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FINRA SIE Exam 150 Complete Q&A – 2025/2026 Edition
–Verified Questions and Correct Answers | A+ Graded
This comprehensive practice test bank is based on the official FINRA Securities
Industry Essentials (SIE) exam content outline. Each question includes the
correct answer and a detailed rationale to help you master the material. The
actual SIE exam consists of 75 multiple-choice questions (plus 10 unscored
pretest questions), to be completed in 1 hour and 45 minutes. A passing score
is 70% (roughly 53 correct answers).
The exam content is broken down into four major sections:
• Knowledge of Capital Markets (16% of exam)
• Understanding Products and Their Risks (44%)
• Understanding Trading, Customer Accounts and Prohibited
Activities (31%)
• Overview of Regulatory Framework (9%)
Section 1: Knowledge of Capital Markets (Questions 1–24)
1. Which of the following best describes the role of the primary market?
A) Investors trade existing securities among themselves.
B) Securities are issued for the first time to raise capital for the issuer.
C) Only government bonds are traded.
D) Transactions occur exclusively through auction markets.
: Answer : B
Explanation: The primary market is where securities are initially issued by
companies or governments to raise capital. Proceeds go to the issuer. Secondary
markets (A) involve trading existing securities among investors.
pg. 1
,2
2. Which federal law primarily regulates the secondary trading of securities?
A) Securities Act of 1933
B) Securities Exchange Act of 1934
C) Investment Company Act of 1940
D) Dodd-Frank Wall Street Reform Act
: Answer : B
Explanation: The Securities Exchange Act of 1934 created the SEC and governs
the secondary trading of securities, including broker-dealer regulation and
reporting requirements. The 1933 Act (A) covers initial offerings. The 1940 Act (C)
regulates investment companies.
3. A broker-dealer that acts as a middleman in a trade, buying and selling from its
own inventory, is acting as a(n):
A) Agent
B) Principal
C) Market maker
D) Underwriter
: Answer : B
Explanation: When a broker-dealer trades from its own account (inventory), it
acts as a principal. When it facilitates a trade between two customers without
taking ownership, it acts as an agent.
4. The Securities and Exchange Commission (SEC) has all the following powers
EXCEPT:
A) Registering new securities issues.
B) Enforcing securities laws against violators.
C) Setting interest rates for the economy.
D) Overseeing public company financial reporting.
: Answer : C
Explanation: Interest rates are set by the Federal Reserve Board, not the SEC. The
SEC regulates securities markets, registers securities, and enforces federal
securities laws.
pg. 2
,3
5. Which of the following is NOT an SRO (Self-Regulatory Organization)?
A) FINRA
B) MSRB
C) SEC
D) CBOE
: Answer : C
Explanation: The SEC is a government agency, not an SRO. FINRA, the Municipal
Securities Rulemaking Board (MSRB), and the Chicago Board Options Exchange
(CBOE) are all SROs that enforce rules within their specific markets.
6. A company’s initial public offering (IPO) occurs in which market?
A) Primary market
B) Secondary market
C) Tertiary market
D) Third market
: Answer : A
Explanation: An IPO is the first sale of stock by a private company to the public.
This transaction occurs in the primary market.
7. Under the Securities Act of 1933, a registration statement becomes effective:
A) Immediately upon filing with the SEC.
B) After 20 days unless the SEC issues a stop order.
C) Only after the SEC approves the merits of the investment.
D) When the company issues a final prospectus.
: Answer : B
Explanation: The 1933 Act includes a 20-day cooling-off period during which the
SEC reviews the registration statement. Unless a stop order is issued, the
registration becomes effective after 20 days.
pg. 3
, 4
8. Which of the following statements about FINRA is TRUE?
A) FINRA is a government agency under the Department of Treasury.
B) FINRA is responsible for setting the federal funds rate.
C) FINRA writes and enforces rules governing broker-dealers and registered
representatives.
D) FINRA primarily regulates the banking industry.
: Answer : C
Explanation: FINRA is a self-regulatory organization (SRO) that writes and
enforces rules for broker-dealers and their associated persons. It is not a
government agency.
9. Rule 144 under the Securities Act of 1933 governs:
A) The resale of restricted and control securities.
B) The registration of investment companies.
C) The margin requirements for stocks.
D) The disclosure requirements for proxy statements.
: Answer : A
Explanation: Rule 144 provides a safe harbor for the resale of restricted
securities (acquired in unregistered private placements) and control
securities (held by affiliates).
10. An SEC Rule 506(b) offering may raise capital from:
A) Only accredited investors.
B) An unlimited number of accredited investors and up to 35 non-accredited
investors.
C) Only non-accredited investors.
D) Only foreign investors.
