50 Free SIE Practice Questions 2026 (with Answers & Explanations)

Correct Answer: B — A custodial account allowing adults to gift assets to a minor, managed by a custodian until the minor reaches the age of majority

Explanation: UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts are custodial accounts where an adult custodian manages assets gifted to a minor. The minor gains full control when they reach the age of majority (18 or 21 depending on state).

Correct Answer: B — 403(b) is for public school employees and certain non-profits; 401(k) is for for-profit company employees

Explanation: 403(b) plans are tax-sheltered annuity plans available to employees of public education institutions (K-12, colleges) and certain non-profit organizations. 401(k) plans are available to employees of for-profit companies. Both have similar contribution limits and tax treatment.

Correct Answer: B — Securities and Exchange Commission (SEC)

Explanation: FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization (SRO) that operates under the oversight of the SEC, which approves FINRA rules and oversees its operations.

Correct Answer: B — Simultaneously buying and selling the same securities between two accounts controlled by the same party to create the illusion of active trading

Explanation: A wash sale (in the manipulation context) involves coordinated buying and selling of securities between related parties to create a false impression of active trading and price movement. This is distinct from the IRS wash sale rule for tax purposes.

Correct Answer: B — Risk that the overall market will decline, affecting all investments

Explanation: Market risk (systematic risk) is the risk of losses due to factors that affect the entire market (e.g., recessions, political events, interest rate changes). It cannot be eliminated through diversification.

Correct Answer: A — Initial Public Offering

Explanation: IPO stands for Initial Public Offering — the first time a company offers shares of stock to the general public on a stock exchange.

Correct Answer: B — An account where the broker has written authorization to make investment decisions on behalf of the customer

Explanation: A discretionary account grants the registered representative written authority to make investment decisions (security, quantity, buy/sell) without prior customer approval for each transaction. Written authorization (POA) is required.

Correct Answer: A — An insurance product that provides a guaranteed fixed rate of return

Explanation: A fixed annuity provides a guaranteed minimum interest rate and predictable, stable income payments. Unlike variable annuities, the insurance company bears the investment risk.

Correct Answer: B — A privilege given to existing shareholders to buy additional shares at a discount to the market price before new shares are offered to the public

Explanation: A rights offering gives existing shareholders the right to purchase additional shares at a discounted price, typically proportional to their current holdings, before offering to the public. Rights can be exercised, traded, or allowed to expire.

Correct Answer: B — A joint account where each owner has a separate, undivided interest that passes to their estate (not the co-owner) upon death

Explanation: In a TIC account, each owner has a distinct, undivided interest in the account. When one owner dies, their interest passes to their estate (subject to probate) rather than to the surviving account owner(s). Ownership percentages need not be equal.

Correct Answer: B — Preferred stock pays a fixed dividend before common stock dividends

Explanation: Preferred stock typically pays a fixed dividend that must be paid before any dividends are paid to common stockholders. In exchange, preferred stockholders usually have no voting rights.

Correct Answer: B — A broker acts as an agent, executing trades for customers; a dealer acts as a principal, buying and selling from their own inventory

Explanation: A broker acts as an agent, connecting buyers and sellers and earning a commission. A dealer acts as a principal, buying and selling from its own inventory and earning a profit (markup/markdown) on the spread. Many firms act as broker-dealers doing both.