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FINRA SIE Exam
Securities Industry Essentials (Page 12 )

Updated On: 12-Jan-2026
Page 8 of 42
PDF with 164 Questions

A bond with a par value of $1,000 that is backed by the taxing power of a local government is known as:

  1. A revenue bond
  2. A Treasury bond
  3. A corporate bond
  4. A general obligation (GO) bond

Answer(s): D

Explanation:

General Obligation (GO) Bonds: Backed by the full faith and credit of the issuing municipality, relying on its taxing power for repayment.

Revenue Bonds: Supported by revenues from a specific project or source.

Treasury Bonds: Issued by the federal government.

Corporate Bonds: Issued by corporations, not municipalities.


Reference:

SEC Municipal Bond Guide: SEC GO Bonds.



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.



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