FINRA Securities Industry Essentials Exam (SIE) SIE Question # 33 Topic 4 Discussion
SIE Exam Topic 4 Question 33 Discussion:
Question #: 33
Topic #: 4
A registered representative is positive about the prospects of Company ABC, a publicly traded corporation. He wants to send an email to his customers about the company’s stock. Which of the following statements in that email is prohibited?
A.
“The stock has paid a quarterly dividend for the past 20 years.”
B.
“According to the attached research report, our firm has rated the stock a strong Buy.”
C.
“ABC has recently changed management. The new chief executive officer has 12 years of experience in ABC’s industry.”
D.
“There is strong demand for ABC stock, and it will hit $50 per share, a 20% increase, by May of this year.”
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.
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