FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 301:

  Pursuant to FINRA rules, which of the following content is inappropriate to link to from a business-related social media site?

  A. A link to the firm's website discussing its products and services
  B. A link to an investment's website stating the investment's performance over the next five years
  C. A link to information on a mutual fund that discusses previous performance over the last five years
  D. A link to a company's filing on EDGAR that contains information on a press release about the company
  B. A link to an investment's website stating the investment's performance over the next five years

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  Explanation

  Under FINRA Rule 2210, firms must avoid making predictions or projections of future investment performance.

  B is correct because it involves prohibited predictive statements. A, C, and D are acceptable under FINRA guidelines, as they do not involve prohibited content.

  References:

  FINRA Rule 2210 (Communications with the Public)

• Question 302:

  Which of the following statements is true regarding Treasury securities?

  A. They are FDIC-insured.
  B. Interest earned is subject to federal tax.
  C. They are only traded in the primary market.
  D. They are issued by states and municipalities.
  B. Interest earned is subject to federal tax.

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  Explanation

  Treasury securities (Treasury bills, notes, and bonds) are obligations of the U.S. government. A key testable feature is their tax treatment: interest earned on Treasuries is subject to federal income tax (though it is generally exempt from state and local income taxes). That makes

  choice B correct.

  Choice A is incorrect because FDIC insurance applies to bank deposit products (e.g., bank CDs, savings accounts) held at insured depository institutions, within insurance limits.

  Treasury securities are not bank deposits; they are direct government securities, so "FDIC-insured" is not the right concept. Treasuries are considered to have very low credit risk due to U.S. government backing, but that is different from FDIC insurance.

  Choice C is incorrect because Treasuries trade in both the primary market (when issued by the Treasury) and the secondary market (after issuance). In fact, Treasuries are among the most actively traded securities in the world, and secondary-market trading is a major source of liquidity and price discovery. Investors can buy newly issued Treasuries at auction (primary) or purchase existing Treasuries from other investors and dealers (secondary).

  Choice D is incorrect because securities issued by states and municipalities are municipal securities (muni bonds/notes), not Treasury securities. Treasuries are issued by the U.S. Department of the Treasury, while municipal bonds are issued by states, cities, counties, and other political subdivisions or authorities. On the SIE, this question targets product knowledge: issuer identity, trading markets, and tax characteristics of government vs. municipal vs. bank products.

• Question 303:

  Which of the following responses is an example of a bullish strategy, action, or position?

  A. Purchasing stocks on margin
  B. Reinvesting portfolio income into bonds
  C. Halting reinvestment of portfolio income
  D. Increasing the cash percentage of an equities portfolio
  A. Purchasing stocks on margin

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  Explanation

  A bullish strategy reflects the expectation that prices-especially equity prices-will rise. Among the choices, purchasing stocks on margin is the most clearly bullish action because it uses borrowed funds to increase buying power and magnify exposure to potential stock price appreciation. If an investor is sufficiently optimistic about a stock or the market, they may choose margin to control a larger position than their cash alone would allow. This is a directional strategy: it increases sensitivity to gains when prices rise, which is the essence of a bullish position. By contrast, reinvesting portfolio income into bonds (choice B) is not inherently bullish; it signals a preference for fixed-income allocation, typically associated with income, capital preservation, or lower volatility rather than expecting equity price appreciation. Halting reinvestment (choice C) can be a defensive move-choosing to stop adding to risk assets, possibly due to uncertainty. Increasing the cash percentage of an equities portfolio (choice D) is usually a bearish or risk-off action, since it reduces equity exposure and positions the investor more defensively against potential declines or volatility. On the SIE, you're expected to recognize that "bullish" aligns with actions that increase exposure to risk assets or benefit from rising prices, while "bearish" aligns with reducing exposure, increasing cash, or taking positions that benefit from declining prices. Margin is particularly testable because it also introduces additional risks-interest costs, maintenance requirements, and the possibility of margin calls-yet it is still fundamentally a bullish leverage tool when used to buy equities.

• Question 304:

  SEC Regulation S-P (Consumer Privacy) requires certain information to be included in privacy notices delivered to customers of broker-dealers (BDs).

  Which of the following information is required to be included in the privacy notice?

  A. The website and telephone number of SIPC
  B. The website and telephone number of the Consumer Financial Protection Bureau (CFPB)
  C. The name and telephone number of the BD's chief compliance officer
  D. The BD's policies and practices for protecting the customer's nonpublic personal information
  D. The BD's policies and practices for protecting the customer's nonpublic personal information

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  Explanation

  Regulation S-P mandates that broker-dealers disclose how they collect, protect, and share customers' nonpublic personal information. The privacy notice must include: The categories of information collected.

  The firm's policies for safeguarding data.

  Opt-out rights for sharing information with unaffiliated third parties.

  D is correct because privacy notices must describe policies for protecting customer information. A, B, and C are incorrect because they do not relate to the required elements of Regulation S-P privacy notices.

  References:

  SEC Regulation S-P (Privacy of Consumer Financial Information)

• Question 305:

  A customer deposits an $8,000 cashier's check in their account. Later the same day, they deposit a $2,500 money order.

