Securities Industry Essentials Exam
The SIE exam assesses a candidate's basic knowledge of the securities industry, including fundamental concepts of securities products, the structure of the securities industry markets, regulatory agencies and their functions, and prohibited practices. It is a prerequisite for all FINRA representative-level registration exams and is open to anyone aged 18 or older -- no firm sponsorship required.
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Practice Questions
Test your knowledge with these SIE-style questions. Click an answer to check if you are correct.
1. Which of the following is a self-regulatory organization (SRO)?
Correct: B. FINRA is a self-regulatory organization that regulates broker-dealers and their registered representatives. The SEC, FRB, and FDIC are all government agencies, not SROs.
2. When interest rates rise, what happens to the price of existing bonds?
Correct: B. Bond prices and interest rates have an inverse relationship. When rates rise, existing bonds with lower coupon rates become less attractive, causing their market prices to decrease.
3. Under Regulation T, what is the initial margin requirement for purchasing securities?
Correct: C. Regulation T, established by the Federal Reserve Board, requires investors to deposit at least 50% of the purchase price as initial margin. The 25% figure refers to the FINRA minimum maintenance margin requirement.
4. A registered representative executes trades in a customer's account without prior authorization to generate commissions. This is an example of:
Correct: B. Churning is the excessive trading in a customer's account primarily to generate commissions for the representative, without regard to the customer's investment objectives. Front running involves trading ahead of a client order, selling away is conducting business outside the firm, and parking is hiding the true ownership of securities.
5. Which securities legislation is primarily concerned with regulating the issuance of new securities in the primary market?
Correct: A. The Securities Act of 1933 (the "Paper Act") regulates new issuances in the primary market, requiring registration and prospectus delivery. The 1934 Act regulates secondary market trading, while the 1940 Acts address investment companies and investment advisers respectively.
Related Exams
After passing the SIE, you will need to pass one or more of these representative-level exams to complete your registration.
General Securities Representative
The most common next step after the SIE. Qualifies you to sell a broad range of securities products including stocks, bonds, options, and packaged products.
Uniform Securities Agent State Law
Required in most states in addition to the Series 7. Covers state securities regulations, registration requirements, and ethical practices.