Thank you to those readers of this column who took the Financial Industry Regulatory Authority (FINRA) quiz that I wrote about a few weeks ago (“FINRA Survey Shows Investors Need More Knowledge”). The quiz, with 11 questions, was part of the National Financial Capability Study, which is conducted every three years by the FINRA Foundation. (A special congratulations for those who achieved a perfect score!)
If you are a quiz taker, there is another, lengthier FINRA test that you might want to tackle, especially if you are either a do-it-yourself investor or a student who is interested in getting a job on Wall Street. Called the Securities Industry Essentials (SIE) Exam, the test has 75 multiple choice questions. To pass, you need to answer 70 questions correctly.
The nice thing is you can take a free practice test online, get scored and review your answers.
Let me share a few questions; I’ll give you the correct answers at the end of this column.
1. UTMA accounts are opened under the tax ID of the
2. Which of the following stakeholders has first claim priority in a Chapter 11 proceeding?
A. Equity holders
B. Secured debt holders
C. Unsecured debt holders
D. Preferred stockholders
3. What is the cost basis of an inherited mutual fund?
A. The net asset value (NAV) of the shares when the owner dies
B. The NAV 30 days after the owner’s death
C. The same cost basis as the deceased
D. The same cost basis as the deceased plus capital gains distributions
To test your mettle, try the free SIE practice test (tinyurl.com/4bh334jd), which is the source of the above questions.
You can also sign up to officially take the test, which you might want to do if you have an interest in working in the financial services industry. Unlike other FINRA tests (example: Series 7), you do not need a financial firm to sponsor you. There is a cost ($80); scores are retained by FINRA for four years.
That part is easy. I would recommend, however, that you take your time to study for the test. Here’s why.
While the exam contains the types of easy questions we reviewed together, it also assesses financial industry knowledge. The SIE “is an introductory-level exam that assesses knowledge of basic industry information, including fundamental concepts such as types of products and their risks; the structure of the markets and regulatory agencies and their respective functions; and prohibited practices,” explains Alexandra Toton, Director of CRED (Credentialing, Registration, Education and Disclosure) Testing and Continuing Education at FINRA.
So, study first.
By the way, passing the test is only the first step into the industry. There are other qualification exams related to the securities business. But, importantly, the SIE is a way to set yourself apart from other candidates.
Toton explains that “because the SIE is required for many of the registrations, passing the SIE is a way for students to differentiate themselves from other candidates when seeking internships or jobs.”
If you are on that track, the FINRA website (tinyurl.com/4yteahkf) provides an overview section for enrolling for the test, as well as the exam’s downloadable content outline, which includes a breakdown of the exam’s categories. According to FINRA, 33 questions involve “Understanding Products and Their Risks,” followed by “Understanding Trading, Customer Accounts and Prohibited Activities” (23 questions), “Knowledge of Capital Markets” (12 questions) and “Overview of Regulatory Framework” (seven questions).
The correct answers for the questions above? 1) A; 2) B; 3) A. If you decide you want to test your knowledge, email me at email@example.com to let me know your results.
On another note, I invite attorneys to join me for a virtual presentation: “SEC Disclosure Tool (Form CRS) Helps Attorneys With Their Due Diligence When Referring a Financial Adviser to a Client,” on Feb. 28 at noon EST. Register at tinyurl.com/kauvrha6.
DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION