Finra SIE Exam Practice Test Instant Access

Question 1

When are registered persons required to fulfill their Continuing Education (CE) Regulatory Element requirement?

AAnnually

BSemiannually

CAfter the initial three-year requirement and then every two years

DUpon the receipt of a customer complaint

Answer : C

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.

Question 2

What is the sales load of an open-end investment company with a net asset value (NAV) of $14.35 and a public offering price (POP) of $15.50?

A7.40%

B8.00%

C8.50%

D9.25%

Answer : C

The sales load is calculated as a percentage of the POP, using the formula:

Sales load = (POP NAV) POP 100

POP = $15.50, NAV = $14.35.

Sales load = ($15.50 $14.35) $15.50 100 = 8.50%.

C is correct because the calculation results in an 8.50% load.

A, B, and D are incorrect due to incorrect calculations.

Question 3

A customer receives a confirmation that discloses the firm has acted in a principal capacity. Which of the following statements is the best explanation for this disclosure?

AThe firm is selling to the customer from its inventory.

BThe firm is acting as an intermediary between the customer and an unrelated firm.

CThe firm is acting as an intermediary between the customer and another customer.

DThe firm matched the customer's purchase with a sell order listed on an electronic communication network (ECN).

Answer : A

When a firm acts in a principal capacity, it trades securities for its own account, buying or selling directly to or from its inventory. The firm's role differs from an agency capacity, where it acts as an intermediary.

A is correct because principal capacity involves selling directly from the firm's inventory.

B, C, and D are incorrect because these scenarios describe agency transactions, where the firm facilitates trades between two parties.

Question 4

The primary market is regulated by the SEC under which of the following acts?

AThe Securities Act of 1933

BThe Securities Exchange Act of 1934

CThe Investment Advisers Act of 1940

DThe Investment Company Act of 1940

Answer : A

The primary market deals with the issuance of new securities, which is regulated under the Securities Act of 1933. This act requires issuers to provide full disclosure of material information to investors to ensure transparency and fairness in new offerings.

A is correct because the Securities Act of 1933 governs initial offerings.

B is incorrect because the Securities Exchange Act of 1934 regulates secondary market trading.

C is incorrect because the Investment Advisers Act of 1940 pertains to investment advisers.

D is incorrect because the Investment Company Act of 1940 governs mutual funds and other investment companies.

Question 5

A registered representative (RR) has a referral relationship with a family friend who is not affiliated with the financial industry. In the absence of a formal agreement, which of the following ways is the RR permitted to compensate the family friend for referrals?

AThe RR is permitted to split commissions with the family friend.

BThe RR is permitted to pay a flat-rate referral fee to the family friend.

CThe RR is permitted to take the family friend out to dinner as a way to say thank you.

DThe RR is permitted to give the family friend prepaid credit cards equal to 50% of the commissions earned on the referrals.

Answer : C

FINRA prohibits the payment of referral fees or splitting of commissions with individuals who are not registered with a broker-dealer. However, taking a friend out to dinner as a gesture of gratitude is allowed, as it does not involve cash or monetary compensation directly tied to the referral.

C is correct because non-monetary expressions of gratitude (like a dinner) are permitted under FINRA rules.

A is incorrect because commission splitting with unregistered individuals is prohibited.

B is incorrect because paying referral fees is also prohibited without registration.

D is incorrect because giving prepaid credit cards tied to commission income violates compensation rules.

Question 6

Which of the following characteristics best describes a benefit of a variable annuity subaccount?

AThe account is managed by a third-party custodian and is, therefore, subject to lower management fees than those charged by the insurance company.

BThe account is held at a broker-dealer that is separate from the insurance company, thereby allowing tax-deferred investments in all types of securities products.

CThe account is held separately from the insurance company's general account and, therefore, is protected from the claims of general creditors of the insurance company.

DThe account represents the indebtedness of the insurance company that is subordinated to the claims of general creditors and, therefore, offers investors a higher rate of return.

Answer : C

Variable annuity subaccounts are held in separate accounts, distinct from the insurance company's general account. This separation protects subaccount assets from claims by creditors in case the insurance company becomes insolvent.

C is correct because the separate account ensures creditor protection.

A is incorrect as management fees for variable annuities are often higher.

B is incorrect because the subaccounts are not held at broker-dealers.

D is incorrect as subaccounts do not represent subordinated debt.

Question 7

Which of the following activities is a responsibility of a mutual fund transfer agent?

AUnderwriting new shares of securities

BDistributing the fund's prospectus to investors

CMaintaining custody of the fund's securities

DMaintaining records of shareholder purchases and redemptions

Answer : D

A transfer agent is responsible for maintaining accurate records of shareholder purchases, redemptions, and account balances. They also handle the issuance and cancellation of shares and ensure shareholders receive appropriate distributions.

D is correct because maintaining shareholder records is a core duty of a transfer agent.

A is incorrect because underwriting is the responsibility of a broker-dealer.

B is incorrect because distributing the prospectus is handled by the fund's distributor.

C is incorrect because custody of securities is the role of a custodian, not the transfer agent.

Finra SIE Securities Industry Essentials Exam Practice Test