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SIE trading, customer accounts and prohibited activities practice test

Free SIE exam questions for the outline section on trading, customer accounts and prohibited activities (31% of the scored items): orders, settlement, accounts, compliance and misconduct.

Tap an answer to check it, or open "Show the answer and rationale" under each question. Customers in the questions are fictional. Exam practice only, not investment advice.

Question 1 of 20

A firm's CIP must collect four items from an individual before opening an account. Which set is correct?

  1. Name, income, net worth, ID number
  2. Name, employer, address, tax bracket
  3. Name, DOB, address, ID number
  4. Name, date of birth, spouse, phone
Show the answer and rationale

Answer: C

The Customer Identification Program collects name, date of birth, address and an identification number (NDAI). Income, net worth, employer and tax bracket are profile or suitability facts, not CIP identity items.

📚 Learn it: Opening an Account: Know Who You Are Serving

Question 2 of 20

Since June 30, 2020, which standard applies to a broker-dealer's recommendations to retail customers?

  1. No federal standard applies
  2. FINRA Rule 2111 only
  3. The Investment Advisers Act fiduciary duty
  4. Regulation Best Interest
Show the answer and rationale

Answer: D

Reg BI's compliance date was June 30, 2020, and FINRA Rule 2111 states that it does not apply to recommendations subject to Reg BI. The Advisers Act fiduciary duty governs investment advisers, not broker-dealers acting as brokers.

📚 Learn it: Suitability, Reg BI and Form CRS

Question 3 of 20

Which statement about adding a TOD beneficiary is accurate?

  1. The beneficiary must co-sign every trade
  2. The beneficiary owns half of the account immediately
  3. The owner may change it while alive
  4. The choice can never be changed
Show the answer and rationale

Answer: C

A TOD designation is revocable during the owner's life; the beneficiary has no current ownership and no say in trading. That is the key difference from adding a joint owner.

📚 Learn it: Individual and Joint Accounts: Who Gets It When Someone Dies

Question 4 of 20

Who determines the age at which a UTMA account passes to the beneficiary?

  1. State law
  2. The donor's choice
  3. The IRS
  4. The custodian's choice
Show the answer and rationale

Answer: A

The age of termination is set by the state's UTMA or UGMA statute. The IRS sets tax rules, and neither the donor nor the custodian picks a different age.

📚 Learn it: Custodial, Trust and Entity Accounts

Question 5 of 20

A customer refuses to sign the loan consent but signs the rest of the margin agreement. What is the result?

  1. The firm must convert it to a cash account
  2. The margin account may still be opened
  3. The margin account cannot be opened
  4. The account must be closed in 30 days
Show the answer and rationale

Answer: B

The loan consent is optional. Without it the firm cannot lend the customer's securities, but the customer can still borrow on margin with the credit and hypothecation agreements signed.

📚 Learn it: Cash, Margin and Who Decides the Trade

Question 6 of 20

A 45-year-old takes $10,000 from a traditional IRA to buy a car. What applies?

  1. Income tax plus a 10% additional tax
  2. Only the 10% additional tax, no income tax
  3. Income tax only, no additional tax
  4. No tax at all, because the amount is $10,000 or less
Show the answer and rationale

Answer: A

Withdrawals before 59½ are generally taxable income plus a 10% additional tax unless an exception applies. Buying a car is not an exception.

📚 Learn it: Traditional and Roth IRAs (Tax Year 2026)

Question 7 of 20

In a nonqualified deferred compensation plan, when does the employer generally take its tax deduction?

  1. When the employee is hired
  2. Every year the plan exists
  3. When the plan is first created
  4. When benefits are paid to the employee
Show the answer and rationale

Answer: D

Nonqualified plans do not get qualified-plan treatment: the employer's deduction generally waits until the employee receives the money and includes it in income.

📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE

Question 8 of 20

A rep had a brokerage account at another firm before joining his new firm. Under Rule 3210, by when must he get his new firm's written consent?

  1. Within one year of associating
  2. Only when he next trades
  3. Within 30 calendar days of associating
  4. No consent is ever needed for pre-existing accounts
Show the answer and rationale

Answer: C

For accounts that already existed when a person became associated, Rule 3210 requires written consent from the employer within 30 calendar days and notice to the other firm. Pre-existing accounts are not exempt.

📚 Learn it: Education Savings and Special Situations

Question 9 of 20

How long must a broker-dealer keep a copy of a filed SAR and its supporting documents?

  1. For the life of the firm
  2. Five years from filing
  3. Three years from filing
  4. Six years from filing
Show the answer and rationale

Answer: B

SARs and supporting documentation are kept for five years from the filing date, the same as CTR copies. Three and six years are Rule 17a-4 periods for other records, and life-of-firm applies to items like the corporate charter.

📚 Learn it: Placement, Layering, Integration

Question 10 of 20

When must a firm verify a new customer's identity under its CIP?

  1. Within one full year after the account is opened
  2. Only if the customer deposits cash
  3. Only after the first trade settles
  4. Reasonably soon before or after opening
Show the answer and rationale

Answer: D

The rule calls for verification within a reasonable time before or after the account is opened. Waiting for settlement, a year, or a cash deposit is not the standard.

