Free FINRA SIE (Securities Industry Essentials) Understanding Trading, Customer Accounts and Prohibited Activities Practice Questions
Understanding trading, customer accounts, and prohibited activities on the FINRA SIE exam covers order types, trade settlement, account types (cash, margin, retirement), suitability, and prohibited practices including insider trading and market manipulation.
Sample Questions
Question 1
Easy
All of the following accurately describe a market order EXCEPT:
Solution
C is correct. A market order is an instruction to buy or sell promptly at the best price currently available, so it emphasizes speed and certainty of execution rather than a specific price. Because no price is specified, in a fast market it can be filled away from the last quote. Setting a maximum purchase price or minimum sale price describes a limit order, not a market order.
Question 2
Medium
All of the following are prohibited practices under FINRA rules EXCEPT:
Solution
B is correct. Performing a reasonable-basis and customer-specific suitability review before recommending a security is the required, permitted process under FINRA's suitability and Regulation Best Interest standards—not a prohibited practice. Churning, front running, and matched orders are all prohibited activities.
Question 3
Hard
A registered representative engages in the following activities. Each of them constitutes a prohibited practice EXCEPT:
Solution
D is correct. Trading ahead of a known customer block order is front running, effecting trades between commonly controlled accounts with no change in beneficial ownership is wash trading, and soliciting excessive in-and-out trading inconsistent with the customer's objectives is churning, all of which are prohibited. Advising a customer against an unsuitable transaction is consistent with the representative's best-interest and suitability obligations and is permitted.