FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 251:

  Which of the following entitles is primarily responsible for providing Internal settlement, accounting and tax support services for securities owned by an investment company?

  A. Custodian
  B. Market maker
  C. Broker-dealer
  D. Fund manager
  A. Custodian

• Question 252:

  A retail investor owns shares of Mutual Fund ABC that paid a $0.25 dividend on September 1 and closed at $10.00.

  What is the opening price once this fund trades on the ex-dividend date?

  A. $9.25
  B. $9.75
  C. $10.00
  D. $10.25
  B. $9.75

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  Explanation

  Step by Step Explanation:

  Ex-Dividend Date Pricing: On the ex-dividend date, the mutual fund's price is adjusted downward by the amount of the dividend.

  Closing Price: $10.00

  Dividend: $0.25

  Adjusted Opening Price: $10.00 - $0.25 =

  $9.75. Incorrect Options: A: $9.25 subtracts more than the dividend amount.

  C: $10.00 does not reflect the dividend adjustment.

  D: $10.25 adds to the price rather than subtracting the dividend.

  SEC Guidance on Mutual Fund Pricing: SEC Mutual Funds.

• Question 253:

  Which of the following conditions typically has a negative effect on the value of an equity real estate investment trust (REIT)?

  A. Overbuilding
  B. Low mortgage rates
  C. An increase in property values
  D. An increase in occupancy rates
  A. Overbuilding

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  Explanation

  An equity REIT owns and operates income-producing real estate, and its value is closely tied to property fundamentals such as rent levels, occupancy, operating costs, and the balance of supply and demand in the markets where it owns properties. Overbuilding increases supply of available real estate (e.g., more apartments, office space, retail capacity) relative to demand, which typically puts downward pressure on rents, increases vacancy risk, and reduces property-level cash flows. Lower expected cash flow and weaker pricing power generally reduce the value of the REIT's properties and can lead to lower REIT share valuations. That is why A is correct. Choice B is generally positive, not negative: low mortgage rates can support real estate values by reducing financing costs, increasing affordability, and improving the economics of acquisitions and development (though effects can vary).

  Choice C-increasing property values-is typically positive for equity REITs because it can raise the value of the underlying real estate portfolio and improve net asset value.

  Choice D-higher occupancy rates-is also generally positive because it means more leased space, steadier rental income, and improved cash flow stability.

  This question is testing a fundamental real estate cycle concept often included in SIE product/risk discussions: real estate is sensitive to economic activity and supply/demand imbalances. Overbuilding is a classic negative driver because it can persistently compress revenues and margins until excess supply is absorbed. Equity REIT investors must consider these sector dynamics, alongside interest-rate sensitivity, leverage, and property-type exposure.

• Question 254:

  A lien was filed against the property of a registered representative (RR) for their failure to pay a contractor for home remodeling work.

  Which of the following items is the RR's broker-dealer (BD) required to file to reflect the lien, and within how many days of learning about the lien must the BD file?

  A. Form U4 within 30 days
  B. Form BD within 60 days
  C. A new fingerprint card within 20 days
  D. The FINRA Rule 4530 complaint report within 45 days
  A. Form U4 within 30 days

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  Explanation

  A lien against a registered person is a reportable financial event that must be disclosed on the individual's registration record. The mechanism for updating that record is an amended Form U4, and firms are required to update Form U4 disclosures promptly (commonly tested as within 30 days after the firm learns of the event). Therefore, the correct answer is A. Form U4 is the Uniform Application for Securities Industry Registration or Transfer and is used not only for initial registration but also for ongoing updates to disclosure items, including certain financial matters such as liens, judgments, and bankruptcies when required.

  Choice B is incorrect because Form BD is the broker-dealer's registration form (the firm's registration), used for firm-level changes and disclosures. A lien filed against an individual RR is not handled by updating the broker-dealer's Form BD.

  Choice C is incorrect because fingerprinting requirements relate to identity / background checks and are not the reporting mechanism for financial liens.

  Choice D is incorrect because FINRA Rule 4530 generally concerns reporting of certain events such as regulatory actions, violations, and specified misconduct; a personal lien is addressed through the representative's disclosure updates rather than being a "customer complaint report" filing. (Also, the question's "complaint report" phrasing is a distractor-liens are not customer complaints.) On the SIE, the point is recognizing where disclosures live (Form U4 for associated persons) and the expectation that firms supervise and update registration records when reportable events occur.

• Question 255:

  Under SEC Regulation A, which of the following market participants, if deemed to be a bad actor, will disqualify the offering from reliance on this registration exemption?

  A. Custodian
  B. Underwriter
  C. Transfer agent
  D. Clearing corporation
  B. Underwriter

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  Explanation

  SEC Regulation A provides a registration exemption for smaller public offerings but includes a "bad actor" disqualification. If certain key parties, such as the issuer, underwriter, or affiliates, have been involved in securities violations, the exemption is forfeited.

  B is correct because underwriters are considered essential participants, and their status as bad actors disqualifies the offering. A, C, and D are incorrect because custodians, transfer agents, and clearing corporations are not included in the "bad actor" provisions of Regulation A.