📚 Learn it: Know Who You're Dealing With

Practice 10 more trading, customer accounts and prohibited activities questions free →

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Question 11 of 20

How long must a broker-dealer keep copies of its retail communications, such as a sales brochure?

  1. Three years
  2. Ten years
  3. Six years
  4. One year
Show the answer and rationale

Answer: A

Rule 2210 points to Rule 17a-4(b), so retail and institutional communications are kept three years, with the dates of use and approving principal recorded. Six years applies to the core ledgers and blotters.

📚 Learn it: Six, Three, and Forever

Question 12 of 20

Under the 2024 amendments to Regulation S-P, what must a broker-dealer maintain to deal with breaches of customer information?

  1. An annual breach filing with FINRA
  2. A written incident response program
  3. A cyber insurance policy of $1 million
  4. A separate privacy officer at each branch
Show the answer and rationale

Answer: B

The amendments require written policies for an incident response program to detect, respond to and recover from unauthorized access, including customer notice. Insurance, branch privacy officers and annual FINRA filings are not what the rule requires.

📚 Learn it: Reg S-P and Red Flags

Question 13 of 20

A new member firm must pre-file a newspaper ad with FINRA. How far ahead of first use must it be filed?

  1. 5 business days
  2. 30 calendar days
  3. 1 business day
  4. 10 business days
Show the answer and rationale

Answer: D

During the new-member year, covered retail communications are filed at least 10 business days before first use. The other periods are not in Rule 2210's new-member filing requirement.

📚 Learn it: 25 in 30: Communications Rules

Question 14 of 20

Complaint statistics for the quarter ending March 31 must reach FINRA by which date?

  1. June 30
  2. March 31
  3. April 30
  4. April 15
Show the answer and rationale

Answer: D

Quarterly statistical and summary complaint data are due by the 15th day of the month after the quarter ends, so April 15. The other dates either fall at quarter-end or are later than the rule allows.

📚 Learn it: Cold Calls and Complaints

Question 15 of 20

A normal cash dividend has a record date of Friday. What is the last day to buy regular way and receive the dividend?

  1. Wednesday
  2. Friday
  3. Monday
  4. Thursday
Show the answer and rationale

Answer: D

A Thursday trade settles Friday (T+1), putting the buyer on the books on the record date. Friday itself is the ex-date, so a Friday buyer settles Monday and misses the dividend.

📚 Learn it: Four Dividend Dates and the One That Decides

Question 16 of 20

What happens to the total market value of a customer's position at the moment of a 3-for-1 split?

  1. It falls by a third
  2. It doubles
  3. It is unchanged
  4. It triples
Show the answer and rationale

Answer: C

A split changes the number of slices, not the size of the pizza: shares triple and the price falls to one third, leaving total value the same. Later price moves are a separate matter.

📚 Learn it: More Slices, Same Pizza: Splits and Stock Dividends

Question 17 of 20

What best describes a tender offer?

  1. A required sale by all holders
  2. A company's new stock issue
  3. A dividend paid in new shares
  4. An offer to buy shares from holders
Show the answer and rationale

Answer: D

A tender offer is a public offer to buy shares from holders, usually at a premium, for a limited time. Each holder decides whether to tender; nothing is required, and no new shares are issued.

📚 Learn it: Offers You Can Take or Leave: Rights, Tenders and Mergers

Question 18 of 20

A firm holds a customer's shares in street name, and the customer sends voting instructions. How are the shares generally voted?

  1. As the customer instructs
  2. As the firm prefers
  3. As management prefers
  4. As the issuer decides
Show the answer and rationale

Answer: A

The firm passes along the beneficial owner's instructions, so the shares are voted as the customer directs. FINRA Rule 2251 generally bars a firm from voting shares it does not beneficially own except in limited cases.

📚 Learn it: Voting From Afar: Proxies and Street Name

Question 19 of 20

A fund manager buys a stock heavily in the last few minutes of trading on the final day of the quarter to lift the price used to value the fund. What is this?

  1. Front running
  2. Marking the close
  3. Painting the tape
  4. Matched orders
Show the answer and rationale

Answer: B

Trading near the close to influence the closing price, often to dress up month-end or quarter-end valuations, is marking the close. Painting the tape fakes volume over time; matched orders need a partner; front running uses advance knowledge of an order.

📚 Learn it: Fake Volume, Fake Prices

Question 20 of 20

Which federal law raised insider trading penalties and added liability for controlling persons such as broker-dealers?

  1. The Maloney Act of 1938
  2. The Securities Investor Protection Act of 1970
  3. ITSFEA, the 1988 insider trading act
  4. The Trust Indenture Act of 1939
Show the answer and rationale

Answer: C

ITSFEA (1988) expanded penalties, added controlling-person liability and required firms to maintain policies against misuse of MNPI. SIPA created SIPC, the Trust Indenture Act covers bond indentures and the Maloney Act allowed self-regulatory organizations.

📚 Learn it: Inside Information, Outside Penalties

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