Section 1: Knowledge of Capital Markets. 15 question(s) in this unit's pool
(3 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 1.1.3
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
A customer's SIPC-member brokerage firm fails. Which statute created SIPC?
How sure are you?
Correct: B. SIPC exists under the Securities Investor Protection Act of 1970.
A. The 1934 Act created the SEC's authority over markets and firms; it did not create SIPC.
C. That statute registers investment advisers, an unrelated body.
D. That statute governs pooled investment vehicles, not the brokerage-failure protection fund.
Unit: SIE outline 1.1.3
Question 2Exam level
Regulation T is issued by which body?
How sure are you?
Correct: C. Regulation T, 12 CFR Part 220, is issued by the Federal Reserve's Board of Governors.
A. FINRA polices firm conduct once credit is already in play; it does not write Regulation T.
B. The SEC administers disclosure and registration, not margin credit rules.
D. The Treasury handles tax treatment and Treasury debt, not margin credit.
Unit: SIE outline 1.1.3
Question 3Exam level
Which office is a bureau of the Treasury that receives Bank Secrecy Act filings, not a securities regulator in its own right?
How sure are you?
Correct: A. FinCEN is the Treasury bureau that receives Bank Secrecy Act filings.
B. OFAC is also a Treasury office, but it runs sanctions programs and the SDN list, not Bank Secrecy Act filings.
C. NASAA is an association of state securities administrators, unrelated to the Treasury.
D. The MSRB is a securities SRO, not a Treasury bureau.
Unit: SIE outline 1.1.3
Question 4Harder
A customer's mutual fund shares, purchased at a bank, lose value after that bank itself fails. Which protection scheme, if any, covers this loss?
How sure are you?
Correct: C. The FDIC's own not-covered list names mutual funds directly, and buying them at a bank does not change that. SIPC responds only to a failed SIPC-member brokerage, and no brokerage failed here.
A. Being purchased at a bank does not turn a mutual fund into an insurable deposit.
B. SIPC responds to a failed brokerage firm, not a failed bank; being a security is not, by itself, enough.
D. Invents a split coverage mechanism neither fund provides.
Unit: SIE outline 1.1.3
Question 5Harder
NASAA brings a direct federal enforcement action against a broker-dealer for a rule violation. Is this accurate?
How sure are you?
Correct: B. NASAA itself regulates nothing directly; its members, the individual state securities administrators, run blue-sky registration and state enforcement.
A. NASAA is not an SRO; it is an association of state administrators, a different kind of body entirely.
C. NASAA's scope is not limited to municipal securities, and it still is not the direct enforcer even there.
D. FINRA also brings actions against broker-dealers, and state administrators act at the state level; the SEC is not the only possible actor.
Unit: SIE outline 1.1.3
Question 6Exam level
A firm fails holding $150,000 cash and $600,000 in securities for one customer. How much does SIPC pay?
How sure are you?
Correct: D. $500,000. The cash ($150,000) is under the $250,000 cash sub-limit, so it counts in full. Add the securities and the claim reaches $750,000, but the $500,000 overall cap binds first.
A. Tempts you into simply adding the two figures. SIPC caps the total at $500,000 regardless of how the $750,000 splits.
B. Pays only the cash portion, as if securities weren't covered at all. Both cash and securities count toward the same $500,000 cap.
C. Pays only the securities and drops the cash entirely. The cash is protected too, it just doesn't push the total past the cap.
Unit: SIE outline 1.1.3
Question 7Exam level
A customer holds $340,000 in a savings account at a single FDIC-insured bank. How much of it is insured?
How sure are you?
Correct: B. $250,000. That is the FDIC's per-depositor, per-bank limit. The remaining $90,000 at this one bank is not insured.
A. Treats FDIC coverage as unlimited. It is capped at $250,000 per depositor, per bank, no matter the account balance.
C. Invents a halfway figure. The FDIC limit is a flat $250,000, not a percentage of the balance.
D. A savings account is exactly the kind of deposit the FDIC exists to insure.
Unit: SIE outline 1.1.3
Question 8Exam level
Which of these does the FDIC not insure?
How sure are you?
Correct: C. A mutual fund is a security. The FDIC's own excluded list names mutual funds directly, whether or not they are sold at a bank.
A. A checking account is a deposit. It is exactly what the FDIC insures.
B. A CD is also a deposit product at the bank, covered the same as a savings account.
D. A savings account is a deposit, covered up to the $250,000 limit.
Unit: SIE outline 1.1.3
Question 9Exam level
On the SIE outline, what does the abbreviation NASAA actually stand for?
How sure are you?
Correct: C. NASAA is the association of the fifty state securities administrators. State registration and enforcement sit at that level.
A. NASAA is not one national rulebook. It represents fifty separate state regulators, each with its own authority.
B. SROs like FINRA and the MSRB operate under the SEC's federal umbrella. NASAA sits at the state level, a separate branch entirely.
D. NASAA is not part of the SEC. It is its own association, outside the federal SEC/SRO structure this course maps separately.
Unit: SIE outline 1.1.3
Question 10Exam level
Which statement about Regulation T is correct?
How sure are you?
Correct: B. The Fed's Board of Governors issues Regulation T, and its 50 percent requirement is a floor, not a fixed ceiling.
A. FINRA does not write Regulation T, and "ceiling" reverses the direction of the rule. 50 percent is where it starts, not where it stops.
C. Neither the author nor the number is right. It's the Fed, not the SEC, and the figure is 50 percent, not 25.
D. Gets the author right but the mechanics wrong. A local regulatory authority can require more than 50 percent; the rule names 50 as the floor "or higher."
Unit: SIE outline 1.1.3
Question 11Harder
A customer's shares drop 40 percent in value after a bad earnings report. Which agency covers the loss?
How sure are you?
Correct: C. SIPC's own page excludes a decline in the value of your securities, and the FDIC never covers securities at all. A price drop is a market outcome, not a firm failure or a bank deposit.
A. Tempts you because SIPC sounds like general investor insurance. It only replaces custody lost when a member firm itself fails, never a market price move.
B. The FDIC's excluded list names stocks by name. It was never in scope here.
D. The SEC is a regulator and enforcer, not an insurer. Nothing in the outline gives it a claims-paying role.
Unit: SIE outline 1.1.3
Question 12Harder
Which two offices are packaged inside the outline's single "Department of the Treasury/IRS" bullet, rather than listed as separate items?
How sure are you?
Correct: B. FinCEN (anti-money-laundering) and OFAC (sanctions) both sit inside the single Treasury/IRS bullet. Neither has its own line on the outline.
A. NASAA and FINRA are each their own outline items, well outside the Treasury/IRS bullet.
C. The SEC and CBOE belong to the SEC and SRO items covered in the previous lesson, not this bullet.
D. SIPC and the FDIC are each their own separate line on the outline, with their own dollar figures.
Unit: SIE outline 1.1.3
Question 13Above the exam
A broker tells a customer: "The SEC approved this stock, and if it drops in value your SIPC coverage will reimburse you for the loss." How many separate false claims does that sentence make, and what is each?
How sure are you?
Correct: B. Securities Act Section 23 makes the "SEC approved" claim false and unlawful to state, and SIPC's own coverage terms exclude a decline in the value of securities; the sentence contains two separate, independently false claims.
A. Undercounts the false claims; the SEC-approval statement is also false.
C. