FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 91:

  A customer wants an investment with minimal credit risk.

  Which of the following is most appropriate?

  A. Corporate bonds
  B. Municipal bonds
  C. Treasury securities
  D. Preferred stock
  C. Treasury securities

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  Explanation

  Treasury Securities: Backed by the U.S. government and considered to have minimal default risk.

  Incorrect Options:

  A & B: Carry some credit risk.

  D: Equity risk.

• Question 92:

  Which of the following economic theories or models is based on the belief that the supply of money in an economy is the primary driver of economic growth?

  A. Supply-side
  B. Monetarist
  C. Keynesian
  D. Demand-pull
  B. Monetarist

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  Explanation

  The correct answer is Monetarist, which centers on the idea that the money supply is a primary driver of economic activity, inflation, and overall growth. Monetarists argue that changes in the quantity of money in circulation significantly influence aggregate demand and price levels over time. In practice, this links closely to the role of a central bank (in the U.S., the Federal Reserve) in influencing economic conditions through monetary tools that affect the availability and cost of money and credit. For SIE purposes, the key takeaway is that monetarist thinking emphasizes controlling money supply growth to promote stable economic expansion and manage inflation. This differs from Keynesian theory, which typically emphasizes fiscal policy (government spending and taxation) and total demand management as the main lever for stabilizing the economy, especially during recessions. While Keynesians also recognize monetary policy, they usually place more focus on government intervention through budget policy to influence employment and output. Supply-side approaches focus more on policies intended to increase production incentives (e.g., lowering taxes and reducing regulation to stimulate investment and labor supply), rather than treating money supply as the central driver. Demand-pull is not a broad "model" in the same sense; it is most commonly associated with a type of inflation where rising demand outpaces supply, pushing prices upward. The FINRA SIE outline includes principal economic theories (including Keynesian and Monetarist) and tests candidates' ability to identify which framework aligns with a described belief about what drives growth and market conditions.

• Question 93:

  Which of the following customers Is eligible to open an institutional account at a broker-dealer?

  A. An investment club with pooled assets totaling $1 million
  B. limited liability partnership with assets of $20 million
  C. corporation with assets totaling $25 million
  D. An Insurance company with assets of $45 million
  D. An Insurance company with assets of $45 million

• Question 94:

  Which of the following activities is permitted during the cooling-off period of an initial public offering (IPO)?

  A. Distribute final prospectus
  B. Deliver securities to purchasers
  C. Conduct sales to public investors
  D. Market the new security to potential investors
  D. Market the new security to potential investors

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  Explanation

  days. During this time, the issuer and underwriters can market the securities but cannot finalize sales. D is correct because marketing (e.g., roadshows) is permitted during the cooling-off period. A is incorrect because the final prospectus is distributed after the offering is effective. B and C are incorrect because sales and deliveries are prohibited until the registration becomes effective.

  References:

  Securities Act of 1933, Section 5

• Question 95:

  Which of the following actions is most likely to increase a company's stock price?

  A. Declining earnings
  B. Increased interest rates
  C. Strong revenue growth
  D. Decreased demand for products
  C. Strong revenue growth

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  Explanation

  Stock Valuation: Strong revenue growth typically leads to higher investor demand and rising stock prices.

  Incorrect Options:

  A, B, and D: Negative factors for stock price.

• Question 96:

  Which of the following statements is true with regard to SIPC and FDIC?

  A. SIPC coverage is only for securities, and FDIC coverage is only for cash.
  B. SIPC protects brokerage accounts, and FDIC protects bank deposits.
  C. Money market mutual funds are covered by the FDIC and are not covered by SIPC.
  D. Securities held at broker-dealers are covered by the FDIC and are not covered by SIPC.
  B. SIPC protects brokerage accounts, and FDIC protects bank deposits.

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  Explanation

  SIPC Coverage: Protects customers of brokerage firms against the loss of securities and cash due to broker-dealer insolvency, but it does not protect against market losses.

  FDIC Coverage: Protects bank deposits (checking, savings, CDs) up to $250,000 per depositor, per institution.

  Incorrect Options:

  A: SIPC covers both securities and cash held at brokerage firms (within limits).

  C & D: Money market mutual funds are not FDIC insured, and securities are not covered by the FDIC.

  SIPC Overview: SIPC Coverage.

