Questions for the SIE were updated on : Nov 21 ,2025
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?
D
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.
Reference: SEC Regulation S-P (Privacy of Consumer Financial Information)
For which of the following account types will the partial ownership pass into an estate account upon
the death of one of the individuals listed on the account?
C
Explanation:
In a tenants in common account, each owner has a distinct percentage of ownership. Upon the death
of one owner, their share does not transfer to the surviving owner(s); instead, it becomes part of the
deceased’s estate.
C is correct because ownership is divided, and the deceased’s share passes to their estate.
A is incorrect because partnerships have different agreements governing ownership transitions.
B is incorrect because trust corporations are governed by trust agreements, not estate processes.
D is incorrect because JTWROS accounts pass ownership directly to the surviving account holder(s).
Reference: SIE Study Guide, Chapter 9: Account Ownership and Beneficiaries
Which of the following responses best characterizes a money market mutual fund?
C
Explanation:
Money market mutual funds invest in highly liquid, short-term debt instruments, such as Treasury
bills, commercial paper, and certificates of deposit. While the funds aim to maintain a stable $1 NAV,
this is not guaranteed.
C is correct because the fund’s investments are short term.
A is incorrect because the rate of return is not fixed; it varies with market interest rates.
B is incorrect because while the fund tries to maintain a $1 NAV, it is not guaranteed.
D is incorrect because yields do not always exceed those of savings accounts.
Reference: SIE Study Guide, Chapter 5: Money Market Funds
Which of the following entities issues certificates of deposit (CDs)?
B
Explanation:
Certificates of Deposit (CDs) are time deposit accounts issued by banks, offering fixed interest rates
for a specified term. CDs are insured by the FDIC up to $250,000 per depositor, but the issuing entity
is the bank itself.
B is correct because banks issue CDs.
A is incorrect because the FDIC insures CDs but does not issue them.
C is incorrect because broker-dealers may facilitate the purchase of CDs but do not issue them.
D is incorrect because the Federal Reserve does not issue CDs; it manages monetary policy.
Reference: SIE Study Guide, Chapter 4: Banking Products
The civil penalty for an individual who is convicted of an insider trading violation is permitted to be
an amount up to how many times the profit gained or loss avoided?
B
Explanation:
Under the Insider Trading and Securities Fraud Enforcement Act of 1988, the SEC may impose a civil
penalty of up to three times the profit gained or loss avoided (referred to as "treble damages") on
individuals found guilty of insider trading.
B is correct because treble damages equal three times the profit or avoided loss.
A is incorrect because the penalty is not limited to one time the profit.
C and D are incorrect because the penalty is capped at three times, not six or ten times.
Reference: Insider Trading and Securities Fraud Enforcement Act of 1988
A customer purchases $3,000 of XYZ, which settles today in a margin account. The customer has no
other positions or balances. According to initial margin requirements, what is the amount of the
required deposit?
B
Explanation:
Under Federal Reserve Regulation T, customers must deposit at least 50% of the purchase price for
margin trades. However, the minimum deposit requirement is $2,000, regardless of the 50% rule, if
the account is below this threshold.
50% of $3,000 = $1,500.
Since $1,500 is less than the $2,000 minimum, the customer must deposit the full $2,000.
B is correct because $2,000 is the required minimum deposit.
A is incorrect because the $1,500 calculation does not meet the minimum.
C and D are incorrect because they exceed the minimum deposit requirement.
Reference: Federal Reserve Regulation T; SIE Study Guide, Chapter 4: Margin Accounts
Which of the following responses describes treasury stock?
C
Explanation:
Treasury stock refers to shares that were issued by a company and subsequently repurchased by the
company. These shares are held in the company’s treasury and are not considered outstanding.
C is correct because treasury stock is stock reacquired by the issuer.
A is incorrect because authorized but unissued stock has never been issued.
B is incorrect because restricted stock refers to shares issued with restrictions on transferability, not
reacquired stock.
D is incorrect because it incorrectly refers to government securities, not corporate stock.
Reference: SIE Study Guide, Chapter 5: Corporate Securities
Which of the following responses describes a FINRA member?
