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

Authorized stock is the maximum number of shares a corporation is legally permitted to issue under its corporate charter (articles of incorporation). That is why choice D is correct. The authorized share count is established when the company is formed and can typically be changed later only through proper corporate procedures (often requiring board approval and shareholder approval, depending on jurisdiction and governing documents). The purpose is to define the company’s legal capacity to issue shares for capital raising, compensation plans, acquisitions, and other corporate needs.

Choice A, issued stock, refers to shares that have actually been sold/issued by the corporation to shareholders. Issued shares are always less than or equal to authorized shares. Choice B, treasury stock, refers to shares that were previously issued and outstanding but have been repurchased by the corporation and are held in the company’s treasury; treasury shares are not outstanding and typically have no voting rights or dividend rights while held by the issuer. Choice C, restricted stock, refers to shares subject to resale restrictions (often associated with Rule 144 or insider/control stock concepts), not the legal maximum number of shares.

This question is a straightforward corporate equity definition commonly tested on the SIE because it links to shareholder rights, corporate actions, and capitalization structure. Candidates should clearly distinguish:

Authorized = legal limit the company may issue

Issued = shares the company has sold/issued

Outstanding = issued minus treasury (shares held by public)

Treasury = repurchased shares held by the issuer

Understanding these terms helps when analyzing corporate filings, dilution, and equity financing decisions.

FINRA’s Continuing Education (CE) requirements include the Regulatory Element, which must be completed:

Within 120 days of the second anniversary of a registered representative’s initial registration.

Every three years thereafter (changed to every two years as of 2023).

C is correct because registered persons must complete the CE Regulatory Element after their initial requirement and then every two years.

A and B are incorrect because CE is not required annually or semiannually.

D is incorrect because CE is not tied to customer complaints.

For SIE exam purposes, a person who beneficially owns 10% or more of an issuer’s outstanding voting stock is treated as an affiliate or control person of the issuer. Affiliates are subject to restrictions when selling control or restricted securities under SEC Rule 144. Rule 144 provides a safe harbor for resale of restricted and control securities if specific conditions are met, such as holding-period requirements, current public information, volume limits, manner-of-sale conditions, and notice filings, depending on whether the seller is an affiliate. Choice C is correct. One percent is commonly associated with the volume limitation under Rule 144 for affiliates, not the threshold in this question. Five percent and fifteen percent are not the standard SIE-tested affiliate percentage. The SIE outline includes control and restrictions under equity securities and specifically references SEC Rule 144. This question tests whether the candidate recognizes the regulatory treatment of control persons and the resale limitations that apply when insiders or controlling shareholders dispose of issuer securities. Reference: Understanding Products and Their Risks; Equity Securities; Control and Restrictions; SEC Rule 144.

The correct answer is C, $800. Total pretax return includes both capital gains and dividend income over the holding period.

Step 1: Calculate the initial investment.

100 shares × $10 = $1,000

Step 2: Calculate the sale proceeds.

100 shares × $15 = $1,500

Step 3: Determine the capital gain.

$1,500 − $1,000 = $500 capital gain

Step 4: Calculate total dividends received.

The stock pays $1 per share annually for 3 years:

$1 × 100 shares × 3 years = $300 dividends

Step 5: Add total return.

$500 (capital gain) + $300 (dividends) = $800 total pretax return

Choice A ($300) only reflects dividends. Choice B ($500) only reflects capital gain. Choice D ($1,800) incorrectly adds total proceeds instead of profit.

For SIE exam purposes, always remember:

Total return = Capital gain/loss + Income (dividends or interest)

Thus, the investor’s total pretax return is $800, making choice C correct.

Interest rate risk—the risk that bond prices will decline when market interest rates rise—is best minimized by buying issues with short maturities, which makes choice C correct. The reason is that shorter-maturity bonds generally have lower duration, meaning they are less sensitive to changes in market rates. When rates rise, a short-term bond’s price typically falls less than a long-term bond’s price because investors will receive principal back sooner and can reinvest at the higher prevailing rates earlier.

Choice A (revenue bonds) is incorrect because revenue vs. GO classification primarily relates to credit/repayment source, not interest rate sensitivity. Revenue bonds can still be long-term and can still have meaningful interest rate risk. Choice B (bonds at a discount) is not the best minimizer of interest rate risk; discount pricing affects yield relationships, but maturity and duration are the key determinants of price volatility due to rate moves. Choice D (highest yield available) is incorrect because higher-yielding munis may carry greater credit risk, longer maturities, call features, or other risks; chasing yield does not minimize interest rate risk and can increase it.

This question targets a core SIE bond concept: price and interest rates move inversely, and the magnitude of price movement depends heavily on time to maturity (and related duration). Investors who are particularly concerned about rate increases often favor short-term municipal notes or shorter maturities to reduce price volatility. While call features and coupon levels also affect rate sensitivity, “short maturities” is the most direct and consistently correct answer for minimizing interest rate risk on the exam.

FINRA Rule 3260 requires that discretionary trades be approved by the customer in writing and reviewed by the supervising firm. The order ticket must indicate that discretion was exercised to ensure proper oversight.

B is correct because marking the order ticket ensures compliance with supervisory requirements.

A is incorrect because discretionary authority is not limited to market orders.

C is incorrect as discretionary trades do not require pre-approval for each trade but require prior written authorization.

D is incorrect because discretionary authority allows the RR to decide on price and timing without specific customer instructions.

A balance sheet provides a snapshot of a company’s financial position at a specific point in time by showing what the company owns and owes, and the residual value attributable to owners. The core balance sheet equation is Assets = Liabilities + Shareholders’ Equity. That is why the best description among the choices is “assets, debts, and the amount invested in the company”—assets correspond to resources owned, debts correspond to liabilities owed, and the “amount invested” corresponds to equity (often including paid-in capital and retained earnings). This aligns with how fundamental analysis uses financial statements to evaluate issuer health, leverage, and capitalization.

Choice A (revenues and expenses) describes an income statement, which measures operating performance over a period of time (e.g., a quarter or a year), not a point-in-time snapshot. Choice B is misleading: while a balance sheet is indeed “at a specific point in time,” it does not show “earnings” at a point in time. Earnings are generated over a period and appear on the income statement; the balance sheet may reflect accumulated earnings through retained earnings, but it is not an earnings statement. Choice C is incorrect because the balance sheet does not include the “number of investors” as a standard line item. Public companies disclose shares outstanding elsewhere, but investor count is not a balance sheet category.

For SIE purposes, the key is recognizing which statement answers which question: balance sheet = financial position (assets, liabilities, equity), income statement = profitability (revenue, expenses, net income), and cash flow statement = sources/uses of cash.

Communications with the public must be fair, balanced, and not misleading. A registered representative may not make exaggerated, unwarranted, promissory, or predictive statements that imply certainty about future market performance. Choice D is prohibited because it states that the stock “will hit $50 per share” by a specific month. That is a definitive price prediction and creates an improper guarantee-like impression about future performance. Choice A is a factual historical statement if accurate. Choice B references a firm research rating and may be permissible if the research report is properly approved and included with appropriate disclosures. Choice C provides factual information about management experience and is not inherently prohibited if accurate and not misleading. The SIE outline includes communications with the public, general requirements, prohibited manipulative or deceptive devices, and suitability/best interest communications. It also lists FINRA Rule 2210, Communications with the Public, and SEC antifraud provisions as relevant rules. The central rule is that sales communications may discuss opinions and facts, but they cannot promise or guarantee a specific future price. Reference: Section 3.2.5 Communications with the Public; FINRA Rule 2210; Section 3.3 Prohibited Activities.