: Answer : B
Explanation: Rule 506(b) allows an unlimited number of accredited investors and
up to 35 non-accredited investors, provided the non-accredited investors receive
disclosure documents.
pg. 4
FINRA SIE Exam 150 Complete Q&A – 2025/2026 Edition
–Verified Questions and Correct Answers | A+ Graded
This comprehensive practice test bank is based on the official FINRA Securities
Industry Essentials (SIE) exam content outline. Each question includes the
correct answer and a detailed rationale to help you master the material. The
actual SIE exam consists of 75 multiple-choice questions (plus 10 unscored
pretest questions), to be completed in 1 hour and 45 minutes. A passing score
is 70% (roughly 53 correct answers).
The exam content is broken down into four major sections:
• Knowledge of Capital Markets (16% of exam)
• Understanding Products and Their Risks (44%)
• Understanding Trading, Customer Accounts and Prohibited
Activities (31%)
• Overview of Regulatory Framework (9%)
Section 1: Knowledge of Capital Markets (Questions 1–24)
1. Which of the following best describes the role of the primary market?
A) Investors trade existing securities among themselves.
B) Securities are issued for the first time to raise capital for the issuer.
C) Only government bonds are traded.
D) Transactions occur exclusively through auction markets.
: Answer : B
Explanation: The primary market is where securities are initially issued by
companies or governments to raise capital. Proceeds go to the issuer. Secondary
markets (A) involve trading existing securities among investors.
pg. 1
,2
2. Which federal law primarily regulates the secondary trading of securities?
A) Securities Act of 1933
B) Securities Exchange Act of 1934
C) Investment Company Act of 1940
D) Dodd-Frank Wall Street Reform Act
: Answer : B
Explanation: The Securities Exchange Act of 1934 created the SEC and governs
the secondary trading of securities, including broker-dealer regulation and
reporting requirements. The 1933 Act (A) covers initial offerings. The 1940 Act (C)
regulates investment companies.
3. A broker-dealer that acts as a middleman in a trade, buying and selling from its
own inventory, is acting as a(n):
A) Agent
B) Principal
C) Market maker
D) Underwriter
: Answer : B
Explanation: When a broker-dealer trades from its own account (inventory), it
acts as a principal. When it facilitates a trade between two customers without
taking ownership, it acts as an agent.
4. The Securities and Exchange Commission (SEC) has all the following powers
EXCEPT:
A) Registering new securities issues.
B) Enforcing securities laws against violators.
C) Setting interest rates for the economy.
D) Overseeing public company financial reporting.
: Answer : C
Explanation: Interest rates are set by the Federal Reserve Board, not the SEC. The
SEC regulates securities markets, registers securities, and enforces federal
securities laws.
pg. 2
,3
5. Which of the following is NOT an SRO (Self-Regulatory Organization)?
A) FINRA
B) MSRB
C) SEC
D) CBOE
: Answer : C
Explanation: The SEC is a government agency, not an SRO. FINRA, the Municipal
Securities Rulemaking Board (MSRB), and the Chicago Board Options Exchange
(CBOE) are all SROs that enforce rules within their specific markets.
6. A company’s initial public offering (IPO) occurs in which market?
A) Primary market
B) Secondary market
C) Tertiary market
D) Third market
: Answer : A
Explanation: An IPO is the first sale of stock by a private company to the public.
This transaction occurs in the primary market.
7. Under the Securities Act of 1933, a registration statement becomes effective:
A) Immediately upon filing with the SEC.
B) After 20 days unless the SEC issues a stop order.
C) Only after the SEC approves the merits of the investment.
D) When the company issues a final prospectus.
: Answer : B
Explanation: The 1933 Act includes a 20-day cooling-off period during which the
SEC reviews the registration statement. Unless a stop order is issued, the
registration becomes effective after 20 days.
pg. 3
, 4
8. Which of the following statements about FINRA is TRUE?
A) FINRA is a government agency under the Department of Treasury.
B) FINRA is responsible for setting the federal funds rate.
C) FINRA writes and enforces rules governing broker-dealers and registered
representatives.
D) FINRA primarily regulates the banking industry.
: Answer : C
Explanation: FINRA is a self-regulatory organization (SRO) that writes and
enforces rules for broker-dealers and their associated persons. It is not a
government agency.
9. Rule 144 under the Securities Act of 1933 governs:
A) The resale of restricted and control securities.
B) The registration of investment companies.
C) The margin requirements for stocks.
D) The disclosure requirements for proxy statements.
: Answer : A
Explanation: Rule 144 provides a safe harbor for the resale of restricted
securities (acquired in unregistered private placements) and control
securities (held by affiliates).
10. An SEC Rule 506(b) offering may raise capital from:
A) Only accredited investors.
B) An unlimited number of accredited investors and up to 35 non-accredited
investors.
C) Only non-accredited investors.
D) Only foreign investors.
: Answer : B
Explanation: Rule 506(b) allows an unlimited number of accredited investors and
up to 35 non-accredited investors, provided the non-accredited investors receive
disclosure documents.
pg. 4
