SIE Mastery Exam UPDATED ACTUAL
Questions and CORRECT Answers
Seacoast Securities, LLC must maintain a copy of its membership agreement for how many
years?
A) Three years
B) Four years
C) Six years
D) Forever - CORRECT ANSWER - D) Forever
The membership agreement is an organizational document for a limited liability corporation
(LLC), similar to a corporation's articles of incorporation. Although LLCs are not specifically
mentioned in the LEM, organizational documents are discussed. The correct answer may be
reached by a process of elimination and some intuitive thinking.
LO 10.g
A company decided to distribute profits to its shareholders. This distribution takes place on a
date specified by the corporation's board of directors. What type of distribution is this?
A company decided to distribute profits to its shareholders. This distribution takes place on a
date specified by the corporation's board of directors. What type of distribution is this?
A) Dividends
B) Options
C) Bonds
D) Warrants - CORRECT ANSWER - A) Dividends
The distribution of profits to shareholders would generally be in the form of dividends to be
received at the discretion of the board of directors. Bonds and warrants are other types of
securities a company might issue, while options are a derivative product that would not be issued
by the company.
LO 2.c
,Which of the following may not be disclosed to a potential buyer while a security is in
registration?
A) A brokerage report shows the security is properly valued.
B) There will be a road show in NYC in May.
C) The issue is being offered through ABC Investment Bank.
D) The issue is expected to be priced early June. - CORRECT ANSWER - A) A brokerage
report shows the security is properly valued.
Brokerage reports may not be distributed while a security is in registration. Expected dates for
pricing and road shows (due diligence meetings) may be communicated to potential buyers. The
underwriters are named in the issue's registration statement.
LO 1.b
Changes in the overall economy that negatively impact securities values are called
A) nonsystematic risk.
B) unsystematic risk.
C) universal risk.
D) systematic risk. - CORRECT ANSWER - D) systematic risk.
Risks that effect the markets as a whole are systematic risks. Nonsystematic and unsystematic
are different terms for risks that apply to a specific issuer or issue. Universal risk is not a term
used for securities risk.
LO 7.a
An investor has the following position in MES stock: 100 shares at $30. After a 3:1 stock split,
this investor will have
A) 200 shares at $15 per share.
B) 300 shares at $30 per share.
C) 100 shares at $90 per share.
D) 300 shares at $10 per share. - CORRECT ANSWER - D) 300 shares at $10 per share.
,The position's net value will always remain unchanged before and after any split adjustment. In
this case, 100 shares × $30 = $3,000. For an even stock split, the number of shares increases by
the split ratio. Here, given a 3:1 split, 100 shares becomes 300 shares. Because we know the net
value must be unchanged, we divide $3,000 by the new number of shares to calculate the new
price per share ($3,000 ÷ 300 shares) of $10.
LO 2.h
Registered Representative Jan Wu terminated her employment with her broker-dealer 18 months
ago in order to return to school and complete a graduate degree in finance. She has completed
her education and applies for a position with a new broker-dealer firm. She will
A) not be required to retake her exams because she was a full-time student, and there is no time
limit for returning so long as the representative was a full-time student.
B) not be required to retake her qualifying exams.
C) be required to retake her qualifying exams because of the number of changes to her U-4.
D) be required to retake her qualifying exams because more than two years have passed since she
sat for the exams. - CORRECT ANSWER - B) not be required to retake her qualifying
exams.
She has been away from her position with a member firm for less than two years; she is not
required to retest. FINRA does not provide an allowance for full-time studies. She will need to
complete a new U-4, but the number of changes are not relevant (unless there is a disqualifying
event).
LO 12.a
Which of the following may be considered suspicious?
A) Transactions that alone, or in the aggregate, involve at least $2,000
B) Moving large sums of money between accounts with the same last names
C) A client expressing undue concern about substantial commissions being charged to the
account
D) A customer unconcerned about losses - CORRECT ANSWER - D) A customer
unconcerned about losses
, It would not be unusual to transfer money between people with the same last name because they
are presumably family members. However, substantial movement between accounts that are not
related would be suspicious, as would customers not caring about losses. It might be because
they are laundering money.
Concern about substantial commissions is healthy. Transactions that alone, or in the aggregate,
involve at least $5,000 in funds that appear to serve no business or lawful purpose would be
considered suspicious.
LO 11.b
An investment that allows for a share in the income, gains, losses, deductions, and tax credits of
the business entity to pass through to investors while protecting the investors from liability is
known as
A) a limited partnership.
B) a real estate investment trust (REIT).
C) a general partnership.
D) an option. - CORRECT ANSWER - A) a limited partnership.
Both general and limited partnerships pass through to investors (partners) a share in the income,
gains, losses, deductions, and tax credits of the business entity. Limited partnerships shield the
limited partners from liablility incurred by the partnership; general partners have no such
protection.
LO 5.f
A customer of a broker-dealer holding two penny stocks in her account, purchased on unsolicited
trades, should expect to receive an account statement how frequently?
A) Quarterly
B) Only months when a penny stock transaction has occurred
C) Annually
D) Monthly - CORRECT ANSWER - D) Monthly
Regardless of activity in the account, if the account holds any penny stocks, broker-dealers must
provide an account statement to the customer monthly.