• Question 97:

  Which of the following security types is frequently offered to the public as part of a package or unit that also includes a fixed income obligation?

  A. Options
  B. Warrants
  C. Common stock
  D. Preferred stock
  B. Warrants

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  Explanation

  Warrants: Are often issued alongside fixed-income securities, such as bonds, to enhance their appeal to investors. Warrants give the holder the right to purchase company stock at a specific price in the future.

  Incorrect Options:

  Options: Not typically bundled with fixed-income securities.

  Common and Preferred Stock: Usually issued separately, not as part of a package with bonds.

  SEC Guide on Warrants: SEC Warrants Information.

• Question 98:

  A common stock undergoes a 1-for-25 reverse stock split.

  Which of the following statements describes the impact of the issuer ' s market capitalization?

  A. It remains the same as it was prior to the split.
  B. It increases because the stock price increases.
  C. It increases because there are more shares outstanding.
  D. It decreases because there are fewer shares outstanding.
  A. It remains the same as it was prior to the split.

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  Explanation

  The correct answer is A, It remains the same as it was prior to the split. A reverse stock split changes the number of shares outstanding and the stock price proportionally, but it does not affect the overall market capitalization of the company.

  Step-by-step, market capitalization is calculated as: Market Cap = Shares Outstanding x Price per Share In a 1-for-25 reverse split, every 25 shares are consolidated into 1 share. This means the number of shares outstanding is reduced to 1/25th of the original amount. At the same time, the stock price increases by a factor of 25. For example, if a company had 25,000 shares at $4 per share (market cap = $100,000), after the reverse split it would have 1,000 shares at $100 per share. The new market cap is still $100,000. Choice B is incorrect because although the price increases, the number of shares decreases proportionally.

  Choice C is incorrect because shares actually decrease, not increase.

  Choice D is incorrect because the decrease in shares is offset by the increase in price. Thus, a reverse stock split has no impact on total market capitalization, making Answer A correct. Bottom of Form

• Question 99:

  Which of the following statements is true regarding the ownership of investment company shares held as tenants in common?

  A. All tenants must sign redemption requests.
  B. Any income is distributed evenly among the tenants.
  C. Each tenant has a fractional interest in the investment.
  D. Upon the death of a tenant, all shares in the account are taxable in the estate of the deceased.
  C. Each tenant has a fractional interest in the investment.

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  Explanation

  Tenants in Common: In this arrangement, each tenant owns a fractional interest in the account's assets, which can be unequal depending on the agreement.

  Income Distribution: Income is distributed based on ownership percentage, not necessarily equally.

  Redemption Requests: Only the owner of the fractional interest has authority to request redemption for

  their portion.

  Estate Taxation: Upon the death of a tenant, only their fractional interest is taxable in their estate.

  FINRA Guidelines on Joint Accounts: FINRA Joint Accounts.

• Question 100:

  Under the SEC's Recordkeeping and Retention Requirements Rule, a broker-dealer is required to keep which of the following records for the lifetime of its existence?

  A. Trade blotters
  B. Customer confirmations
  C. Corporate formation documents
  D. Forms U4, Forms U5 and employee records
  C. Corporate formation documents

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  Explanation

  Broker-dealers are subject to SEC recordkeeping and retention rules (commonly tested under Exchange Act recordkeeping requirements). Certain records must be preserved for long periods, and some must be kept for the life of the firm.

  Among the choices, corporate formation documents (e.g., articles of incorporation/charter, bylaws, partnership agreements, and similar foundational records) are the category most clearly associated with "lifetime" retention. These documents establish the firm's legal existence, governance structure, and authority to conduct business, so regulators require them to remain available as long as the broker-dealer exists. Trade blotters and customer confirmations are important operational records, but they are generally subject to multi-year retention requirements rather than "lifetime." They help reconstruct trades, demonstrate compliance, and support customer reporting, yet the retention period is not typically "for the life of the firm." Similarly, Forms U4 and U5 and other employee records are retained for specified periods and are updated as reportable events occur, but they are not generally described as "lifetime of the broker-dealer" records in the way corporate formation documents are. On the SIE, this question is about understanding that recordkeeping rules distinguish between: organizational/legal foundation records (kept for the life of the firm), and transactional/operational records (kept for defined periods). That distinction supports investor protection and regulatory supervision by ensuring that a firm's legal identity and governance history remain accessible for examinations, enforcement, and customer protection purposes.