Free Securities Industry Essentials (SIE) Exam Practice Questions

Sample Practice Questions

Try these 10 sample questions from the 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 part of the SEC's mission in securities regulation?

   1. A. Set the federal funds rate
   2. B. Facilitate capital formation
   3. C. Insure bank checking accounts
   4. D. Guarantee investment returns

   Answer: B

   Explanation: The SEC states that its mission includes "facilitate capital formation." That objective concerns securities regulation, while the other choices describe monetary policy, bank deposit insurance, or an investment guarantee.

   Reference: SEC.gov | About — About, opening paragraph

2. 2What interest does a stockholder hold in the issuing company?

   1. A. An ownership share
   2. B. A creditor's claim
   3. C. A bank deposit
   4. D. A guaranteed annuity

   Answer: A

   Explanation: The SEC says "Stocks are a type of security that gives stockholders a share of ownership in a company." Debt, deposits, and annuities are different claims.

   Reference: Stocks - FAQs — What are stocks?

3. 3What is the key price uncertainty in a market order to buy stock?

   1. A. Execution is guaranteed at the last-traded price
   2. B. The execution price is not guaranteed
   3. C. The order cannot execute until the next day
   4. D. The buyer selects a maximum execution price

   Answer: B

   Explanation: The SEC states, "Generally, a market order will be executed immediately. However, the price at which a market order will be executed is not guaranteed." Speed of execution does not fix the purchase price.

   Reference: Understanding Order Types – Investor Bulletin — Market Order

4. 4How does FINRA Rule 1210 determine the registration category for a person engaged in a member's securities business?

   1. A. By the person's functions and responsibilities
   2. B. By the security products the person personally prefers
   3. C. By the registration category the person held at a prior firm
   4. D. By the category that requires the fewest examinations

   Answer: A

   Explanation: Rule 1210 requires registration "in each category of registration appropriate to his or her functions and responsibilities". The person's work, subject to stated exemptions, controls the category.

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

5. 5What gives the SEC broad authority over the securities industry?

   1. A. Federal securities laws
   2. B. FINRA membership contracts
   3. C. State banking charters
   4. D. SIPC insurance policies

   Answer: A

   Explanation: The SEC explains that "The federal securities laws empower the Securities and Exchange Commission with broad authority over all aspects of the securities industry." The other instruments govern different relationships or institutions.

   Reference: SEC.gov | About — About, opening paragraph

6. 6For an investor who owns common stock, which right normally accompanies the shares?

   1. A. Voting at shareholder meetings
   2. B. Guaranteed repayment of principal
   3. C. Priority over bondholders in liquidation
   4. D. A fixed maturity date

   Answer: A

   Explanation: The SEC states that "Common stock entitles owners to vote at shareholder meetings and receive dividends." Common stock is ownership, so the debt-style maturity and repayment choices do not apply.

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

7. 7An investor submits a buy limit order at $20 for a stock. Which execution price is permitted by that instruction?

   1. A. Only $20 or lower
   2. B. Only $20 or higher
   3. C. Any available price at execution
   4. D. Only the stock's last closing price

   Answer: A

   Explanation: The SEC explains, "A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher." A $20 buy limit caps the acceptable purchase price.

   Reference: Understanding Order Types – Investor Bulletin — Limit Order

8. 8Under FINRA Rule 1210.03, which examinations generally must a prospective representative pass before representative registration becomes effective?

   1. A. The SIE and an appropriate representative qualification examination
   2. B. The SIE alone, with no representative qualification examination
   3. C. A principal qualification examination alone
   4. D. Only an exchange's trading systems assessment

   Answer: A

   Explanation: Rule 1210.03 requires the "Securities Industry Essentials" exam and "an appropriate representative qualification examination" before representative registration becomes effective. Passing the SIE alone is insufficient.

   Reference: FINRA Rule 1210: Registration Requirements — Supplementary Material .03, Qualification Examinations

9. 9How is FINRA classified within securities industry oversight?

   1. A. A federal cabinet department
   2. B. A self-regulatory organization
   3. C. A bank deposit insurer
   4. D. A municipal bond issuer

   Answer: B

   Explanation: FINRA describes itself as a "self-regulatory organization (SRO)". It is not a cabinet department, insurer, or securities issuer.

   Reference: How FINRA Serves Investors and Members — Opening paragraph

10. 10Relative to common stockholders, which claim do preferred stockholders usually have?

    1. A. Earlier dividend payments
    2. B. Earlier voting rights
    3. C. Earlier payment than bondholders
    4. D. A guaranteed share price

    Answer: A

    Explanation: The SEC says preferred holders "receive dividend payments before common stockholders do". This priority is relative to common stock, not bondholders, and does not guarantee price.

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