Pass the FINRA General Securities Representative SIE Questions and answers with ExamsMirror

Nonregistered persons may perform clerical, ministerial, and administrative functions that do not involve securities recommendations, solicitation, or order taking. Assisting sales staff in tracing and tabulating commissions is a classic back-office/administrative task and is permitted for nonregistered personnel, making B correct. This type of activity supports operations but does not involve engaging in securities business that requires registration.

Choice A is not permitted because even taking unsolicited orders can be considered participating in securities transactions and can cross into activity reserved for registered persons, depending on the specifics. The SIE expects you to treat order taking as a registered activity unless it is clearly limited to purely clerical receipt and immediate routing under strict supervision—most exam questions treat “taking orders” as requiring registration.

Choice C is also problematic because contacting customers about whether they are satisfied with their investments can easily become a discussion about performance, holdings, or recommendations. While customer service calls may be allowed if strictly scripted and non-securities related, the wording “satisfied with their existing investments” suggests an investment discussion that can cross into solicitation or advice, which a nonregistered person should not do.

Choice D is not permitted because contacting prospective investors about a seminar tied to the BD’s proprietary mutual fund is effectively marketing/sales-related outreach that can be viewed as solicitation. Even if framed as “educational,” it is connected to a specific product and prospecting activity, which generally requires registration.

The SIE tests the boundary: nonregistered = administrative support; registered = solicitation, recommendations, and securities business communications.

FINRA Rule 5130 restricts participation in IPOs for certain individuals (e.g., restricted persons) to prevent potential conflicts of interest. Restricted persons include employees of broker-dealers and their immediate family members.

C is correct because the president of a local bank is not considered a restricted person under FINRA Rule 5130.

A is incorrect because employees (registered or not) of broker-dealers are restricted.

B is incorrect because immediate family members of broker-dealer employees are restricted, even if unemployed.

D is incorrect because the immediate family of a registered representative is restricted.

Step by Step Explanation:

Discount Bonds: These are issued or traded below par value. Over time, their price moves closer to par as they approach maturity, assuming yields remain constant.

Other Options:

Par Value Changes: The par value of a bond does not change over time; only its price fluctuates.

SEC and FINRA Bond Basics: SEC Discount Bonds.

Municipal securities regulation places a strong emphasis on transparency about the dealer’s role and regulatory status in the municipal market. Under MSRB customer disclosure expectations, municipal securities dealers are required to provide customers with certain written disclosures, and a commonly tested requirement is that customers receive written notice confirming that the dealer is registered with the MSRB (often tied to annual customer notifications and educational disclosures). Therefore, the correct answer is B.

Choice A is incorrect because dealers are not required to distribute their own year-end income statements to customers annually as an MSRB customer disclosure item. Financial statement delivery requirements generally relate to specific contexts (and are not a standard annual customer mailing requirement under MSRB rules for all customers). Choice C is not the best choice because while firms must have supervisory and compliance infrastructure and may provide contacts, an annual written requirement to provide the chief compliance officer’s contact information is not the standard MSRB annual disclosure item being tested here. Choice D is incorrect because dealers do not provide customers an annual count of complaints as a required MSRB disclosure; complaint reporting and recordkeeping are internal compliance matters and may be reportable to regulators, but not typically distributed as a required annual customer disclosure.

On the SIE, when you see “municipal securities dealer” + “annual written disclosure,” you should think MSRB-focused customer protection messaging—especially disclosures about the dealer’s municipal regulatory framework and how municipal customers can access educational resources and regulatory information. The cleanest match among the options is the dealer’s written statement of MSRB registration.

The process where the buyer’s side provides payment and the seller’s side delivers securities is settlement, so the correct answer is D. Settlement is the final stage of a securities transaction’s lifecycle. After a trade is executed, there are still operational steps required to complete it: confirming details, matching the trade between counterparties, and ensuring each party meets its obligations. Settlement specifically refers to the exchange of money for securities—delivery versus payment—so that ownership is transferred to the buyer and cash is transferred to the seller.

Choice A, trade execution, is the moment the order is filled—when the buyer and seller agree on price and quantity in the market. Execution happens first, but it does not complete the transfer of funds and securities. Choice C, clearing, is the process that occurs between execution and settlement. Clearing includes trade comparison, confirmation, netting of obligations, and risk management steps performed by clearing agencies to ensure the trade can be settled efficiently and accurately. Choice B, corporate action, is unrelated; corporate actions are issuer events like stock splits, dividends, tender offers, and mergers that can affect securities positions.

This is a heavily tested SIE market mechanics concept because it ties to customer account understanding, settlement time frames (e.g., T+1 for many securities in the U.S.), and the roles of clearing corporations and depositories (e.g., DTCC). Knowing the vocabulary—execution vs clearing vs settlement—helps you correctly interpret questions about when obligations arise and when ownership officially changes hands.

Under FINRA Rule 2210, firms must avoid making predictions or projections of future investment performance.

B is correct because it involves prohibited predictive statements.

A, C, and D are acceptable under FINRA guidelines, as they do not involve prohibited content.

Step by Step Explanation:

Priority in Bankruptcy: Preferred stockholders have a higher claim on a company’s assets than common stockholders during liquidation. Common stockholders are residual claimants.

Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.

Incorrect Options:

A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.

C: Common stock dividends are subordinate to preferred stock dividends.

SEC Guidance on Stockholder Rights: SEC Stock Rights.

A 1-for-3 reverse stock split means that shareholders will receive one new share for every three shares currently owned. Reverse splits reduce the number of shares outstanding while proportionally increasing the market price per share, leaving the investor’s overall market value (ignoring market reactions and rounding) essentially unchanged at the moment of the split. In this question, the investor owns 300 shares at $9.00 each. Dividing the share count by 3 results in 100 shares after the reverse split (300 ÷ 3 = 100). Because the split is reverse, the price is multiplied by 3 to keep the position value constant: $9.00 × 3 = $27.00 per share. Therefore, the investor will have 100 shares at $27.00, which is answer choice A.

You can also verify by checking the total value before and after the split. Before: 300 × $9.00 = $2,700. After: 100 × $27.00 = $2,700. This illustrates the central split principle tested on the SIE: stock splits and reverse splits change share count and per-share price, but do not inherently create gains or losses; instead, they adjust the number of shares and the price per share proportionally. Cost basis per share is adjusted accordingly (the total cost basis remains the same, but it is allocated across fewer shares at a higher per-share basis).

Reverse splits are often used by issuers seeking to raise the trading price per share (for example, to meet listing requirements), and the SIE commonly tests the mechanical impact on share quantity, market price, and cost basis.

Buying a call option gives the investor the right to purchase the stock at a fixed price (strike price). If the stock’s price rises significantly, the value of the call option increases, allowing the investor to profit.

B is correct because a call option profits directly from a stock price increase.

A is incorrect because a put option profits from a stock price decline.

C and D are incorrect because selling options limits profit potential and exposes the seller to significant risk if the stock moves unfavorably.