  References:

  SEC Regulation A, Rule 262 (Disqualification Provisions)

• Question 256:

  Which of the following statements is true about a general obligation (GO) municipal bond?

  A. It does not carry an attached legal opinion.
  B. It carries no exemption from federal or state income taxes.
  C. It is backed by the full faith and credit of the issuing jurisdiction.
  D. It is payable solely from the revenues of the facility against which the bonds were issued.
  C. It is backed by the full faith and credit of the issuing jurisdiction.

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  Explanation

  A general obligation (GO) municipal bond is backed by the full faith and credit of the issuing municipality or governmental unit, which is why choice C is correct. In practical terms, this means the issuer pledges its general taxing power and overall resources to meet debt service-interest and principal payments. GO bonds are typically supported by the issuer's ability to levy taxes (often property taxes, subject to legal limits), making their repayment source broader than that of revenue bonds.

  Choice D describes a revenue bond, which is payable only from a specific revenue stream (e.g., tolls from a bridge, fees from a water/sewer system, or revenues from an airport). Revenue bonds do not rely on the issuer's general taxing power; instead, bondholders depend on the project's or enterprise's revenues. That is a key GO vs.revenue distinction tested heavily on the SIE.

  Choice A is incorrect because municipal securities customarily include a legal opinion addressing validity and tax status, especially for tax-exempt issues; the presence of a legal opinion is not something GO bonds uniquely lack.

  Choice B is incorrect because many municipal bonds, including many GO bonds, are federally tax-exempt on interest (and may also be state/local tax-exempt for in-state residents), though there are exceptions such as taxable munis and AMT considerations in certain cases. The question's best, universally correct feature of a GO bond is the backing by the issuing jurisdiction's full faith and credit. This question aligns with SIE product knowledge of municipal securities, including repayment sources and how those sources affect credit considerations.

• Question 257:

  Shares in a private investment in public equity (PIPE) offering are priced:

  A. At the current market value per share.
  B. Below the current market value per share.
  C. Above the current market value per share.
  D. At the public offering price (POP) as determined by the underwriters.
  B. Below the current market value per share.

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  Explanation

  PIPE Offerings: Typically priced below the current market value to incentivize institutional investors to participate in these transactions.

  Discount: The discounted price compensates for the potential illiquidity and risk associated with PIPE offerings.

  POP/Market Value: These do not apply to private offerings structured as PIPE transactions.

  SEC PIPE Offering Guidance: SEC PIPE Offerings.

• Question 258:

  The formation of an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans is known as:

  A. Securitization
  B. Hypothecation
  C. Loan processing
  D. Claim processing
  A. Securitization

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  Explanation

  Securitization: The process of pooling financial assets, such as mortgage loans, and creating asset-backed securities that investors can buy.

  Incorrect Options:

  B: Hypothecation refers to pledging assets as collateral.

  C & D: Loan and claim processing are administrative terms, not related to the creation of securities.

  SEC Guidance on Asset-Backed Securities: SEC ABS Info.

• Question 259:

  Which of the following statements is a characteristic of a government bond fund?

  A. Government bond funds are diversified.
  B. Dividend/interest payments will be the same each month.
  C. If interest rates fall, the net asset value (NAV) of the fund will likely drop as well.
  D. The value of the fund is not guaranteed by the government or any federal agency.
  D. The value of the fund is not guaranteed by the government or any federal agency.

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  Explanation

  Government Bond Funds: Invest in government-backed securities, but the value of the fund itself is not guaranteed by the government, as these funds are subject to market risks.

  Incorrect Options:

  A: Diversification depends on the fund's investment strategy.

  B: Interest/dividend payments may fluctuate.

  C: If interest rates fall, NAVs typically rise, not drop.

  SEC Guidance on Mutual Funds: SEC Government Bond Funds.

• Question 260:

  Under SEC rules, which of the following is not a security?

  A. A debenture
  B. A fund of funds
  C. A unit investment trust (UIT)
  D. A bank money market deposit account
  D. A bank money market deposit account

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  Explanation

  The correct answer is D, A bank money market deposit account. Under the Securities Act of 1933 and related SEC regulations, most investment instruments are classified as securities and are subject to federal securities laws. However, certain banking products are specifically excluded. A bank money market deposit account is a banking product, not a security. It is typically offered by banks, insured by the FDIC (within limits), and regulated by banking authorities rather than the SEC. Because of this, it is exempt from securities registration requirements. In contrast, the other choices are all considered securities. A debenture (choice

  A. is an unsecured corporate bond and clearly falls under the definition of a security. A fund of funds (choice

  B. is an investment company that invests in other mutual funds and is regulated as a security. A unit investment trust (UIT) (choice

  C. is also an investment company product registered under the Investment Company Act of 1940. The key takeaway for the SIE exam is that banking products (like deposit accounts and CDs) are generally not securities, while investment products issued by corporations or investment companies are securities. Thus, choice D is correct.