SIE
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SIE is a trademark of its owner, which is not affiliated with and does not endorse Test Treasure Publication or TTP Prep.
10 sample questions for the SIE, with the correct answer and an explanation for each. No account needed. Try each one before you open the answer.
Sections covered on the exam: Knowledge Of Capital Markets, Marketstructure, Knowledge of Capital Markets, Offerings, Understanding Products And Their Risks, Products, Investmentrisks, Understanding Products and Their Risks, Understanding Trading, Customer, Trading,Settlement,Andcorporateactions, Understanding Trading, Customer Accounts, and Prohibited Activities, Prohibitedactivities, Overview Of The Regulatory Framework, Overview of the Regulatory Framework.
Question 1 · Knowledge Of Capital Markets
Which of the following regulatory bodies is primarily responsible for enforcing federal securities laws in the United States?
Answer: D. SEC
The Securities and Exchange Commission (SEC) is the primary federal regulatory agency for the securities industry. It oversees securities exchanges, brokers and dealers, investment advisors, and mutual funds to ensure fair dealing and investor protection.
Question 2 · Products
Preferred stock is considered a hybrid security because it has characteristics of both:
Answer: D. Equity and debt
Preferred stock pays fixed dividends like a bond (debt) but represents ownership in the company (equity), making it a hybrid security.
Question 3 · Products
A limited partner in a real estate program begins making day-to-day management decisions for the partnership. What is the most significant consequence?
Answer: A. The limited partner may lose limited liability protection
Limited partners are passive investors whose liability is limited to their investment. A limited partner who takes part in managing the partnership risks being treated as a general partner, with unlimited liability for the partnership's debts.
Question 4 · Understanding Trading, Customer
Which settlement cycle is standard for most U.S. equities trades?
Answer: B. T+1
Regular-way settlement for most U.S. securities trades, including stocks and corporate and municipal bonds, is T+1: one business day after the trade date. The industry moved from T+2 to T+1 to reduce risk between trade and settlement.
Question 5 · Prohibitedactivities
A representative recommends that a customer invest $48,000 in a fund's Class A shares when the fund offers a reduced sales charge starting at $50,000, without telling the customer about the breakpoint. This is an example of:
Answer: B. Breakpoint selling
Breakpoint selling is recommending a purchase just below a breakpoint, or failing to tell the customer about it, so that the customer pays a higher sales charge. It is prohibited because it benefits the representative at the customer's expense.
Question 6 · Knowledge Of Capital Markets
Which organization writes the rules for firms in the municipal securities market but has no authority to enforce them?
Answer: D. MSRB
The Municipal Securities Rulemaking Board (MSRB) writes rules for broker-dealers, banks, and municipal advisors in the municipal market. It has no examination or enforcement authority; the SEC, FINRA, and bank regulators enforce its rules.
Question 7 · Products
Which privately negotiated contract obligates both parties to buy and sell an asset at a future date at a price agreed on today?
Answer: C. Forward contract
A forward contract is a customized, privately negotiated obligation between two parties to buy and sell an asset at a set price on a future date. A futures contract creates a similar obligation, but it is standardized and exchange-traded, not privately negotiated.
Question 8 · Products
Which statement about a 529 college savings plan is correct?
Answer: A. Withdrawals used for qualified education expenses are free of federal income tax
Contributions to a 529 plan are made with after-tax money and are not federally deductible (some states offer a state deduction). Earnings grow tax-deferred, and withdrawals used for qualified education expenses are free of federal income tax.
Question 9 · Understanding Trading, Customer
Which type of order guarantees price but not execution?
Answer: D. Limit Order
A limit order sets the maximum (buy) or minimum (sell) price at which you are willing to trade. You may not be filled if the market does not reach your limit price, but if it does, you receive the price you specified.
Question 10 · Prohibitedactivities
A wash sale is disallowed for tax purposes when an investor:
Answer: A. Sells a security at a loss and repurchases identical stock within 30 days
The wash‐sale rule prohibits recognizing a loss if the investor repurchases the same (or substantially identical) security within 30 days before or after the sale.
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