Finra SIE Exam Questions Instant Access - No Installation Required

Question 1

Which of the following types of investment companies raise money by issuing a fixed number of shares through an initial public offering (IPO), actively manage their portfolios and trade their shares on a stock exchange?

AOpen-end funds

BClosed-end funds

CVariable annuities

DUnit investment trusts (UITs)

Answer : B

The description matches closed-end funds, making choice B correct. Closed-end investment companies raise capital by issuing a fixed number of shares, typically through an IPO (or subsequent offerings in some cases). After the initial issuance, investors generally buy and sell shares of the closed-end fund in the secondary market, most commonly on a stock exchange, at market prices determined by supply and demand. Closed-end funds are typically actively managed, though some may follow rules-based strategies.

This differs from open-end mutual funds (choice A), which continuously issue and redeem shares directly with investors at net asset value (NAV) (plus/minus applicable sales charges). Open-end funds do not have a fixed number of shares; the number of shares outstanding changes every day as investors purchase and redeem. Variable annuities (choice C) are insurance products with subaccounts that resemble mutual funds, but they are not investment companies that issue exchange-traded shares via an IPO. UITs (choice D) do issue redeemable units and have a defined portfolio, but they are not actively managed---the portfolio is generally fixed, and the UIT terminates on a stated date.

A key SIE concept embedded here is that closed-end funds often trade at a premium or discount to NAV, unlike open-end funds that transact at NAV. The exchange-traded nature also means investors may pay brokerage commissions and face bid-ask spreads, and their execution price depends on market trading---important distinctions in cost and liquidity compared to open-end funds.

Question 2

When is it permissible to exercise European-style options contracts?

AOnly on the last business day before expiration

BOnly on the day of expiration

COnly on the day after expiration

DOnly on the third Friday of every month

Answer : B

Step by Step

European-Style Options: Can only be exercised on their expiration date, unlike American-style options, which can be exercised any time before expiration.

Incorrect Options:

A: Not accurate; the exercise must occur specifically on the expiration date.

C: Options cannot be exercised after expiration.

D: The expiration date depends on the option contract, not a specific weekday.

Options Clearing Corporation (OCC) Guidelines: OCC European Options.

Question 3

Which of the following securities receives the highest priority in case of a bankruptcy?

ARights

BCommon stock

CPreferred stock

DAmerican Depositary Receipts (ADRs)

Answer : C

Question 4

Which of the following agencies publishes the list used by broker-dealers to verify that customers are not known money launderers, terrorists or others deemed ineligible to open an account at a financial institution?

AThe SEC

BThe IRS

CThe FBI

DThe Office of Foreign Assets Control (OFAC)

Answer : D

Question 5

A customer purchased $80,000 of Fund XYZ two years ago. He now wants to buy $50,000 of Fund LMN offered within the same fund family, which offers a $100,000 breakpoint under right of accumulation. Which of the following statements is true?

AThe additional investment qualifies for a $100,000 breakpoint.

BEach fund requires contributions of $100,000 to qualify for a breakpoint.

CThe customer must sign a new letter of intent to receive the $100,000 breakpoint on the additional purchase.

DThe customer will receive a sales charge discount on his next purchase after the account balance of the fund reaches $100,000.

Answer : A

Step by Step

Right of Accumulation: Allows an investor to combine the value of existing investments within the same fund family to qualify for a breakpoint (reduced sales charge) on new purchases.

Current Holdings: $80,000

New Purchase: $50,000

Total: $130,000, qualifying for the $100,000 breakpoint.

Incorrect Options:

B: Contributions from all funds within the same family can be aggregated.

C: A new letter of intent is unnecessary; right of accumulation applies automatically.

D: Discounts apply immediately, not retroactively.

FINRA Guidance on Breakpoints: FINRA Breakpoints.

Question 6

A customer will be out of the country for the next two months on business and asks his firm to hold his mail until he returns. Which of the following statements is true regarding this request?

AThe firm is prohibited from holding the customer's mail under FINRA rules due to the personal information contained.

BThe firm must receive written instructions from the customer that include the time period for the requested mail hold.

CThe firm is permitted to hold the mail as long as the registered representative (RR) complies with the customer's oral instructions.

DAt the discretion of the RR, the firm is permitted to hold the customer's mail provided it takes reasonable actions to ensure no tampering occurs with this mail.

Answer : B

Step by Step

FINRA Rule 3150: Permits firms to hold customer mail only with written instructions specifying the duration, which cannot exceed three months unless there are exceptional circumstances.

Incorrect Options:

A: Holding mail is not prohibited if done in compliance with FINRA rules.

C & D: Oral instructions or RR discretion are not sufficient; written authorization is mandatory.

FINRA Rule 3150 (Holding of Customer Mail): FINRA Rule 3150.

Question 7

Activities]

Which of the following statements is true regarding 529 savings plans?

A529 contributions are tax deductible in all states.

BThere are income limitations for contributing to a 529 savings plan.

CThe account beneficiary has control over the assets in a 529 savings plan.

DAssets are transferable to another 529 savings plan tax-free if the new beneficiary is a family member of the current beneficiary.

Answer : D

529 savings plans are state-sponsored education savings accounts that offer tax-advantaged growth. Key features include:

Contributions are not federally tax deductible (some states offer state-level deductions).

No income limitations for contributions.

The account owner, not the beneficiary, controls the plan.

Assets can be transferred tax-free to another family member's 529 plan.

D is correct because tax-free rollovers are allowed for family members of the current beneficiary.

A is incorrect as contributions are not universally tax deductible.

B is incorrect as there are no income limitations for contributing.

C is incorrect because the account owner, not the beneficiary, controls the assets.

Finra Securities Industry Essentials SIE Exam Questions