Practice: 1.1.1 The Securities and Exchange Commission (SEC)

Section 1: Knowledge of Capital Markets. 12 question(s) in this unit's pool (2 above the exam). Free up to ten a day; the coach picks which ones based on what you have already answered and when each is next due.

Section 1: Knowledge of Capital MarketsSIE outline 1.1.1
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Today's practice

Pick an answer, say how sure you are, then reveal. Every wrong choice gets its own explanation. Questions you have already answered correctly and confidently stay out of the way until they are due for review again.

Question 1Exam level

Which body's founding number on the SIE is 1934?

How sure are you?

Correct: B. The Securities Exchange Act of 1934 is the SEC's founding statute, and 1934 is its number.
A. FINRA's number on this sheet is its 3 named rules, not a founding year.
C. The MSRB carries no SIE statute; its number is its 3 named rules.
D. NASAA carries no SIE statute and no SIE number at all.

Unit: SIE outline 1.1.1

Question 2Exam level

Which act of Congress created the Securities and Exchange Commission itself?

How sure are you?

Correct: B. The 1934 Act governs the trading markets and the people in them, and it is the act that creates the SEC itself.
A. The 1933 Act governs new issues and the registration statement an issuer files; it does not create the SEC.
C. The 1940 Act regulates investment companies, well after the SEC already existed.
D. The 1939 Act governs bond indentures, not the SEC's own creation.

Unit: SIE outline 1.1.1

Question 3Exam level

The SEC states its own mission in three parts: protecting investors, maintaining fair, orderly and efficient markets, and which third goal?

How sure are you?

Correct: A. The SEC's own mission page names facilitating capital formation as its third stated goal, alongside investor protection and fair, orderly, efficient markets.
B. Setting monetary policy is the Federal Reserve's job, not the SEC's.
C. Insuring bank deposits is the FDIC's job, not the SEC's.
D. FINRA writes its own rulebook, which the SEC then reviews; the SEC does not write it directly.

Unit: SIE outline 1.1.1

Question 4Exam level

FINRA's own authority to register as a national securities association comes from which provision?

How sure are you?

Correct: A. Exchange Act Section 15-A is where FINRA's own authority as a national securities association comes from.
B. Section 7 sets registration content for a new issue, unrelated to FINRA's own charter.
C. Section 12 governs a security's own exchange registration, not FINRA's charter as an association.
D. Section 23 governs what an effective registration statement does and does not mean, not FINRA's charter.

Unit: SIE outline 1.1.1

Question 5Exam level

What does the SEC's oversight of FINRA's and the MSRB's own rulebooks actually consist of?

How sure are you?

Correct: A. Every SRO's rulebook, including FINRA's and the MSRB's, is filed with and can be reviewed by the SEC; the SRO itself writes the rules.
B. The SRO writes its own rulebook; the SEC reviews it rather than writing it.
C. FINRA and CBOE enforce their own rules, and an MSRB violation is enforced by FINRA or a bank regulator, not routinely by the SEC itself.
D. Membership dues are not part of the SEC's stated oversight role over an SRO's rulebook.

Unit: SIE outline 1.1.1

Question 6Exam level

Which of the following is governed by the Securities Act of 1933 rather than the Securities Exchange Act of 1934?

How sure are you?

Correct: A. The 1933 Act governs new issues, including the registration statement an issuer files before its first sale.
B. Ongoing reporting after a security is already trading is 1934 Act, trading-market, territory.
C. The 1934 Act creates the SEC, not the 1933 Act.
D. Day-to-day trading of an already-issued security is the 1934 Act's own domain.

Unit: SIE outline 1.1.1

Question 7Exam level

Which Exchange Act section governs a broker-dealer's own registration, as distinct from a security's own exchange listing?

How sure are you?

Correct: B. Exchange Act Section 15 governs a broker-dealer's own registration and regulation, separate from a security's own listing.
A. Section 12 governs a security's own exchange registration, not the broker-dealer itself.
C. Section 15-A is FINRA's own charter as an association, not an individual broker-dealer's registration.
D. Section 23 is a Securities Act provision about registration-statement effectiveness, unrelated to broker-dealer registration.

Unit: SIE outline 1.1.1

Question 8Exam level

Which two tiers make up U.S. securities regulation, as the outline frames it?

How sure are you?

Correct: B. The SEC is the federal agency at the top; FINRA, the MSRB and CBOE are self-regulatory organizations beneath it, industry-funded and registered with the SEC.
A. Drops the SRO layer entirely, though it does most of the day-to-day rule-writing and enforcement.
C. Reverses the hierarchy; the SEC sits above the SROs, not beneath them.
D. Invents a structure the outline never describes; the actual split is federal agency over industry SROs.

Unit: SIE outline 1.1.1

Question 9Exam level

The Securities Act of 1933 is primarily about what?

How sure are you?

Correct: A. The 1933 Act governs new issues, the offering itself, under Sections 7, 8, 10 and 23.
B. Describes the 1934 Act's subject, the ongoing markets and the people in them, not the 1933 Act.
C. The passing score is set separately and appears nowhere in either foundation statute.
D. SIPC was created by the Securities Investor Protection Act of 1970, a different statute entirely.

Unit: SIE outline 1.1.1

Question 10Harder

Under Securities Act Section 23, which is true of an effective registration statement?

How sure are you?

Correct: C. Section 23 states that neither a filing, its being effective, nor the absence of a stop order is a finding of accuracy or merit, and makes a contrary representation to a buyer unlawful.
A. Section 23 explicitly denies that effectiveness is a finding of accuracy.
B. Section 23 explicitly denies that the Commission has passed upon the merits.
D. Invents a guarantee the section never makes; the absence of a stop order today says nothing about tomorrow.

Unit: SIE outline 1.1.1

Question 11Above the exam

A newly public company's registration statement becomes effective on day 20. A representative later tells a client the SEC's own review means the offering was approved and is safe. Separately, the client asks who wrote the rule requiring the representative's own firm to supervise that communication. Which pair is correct?

How sure are you?

Correct: B. Section 23 makes an 'approved and safe' statement about an effective registration statement unlawful, not merely inaccurate; and FINRA both writes and enforces its own rulebook for broker-dealers and their representatives, unlike the MSRB, which only writes.
A. Wrong on both counts: effectiveness is not approval, and FINRA, not this rep's own firm in isolation, wrote the supervision rule the SEC reviews.
C. The SEC reviews the rulebook FINRA itself writes; it does not write FINRA's supervision rule directly.
D. Correctly calls the rep's statement unlawful, but this supervision rule concerns broker-dealer representatives generally, FINRA's own domain, not the MSRB's municipal scope.

Unit: SIE outline 1.1.1

Question 12Above the exam

An issuer's registration statement goes effective, the stock later declines, and a customer complains that the SEC guaranteed the deal. Two separate facts settle the complaint: what 'effective' means under Section 23, and which regulatory tier actually reviews a broker-dealer's day-to-day sales practice once the stock trades. Which choice states both correctly?

How sure are you?

Correct: A. Section 23 states effectiveness is not a Commission finding of accuracy or a passing on the merits; and under the outline's own two-tier structure, the SRO tier (FINRA) reviews day-to-day broker-dealer sales practice, not the SEC directly.
B. Reverses the Section 23 rule and wrongly assigns day-to-day sales-practice review to the SEC directly.
C. Correctly states the Section 23 rule but assigns sales-practice review to the Federal Reserve, which has no role here.
D. Reverses the Section 23 rule, even though it correctly names FINRA as the SRO-tier reviewer.

Unit: SIE outline 1.1.1