Top 25 SIE Exam Sample Questions with Answers
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🧾 Top 25 SIE Exam Sample Questions with Answers
🎓 Essential Practice Questions for Your SIE Exam Prep
The Securities Industry Essentials (SIE) Exam is the foundational exam for those entering the securities industry. To help you prepare, here are 25 sample questions with answers to give you a better understanding of the material and test format. These questions cover various topics, including types of securities, market participants, and regulatory requirements.
🎯 Sample Questions
- Which of the following is NOT a characteristic of a bond?
- A) Fixed interest payments
- B) Maturity date
- C) Ownership of the issuer
- D) Principal repayment at maturity
Explanation: A bond is a debt instrument, not an equity ownership.
- Which of the following is an example of an equity security?
- A) Treasury bond
- B) Preferred stock
- C) Corporate bond
- D) Mutual fund share
Explanation: Preferred stock represents ownership in a company, making it an equity security.
- Which government agency oversees the enforcement of securities laws?
- A) Federal Reserve
- B) U.S. Treasury
- C) Securities and Exchange Commission (SEC)
- D) FINRA
Explanation: The SEC enforces securities laws and regulates the securities industry.
- A mutual fund must send its shareholders an updated prospectus at least:
- A) Quarterly
- B) Annually
- C) Every 2 years
- D) Upon request
Explanation: A mutual fund is required to send updated prospectuses annually, detailing its investment strategies and financial performance.
- Which of the following is NOT an example of a registered investment company?
- A) Mutual fund
- B) Hedge fund
- C) Exchange-traded fund (ETF)
- D) Unit investment trust (UIT)
Explanation: Hedge funds are typically not registered with the SEC like mutual funds and ETFs.
- Which of the following is the primary market where securities are initially sold to investors?
- A) Secondary market
- B) Over-the-counter (OTC) market
- C) Primary market
- D) Futures market
Explanation: The primary market is where securities are first sold to investors, such as during an Initial Public Offering (IPO).
- Which of the following is true about municipal bonds?
- A) They are issued by corporations.
- B) Interest is subject to federal tax.
- C) They are typically considered low risk.
- D) They are issued by federal agencies.
Explanation: Municipal bonds are issued by local or state governments and are generally considered low-risk investments.
- The Securities Investor Protection Corporation (SIPC) provides coverage for:
- A) Investment losses from bad decisions
- B) Mismanagement of funds by brokers
- C) Theft of funds or securities from a broker-dealer’s account
- D) Civil fines for violations of securities laws
Explanation: SIPC protects customers’ securities and cash in the event of a broker-dealer’s bankruptcy.
- Which of the following is the main purpose of the Securities Act of 1933?
- A) Regulating the secondary market
- B) Protecting investors from fraud in the securities market
- C) Overseeing mergers and acquisitions
- D) Establishing the SEC
Explanation: The Securities Act of 1933 is designed to ensure transparency and protect investors by requiring disclosure of financial information before securities are sold.
- What type of investment does NOT allow the investor to share in the company’s profits?
- A) Preferred stock
- B) Common stock
- C) Corporate bond
- D) Warrants
Answer: C) Corporate bond
Explanation: Bondholders do not share in a company’s profits; they receive fixed interest payments instead.
- Which of the following is the primary function of the Federal Reserve?
- A) Issuing stocks and bonds
- B) Regulating investment advisers
- C) Controlling monetary policy
- D) Enforcing securities laws
Answer: C) Controlling monetary policy
Explanation: The Federal Reserve controls monetary policy by managing interest rates and money supply to influence the economy.
- Which of the following is considered a “buy” order for a security?
- A) A market order
- B) A limit order
- C) A stop-loss order
- D) A short sale order
Answer: A) A market order
Explanation: A market order instructs the broker to buy the security immediately at the best available price.
- What is the primary purpose of the SEC?
- A) Oversee credit rating agencies
- B) Regulate the trading of municipal bonds
- C) Protect investors and maintain fair and efficient markets
- D) Set interest rates for the bond market
Answer: C) Protect investors and maintain fair and efficient markets
Explanation: The SEC’s primary role is to ensure market integrity and investor protection by enforcing securities laws.
- What is the maximum duration for which a Treasury bill (T-bill) can be issued?
- A) 1 year
- B) 3 years
- C) 5 years
- D) 10 years
Answer: A) 1 year
Explanation: T-Bills are short-term debt securities issued by the U.S. Treasury with maturities of one year or less.
- What does the acronym IPO stand for?
- A) International Purchase Option
- B) Initial Public Offering
- C) Investment Profit Opportunity
- D) Institutional Preferred Offering
Answer: B) Initial Public Offering
Explanation: An IPO is the process by which a company offers its stock to the public for the first time.
- **Which of the following is a key characteristic of an exchange-traded fund (ETF)?
- A) ETFs are actively managed.
- B) ETFs trade on exchanges like individual stocks.
- C) ETFs cannot be sold short.
- D) ETFs are only available in mutual fund form.
Answer: B) ETFs trade on exchanges like individual stocks
Explanation: ETFs are passively managed and trade on exchanges like stocks.
- What type of investment strategy involves buying securities in anticipation of price increases?
- A) Short selling
- B) Buying on margin
- C) Long position
- D) Hedging
Answer: C) Long position
Explanation: A long position involves buying securities with the expectation that their price will rise.
- Which of the following is an example of a direct participation program (DPP)?
- A) Corporate bond
- B) Real estate investment trust (REIT)
- C) Limited partnership
- D) Municipal bond
Answer: C) Limited partnership
Explanation: Limited partnerships (LPs) are a form of direct participation program (DPP) where investors participate directly in the underlying business.
- Which of the following securities has the highest level of risk?
- A) Treasury bonds
- B) Investment-grade corporate bonds
- C) Junk bonds
- D) Municipal bonds
Answer: C) Junk bonds
Explanation: Junk bonds, or high-yield bonds, carry the highest level of risk due to the issuer’s lower credit rating.
- What does “blue sky” regulation refer to?
- A) Enforcement of securities laws by the SEC
- B) Regulation of the bond market
- C) State-level securities laws that protect investors from fraud
- D) Laws governing over-the-counter trading
Answer: C) State-level securities laws that protect investors from fraud
Explanation: Blue sky laws are state laws designed to protect investors by requiring that securities be registered before being sold.
🚀 Conclusion
These 20 sample questions are designed to help you understand key concepts and practice for the SIE exam. Use them to gauge your understanding of investment products, regulatory rules, and other topics covered in the exam.
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