SIE Practice Test [PDF] Securities Industry Essentials license Exam

SIE Practice Test [PDF]: Download Securities Industry Essentials license Exam free printable PDF with review questions answers by Financial Industry Regulatory Authority (FINRA).

Don’t be fooled. Exam creators love to trip you up by making you jump ahead and answer the question — incorrectly — before you read the entire problem. Often one of the last words in the call (specific inquiry) of the question is worded in the negative, like “all of the following are true except,” or “which of the following is the least likely to,” and so on

SIE Practice Test

Exam Name SIE Practice Test 2022
Number of Questions 25
Format Multiple Choice
Duration N/A
Passing Score:  passing score is 70 (on a scale of 0 to 100)
Printable PDF Download Link is given below

1. A trade surplus results from which of the following?

  • (A) A country having a current account deficit.
  • (B) A country exporting more than it imports.
  • (C) A country exporting less than it imports.
  • (D) None of the above are correct.
View Correct Answer
 Answer: B A trade surplus results from a country exporting more than it imports.

2. Which of the following agreements specify that any unsold securities are retained by the underwriters?

I. Firm commitment
II. All or none
III. Best efforts
IV. Mini-max

  • (A) I only
  • (B) II only
  • (C) I, II, and IV
  • (D) II, III, and IV
View Correct Answer
 Answer: A In a firm commitment underwriting, all securities left unsold are retained by the underwriters. All or none and mini-max are actually types of best efforts underwritings.

3. William, age 56, recently retired from Epsilon Inc., and would like to take a distribution from a retirement plan to pay for medical expenses. Which of the following plans would allow William to take a penalty free withdrawal?

  • (A) Single premium deferred annuity
  • (B) Traditional IRA
  • (C) Money purchase plan from his employer before Epsilon Inc.
  • (D) 401(k) from Epsilon Inc.
View Correct Answer
 Answer: D, Withdrawals from a 401(k) after separating from service are penalty free if the separation occurs at age 55 or older. The other options would result in
an early withdrawal penalty.

4. All but which of the following are characteristics of a REIT?

  • (A) It is a publicly traded open-end investment company.
  • (B) A mortgage REIT is a specific type of REIT.
  • (C) A REIT can sell at a premium or discount to its NAV.
  • (D) All of the above are correct.
View Correct Answer
 Answer: A, REITs are publicly traded closed-end investment companies that can sell at a premium or discount to its NAV. A mortgage REIT is a specific type of REIT.

5. All of the following are types of state securities registration EXCEPT:

  • (A) filing
  • (B) cooperation
  • (C) qualification
  • (D) coordination
View Correct Answer
 Answer: B, The three types of state registration for securities are notification (filing), coordination, and qualification.

6. Which of the following can an investor sign which allows him or her to receive breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a period of time, usually 13 months?

  • (A) Investment advisory contract
  • (B) Investment memorandum
  • (C) Letter of intent
  • (D) Prospectus
View Correct Answer
 Answer: C, An investor can sign a letter of intent (LOI) which allows him or her to receive breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a period of time, usually 13 months.

7. An issuer is offering 1,000,000 shares of their common stock. 800,000 of the shares are from shares that have never been offered and 200,000 shares are treasury stock. What kind of offering is this?

  • (A) An IPO
  • (B) A primary offering
  • (C) A secondary offering
  • (D) A combined offering
View Correct Answer
 Answer: D, Since the issuer has treasury stock (repurchases stock), it is not an IPO. An IPO is an initial public offering and it is the first time a corporation ever issues securities. If this company that has already issued securities is only offering shares that have not previously been sold, it would be a primary offering. However, in this case, the issuer is selling 800,000 shares that have never been sold (primary) and 200,000 shares of treasury stock (secondary), so it is considered a combined or split offering

8. Which of the following is a type of exchange rate system in which a country ties its currency to a basket of other currencies or to another measure of value, such as gold?