Questions and CORRECT Answers
Seacoast Securities, LLC must maintain a copy of its membership agreement for how many
years?
A) Three years
B) Four years
C) Six years
D) Forever - CORRECT ANSWER - D) Forever
The membership agreement is an organizational document for a limited liability corporation
(LLC), similar to a corporation's articles of incorporation. Although LLCs are not specifically
mentioned in the LEM, organizational documents are discussed. The correct answer may be
reached by a process of elimination and some intuitive thinking.
LO 10.g
A company decided to distribute profits to its shareholders. This distribution takes place on a
date specified by the corporation's board of directors. What type of distribution is this?
A company decided to distribute profits to its shareholders. This distribution takes place on a
date specified by the corporation's board of directors. What type of distribution is this?
A) Dividends
B) Options
C) Bonds
D) Warrants - CORRECT ANSWER - A) Dividends
The distribution of profits to shareholders would generally be in the form of dividends to be
received at the discretion of the board of directors. Bonds and warrants are other types of
securities a company might issue, while options are a derivative product that would not be issued
by the company.
LO 2.c
,Which of the following may not be disclosed to a potential buyer while a security is in
registration?
A) A brokerage report shows the security is properly valued.
B) There will be a road show in NYC in May.
C) The issue is being offered through ABC Investment Bank.
D) The issue is expected to be priced early June. - CORRECT ANSWER - A) A brokerage
report shows the security is properly valued.
Brokerage reports may not be distributed while a security is in registration. Expected dates for
pricing and road shows (due diligence meetings) may be communicated to potential buyers. The
underwriters are named in the issue's registration statement.
LO 1.b
Changes in the overall economy that negatively impact securities values are called
A) nonsystematic risk.
B) unsystematic risk.
C) universal risk.
D) systematic risk. - CORRECT ANSWER - D) systematic risk.
Risks that effect the markets as a whole are systematic risks. Nonsystematic and unsystematic
are different terms for risks that apply to a specific issuer or issue. Universal risk is not a term
used for securities risk.
LO 7.a
An investor has the following position in MES stock: 100 shares at $30. After a 3:1 stock split,
this investor will have
A) 200 shares at $15 per share.
B) 300 shares at $30 per share.
C) 100 shares at $90 per share.
D) 300 shares at $10 per share. - CORRECT ANSWER - D) 300 shares at $10 per share.
,The position's net value will always remain unchanged before and after any split adjustment. In
this case, 100 shares × $30 = $3,000. For an even stock split, the number of shares increases by
the split ratio. Here, given a 3:1 split, 100 shares becomes 300 shares. Because we know the net
value must be unchanged, we divide $3,000 by the new number of shares to calculate the new
price per share ($3,000 ÷ 300 shares) of $10.
LO 2.h
Registered Representative Jan Wu terminated her employment with her broker-dealer 18 months
ago in order to return to school and complete a graduate degree in finance. She has completed
her education and applies for a position with a new broker-dealer firm. She will
A) not be required to retake her exams because she was a full-time student, and there is no time
limit for returning so long as the representative was a full-time student.
B) not be required to retake her qualifying exams.
C) be required to retake her qualifying exams because of the number of changes to her U-4.
D) be required to retake her qualifying exams because more than two years have passed since she
sat for the exams. - CORRECT ANSWER - B) not be required to retake her qualifying
exams.
She has been away from her position with a member firm for less than two years; she is not
required to retest. FINRA does not provide an allowance for full-time studies. She will need to
complete a new U-4, but the number of changes are not relevant (unless there is a disqualifying
event).
LO 12.a
Which of the following may be considered suspicious?
A) Transactions that alone, or in the aggregate, involve at least $2,000
B) Moving large sums of money between accounts with the same last names
C) A client expressing undue concern about substantial commissions being charged to the
account
D) A customer unconcerned about losses - CORRECT ANSWER - D) A customer
unconcerned about losses
, It would not be unusual to transfer money between people with the same last name because they
are presumably family members. However, substantial movement between accounts that are not
related would be suspicious, as would customers not caring about losses. It might be because
they are laundering money.
Concern about substantial commissions is healthy. Transactions that alone, or in the aggregate,
involve at least $5,000 in funds that appear to serve no business or lawful purpose would be
considered suspicious.
LO 11.b
An investment that allows for a share in the income, gains, losses, deductions, and tax credits of
the business entity to pass through to investors while protecting the investors from liability is
known as
A) a limited partnership.
B) a real estate investment trust (REIT).
C) a general partnership.
D) an option. - CORRECT ANSWER - A) a limited partnership.
Both general and limited partnerships pass through to investors (partners) a share in the income,
gains, losses, deductions, and tax credits of the business entity. Limited partnerships shield the
limited partners from liablility incurred by the partnership; general partners have no such
protection.
LO 5.f
A customer of a broker-dealer holding two penny stocks in her account, purchased on unsolicited
trades, should expect to receive an account statement how frequently?
A) Quarterly
B) Only months when a penny stock transaction has occurred
C) Annually
D) Monthly - CORRECT ANSWER - D) Monthly
Regardless of activity in the account, if the account holds any penny stocks, broker-dealers must
provide an account statement to the customer monthly.
