FINRA Updated SIE Exam Questions and Answers by lisa

The correct answer is C, A tender offer. A tender offer is considered a voluntary corporate action because it gives shareholders the choice to participate or not. In a tender offer, a company or third party offers to purchase shares from existing shareholders at a specified price, usually at a premium to market value. Investors can decide whether to tender (sell) their shares.

Step-by-step, voluntary corporate actions require active participation or decision-making by the investor. If the investor does nothing, no action is taken on their behalf.

Choice A, a stock split, is a mandatory corporate action—all shareholders are automatically affected, and no decision is required. Choice B, a full merger, is also mandatory once approved, as shareholders are typically required to exchange their shares for new securities or cash. Choice D, pre-refunding, is related to municipal bonds and is not a voluntary action for investors; it involves the issuer setting aside funds to retire debt early.

Thus, the only option where the investor has control and discretion to participate is a tender offer, making Answer C correct.

Buying a call option gives the investor the right to purchase the stock at a fixed price (strike price). If the stock’s price rises significantly, the value of the call option increases, allowing the investor to profit.

B is correct because a call option profits directly from a stock price increase.

A is incorrect because a put option profits from a stock price decline.

C and D are incorrect because selling options limits profit potential and exposes the seller to significant risk if the stock moves unfavorably.

Step by Step Explanation:

Prohibition on Signing Customer Names: It is never permissible to sign a customer ' s name without written authorization (POA) due to legal and ethical concerns. Unauthorized signing constitutes forgery and violates FINRA rules.

Incorrect Options:

A: Firm principal approval does not override this prohibition.

B: Verbal authorization is insufficient.

C: Discretionary authority does not allow unauthorized signing.

FINRA Rule 4512 (Customer Account Information): FINRA Rule 4512.

American Depositary Receipts, or ADRs, represent ownership interests in shares of a foreign issuer and trade in U.S. markets in U.S. dollars. Dividends paid by the foreign issuer are converted by the depositary bank into U.S. dollars before being distributed to ADR holders. Therefore, choice A is correct. ADRs are still subject to political risk because changes in the foreign issuer’s home country, including political instability, capital controls, sanctions, or regulatory changes, may affect the issuer and the investment. Choice C is incorrect because ADR investors remain exposed to currency risk. Even though the ADR trades and pays dividends in U.S. dollars, the value of the underlying foreign shares and dividends may be affected by exchange-rate movements. Choice D is incorrect because ADR ratios vary. One ADR may represent one foreign share, multiple shares, or a fraction of a share, depending on the ADR program. The SIE outline includes ADRs under equity securities and separately identifies currency, political, market, and other risks under investment risks. This question tests both product structure and international risk exposure. Reference: Section 2.1.1 Equity Securities, ADRs; Section 2.2 Investment Risks.