SIE Plan

Knowledge of Capital Markets: practice questions

4 original questions · 4 editor-approved · every choice explained.

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Blueprint-mapped questions with full rationales for every choice.

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Knowledge of Capital MarketsDifficulty 2/5

A broker-dealer fails and a retail customer cannot access the securities in their account. Which body is relevant?

  1. ASIPC, which protects customers of a failed broker-dealer up to its limits
  2. BFDIC, which protects customers of a failed broker-dealer up to its limits
  3. CThe SEC, which reimburses customers of a failed broker-dealer directly
  4. DFINRA, which reimburses customers of a failed broker-dealer from member fees
Show answer and rationale

Correct: A. SIPC exists for exactly this situation: a broker-dealer failure in which customer assets are missing. It protects against the firm failing, not against securities losing value.

  • B — The FDIC insures deposits at banks; it has no role when a broker-dealer fails.
  • C — The SEC regulates and enforces; it does not reimburse individual customers for losses.
  • D — FINRA is a self-regulatory organisation and does not compensate customers of failed firms.
Knowledge of Capital MarketsDifficulty 3/5

Two institutions trade a large block of stock directly with one another without using a broker-dealer. Which market is this?

  1. AThe primary market, where institutions trade directly with each other
  2. BThe fourth market, where institutions trade directly with each other
  3. CThe third market, where institutions trade directly with each other
  4. DThe second market, where institutions trade directly with each other
Show answer and rationale

Correct: B. The fourth market is institution-to-institution trading without an intermediary. The third market is the neighbouring idea that catches people out: exchange-listed securities traded over the counter.

  • C — The third market is exchange-listed securities traded over the counter, not direct institutional trading.
  • D — The second market is the traditional label for over-the-counter dealer trading of unlisted securities, not direct trading between institutions.
  • A — The primary market is where securities are issued, not where existing holdings change hands.
Knowledge of Capital MarketsDifficulty 2/5

The Federal Reserve conducts open market operations to influence the money supply. This is an example of what?

  1. ARegulatory policy, which the Federal Reserve carries out through rates and operations
  2. BTrade policy, which the Federal Reserve carries out through rates and operations
  3. CMonetary policy, which the Federal Reserve carries out through rates and operations
  4. DFiscal policy, which the Federal Reserve carries out through rates and operations
Show answer and rationale

Correct: C. Monetary policy is the Federal Reserve acting on the money supply and rates. Fiscal policy is taxation and government spending, which are decisions of Congress and the executive, not the Fed.

  • D — Fiscal policy is taxation and government spending, and is not set by the Federal Reserve.
  • A — Regulatory policy is not the term for influencing the money supply through market operations.
  • B — Trade policy concerns tariffs and international commerce, not domestic money supply.
Knowledge of Capital MarketsDifficulty 3/5

An underwriter buys an entire issue from the issuer and resells it, bearing the risk of unsold shares. What is this arrangement?

  1. AA best efforts offering, in which the underwriter acts as principal and carries the risk
  2. BA shelf registration, in which the underwriter acts as principal and carries the risk
  3. CA private placement, in which the underwriter acts as principal and carries the risk
  4. DA firm commitment, in which the underwriter acts as principal and carries the risk
Show answer and rationale

Correct: D. Firm commitment means the underwriter buys the issue and resells it as principal, so unsold shares are its problem. Under best efforts the underwriter acts as agent and the issuer keeps the risk.

  • A — Under best efforts the underwriter acts as agent and returns unsold securities to the issuer.
  • B — A shelf registration is a method of registering securities for later sale, not an underwriting commitment.
  • C — A private placement describes who securities are sold to, not how the underwriter is committed.

Primary references

  1. Securities Industry Essentials (SIE) Examination Content Outline — Financial Industry Regulatory Authority (FINRA) · primary · retrieved 2026-09-22, verified 2026-09-22