FINRA Updated SIE Exam Questions and Answers by alanna

A market order is the order type most likely to ensure immediate execution because it instructs the broker-dealer to buy or sell at the best available current market price. If the investor’s primary objective is execution today rather than a specific price, a market order is the correct choice. Choice C is correct. A stop order becomes a market order only after the stop price is reached; if the stop price is not triggered, the order may not execute. A limit order specifies the minimum sale price or maximum purchase price, so execution is not guaranteed unless the market reaches the limit price and there is sufficient liquidity. A stop-limit order is even less certain because, after activation, it becomes a limit order rather than a market order. The SIE outline includes order types such as market, stop, limit, and good-til-canceled orders under Orders and Strategies. The technical trade-off is execution certainty versus price certainty. Market orders prioritize execution, while limit and stop-limit orders introduce conditions that may prevent execution. Reference: Section 3.1.1 Orders and Strategies.

Step by Step Explanation:

Priority in Bankruptcy: Preferred stockholders have a higher claim on a company’s assets than common stockholders during liquidation. Common stockholders are residual claimants.

Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.

Incorrect Options:

A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.

C: Common stock dividends are subordinate to preferred stock dividends.

SEC Guidance on Stockholder Rights: SEC Stock Rights.

Treasury securities (Treasury bills, notes, and bonds) are obligations of the U.S. government. A key testable feature is their tax treatment: interest earned on Treasuries is subject to federal income tax (though it is generally exempt from state and local income taxes). That makes choice B correct.

Choice A is incorrect because FDIC insurance applies to bank deposit products (e.g., bank CDs, savings accounts) held at insured depository institutions, within insurance limits. Treasury securities are not bank deposits; they are direct government securities, so “FDIC-insured” is not the right concept. Treasuries are considered to have very low credit risk due to U.S. government backing, but that is different from FDIC insurance.

Choice C is incorrect because Treasuries trade in both the primary market (when issued by the Treasury) and the secondary market (after issuance). In fact, Treasuries are among the most actively traded securities in the world, and secondary-market trading is a major source of liquidity and price discovery. Investors can buy newly issued Treasuries at auction (primary) or purchase existing Treasuries from other investors and dealers (secondary).

Choice D is incorrect because securities issued by states and municipalities are municipal securities (muni bonds/notes), not Treasury securities. Treasuries are issued by the U.S. Department of the Treasury, while municipal bonds are issued by states, cities, counties, and other political subdivisions or authorities.

On the SIE, this question targets product knowledge: issuer identity, trading markets, and tax characteristics of government vs. municipal vs. bank products.

FINRA Rule 2360 requires that customers receive the Options Disclosure Document (ODD), published by the Options Clearing Corporation (OCC), before they are approved to trade options. The ODD explains the risks and characteristics of options trading.

D is correct because the ODD is mandatory for options account approval.

A is incorrect because a prospectus is not specific to options trading.

B is incorrect because the MSRB Investor Brochure applies to municipal securities.

C is incorrect because a margin disclosure statement is required only for margin accounts.