SIE Exam Dumps - Securities Industry Essentials Exam (SIE)

A stock dividend increases the number of shares owned without affecting the total cost basis. The new cost basis per share is calculated by dividing the original total investment by the new number of shares:

Original total investment = 100 shares × $50.00 = $5,000

After a 10% stock dividend, the investor owns 110 shares.

New cost basis = $5,000 ÷ 110 shares = $45.45 per share.

B is correct because it reflects the adjusted cost basis per share.

Federal funds are overnight loans between banks, typically involving excess reserves held at Federal Reserve Banks. Banks with surplus reserves lend to banks that need reserves to meet regulatory reserve requirements or internal liquidity needs. The interest rate charged on these overnight loans is the federal funds rate, a key short-term interest rate that influences broader money market conditions, bank lending, and monetary policy transmission. Choice A is correct because the question specifically describes overnight interbank lending of excess reserves. Commercial paper is an unsecured short-term debt instrument issued by corporations to meet working capital needs, not an overnight reserve loan between banks. “Money market loans” is too general and is not the precise SIE term. Bankers’ acceptances are short-term instruments used primarily in trade finance, especially international commerce. The SIE outline includes the Federal Reserve, monetary policy, interest rates, the federal funds rate, and money market instruments as core capital markets topics. This question tests the candidate’s ability to identify a specific short-term banking and monetary-policy instrument. Reference: Section 1.3.1 Federal Reserve Board’s Impact on Business Activity and Market Stability; Section 2.1.2 Debt Instruments.

Mutual funds are traded based on forward pricing. Orders received after the market closes are executed at the NAV calculated at the next market close.

A is correct because it aligns with forward pricing rules.

B, C, and D are incorrect as they do not follow mutual fund trade practices.

A mutual fund investor’s cost basis is generally the total amount invested in the position, adjusted for actions that add to or reduce the investor’s investment in the fund. Reinvested dividends change cost basis because the dividends are used to purchase additional shares, which increases the investor’s total invested amount. Even if the dividends are paid from the fund and immediately reinvested, the IRS treats them as distributed to the shareholder and then used to buy shares. As a result, reinvestment increases the number of shares owned and increases total basis by the amount reinvested. Therefore, D is correct.

Choice A is incorrect because transferring a position via ACATS does not change the investor’s economic investment; it is simply moving the account/position between firms. The cost basis should transfer as part of the record (subject to cost basis reporting rules), but the act of transfer itself does not change basis. Choice B is incorrect because NAV movement changes market value, not what the investor paid; unrealized appreciation does not change cost basis. Choice C is incorrect because a new portfolio manager may affect future performance, but it does not alter the historical amounts the investor contributed or reinvested; thus it does not change basis.

For SIE purposes, the key relationship is: cost basis changes when the investor adds money (new purchases, dividend/cap gains reinvestments) or when basis is adjusted due to specific corporate/fund actions (like return of capital distributions in some contexts). Reinvested dividends are a standard, frequently tested basis-changing event because they affect taxable reporting and future gain/loss calculations upon redemption.

A numbered account is permitted if the firm maintains proper ownership records and obtains the required customer acknowledgment. The account may be identified internally or on certain documents by number for confidentiality, but the broker-dealer must still know the customer’s true identity and maintain appropriate books and records. The registered representative must obtain a signed statement from the customer accepting ownership of the numbered account. Choice D is correct. Choice A is incorrect because numbered accounts are not categorically prohibited under SEC rules. Choice B is incorrect because anti-money laundering and customer identification obligations do not prohibit all numbered accounts; they require the firm to identify and verify the customer. Choice C is incorrect because tax returns are not the required document for opening a numbered brokerage account. The SIE outline includes anti-money laundering, customer account information, books and records, privacy, and customer protection topics. It also lists FINRA Rule 3250, Designation of Accounts, and FINRA Rule 4512, Customer Account Information, as relevant rules. The technical issue is confidentiality without anonymity: the firm may use a number, but it must document beneficial ownership. Reference: Section 3.2.3 AML; Section 3.2.4 Books and Records; FINRA Rules 3250 and 4512.

The Options Clearing Corporation (OCC) is responsible for issuing and guaranteeing the performance of listed options contracts, including Long-term Equity Anticipation Securities (LEAPS), which are long-term options.

D is correct because LEAPS are a type of listed options contract cleared by the OCC.

A is incorrect because listed stocks are not options contracts.

B is incorrect because over-the-counter bonds are not cleared by the OCC.

C is incorrect because ETFs are not options, though ETF options may be cleared by the OCC.

A registered representative may not sign a customer’s name or apply a customer’s digital signature on the customer’s behalf, even if the customer verbally agreed to the transaction or previously provided identifying information. Choice C is correct because the prohibited conduct is the representative’s act of signing for the customer. The issue is not whether the form is internal, whether the investment is suitable, or whether the authentication information was accurate. Customer signatures evidence customer review, consent, and acknowledgment. Allowing a representative to sign for the customer undermines books and records integrity and creates a false record. Choice A is incorrect because internal firm documents still must be accurate and authentic. Choice B is incorrect because possessing authentication information does not authorize the representative to impersonate the customer. Choice D is too narrow; the action would be impermissible even if the authentication information were current. The SIE outline includes falsifying or withholding documents, signatures of convenience, books and records, suitability, and prohibited activities related to account documentation. This falls directly under improper maintenance of records and falsification concerns. Reference: Understanding Trading, Customer Accounts and Prohibited Activities; Prohibited Activities; Falsifying Documents; Books and Records.

SEC Regulation A provides a registration exemption for smaller public offerings but includes a " bad actor " disqualification. If certain key parties, such as the issuer, underwriter, or affiliates, have been involved in securities violations, the exemption is forfeited.

B is correct because underwriters are considered essential participants, and their status as bad actors disqualifies the offering.

A, C, and D are incorrect because custodians, transfer agents, and clearing corporations are not included in the " bad actor " provisions of Regulation A.