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Question 1
Under which of the following circumstances, if any, is a member firm permitted to send gifts to registered representatives (RRs) of another member firm?
Correct : C
FINRA Rule 3220 prohibits member firms from giving gifts exceeding $100 per individual per year to ensure that gifts do not influence business conduct. The rule applies to gifts given in connection with the firm's business.
C is correct because it adheres to FINRA's $100 annual limit.
A is incorrect because the total value of gifts must also not exceed $100 annually.
B is incorrect as there is no $200 limit.
D is incorrect as gifts are allowed within the $100 limit.
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Question 2
Which of the following strategies is best for mitigating the risk of a concentrated position?
Correct : A
Step by Step Explanation:
Diversification: Spreads investments across multiple securities, industries, or asset classes to reduce exposure to a single security or sector.
Other Options:
Use of Leverage: Increases, not decreases, portfolio risk.
Dollar-Cost Averaging: Reduces timing risk but does not address concentration.
Dividend Reinvestment: Enhances returns but does not mitigate concentration risk.
SEC Guidance on Diversification: SEC Diversification.
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Question 3
Which of the following statements is true about a corporation's balance sheet?
Correct : C
Step by Step Explanation:
Balance Sheet Definition: Shows a company's financial position at a specific point in time, listing assets, liabilities, and shareholders' equity (net worth).
Other Financial Statements:
Profit and Loss Statement: Summarizes revenues and expenses over a period.
Cash Flow Statement: Tracks cash inflows and outflows.
SEC Guide to Financial Statements: SEC Financials.
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Question 4
An associated person at a member firm receives a complaint from a customer involving allegations of forgery. Once the complaint is received, which of the following actions is required?
Correct : A
Step by Step Explanation:
FINRA Rule 4530: Requires member firms to report certain events, including allegations of forgery, to FINRA promptly.
Incorrect Options:
Option B: Maintaining a record does not substitute for required reporting.
Option C: Arbitration isn't required before reporting.
Option D: Reporting is mandatory irrespective of internal investigations.
FINRA Rule 4530 (Reporting Requirements): FINRA Rule 4530.
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Question 5
A grandfather establishes a Uniform Transfers to Minors Act (UTMA) custodial account for his grandson and appoints an attorney as custodian. Which of the following individuals owns the account?
Correct : C
In a UTMA account, the minor is the legal owner of the account. The custodian (in this case, the attorney) manages the account until the minor reaches the age of majority specified by state law.
C is correct because the grandson (the minor) is the account's legal owner.
A is incorrect because the attorney is the custodian, not the owner.
B is incorrect because the grandfather established the account but does not own it.
D is incorrect because the parent does not have ownership unless explicitly named as the custodian.
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- Exam Name: Securities Industry Essentials Exam
- Exam Code: SIE
- Last Update: 08-Mar-2026
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