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

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.

Regulation S-P mandates that broker-dealers disclose how they collect, protect, and share customers’ nonpublic personal information. The privacy notice must include:

The categories of information collected.

The firm’s policies for safeguarding data.

Opt-out rights for sharing information with unaffiliated third parties.

D is correct because privacy notices must describe policies for protecting customer information.

A, B, and C are incorrect because they do not relate to the required elements of Regulation S-P privacy notices.

The correct answer is D, $102,875.00. Municipal bonds are quoted as a percentage of par value, and par value is typically $1,000 per bond.

Step-by-step calculation:

Convert the quote 102-7/8 into a decimal:

7/8 = 0.875

So, 102-7/8 = 102.875% of par

Apply this percentage to one bond:

$1,000 × 102.875% = $1,028.75 per bond

Multiply by the number of bonds (100 bonds):

$1,028.75 × 100 = $102,875

Choice A and B are incorrect because they represent the price for 10 bonds, not 100. Choice C is close but incorrectly calculates the fractional portion.

Understanding how to convert bond quotes (including fractions like 7/8) into dollar amounts is essential for pricing municipal securities on the SIE exam.

Thus, the investor would pay $102,875.00, making Answer D correct.

Open-end mutual funds do not trade on secondary markets. Instead, shares are continuously issued or redeemed by the fund at the net asset value (NAV), calculated at the market close.

D is correct because investors purchase and redeem shares directly through the fund or authorized brokers.

A is incorrect because mutual funds do not have a predetermined dissolution date.

B is incorrect because mutual fund shares are priced at the NAV calculated once daily after the market closes.

C is incorrect because secondary market trading applies to closed-end funds and ETFs, not open-end mutual funds.

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.

Step by Step Explanation:

Prohibition on Signing Customer Names: It is never permissible to sign a customer ' s name without written authorization (POA) due to legal and ethical concerns. Unauthorized signing constitutes forgery and violates FINRA rules.

Incorrect Options:

A: Firm principal approval does not override this prohibition.

B: Verbal authorization is insufficient.

C: Discretionary authority does not allow unauthorized signing.

FINRA Rule 4512 (Customer Account Information): FINRA Rule 4512.

The correct answer is A (No filing required) based on the facts provided. A Currency Transaction Report (CTR) is generally triggered by currency transactions (cash) over the applicable threshold within a single business day. In this scenario, the customer deposited a cashier’s check and a money order, which are monetary instruments, not “currency” (cash). Therefore, even though the combined amount is $10,500, the deposits described are not cash deposits, so this does not automatically require a CTR.

A Suspicious Activity Report (SAR) is required when activity is suspicious and meets reporting criteria—such as transactions that appear designed to evade reporting requirements, have no apparent lawful purpose, involve potential money laundering, or otherwise raise red flags. Here, the amounts and instruments alone—$8,000 cashier’s check and $2,500 money order deposited the same day—do not necessarily indicate suspicious activity. Without additional facts (e.g., patterns of structuring, inconsistent customer profile, unusual source of funds, evasive behavior, or other AML red flags), the firm is not required to file a SAR solely on this activity.

Form W-9 is used to request a taxpayer identification number and certification for certain tax-reporting purposes, but it is not a standard “required filing” triggered by these deposits as described.

The SIE tests the ability to distinguish between currency-based reporting (CTR) and suspicion-based reporting (SAR), and to recognize that not every large or same-day deposit is automatically reportable without meeting the specific rule trigger.

Step by Step Explanation:

Nonpublic Information: A customer’s net worth is nonpublic personal information that requires confidentiality under Regulation S-P.

Incorrect Options:

A, B, and D: Names, addresses, and phone numbers may be public unless linked to specific financial or personal details.

SEC Regulation S-P (Privacy of Consumer Financial Information): SEC Regulation S-P.