FINRA SIE EXAM | QUESTIONS AND
VERIFIED ANSWERS RATED A+ | 100%
VERIFIED | 2025/2026 GUIDE
A market maker
A) can only be an institution doing proprietary trading.
B) acts as an agent to buy and sell for public customers who will hold
their own securities.
C) trades in a customer's account standing ready to buy or sell at their
own discretion.
D) trades in a proprietary account to facilitate trading of a security and
provide liquidity. - Correct Answer -
Rationale: Any entity, individual or institution, willing to accept the risk of
holding a particular security in its own account to facilitate trading and
provide liquidity in that security is known as a market maker or trader.
Which of the following is true of an additional public offering?
A) The issuer receives all of the proceeds from the sale. - Correct
Answer -
B) Existing shareholders receive all of the proceeds of the sale.
C) The issuer receives some of the proceeds, and existing shareholders
receive some of the proceeds from the sale.
,D) The investors are a combination of institutional and retail investors,
and the issuer receives none of the proceeds from the sale.
An investor has a long position in OMQ stock. After selling the stock at a
loss, the investor could purchase which of the following and not violate
the wash sale rule?
A) OMQ convertible bonds
B) OMQ call options
C) OMQ put options - Correct Answer -
D) OMQ warrants
In order to avoid violating the wash sale rule, investors selling a stock at
a loss cannot purchase that same, or substantially identical, security
within a 30-day period before or after the sale incurring the loss.
Substantially identical would include anything that is exercisable or
convertible into the same shares of stock, such as rights, warrants, call
options, or a convertible bond. Purchasing the put options would not
violate the wash sale rule because these can be exercised to sell the
stock, not purchase it.
The authorities delegated to FINRA by the SEC include all of these
except
A) establishing initial margin requirements. - Correct Answer -
B) investigating complaints.
,C) establishing testing and standards for associates of broker-dealers.
D) establishing membership requirements.
Rationale: The initial margin requirement is set by the Federal Reserve
under Regulation T. FINRA creates and administers securities licensing
requirements (e.g., the SIE), sets its own membership requirements, and
may investigate complaints from customers.
What is the intrinsic value of an XYZ 40 call sold at a premium of 3 when
the current market value of XYZ is at 30?
A) $7
B) -$7
C) -$10
D) $0 - Correct Answer -
Rationale: Intrinsic value is the amount that a contract is in the money.
The premium of the contract is not a factor. All calls are in the money
when the market value of the stock is above the strike price.
Accusations of Financial Industry Regulatory Authority (FINRA) Conduct
Rule violations will heard and handled under the
A) Uniform Securities Act.
B) Code of Procedure. - Correct Answer -
C) Code of Arbitration Procedure.
D) Uniform Practice Code.
, Rationale: The Code of Procedure describes how member violations of
the Conduct Rules will be heard and handled.
All of the following are taxable to the investor except
A) stock dividends. - Correct Answer -
B) capital gains distributions.
C) semiannual interest payments.
D) cash dividends.
Rationale: A stock dividend is payment of additional shares of the issuer
to the stockholder rather than payment of cash. The price of the stock is
adjusted so that the total value of the outstanding stock is the same
before and after the dividend is paid. Stock dividends are thus not
taxable.
Regarding sales loads, management fees, and operating expenses for
mutual funds, which of the following is true?
A) Sales loads increase investor returns because they are received by
the fund increasing the amount they have to invest.
B) All increase investor returns because each is received by the fund
increasing the amount they have to invest.
C) All reduce investor returns because they reduce the amount of money
available for the fund to invest. - Correct Answer -
D) Only management fees and operating expenses reduce investor
returns by reducing the amount of money available for the fund to invest.
VERIFIED ANSWERS RATED A+ | 100%
VERIFIED | 2025/2026 GUIDE
A market maker
A) can only be an institution doing proprietary trading.
B) acts as an agent to buy and sell for public customers who will hold
their own securities.
C) trades in a customer's account standing ready to buy or sell at their
own discretion.
D) trades in a proprietary account to facilitate trading of a security and
provide liquidity. - Correct Answer -
Rationale: Any entity, individual or institution, willing to accept the risk of
holding a particular security in its own account to facilitate trading and
provide liquidity in that security is known as a market maker or trader.
Which of the following is true of an additional public offering?
A) The issuer receives all of the proceeds from the sale. - Correct
Answer -
B) Existing shareholders receive all of the proceeds of the sale.
C) The issuer receives some of the proceeds, and existing shareholders
receive some of the proceeds from the sale.
,D) The investors are a combination of institutional and retail investors,
and the issuer receives none of the proceeds from the sale.
An investor has a long position in OMQ stock. After selling the stock at a
loss, the investor could purchase which of the following and not violate
the wash sale rule?
A) OMQ convertible bonds
B) OMQ call options
C) OMQ put options - Correct Answer -
D) OMQ warrants
In order to avoid violating the wash sale rule, investors selling a stock at
a loss cannot purchase that same, or substantially identical, security
within a 30-day period before or after the sale incurring the loss.
Substantially identical would include anything that is exercisable or
convertible into the same shares of stock, such as rights, warrants, call
options, or a convertible bond. Purchasing the put options would not
violate the wash sale rule because these can be exercised to sell the
stock, not purchase it.
The authorities delegated to FINRA by the SEC include all of these
except
A) establishing initial margin requirements. - Correct Answer -
B) investigating complaints.
,C) establishing testing and standards for associates of broker-dealers.
D) establishing membership requirements.
Rationale: The initial margin requirement is set by the Federal Reserve
under Regulation T. FINRA creates and administers securities licensing
requirements (e.g., the SIE), sets its own membership requirements, and
may investigate complaints from customers.
What is the intrinsic value of an XYZ 40 call sold at a premium of 3 when
the current market value of XYZ is at 30?
A) $7
B) -$7
C) -$10
D) $0 - Correct Answer -
Rationale: Intrinsic value is the amount that a contract is in the money.
The premium of the contract is not a factor. All calls are in the money
when the market value of the stock is above the strike price.
Accusations of Financial Industry Regulatory Authority (FINRA) Conduct
Rule violations will heard and handled under the
A) Uniform Securities Act.
B) Code of Procedure. - Correct Answer -
C) Code of Arbitration Procedure.
D) Uniform Practice Code.
, Rationale: The Code of Procedure describes how member violations of
the Conduct Rules will be heard and handled.
All of the following are taxable to the investor except
A) stock dividends. - Correct Answer -
B) capital gains distributions.
C) semiannual interest payments.
D) cash dividends.
Rationale: A stock dividend is payment of additional shares of the issuer
to the stockholder rather than payment of cash. The price of the stock is
adjusted so that the total value of the outstanding stock is the same
before and after the dividend is paid. Stock dividends are thus not
taxable.
Regarding sales loads, management fees, and operating expenses for
mutual funds, which of the following is true?
A) Sales loads increase investor returns because they are received by
the fund increasing the amount they have to invest.
B) All increase investor returns because each is received by the fund
increasing the amount they have to invest.
C) All reduce investor returns because they reduce the amount of money
available for the fund to invest. - Correct Answer -
D) Only management fees and operating expenses reduce investor
returns by reducing the amount of money available for the fund to invest.