D
Explanation:
A FINRA member is a broker-dealer that is registered with FINRA and regulated by a national
securities association. Individuals employed by the member firm (e.g., registered representatives)
are associated persons, not members themselves.
D is correct because FINRA membership applies to broker-dealers, not individuals.
A, B, and C are incorrect because they refer to individuals or roles within member firms, not the firms
themselves.
Reference: FINRA Rule 0140 (Membership)
A registered representative (RR) at a member firm is the subject of a statutory disqualification. Which
of the following statements is true?
B
Explanation:
A statutory disqualification occurs if an RR has been convicted of certain crimes, violated securities
laws, or been barred by a regulatory authority. Under FINRA rules, the RR cannot associate with a
member firm in any capacity unless they obtain a waiver from FINRA.
B is correct because the disqualified person must obtain a waiver to continue employment.
A and C are incorrect because the RR is not allowed to associate with the firm in any capacity without
a waiver.
D is incorrect because statutory disqualification directly affects the RR’s employment status.
Reference: FINRA By-Laws, Article III, Section 4; FINRA Rule 9520 (Eligibility Proceedings)
An investor is bullish on a particular stock for the long run, but he would prefer a better price than
the stock's current quote. Which of the following trades should the investor enter for this stock?
B
Explanation:
A limit order to buy allows the investor to specify the maximum price he is willing to pay for the
stock. The order will only execute if the stock price falls to or below the specified price.
B is correct because a limit order to buy aligns with the investor’s desire to secure a better price.
A is incorrect because a limit order to sell is used when an investor wants to sell at a minimum price.
C and D are incorrect because market orders execute at the current market price, not at a preferred
price.
Reference: SIE Study Guide, Chapter 1: Trade Execution and Order Types
Which of the following responses best describes how member firms are required to retain electronic
correspondence and internal communications of associated persons?
D
Explanation:
FINRA Rule 4511 requires member firms to retain records, including electronic communications, in a
non-rewriteable, non-erasable format (often referred to as WORM: Write Once, Read Many). This
ensures that records cannot be altered or deleted once stored.
D is correct because firms must store records in a tamper-proof format.
A, B, and C are incorrect because these formats do not guarantee compliance with the tamper-proof
requirements set forth by FINRA and the SEC.
Reference: FINRA Rule 4511 (General Requirements for Books and Records)
Which of the following securities has the greatest investment risk?
C
Explanation:
Technology stocks are considered high-risk investments due to their volatility and sensitivity to
economic cycles, regulatory changes, and technological advancements. While they may offer
significant growth potential, they carry greater risk than blue chip stocks, corporate bonds, or
government bonds.
C is correct because technology stocks are subject to high volatility and risk.
A is incorrect because blue chip stocks are generally stable and lower-risk.
B is incorrect because corporate bonds carry moderate risk, depending on the issuer’s
creditworthiness.
D is incorrect because government bonds are considered low-risk due to the backing of the issuing
government.
Reference: SIE Study Guide, Chapter 6: Investment Risks
A Treasury bill is issued under which of the following terms?
C
Explanation:
Treasury bills (T-bills) are short-term debt securities issued at a discount to par value. The difference
between the purchase price and the par value represents the investor’s interest income, which is
realized when the T-bill matures.
C is correct because T-bills are issued at a discount and mature at par.
A is incorrect because T-bills are not sold at par value.
B and D are incorrect because T-bills do not pay periodic interest; the return is based on the discount.
Reference: SIE Study Guide, Chapter 3: U.S. Treasury Securities
How does an individual acquire restricted stock?
A
Explanation:
Restricted stock refers to securities acquired through private placements, such as those offered
under Regulation D. These securities are not registered with the SEC and are subject to holding
period restrictions before resale.
A is correct because Regulation D offerings involve private placements, resulting in restricted stock.
B is incorrect because IPOs involve publicly traded shares, not restricted stock.
C and D are incorrect because restricted stock is not obtained through warrants or exchange-traded
options.
Reference: SEC Regulation D, Rule 144 (Restricted and Control Securities)
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?
D
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.
Reference: FINRA Rule 2360 (Options)