FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 221:

  An investor sells shares of a closed-end fund at the market.

  Which of the following responses best describes the net proceeds to be received?

  A. Net asset value (NAV)
  B. NAV less any redemption fee
  C. Bid price less any commission
  D. Public offering price (POP) less any redemption fee
  C. Bid price less any commission

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  Explanation

  Closed-End Funds: Trade on exchanges like stocks, and the investor receives the bid price (market price) minus any applicable commissions.

  Incorrect Options:

  A & B: NAV applies to open-end mutual funds, not closed-end funds.

  D: POP applies to initial sales of mutual fund shares.

  SEC Guidance on Closed-End Funds: SEC Closed-End Funds.

• Question 222:

  Which of the following statements is true regarding common stockholders?

  A. They receive fixed dividends
  B. They have priority over bondholders in liquidation
  C. They may vote on corporate matters
  D. They are guaranteed returns
  C. They may vote on corporate matters

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  Explanation

  Common Stockholders: Typically have voting rights, including electing the board of directors.

  Incorrect Options:

  A: Dividends are not fixed.

  B: Bondholders have priority.

  D: Returns are not guaranteed.

• Question 223:

  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?

  A. Open-end funds
  B. Closed-end funds
  C. Variable annuities
  D. Unit investment trusts (UITs)
  B. Closed-end funds

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  Explanation

  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 224:

  A broker-dealer (BD) creates a marketing postcard that includes a statement regarding FINRA's endorsement of the BD.

  Which of the following responses is true?

  A. The statement regarding FINRA's endorsement is not permissible.
  B. The statement is permissible if a principal of the BD approves it in writing prior to use.
  C. The statement is permissible if the statement is approved in writing by FINRA prior to use.
  D. The statement is permissible if the postcard does not discuss specific investment opportunities.
  A. The statement regarding FINRA's endorsement is not permissible.

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  Explanation

  FINRA Rule 2210: Firms are prohibited from suggesting or implying FINRA's endorsement or approval in any advertising materials.

  Approvals: Even if a principal or FINRA approves the content, such a statement remains impermissible.

  Key Point: FINRA's role is to regulate, not to endorse firms or their marketing.

  FINRA Rule 2210 (Communications with the Public): FINRA Rule 2210.

• Question 225:

  Which of the following statements describes a violation of industry standards of conduct?

  A. A firm hires a registered representative (RR) with a 15-year-old felony conviction.
  B. An RR ' s cousin purchases shares of an initial public offering (IPO).
  C. An RR takes a second job as a bartender without notifying her firm.
  D. An RR purchases a stock based on a published research report prepared by her firm.
  C. An RR takes a second job as a bartender without notifying her firm.

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  Explanation

  The correct answer is C, An RR takes a second job as a bartender without notifying her firm. This is a violation of FINRA rules regarding outside business activities (OBAs). Registered representatives are required to provide prior written notice to their firm before engaging in any outside employment, regardless of whether it is related to the securities industry. The firm must then evaluate whether the activity presents a conflict of interest. Step-by-step, FINRA Rule 3270 governs OBAs and ensures firms can supervise potential conflicts or reputational risks. Failure to notify the firm prevents proper supervision and is therefore a clear violation. Choice A is not a violation because a felony conviction older than 10 years does not automatically disqualify an individual from registration under statutory disqualification rules.

  Choice B is not a violation because a cousin is not considered an immediate family member under IPO restricted persons rules, so the purchase is permitted.

  Choice D is also not a violation, provided the research report is publicly available and the RR follows firm policies regarding personal trading. Thus, failing to disclose outside employment is a direct breach of industry conduct standards, making Answer C correct.

• Question 226:

  For which of the following account types will the partial ownership pass into an estate account upon the death of one of the individuals listed on the account?

  A. Partnership
  B. Trust corporation
  C. Tenants in common
  D. Joint tenants with right of survivorship (JTWROS)
  C. Tenants in common

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  Explanation

  In a tenants in common account, each owner has a distinct percentage of ownership. Upon the death of one owner, their share does not transfer to the surviving owner(s); instead, it becomes part of the deceased's estate. C is correct because ownership is divided, and the deceased's share passes to their estate. A is incorrect because partnerships have different agreements governing ownership transitions. B is incorrect because trust corporations are governed by trust agreements, not estate processes.