  • (A) Adjustable exchange rate system
  • (B) Commodity exchange rate system
  • (C) Fixed exchange rate system
  • (D) Variable exchange rate system
View Correct Answer
 Answer: C, In a fixed exchange rate system, a country ties its currency to a basket of other currencies or to another measure of value, such as gold.

9. Which of the following will result if money distributed from a 529 plan is not used to pay for qualifying education expenses?

  • (A) The gain is taxed at capital gains rates, and a 10% penalty is applied.
  • (B) The gain is taxed at capital gains rates, and a 20% penalty is applied.
  • (C) The gain is taxed as ordinary income, and a 10% penalty is applied.
  • (D) The gain is taxed as ordinary income, and a 20% penalty is applied.
View Correct Answer
 Answer: C, If money distributed from a 529 plan is not used to pay for qualifying education expenses, the gain is taxed as ordinary income and a 10% penalty is applied.

10. Which of the following are exempt transactions?

I. Private placements
II. Securities issued by the US government
III. Intrastate offerings
IV. Commercial paper

  • (A) I and III
  • (B) I, II, and IV
  • (C) II and IV
  • (D) I, II, III, and IV
View Correct Answer
 Answer: D, . This one is tricky because they’re all exempt. Regulation D private placements and intrastate offerings are exempt based on the type of transactions. However, securities issued by the US government and commercial paper are exempt based on the type of security.

11. An investor who believes that an economic recession is imminent should purchase which of the following type of stocks?

  • (A) Defensive stocks because they tend to underperform during economic downturns.
  • (B) Defensive stocks because they tend to outperform during economic downturns.
  • (C) Cyclical stocks because they tend to outperform during economic downturns.
  • (D) Cyclical stocks because they tend to underperform during economic downturns.
View Correct Answer
 Answer: B, An investor who believes that an economic recession is imminent should purchase defensive stocks because they tend to outperform during economic downturns.

12. The trading volume for BBB Corporation for the previous 5 weeks is as follows:
March 31: 50,000 shares
March 24: 38,000 shares
March 17: 44,000 shares
March 10: 40,000 shares
March 3: 42,000 shares

BBB Corporaton is listed on an exchange and has 4,200,000 shares outstanding. What is the maximum number of shares an insider can sell under Rule 144 on April 4th of the following year?

  • (A) 41,000
  • (B) 42,000
  • (C) 43,000
  • (D) 44,000
View Correct Answer
 Answer: C, Since the holding period has been met, the maximum number of shares that can be sold by an insider under rule 144 is 1 percent of the outstanding shares or the average trading volume for the previous 4 weeks, whichever is greater.

13. Which of the following is/are correct regarding dividends paid by growth stocks and value stocks?
(1) Because they are growing and expanding, growth stocks typically do not pay large dividends.
(2) Most of the earnings generated from value stocks are reinvested back into the company.

  • (A) (1) only
  • (B) (2) only
  • (C) Both (1) and (2) are correct.
  • (D) Neither (1) or (2) are correct.
View Correct Answer
 Answer: A, Because they are growing and expanding, growth stocks typically do not pay large dividends. Most of the earnings generated from growth stocks are
reinvested back into the company.

14. Bullbear Broker Dealer is offering an IPO that will not be on the NYSE, NASDAQ, or any exchange. How long after the effective date must Bullbear provide a final prospectus to all purchasers of the security?

  • (A) 25 days
  • (B) 40 days
  • (C) 45 days
  • (D) 90 days
View Correct Answer
 Answer: D, For IPOs (Initial Public Offerings), a final prospectus must be available to all purchasers of the IPO for 90 days after the effective date (the first day the security starts trading). 

15. Which of the following is a type of broker that acts as a liaison between an investor and a clearing corporation by helping to ensure that trades are settled appropriately and transactions are successfully completed?

  • (A) Carrying broker
  • (B) Clearing broker
  • (C) Executing broker
  • (D) Introducing broker
View Correct Answer
 Answer: B, A clearing broker acts as a liaison between an investor and a clearing corporation by helping to ensure that trades are settled appropriately and transactions are successfully completed.

