TheorySIE Securities Practice Questions
Free SIE Securities practice questions with answers and plain-English explanations. Browse the PDF, video and online mock test.
SIE Securities Questions
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Q1Which federal law created the Securities and Exchange Commission (SEC)?
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✓ Correct answer: The Securities Exchange Act of 1934
The Securities Exchange Act of 1934 created the SEC to regulate the secondary market and enforce the federal securities laws. The 1933 Act governs new issues but did not create the SEC.
Q2The Securities Act of 1933 primarily regulates which of the following?
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✓ Correct answer: The issuance of new securities to the public
The Securities Act of 1933 is the 'paper act' governing the primary market — registration and disclosure for new issues. Secondary trading is covered by the 1934 Act.
Q3FINRA is best described as which type of organization?
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✓ Correct answer: A self-regulatory organization (SRO)
FINRA is a self-regulatory organization that oversees broker-dealers. It is not a government agency; it operates under SEC oversight.
Q4Which entity is primarily responsible for regulating broker-dealers and registered representatives in the over-the-counter market?
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✓ Correct answer: FINRA
FINRA is the primary SRO regulating broker-dealers and their associated persons. It writes rules, administers exams, and enforces conduct standards under SEC oversight.
Q5In which market do issuers raise new capital by selling securities for the first time?
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✓ Correct answer: The primary market
The primary market is where issuers sell newly created securities to investors, raising capital for the issuer. Subsequent trading among investors occurs in the secondary market.
Q6When an investor sells previously issued shares to another investor on an exchange, this transaction occurs in the:
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✓ Correct answer: Secondary market
The secondary market is where investors trade outstanding securities among themselves. The issuing company does not receive proceeds from these trades.
Q7A company offering its shares to the public for the very first time is conducting a(n):
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✓ Correct answer: Initial public offering (IPO)
An IPO is the first sale of a company's stock to the public, a primary market transaction. After the IPO, the shares trade in the secondary market.
Q8The NYSE is an example of which type of market?
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✓ Correct answer: An exchange (auction) market
The NYSE is an auction market where buyers and sellers compete to obtain the best price. Designated market makers help maintain orderly trading in listed securities.
Q9A broker acts in which capacity when executing a customer order?
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✓ Correct answer: As an agent, matching buyers and sellers for a commission
A broker acts as an agent, arranging trades between buyers and sellers and charging a commission. It does not take ownership of the securities.
Q10A dealer (market maker) earns compensation primarily through:
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✓ Correct answer: A markup or markdown on principal trades
A dealer trades as principal from its own inventory and is compensated by the markup (when selling to a customer) or markdown (when buying from a customer). Brokers, by contrast, charge commissions.
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