  References:

  SIE Study Guide, Chapter 9: Account Ownership and Beneficiaries

• Question 227:

  Under FINRA rules, which of the following activities is a private securities transaction that requires preapproval?

  A. Selling term life and property casualty insurance
  B. Providing accounting and tax preparation services
  C. Teaching a financial planning class at a local community college
  D. Participating in the sale of promissory notes to raise money for a small business
  D. Participating in the sale of promissory notes to raise money for a small business

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  Explanation

  A private securities transaction generally involves an associated person participating in the sale of securities outside the regular scope of their member firm's business, often referred to as "selling away." Under FINRA rules, such activity typically requires prior written notice to the firm and, if compensation is involved, firm approval and supervision. Participating in the sale of promissory notes to raise money for a small business is a classic example of a securities transaction that falls into this category, making D correct. Promissory notes can be securities depending on their structure and context, and selling them to investors outside firm supervision raises significant investor protection concerns. Choices A, B, and C are generally outside business activities that may require disclosure to the firm, but they are not necessarily securities transactions. Selling insurance (especially term life and property/casualty) is typically an insurance activity, not a securities sale (though variable products are securities). Providing accounting/tax services is a professional service, not a securities transaction. Teaching a class is an outside activity, not a securities sale. These may require firm reporting under outside business activity rules, but they are not inherently private securities transactions. SIE-wise, this question tests your ability to identify when an activity crosses the line from ordinary outside business activity into selling securities away from firm oversight. The high-risk, heavily tested example is the representative selling notes or other investments to customers through a separate business or personal arrangement-this requires firm preapproval and supervision.

• Question 228:

  Which of the following best describes a shareholder's right in a corporation?

  A. Guaranteed dividend payments
  B. Priority over creditors in liquidation
  C. Voting on corporate matters
  D. Fixed return on investment
  C. Voting on corporate matters

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  Explanation

  Common shareholders have voting rights, including electing the board of directors and approving major corporate actions. Dividends are not guaranteed, and creditors have priority in liquidation.

  References:

  SIE Study Guide, Corporate Securities

• Question 229:

  What is the maximum total contribution that Is permitted to be made per child within a Coverdell education savings account annually?

  A. $500
  B. $1,000
  C. $2,000
  D. $6,500
  B. $1,000

• Question 230:

  A weakening of the U.S.

  dollar versus foreign currencies will generally result in which of the following situations?

  A. U.S. imports will increase.
  B. U.S. exports will decrease.
  C. Foreign goods will be less expensive.
  D. Foreign goods will be more expensive.
  D. Foreign goods will be more expensive.

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  Explanation

  If the U.S. dollar weakens relative to foreign currencies, it takes more dollars to buy the same amount of foreign currency. As a result, foreign goods become more expensive for U.S. consumers, which makes choice D correct. This is a straightforward foreign exchange relationship tested on the SIE under international economic factors and exchange rates. To see why, imagine a product priced in euros. If the dollar weakens against the euro, each euro costs more in dollars, so that same euro-priced item costs more when converted into USD. This tends to reduce U.S. demand for imports (not increase it), because imported goods now require more dollars to purchase. That's why

  choice A is generally false. A weaker dollar often has the opposite effect on U.S. exporters: U.S. goods become cheaper to foreign buyers because foreign currencies can purchase more dollars than before. That can make U.S. products more competitive abroad, which may increase exports, not decrease them. Therefore, choice B is also generally false.

  Choice C is the opposite of what happens: foreign goods become more expensive, not SIE questions frequently test these directional relationships rather than requiring calculations. The key rule to remember: weaker domestic currency # imports cost more, exports tend to become more competitive (all else equal). This can affect corporate earnings, inflation pressures, and market sectors differently, which is why exchange rates are included as a foundational macroeconomic concept on the SIE outline.