16. A preliminary prospectus would include which of the following?
I. An SEC disclaimer
II. The names of the officers of the issuing corporation
III. The public offering price
IV. An explanation of what the funds raised by the offering would be used for

  • (A) I and IV
  • (B) I, II, and IV
  • (C) II, III, and IV
  • (D) I, II, III, and IV
View Correct Answer
 Answer: B, All of the choices listed would be in the preliminary prospectus (red herring) except for the final offering price. The offering price at this point has not been determined. The offering price as well as the underwriting spread and the delivery date would be included in the final prospectus.

17. Which of the following forms must broker-dealers, investment advisers, or issuers of securities fill out in order to terminate the registration of an individual in the appropriate jurisdiction? It is also known as the Uniform Termination Notice for Securities Industry Registration.

  • A. Form U4
  • B. Form U5
  • C. Form U6
  • D. Form U7
View Correct Answer
 Answer: B, Broker-dealers, investment advisers, and issuers of securities must fill out form U5 in order to terminate the registration of an individual in the appropriate jurisdiction. It is also known as the Uniform Termination Notice for Securities Industry Registration.

18. Which of the following is an order to sell a stock at a price below the current market price?

  • (A) Sell discount order
  • (B) Sell limit order
  • (C) Sell market order
  • (D) Sell stop order
View Correct Answer
 Answer: D, A sell stop order is an order to sell a stock at a price below the current market price

19. Which of the following was adopted to update short sale regulations and to address concerns regarding potentially abusive naked short selling?

  • (A) Regulation BTR
  • (B) Regulation HFT
  • (C) Regulation NMS
  • (D) Regulation SHO
View Correct Answer
 Answer: D, Regulation SHO was adopted to update short sale regulations and to address concerns regarding potentially abusive naked short selling.

20. The federal law which regulates the initial sale of stock to the public is:

  • (A) the Securities Act of 1933
  • (B) the Securities Exchange Act of 1934
  • (C) the Trust Indenture Act of 1939
  • (D) all of the above
View Correct Answer
 Answer: A, The Securities Act of 1933 (Truth in Securities Act, Paper Act, Full Disclosure Act, Prospectus Act, or the New Issues Act) regulates new issues of corporate stocks and bonds. Included in the act are rules to prevent fraud and deception as well as rules about the issuer providing information about itself and the securities being offered.

21. Which of the following may not be included in a tombstone advertisement?

  • (A) the number of securities to be sold
  • (B) the issuer’s name
  • (C) the final offering price
  • (D) all underwriter’s name
View Correct Answer
 Answer: C, Tombstone advertisements may or may not include the offering price — it depends on whether that has been decided yet.

22. Which of the following is a self-regulatory organization (SRO)?

  • (A) FINRA
  • (B) NYSE
  • (C) SIPC
  • (D) All of the above are correct.
View Correct Answer
 Answer: D, FINRA, NYSE, and SIPC are self-regulatory organizations (SROs).

23. Which of the following is the largest options exchange in the U.S., and focuses on options contracts for individual equities and indexes?

  • (A) AMEX
  • (B) CBOE
  • (C) NASDAQ
  • (D) NYSE
View Correct Answer
 Answer: B, The CBOE (Chicago Board Options Exchange) is the largest options exchange in the U.S. and focuses on options contracts for individual equities and indexes. .

24. The cooling-off period usually lasts about:

  • (A) 20 days
  • (B) 30 days
  • (C) 45 days
  • (D) 90 days
View Correct Answer
 Answer: C, The cooling-off period is when an issuer files a registration statement with the SEC. During this time, the SEC reviews the registration statement to see if it needs to be amended or if additional information is needed. It typically takes 20 days for the SEC to review the registration statement. As a matter of fact, it is sometimes referred to as the 20-day coolingoff period.

25. Which of the following is the formula to calculate an investment’s real return?

  • A. Real return = Nominal return – Inflation
  • B. Real return = Nominal return + Inflation
  • C. Real return = Nominal return ÷ Inflation
  • D. Real return = Inflation ÷ Nominal return
View Correct Answer
 Answer: A, Real return = Nominal return – Inflation.

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