Free FINRA Securities Industry Essentials (SIE) Exam Practice Questions

Sample Practice Questions

Try these 10 sample questions from the FINRA Securities Industry Essentials (SIE) Exam practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Which objective is one part of the SEC's three-part mission?

   1. A. Guaranteeing returns on registered securities
   2. B. Facilitating capital formation
   3. C. Insuring all brokerage account balances
   4. D. Setting corporate dividend rates

   Answer: B

   Explanation: The SEC lists "Facilitate capital formation" as part of its mission. It does not guarantee investment returns, insure accounts, or set issuer dividends.

   Reference: The Role of the SEC — Mission

2. 2What ownership interest does a share of common stock represent?

   1. A. A share of ownership in the issuing company
   2. B. A loan that the issuer must repay at maturity
   3. C. A claim to insured bank deposits
   4. D. A contract to buy shares at a strike price

   Answer: A

   Explanation: The SEC says "Stocks are a type of security that gives stockholders a share of ownership in a company." Bonds are debt, deposits are bank liabilities, and options are contracts.

   Reference: Stocks - FAQs — What are stocks?

3. 3What trade-off does a market order make when submitted to buy a stock?

   1. A. It guarantees the last quoted price but may never execute
   2. B. It generally executes promptly but does not guarantee price
   3. C. It executes only at the investor's specified maximum price
   4. D. It remains open until canceled regardless of timing instructions

   Answer: B

   Explanation: Execution is generally prompt, while the fill price can differ from the quote; the other choices describe limit or time instructions. "Generally, a market order will be executed immediately. However, the price at which a market order will be executed is not guaranteed."

   Reference: Understanding Order Types – Investor Bulletin — Market Order

4. 4A person performs a member firm's securities business in a role requiring registration. Under Rule 1210, how must that person's registration align with the work?

   1. A. Register in each category appropriate to the person's functions and responsibilities
   2. B. Register only in the category with the shortest exam
   3. C. Use any category held by another employee at the firm
   4. D. Register only when a customer specifically requests it

   Answer: A

   Explanation: Registration must match the person's actual functions and responsibilities. "shall be registered with FINRA as a representative or principal in each category of registration appropriate to his or her functions and responsibilities"

   Reference: FINRA Rule 1210: Registration Requirements — Rule 1210, opening paragraph

5. 5How does a securities self-regulatory organization govern its members?

   1. A. It adopts and enforces member conduct rules.
   2. B. It guarantees member firms' investment results.
   3. C. It issues all federal securities statutes.
   4. D. It sets interest rates for member firms.

   Answer: A

   Explanation: The SEC explains that "An SRO manages its industry through the adoption of rules governing the conduct of its members. SROs also enforce the rules they adopt and discipline members for violating SRO rules." The other choices confuse rule oversight with guarantees, legislation, or monetary policy.

   Reference: Market Participants — Self-Regulatory Organizations (SROs)

6. 6Which right is normally associated with common stock ownership?

   1. A. Voting at shareholder meetings
   2. B. Receiving interest at a fixed coupon
   3. C. Receiving principal at bond maturity
   4. D. Redeeming shares at a fund's NAV

   Answer: A

   Explanation: The SEC states, "Common stock entitles owners to vote at shareholder meetings and receive dividends." Fixed coupons, principal repayment, and fund redemption belong to other products.

   Reference: Stocks - FAQs — What kinds of stocks are there?

7. 7A customer will buy stock only at $25 per share or less. Which order instruction directly expresses that ceiling?

   1. A. A buy market order
   2. B. A buy stop above the market
   3. C. A buy limit at $25
   4. D. A sell limit at $25

   Answer: C

   Explanation: A buy limit sets the maximum acceptable purchase price, although execution is not assured. "A buy limit order can only be executed at the limit price or lower"

   Reference: Understanding Order Types – Investor Bulletin — Limit Order

8. 8A person passes the SIE but has not passed the applicable representative qualification examination or met other registration requirements. What does FINRA Rule 1210.03 say?

   1. A. Passing the SIE alone does not qualify the person for FINRA registration.
   2. B. Passing the SIE automatically registers the person as a representative.
   3. C. The person may function in any principal capacity.
   4. D. The person is registered once a customer account is opened.

   Answer: A

   Explanation: The SIE is only one part of qualification for registration. "passing the SIE alone shall not qualify an individual for registration with FINRA."

   Reference: FINRA Rule 1210: Registration Requirements — Supplementary Material .03, Securities Industry Essentials Exam

9. 9A broker-dealer needs an entity to compare member trades and prepare automated settlement instructions. Which entity performs that role?

   1. A. A transfer agent
   2. B. An investment adviser
   3. C. A clearing corporation
   4. D. A credit rating agency

   Answer: C

   Explanation: The SEC states that clearing corporations "compare member transactions, clear those trades and prepare instructions for automated settlement of those trades." The alternatives maintain ownership records, provide advice, or assess credit quality.

   Reference: Market Participants — Clearing Agencies

10. 10Compared with common stock, what dividend priority does preferred stock usually have?

    1. A. It receives dividends before common stock.
    2. B. It receives dividends only after common stock.
    3. C. It receives the same mandatory dividend as bonds.
    4. D. It receives no dividends under any circumstances.

    Answer: A

    Explanation: The SEC says preferred stockholders "receive dividend payments before common stockholders do." This priority is distinct from voting rights or debt coupons.

    Reference: Stocks - FAQs — What kinds of stocks are there?