  Which of the following actions, if any, must the firm take in response to this activity?

  A. No filing required
  B. File Form W-9 with the IRS
  C. File a Suspicious Activity Report (SAR)
  D. File a Currency Transaction Report (CTR)
  A. No filing required

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  Explanation

  The correct answer is A (No filing required) based on the facts provided. A Currency Transaction Report (CTR) is generally triggered by currency transactions (cash) over the applicable threshold within a single business day. In this scenario, the customer deposited a cashier's check and a money order, which are monetary instruments, not "currency" (cash). Therefore, even though the combined amount is $10,500, the deposits described are not cash deposits, so this does not automatically require a CTR. A Suspicious Activity Report (SAR) is required when activity is suspicious and meets reporting criteria-such as transactions that appear designed to evade reporting requirements, have no apparent lawful purpose, involve potential money laundering, or otherwise raise red flags. Here, the amounts and instruments alone-$8,000 cashier's check and $2,500 money order deposited the same day-do not necessarily indicate suspicious activity.

  Without additional facts (e.g., patterns of structuring, inconsistent customer profile, unusual source of funds, evasive behavior, or other AML red flags), the firm is not required to file a SAR solely on this activity. Form W-9 is used to request a taxpayer identification number and certification for certain tax-reporting purposes, but it is not a standard "required filing" triggered by these deposits as described. The SIE tests the ability to distinguish between currency-based reporting (CTR) and suspicion-based reporting (SAR), and to recognize that not every large or same-day deposit is automatically reportable without meeting the specific rule trigger.

• Question 306:

  A customer has four traditional Individual retirement accounts (IRAs): two are at banks, one Is held directly at a mutual fund, and one Is held in her brokerage account.

  In order to meet her required minimum distribution (RMD), which of the following actions is she required to take?

  A. Take a distribution from the largest account based on current value
  B. Take a distribution from the smallest account based on current value
  C. Take a distribution from one of the bank IRAs and either the mutual fund or brokerage IRA
  D. Take a distribution based on the value of all of the accounts at the previous year end
  D. Take a distribution based on the value of all of the accounts at the previous year end

• Question 307:

  A customer wants to open an account to trade covered calls and puts.

  Which of the following communications must be provided to the customer prior to approving the account for trading?

  A. Prospectus
  B. MSRB Investor Brochure
  C. Margin disclosure statement
  D. Options disclosure document (ODD)
  D. Options disclosure document (ODD)

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  Explanation

  FINRA Rule 2360 requires that customers receive the Options Disclosure Document (ODD), published by the Options Clearing Corporation (OCC), before they are approved to trade options. The ODD explains the risks and characteristics of options trading. D is correct because the ODD is mandatory for options account approval. A is incorrect because a prospectus is not specific to options trading. B is incorrect because the MSRB Investor Brochure applies to municipal securities. C is incorrect because a margin disclosure statement is required only for margin accounts.

  References:

  FINRA Rule 2360 (Options)

• Question 308:

  In a rising interest rate environment, which of the following statements is true regarding the price of fixed-rate corporate bonds?

  A. Their price will remain constant.
  B. Their price will revert to par value.
  C. Their price will appreciate in value.
  D. Their price will depreciate in value.
  D. Their price will depreciate in value.

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  Explanation

  When interest rates rise, the price of fixed-rate corporate bonds falls because the bond's coupon payments become less attractive compared to new bonds issued at higher rates. D is correct as bond prices move inversely to interest rates. A is incorrect because bond prices fluctuate with interest rate changes. B is incorrect because bond prices revert to par only at maturity. C is incorrect because prices do not appreciate when rates rise.

  References:

  SIE Study Guide, Chapter 3: Interest Rates and Bond Prices

• Question 309:

  If a company with a single outstanding bond issue chooses to extinguish this debt through refunding, which of the following actions will occur?

  A. The company will issue stock to replace the bonds.
  B. The company will retire one debt with the proceeds from another issue.
  C. The company will buy back the bonds, at a discount, from the bondholders.
  D. The company will establish a sinking fund for use in making regular open-market purchases of the bonds.
  B. The company will retire one debt with the proceeds from another issue.

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  Explanation

  Refunding involves replacing existing debt with new debt, usually to take advantage of lower interest rates. B is correct because the company issues new bonds to pay off the existing debt.

  A is incorrect as refunding involves issuing debt, not equity.

  C is incorrect because the company is not obligated to buy back bonds at a discount.

  D is incorrect because a sinking fund is used for gradual repayment, not refunding.

  References:

  SIE Study Guide, Chapter 3: Corporate Bonds

• Question 310:

  Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?

  A. Prime rate
  B. Discount rate
  C. Federal funds rate
  D. LIBOR
  C. Federal funds rate

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  Explanation

  Federal Funds Rate: The rate at which depository institutions lend reserves to each other overnight. It is set by the Federal Open Market Committee (FOMC).

  Other Rates:

  Prime Rate: Rate banks charge their most creditworthy customers.

  Discount Rate: Rate the Federal Reserve charges banks for borrowing directly from it.

  LIBOR: Interbank lending rate used internationally, now being phased out.

  Federal Reserve of Rates: Federal Funds Rate.