulatory Element requirement?

• A. The calendar year following initial registration
• B. Every five years
• C. Every three years after the date of registration
• D. On the anniversary date of initial registration

Answer: D

Explanation:
Step by Step Explanation:
* Regulatory Element Requirement: Newly registered persons must complete the Continuing Education (CE) Regulatory Element on the second anniversary of their initial registration and every three years thereafter.
* Incorrect Options:
* A: The requirement begins on the second anniversary, not the following calendar year.
* D: The cycle is every three years, not five.
References:
* FINRA Rule 1240 (Continuing Education): FINRA Rule 1240.

NEW QUESTION # 104
Which of the following statements is true regarding the SEC's characterization of a registration statement that has just been made effective?

• A. The SEC has not passed judgment on the merits of the security being offered for sale.
• B. The SEC has determined that no material information has been omitted.
• C. The SEC has found the information presented to be true and accurate.
• D. The SEC has approved the security being offered for sale.

Answer: A

Explanation:
Step by Step Explanation:
* SEC Registration Statements: The SEC reviews registration statements for completeness and compliance but does not judge the merits, approve, or endorse the securities being offered.
* Other Options:
* A, B, and C: Misrepresent the SEC's role in the registration process.
References:
* SEC Bulletin on Registration Statements: SEC Registration Process.

NEW QUESTION # 105
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