SIE Practice Exam 2 | 25 Free Practice Questions for 2024

Our second SIE practice exam contains 25 more questions. These questions are challenging and designed to be similar to those in previous Securities Industry Essential (SIE) exams. Test your knowledge about securities and financial markets.

1. When reviewing the definitions of broker-dealers and investment advisers, one would find that:

Broker-dealers can engage in securities transactions for compensation

Investment advisers engage in providing advice relating to the advisability of investing or not investing in securities for compensation

An investment advisory firm must have an account at a broker-dealer in order to have the recommended transactions executed

All of these

2. FINRA has promulgated various rules and procedures pertaining to the operation of broker-dealers and departments within member firms. The M&A Department:

Is tasked with supervising Managed accounts and Asset Allocation accounts

Is in charge of rules governing the Member and Associated persons

Creates the firm’s procedures pertaining to Merger and Acquisition activity

Deals with Market making and inventory Acquisition for the firm

3. A significant number of public investors do not have a solid understanding of how common stock is offered to the public. Two methods are the secondary offering and the follow-on offering. Which of the following are TRUE statements regarding these methods?

Secondary offerings involve the sale of new shares other than the first time a company is going public (IPO)

A follow-on is an offering of new shares other than the initial public offering (IPO)

Secondary and Follow-on are two different terms for the same investment banking activity.

Secondary offerings involve the resale of outstanding shares at market bid and ask pricing

4. A customer complaint is formally defined as a:

Any communication from a customer or a legal representative of a customer regarding misconduct

Any written communication from a customer or legal rep of a customer regarding an allegation of a violation of one or more securities rules or federal regulations

A written allegation of a violation submitted by a customer

None of the above

5. Recommending a limited partnership DPP investment to a customer would be a defendable recommendation for a client:

Seeking flow-through tax benefits

Who is not risk-averse

Who does not have an immediate need for liquidity

Any of the above

6. Regulation SHO severely restricts short selling during the cooling offer period of a follow-on offering. Which of the below is true?

Shorting a company’s stock undergoing a follow-on offering is prohibited during registration period.

An investor cannot buy the new shares in a follow-up deal if they have sold the outstanding shares of that issuer during the cooling-off period.

An investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date

None of the above

7. The least liquidity in the securities shown below would be found:

In securities traded on the Pink Quote system

In securities listed on regional stock exchanges

In T-bills

In general obligation issues

8. When a corporation announces that it is seeking additional equity capital through a sale of additional authorized but unissued shares:

This is a secondary distribution

This is a primary distribution

This is an IPO

This is a split offering

9. Which of the following investment risks is the most significant risk in a variable life insurance policy?

Credit risk

Market risk

Inflation risk

Interest rate risk

10. Keynesian economic theory deals with:

Controlling the economy through regulating money supply

Controlling the economy through budget/government spending and taxation policies

Incentivizing responsible financial behaviors through Congressional legislation and agency regulations

None of the above

11. At issues, which of the following debt securities matures in one year or less?

FNMA bonds

GNMA bonds

Treasury notes

Money market instruments

12. Under industry regulations, an initial purchase of $3000 of common stock in a margin account requires a cash deposit of:

$750

$1500

$2000

$3000

13. The Securities & Exchange Commission was formed as part of:

The Securities Act of 1933

The Securities & Exchange Act of 1934

The New Deal legislation

None of the above

14. Which of the following investment instruments trades on an exchange at a market price that is not directly related to its net asset value?

Open-end investment company

Private hedge fund

Put and call option contracts

Closed-end investment company

15. Pre-emptive Rights and Stock Warrants have several similarities. Which of the following represent characteristics these products have in common?

(Correct)
.
(Correct)

I. Each has a fixed price at which the holder may purchase shares of the issuer’s common stock.

II. The fixed exercise price for both products is initially set at a level below the current market value of the common stock

III. These products are tradable on securities exchanges

IV. Both have relatively short-term expiration dates

16. Sweeteners, as that term is used in the investment banking community, refer to issue enhancements which include:

Warrants

Insurance

Convertibility

Any of the above

17. When growth is the principal objective of the investor, each of the below could be suitable except:

Defensive issues

Emerging industries

Growth mutual fund

Technology ETF

18. The primary difference between a stock dividend and a cash dividend is:

Stock dividends provide the corporate shareholder with additional shares in place of cash.

Cash dividends are tax-free if reinvested in additional shares

Cash dividends are tax-deferred if reinvested in additional shares

Stock dividends are taxable upon receipt

19. Stabilizing is a term generally used in Wall Street to refer to the practice of:

Price fixing of a new issue

Maintaining a market price at or near the POP of a new issue for the sole purpose of protecting the stock from decline during a new offering

Preventing losses for investors who buy IPOs

None of the above

20. The maximum coverage offered per separate customer under SIPC insurance was set by Congress at:

$250,000 for cash and securities combined

$500,000 for securities and cash combined

$1,000,000 for securities and cash with no more than $250,000 for cash claims

$500,000 for cash and securities coverage with no more than $250,000 for securities claims

21. The exercise of an equity put option involves the writer:

(Correct)

The hours of operation of the Chicago Board Options Exchange are:

Selling the underlying instrument at the strike price

Buying the underlying instrument at the strike price

Buying the underlying instrument at the strike price less premium

Selling the underlying instrument at the strike price less premium

22. The hours of operation of the Chicago Board Options Exchange are:

9:30 am to 4:00 pm CT

8:00 am to 8:00 pm ET

8:30 am to 3:00 pm CT

7:00 am to 7:00 pm CT

23. The redemption value of an open-end investment company’s shares is based on the:

Previous offering price

Previous closing net asset value (NAV)

NAV computed after the order is received

The offering price computed after the order is received

24. Among the reasons a corporate Board would declare a stock split:

Is to increase corporate net worth

Is to decrease the annual dividend

Is to reduce individual shareholders’ percentage ownership

Is to make the stock more affordable

25. All investors with short option positions:

Have a contractual obligation to perform in accordance with the contract terms if the option is exercised

Pay a premium in order to acquire the contractual rights associated with the option

Must be considered suitable for short sales of stock in order to be permitted to engage in shorting options

May close out the position by taking a long position in a corresponding option contract

Question 1 of 25

After finishing this test, don’t forget to try our SIE Practice Exam 3. Our third practice test also contains 25 challenging questions.

SIE Practice Exam 3 >>