FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 141:

  Corporate bonds unsecured by any pledge of property are called:

  A. Debentures
  B. Trust certificates
  C. Collateral trust bonds
  D. General obligation (GO) bonds
  A. Debentures

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  Explanation

  Debentures: Corporate bonds not backed by physical assets or collateral. They rely on the issuer's creditworthiness.

  Incorrect Options:

  B: Trust certificates are a legacy term for bonds backed by a trust.

  C: Collateral trust bonds are secured by financial assets.

  D: GO bonds are issued by municipalities, not corporations.

  SEC Guide on Corporate Bonds: SEC Corporate Bonds.

• Question 142:

  When is a newly registered person subject to the Continuing Education Regulatory Element requirement?

  A. The calendar year following initial registration
  B. On the anniversary date of initial registration
  C. Every three years after the date of registration
  D. Every five years
  B. On the anniversary date of initial registration

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  Explanation

  Regulatory Element Requirement: Newly registered persons must complete the Continuing Education (CE) Regulatory Element on the second anniversary of their initial registration and every three years thereafter.

  Incorrect Options:

  A: The requirement begins on the second anniversary, not the following calendar year.

  D: The cycle is every three years, not five.

  FINRA Rule 1240 (Continuing Education): FINRA Rule 1240.

• Question 143:

  Under the Investment Company Act of 1940, which of the following products are considered redeemable securities?

  A. Short-term paper
  B. Master limited partnerships
  C. Shares issued by a closed-end investment company
  D. Shares of unit investment trusts (UITs) purchased through a public offering
  D. Shares of unit investment trusts (UITs) purchased through a public offering

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  Explanation

  Redeemable securities are those that can be sold back to the issuer. D is correct because unit investment trusts (UITs) issue redeemable securities. C is incorrect because closed-end fund shares are traded on secondary markets, not redeemable. A and B do not meet the definition of redeemable securities.

  References:

  Investment Company Act of 1940, Section 2(a)(32)

• Question 144:

  An investor needs to liquidate stock today because he needs the cash.

  Which of the following order types must the investor place to ensure that the trade will be executed today?

  A. Stop order
  B. Limit order
  C. Market order
  D. Stop limit order
  C. Market order

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  Explanation

  The correct answer is C, Market order. A market order is an order to buy or sell a security immediately at the best available current price, ensuring execution as long as the market is open and there is liquidity. Step-by-step, the key phrase in the question is "ensure that the trade will be executed today." Market orders prioritize execution over price, meaning the investor accepts the current market price in exchange for immediate execution. This makes it the most appropriate choice when urgency is the primary concern. Choice A, a stop order, becomes a market order only after a specified stop price is reached, so execution is not guaranteed if the price is never triggered.

  Choice B, a limit order, sets a specific price at which the investor is willing to trade, but the order may not be executed if the market does not reach that price.

  Choice D, a stop limit order, has even more restrictions, as it requires both a trigger price and a limit price, further reducing the likelihood of execution. Thus, when an investor must sell immediately and guarantee execution, a market order is the correct choice, making Answer C correct.

• Question 145:

  The primary market is regulated by the SEC under which of the following acts?

  A. The Securities Act of 1933
  B. The Securities Exchange Act of 1934
  C. The Investment Advisers Act of 1940
  D. The Investment Company Act of 1940
  A. The Securities Act of 1933

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  Explanation

  The primary market deals with the issuance of new securities, which is regulated under the Securities Act of 1933. This act requires issuers to provide full disclosure of material information to investors to ensure transparency and fairness in new offerings.

  A is correct because the Securities Act of 1933 governs initial offerings. B is incorrect because the Securities Exchange Act of 1934 regulates secondary market trading. C is incorrect because the Investment Advisers Act of 1940 pertains to investment advisers. D is incorrect because the Investment Company Act of 1940 governs mutual funds and other investment companies.

• Question 146:

  Which of the following securities is considered a short-term money market instrument?

  A. Treasury bill
  B. Treasury bond
  C. Corporate debenture
  D. Municipal revenue bond
  A. Treasury bill

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  Explanation

  Treasury bills have maturities of one year or less and are considered money market securities.

  References:

  SIE Study Guide, Money Market Instruments

• Question 147:

  An investor writes a call option with a strike price of $35.00 on underlying XYZ stock with an expiration date of March 15. On March 15, XYZ is priced at $36.50. The call option:

  A. is at the money.
  B. will expire worthless.
  C. is in the money by $1.50.
  D. is out of the money by $1.50.
  C. is in the money by $1.50.

