FINRA - SIE–Professional Passing Score

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FINRA SIE Exam Syllabus Topics:

TopicDetails
Topic 1
  • Market Structure: This section of the exam measures the skills of Equity Market Specialists and covers the classification of financial markets, including the primary, secondary, third, and fourth markets. Candidates must demonstrate knowledge of electronic trading, over-the-counter (OTC) markets, and physical exchanges. One specific skill tested is differentiating between various market types and their operational mechanisms.
Topic 2
  • Understanding Products and Their Risks: This section of the exam measures the skills of Investment Analysts and examines different financial products and associated risks. Candidates must understand equity securities, including common stock, as well as debt instruments such as Treasury securities and mortgage-backed securities.
Topic 3
  • Employee Conduct and Reportable Events: This section of the exam measures the skills of Financial Compliance Specialists and covers regulatory expectations regarding employee conduct and disclosure requirements. Candidates must be familiar with Form U4 and Form U5, as well as reporting obligations for outside business activities and political contributions.

FINRA Securities Industry Essentials Exam (SIE) Sample Questions (Q31-Q36):

NEW QUESTION # 31
A registered representative (RR) opens a new account for a customer whose investment objectives are growth and income. She makes an initial deposit of $5,500 using a series of money orders drawn from different sources, and she makes no investments for the first 30 days the account is open. At the end of that time, the customer asks to have the funds wired to an account at a different firm as her needs have changed. The RR's first course of action should be to:

Answer: C

Explanation:
Step by Step Explanation:
* Suspicious Activity: The use of multiple money orders, lack of investment activity, and request to wire funds to another firm raise red flags for potential money laundering.
* FINRA Rules: The RR should escalate the issue by reporting internally and potentially filing a Suspicious Activity Report (SAR).
* Incorrect Options:
* A: Denying the request without investigation may violate customer instructions.
* B: Freezing the account requires a valid legal or regulatory basis.
* D: Processing the request without investigation could facilitate illegal activity.
References:
* FINRA Anti-Money Laundering (AML) Guidance: FINRA AML Rules.


NEW QUESTION # 32
Which of the following entities settles broker-to-broker equity, listed corporate and municipal bond, and unit investment trust (UIT) transactions in the U.S. equities markets?

Answer: A

Explanation:
Step by Step Explanation:
* National Securities Clearing Corporation (NSCC): A subsidiary of the Depository Trust & Clearing Corporation (DTCC), the NSCC handles the clearance and settlement of broker-to-broker equity, corporate bond, municipal bond, and UIT transactions.
* Incorrect Options:
* A: The SEC oversees regulatory compliance but does not settle trades.
* B: FINRA is a self-regulatory organization, not a clearing entity.
* C: The Federal Reserve manages monetary policy and banking but is not involved in securities settlement.
References:
* DTCC Overview of NSCC: DTCC NSCC.


NEW QUESTION # 33
An increase in interest rates has which of the following effects on a municipal bond?

Answer: C

Explanation:
When interest rates rise, existing bond prices generally fall, and this relationship applies to municipal bonds just as it does to Treasuries and corporate bonds. The reason is competitive pricing in the market: newly issued bonds come to market offering higher yields (because prevailing rates are higher). To remain attractive, older bonds with lower coupon rates must trade at discounted prices so that their yield to an investor purchasing them today rises to a competitive level. Therefore, an increase in interest rates typically causes a decrease in the market price of an existing municipal bond, making choice A correct.
Choice B is the opposite of the correct interest-rate/price relationship. Choice C and D are incorrect because the question asks about the effect on a municipal bond already issued. The bond's coupon rate (the stated interest rate on the bond) is fixed at issuance for most standard municipal bonds; market interest rates changing does not retroactively change the bond's coupon. What changes is the bond's market price and therefore its yield in the secondary market.
This concept is core SIE bond math/relationships: price and yield move inversely, and bond sensitivity to rate changes increases with longer maturities and lower coupons (i.e., more duration). Municipal bonds also carry other risks (credit, call/prepayment features, liquidity), but the direct effect of a general rise in interest rates is a market-price decline due to the need to adjust yields to current levels. The SIE outline specifically expects understanding of debt instruments and the relationship between price and interest rates.


NEW QUESTION # 34
In performing fundamental analysis of an equity, which of the following elements should an investor consider?

Answer: D

Explanation:
Fundamental analysis focuses on evaluating a company's financial health and potential for growth by analyzing its financial statements, such as the income statement, balance sheet, and cash flow statement.
* C is correct because financial statements provide the data necessary for fundamental analysis.
* A and B are incorrect because chart patterns and moving averages are tools of technical analysis, not fundamental analysis.
* D is incorrect because resistance and support levels are also part of technical analysis.
Reference: SIE Study Guide, Chapter 6: Fundamental Analysis


NEW QUESTION # 35
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:

Answer: B

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.


NEW QUESTION # 36
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