Free SIE Practice Questions

Test your SIE exam readiness with our free practice questions. Each question includes detailed explanations and study tips to help you master the Securities Industry Essentials exam concepts.

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Questions

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Free practice questions covering all major SIE exam topics including regulations, securities, and market structure concepts.

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Explained

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Every answer includes comprehensive explanations with reasoning, helping you understand why each choice is correct or incorrect.

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Min Each

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Quick practice session - each question takes 1-2 minutes to complete, perfect for study breaks and concept review.

SIE Practice Questions

These practice questions mirror the format and difficulty of the actual SIE exam. Take your time to read each question carefully and select the best answer.

Which of the following is considered a security under the Securities Act of 1933?

A) A savings account at a commercial bank
B) A variable annuity
C) A fixed annuity guaranteed by an insurance company
D) A commodity futures contract

Answer: B) A variable annuity

Explanation: Variable annuities are considered securities because their investment performance depends on the underlying securities in separate accounts, subjecting investors to investment risk. The return is not guaranteed and varies based on market performance.

Why other answers are incorrect:
• A) Savings accounts are bank deposits, not securities
• C) Fixed annuities have guaranteed returns, not securities
• D) Commodities are regulated by CFTC, not SEC

Study Tip: Remember the key test for securities: investment risk. If returns vary based on market performance, it’s likely a security.

Which statement about FINRA registration is correct?

A) All investment advisers must register with FINRA
B) Only broker-dealers must register with FINRA
C) Both broker-dealers and investment advisers must register with FINRA
D) FINRA registration is optional for all firms

Answer: B) Only broker-dealers must register with FINRA

Explanation: FINRA is a self-regulatory organization that oversees broker-dealers and their registered representatives. Investment advisers register with either the SEC (if they manage over $100 million) or state securities administrators, not FINRA.

Why other answers are incorrect:
• A) Investment advisers register with SEC or states, not FINRA
• C) Only broker-dealers register with FINRA
• D) FINRA registration is mandatory for broker-dealers

Study Tip: FINRA = Broker-dealers. SEC/State = Investment advisers. Keep the regulators separate!

In the primary market, securities are:

A) Traded between existing investors
B) Sold by the issuer to raise capital
C) Always traded on an exchange
D) Priced by supply and demand only

Answer: B) Sold by the issuer to raise capital

Explanation: The primary market is where issuers (companies) sell new securities directly to investors to raise capital. This includes IPOs, secondary offerings, and bond issuances. The proceeds go to the issuing company.

Why other answers are incorrect:
• A) This describes the secondary market
• C) Primary market sales can occur anywhere, not just exchanges
• D) Pricing involves multiple factors including issuer needs

Study Tip: Primary = Issuer gets money. Secondary = Investors trade with each other.

Which professional has a fiduciary duty to their clients?

A) A broker representing a customer in a trade
B) An investment adviser managing client assets
C) A dealer selling securities from inventory
D) A financial journalist writing market commentary

Answer: B) An investment adviser managing client assets

Explanation: Investment advisers have a fiduciary duty under the Investment Advisers Act, requiring them to act in their clients’ best interests at all times. This includes duties of care and loyalty, and avoiding conflicts of interest.

Why other answers are incorrect:
• A) Brokers have a best interest standard, not full fiduciary duty
• C) Dealers are principals selling their own inventory
• D) Journalists have no client relationship

Study Tip: Investment Advisers = Fiduciary duty. Broker-dealers = Best interest standard (Reg BI).

When interest rates rise, the price of existing bonds will:

A) Rise proportionally
B) Fall
C) Remain unchanged
D) Rise to match new rates

Answer: B) Fall

Explanation: Bond prices have an inverse relationship with interest rates. When rates rise, existing bonds with lower coupon rates become less attractive, so their prices must fall to offer competitive yields to new investors.

Why other answers are incorrect:
• A) Prices move inversely, not proportionally
• C) Prices always adjust to market conditions
• D) Prices fall to compete with higher rate bonds

Study Tip: Interest rates ↑ = Bond prices ↓ (inverse relationship). Think seesaw!

Mutual fund shares are typically priced:

A) Throughout the trading day
B) Once per day after market close
C) Only when purchased or redeemed
D) Based on the highest bidder

Answer: B) Once per day after market close

Explanation: Mutual funds calculate their Net Asset Value (NAV) once per day after markets close, based on the closing prices of all holdings. This forward pricing means investors receive the next calculated NAV after their order is placed.

Why other answers are incorrect:
• A) This describes ETFs, not traditional mutual funds
• C) Pricing is independent of purchase timing
• D) Mutual funds don’t use auction-style pricing

Study Tip: Mutual funds = One price per day (NAV). ETFs = Trade all day like stocks.

The Securities Act of 1933 primarily regulates:

A) Secondary market trading
B) Investment adviser activities
C) New securities offerings
D) Broker-dealer operations

Answer: C) New securities offerings

Explanation: The Securities Act of 1933 (the “Truth in Securities Act”) regulates the initial offering of securities to the public. It requires registration and disclosure for new issues to ensure investors receive material information before investing.

Why other answers are incorrect:
• A) Secondary trading is regulated by the Securities Exchange Act of 1934
• B) Investment advisers are regulated by the Investment Advisers Act of 1940
• D) Broker-dealers are regulated by the Securities Exchange Act of 1934

Study Tip: 1933 Act = New issues (“paper act”). 1934 Act = Trading/exchanges (“people act”).

SIPC insurance protects customers against:

A) Market losses in their investments
B) Broker-dealer bankruptcy
C) Unsuitable investment recommendations
D) Fraudulent securities offerings

Answer: B) Broker-dealer bankruptcy

Explanation: SIPC (Securities Investor Protection Corporation) protects customer assets when a FINRA member broker-dealer fails financially. It covers up to $500,000 per customer ($250,000 for cash), but does not protect against investment losses due to market conditions.

Why other answers are incorrect:
• A) SIPC doesn’t cover market risk or investment losses
• C) Suitability violations are regulatory matters, not SIPC coverage
• D) Securities fraud is handled through other legal remedies

Study Tip: SIPC = Protects against firm failure, NOT investment losses. Like FDIC for banks!

Ready for More Practice?

These 8 questions are just the beginning. Top SIE prep courses offer hundreds more practice questions with detailed explanations, simulated exams, and comprehensive study materials.

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