Securities Industry Essentials (SIE) Exam by
FINRA New 2025-2026 Version with All
Questions from Actual Exam, 100% Correct
Answers and Rationales
SIE Practice Exam: 70 Questions
Section 1: Knowledge of Capital Markets (16 Questions)
This section tests understanding of regulatory entities, market structures, and economic concepts.
Question 1
Which organization regulates the underwriting and trading of municipal securities?
A. FINRA
B. SEC
C. MSRB
D. NYSE Correct Answer: C
Rationale: The Municipal Securities Rulemaking Board (MSRB) regulates the underwriting,
trading, and issuance of state and municipal securities.
Question 2
What is the primary role of the Federal Reserve?
A. Enforce securities laws
B. Regulate money supply and monetary policy
C. Oversee broker-dealers
D. Issue municipal bonds Correct Answer: B
Rationale: The Federal Reserve regulates the U.S. money supply, sets reserve requirements, and
implements monetary policy.
Question 3
Which market is characterized by over-the-counter (OTC) trading?
A. Primary market
B. Secondary market
C. Third market
D. Fourth market Correct Answer: C
Rationale: The third market involves OTC trading of exchange-listed securities, typically
between institutions and broker-dealers.
Question 4
What is the role of a transfer agent?
A. Executes trades for customers
B. Maintains records of securities ownership
C. Underwrites new securities
D. Regulates market participants Correct Answer: B
Rationale: A transfer agent maintains records of securities ownership, handles certificate
, issuance, and addresses lost or stolen certificates.
Question 5
Which entity acts as the central clearinghouse for securities transactions?
A. DTCC
B. FINRA
C. SEC
D. SIPC Correct Answer: A
Rationale: The Depository Trust & Clearing Corporation (DTCC) clears and settles securities
transactions.
Question 6
What happens to interest rates when the Federal Reserve increases the money supply?
A. They increase
B. They decrease
C. They remain unchanged
D. They become volatile Correct Answer: B
Rationale: An increase in money supply typically lowers interest rates, as more funds are
available for borrowing.
Question 7
Which of the following is a self-regulatory organization (SRO)?
A. SEC
B. FINRA
C. Federal Reserve
D. IRS Correct Answer: B
Rationale: FINRA is an SRO that regulates broker-dealers and enforces compliance with
securities rules.
Question 8
What is the primary market?
A. Where securities are traded among investors
B. Where new securities are issued
C. Where OTC securities are traded
D. Where institutional investors trade privately Correct Answer: B
Rationale: The primary market is where new securities are issued and sold to investors.
Question 9
Which agency enforces federal securities laws?
A. FINRA
B. MSRB
C. SEC
D. CFTC Correct Answer: C
Rationale: The Securities and Exchange Commission (SEC) enforces federal securities laws and
oversees markets.
FINRA New 2025-2026 Version with All
Questions from Actual Exam, 100% Correct
Answers and Rationales
SIE Practice Exam: 70 Questions
Section 1: Knowledge of Capital Markets (16 Questions)
This section tests understanding of regulatory entities, market structures, and economic concepts.
Question 1
Which organization regulates the underwriting and trading of municipal securities?
A. FINRA
B. SEC
C. MSRB
D. NYSE Correct Answer: C
Rationale: The Municipal Securities Rulemaking Board (MSRB) regulates the underwriting,
trading, and issuance of state and municipal securities.
Question 2
What is the primary role of the Federal Reserve?
A. Enforce securities laws
B. Regulate money supply and monetary policy
C. Oversee broker-dealers
D. Issue municipal bonds Correct Answer: B
Rationale: The Federal Reserve regulates the U.S. money supply, sets reserve requirements, and
implements monetary policy.
Question 3
Which market is characterized by over-the-counter (OTC) trading?
A. Primary market
B. Secondary market
C. Third market
D. Fourth market Correct Answer: C
Rationale: The third market involves OTC trading of exchange-listed securities, typically
between institutions and broker-dealers.
Question 4
What is the role of a transfer agent?
A. Executes trades for customers
B. Maintains records of securities ownership
C. Underwrites new securities
D. Regulates market participants Correct Answer: B
Rationale: A transfer agent maintains records of securities ownership, handles certificate
, issuance, and addresses lost or stolen certificates.
Question 5
Which entity acts as the central clearinghouse for securities transactions?
A. DTCC
B. FINRA
C. SEC
D. SIPC Correct Answer: A
Rationale: The Depository Trust & Clearing Corporation (DTCC) clears and settles securities
transactions.
Question 6
What happens to interest rates when the Federal Reserve increases the money supply?
A. They increase
B. They decrease
C. They remain unchanged
D. They become volatile Correct Answer: B
Rationale: An increase in money supply typically lowers interest rates, as more funds are
available for borrowing.
Question 7
Which of the following is a self-regulatory organization (SRO)?
A. SEC
B. FINRA
C. Federal Reserve
D. IRS Correct Answer: B
Rationale: FINRA is an SRO that regulates broker-dealers and enforces compliance with
securities rules.
Question 8
What is the primary market?
A. Where securities are traded among investors
B. Where new securities are issued
C. Where OTC securities are traded
D. Where institutional investors trade privately Correct Answer: B
Rationale: The primary market is where new securities are issued and sold to investors.
Question 9
Which agency enforces federal securities laws?
A. FINRA
B. MSRB
C. SEC
D. CFTC Correct Answer: C
Rationale: The Securities and Exchange Commission (SEC) enforces federal securities laws and
oversees markets.