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  Explanation

  The correct answer is C, is in the money by $1.50. A call option is in the money (ITM) when the market price of the underlying stock is above the strike price. Step-by-step, the intrinsic value of a call option is calculated as: Market Price #

  Strike Price In this case: $36.50 # $35.00 = $1.50 This means the call option has $1.50 of intrinsic value at expiration. Since the option is in the money, it will not expire worthless-instead, it will be exercised (or automatically exercised), allowing the holder to buy the stock at $35 and potentially sell it at the market price of $36.50. Choice A is incorrect because "at the money" would mean the stock price equals the strike price.

  Choice B is incorrect because only out-of-the-money options expire worthless.

  Choice D is incorrect because the option is not out of the money-it is above the strike price. It is also important to note that the investor wrote (sold) the call, meaning they face an obligation to deliver the stock at $35 if exercised, resulting in potential loss. Thus, the call option is in the money by $1.50, making Answer C correct.

• Question 148:

  Under which of the following circumstances, if any, is a member firm permitted to send gifts to registered representatives (RRs) of another member firm?

  A. No single gift exceeds $100; no limit on the number of gifts
  B. No single gift exceeds $100; maximum value of all gifts per RR per year is $200
  C. Value of all gifts to an RR during a period of one year does not exceed $100
  D. Under no circumstance
  C. Value of all gifts to an RR during a period of one year does not exceed $100

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  Explanation

  FINRA Rule 3220 prohibits member firms from giving gifts exceeding $100 per individual per year to ensure that gifts do not influence business conduct. The rule applies to gifts given in connection with the firm's business. C is correct because it adheres to FINRA's $100 annual limit. A is incorrect because the total value of gifts must also not exceed $100 annually.

  B is incorrect as there is no $200 limit.

  D is incorrect as gifts are allowed within the $100 limit.

  References:

  FINRA Rule 3220 (Influencing or Rewarding Employees of Others)

• Question 149:

  Which of the following groups are members of NASAA?

  A. Broker-dealers
  B. Major stock exchanges
  C. State securities regulators
  D. Self-regulatory organizations (SROs)
  C. State securities regulators

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  Explanation

  NASAA is the North American Securities Administrators Association, and its membership is made up of state, provincial, and territorial securities regulators (in the U.S., primarily the state securities administrators). That makes C correct. On the SIE, NASAA is tested as the umbrella organization representing state-level regulators, which are responsible for enforcing state securities laws ("blue sky" laws), registering certain securities offerings when applicable, and registering/ licensing investment adviser representatives and other participants under state jurisdiction. Choice A is incorrect because broker-dealers are regulated entities, not NASAA members. Broker-dealers register with the SEC and are members of self-regulatory organizations like FINRA, but they are not "members of NASAA."

  Choice B is incorrect because stock exchanges are marketplaces and are often SROs themselves, but they are not NASAA members.

  Choice D is incorrect because SROs (such as FINRA or MSRB) are not NASAA members; NASAA represents state-level governmental regulators, not self-regulatory organizations. This question reinforces an important SIE framework: U.S.

  securities regulation is shared among federal regulators (SEC), self-regulatory organizations (FINRA, MSRB, exchanges), and state regulators. NASAA serves as a coordinating body for state regulators, promoting uniformity through model rules, policy coordination, investor education, and cooperation among jurisdictions. Understanding NASAA's membership helps you correctly assign regulatory roles-especially when questions involve blue sky laws, state registration requirements, and state-level enforcement.

• Question 150:

  Which of the following terms describes an offer to purchase some or all shareholders' shares in a corporation, usually at a premium to the market price?

  A. Tender
  B. Stock split
  C. Redemption
  D. Class action
  A. Tender

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  Explanation

  Tender Offer Definition: A tender offer is an offer to purchase a certain number of shares from shareholders, typically at a price above the current market value. This is often part of mergers, acquisitions, or corporate takeovers.

  Stock Split: A stock split increases the number of shares but decreases the price per share without affecting the total value of an investor's holdings.

  Redemption: Redemption refers to the repayment of a bond or preferred stock at maturity or at a predetermined date.

  Class Action: A class action is a lawsuit filed by a group of people with similar grievances.

  SEC Rule 14e on tender offers: SEC Tender Offers.