FINRA Securities Industry Essentials SIE Dumps in PDF

Free FINRA SIE Real Questions (page: 10)

A hypothecation agreement gives the broker-dealer the right to engage in which of the following activities?

  1. Sharing customers' nonpublic personal information with nonaffiliated third parties
  2. Entering trades in a customer's account without prior authorization from the customer
  3. Selling a customer's securities when the customer has failed to pay for trades in a cash account
  4. Using securities that a customer has bought on margin as collateral to obtain a loan from a bank

Answer(s): D

Explanation:

Hypothecation Agreement: Required for margin accounts, it authorizes the broker-dealer to use the customer's margin securities as collateral to secure loans for funding customer transactions.

Incorrect Options:

A: Sharing customer information is regulated under privacy rules (Regulation S-P).

B: Unauthorized trading violates securities laws.

C: Selling unpaid securities in cash accounts pertains to Regulation T, not hypothecation agreements.


Reference:

FINRA Margin Account Rules: FINRA Rule 4210.



When is it permissible to exercise European-style options contracts?

  1. Only on the last business day before expiration
  2. Only on the day of expiration
  3. Only on the day after expiration
  4. Only on the third Friday of every month

Answer(s): B

Explanation:

European-Style Options: Can only be exercised on their expiration date, unlike American-style options, which can be exercised any time before expiration.

Incorrect Options:

A: Not accurate; the exercise must occur specifically on the expiration date.

C: Options cannot be exercised after expiration.

D: The expiration date depends on the option contract, not a specific weekday.


Reference:

Options Clearing Corporation (OCC) Guidelines: OCC European Options.



At a prospecting event, a registered representative (RR) provides cards for attendees to write down their contact information if they want to have a follow-up meeting with her.
Which of the following actions should the RR take in this situation to comply with telemarketing rules?

  1. Obtain the broker-dealer's approval before making a call
  2. Limit contact with prospects to between 9 a.m. and 9 p.m.
  3. Contact the prospects at will since they provided express written consent
  4. Prior to contacting the prospects, check all of the names on the cards to make sure they are not on the National Do Not Call Registry

Answer(s): D

Explanation:

Telemarketing Rules (FINRA Rule 3230): Require firms to check the National Do Not Call Registry before contacting individuals, even if those individuals provide their contact information voluntarily.

Incorrect Options:

A: Approval isn't required for individual follow-ups; compliance with the registry is.

B: While calls must be limited to appropriate hours, the registry check is still mandatory.

C: Written consent does not override the registry requirement.


Reference:

FINRA Rule 3230 (Telemarketing): FINRA Rule 3230.



Which of the following disclosures is a municipal securities dealer required to provide its customers once every calendar year?

  1. The firm's address
  2. The firm's financial standing
  3. FINRA violations of all registered representatives
  4. The location and availability of the MSRB investor brochure

Answer(s): D

Explanation:

MSRB Rule G-10: Requires municipal securities dealers to notify customers annually about the availability of the MSRB investor brochure, which explains investor protections and complaint filing procedures.

Incorrect Options:

A and B: Address and financial standing are not specifically required disclosures.

C: FINRA violations are not a required disclosure under MSRB rules.


Reference:

MSRB Rule G-10 (Investor Brochure Requirement): MSRB Rule G-10.



Which of the following risks are associated with Treasury securities?

  1. Credit risk
  2. Liquidity risk
  3. Prepayment risk
  4. Interest rate risk

Answer(s): D

Explanation:

Interest Rate Risk: Treasury securities are sensitive to changes in interest rates.
When rates rise, Treasury prices fall, exposing investors to price risk.

Incorrect Options:

Credit Risk: Virtually nonexistent for Treasuries, as they are backed by the U.S. government.

Liquidity Risk: Treasuries are highly liquid.

Prepayment Risk: Applies to mortgage-backed securities, not Treasuries.


Reference:

SEC Bond Risk Disclosures: SEC Treasury Risks.



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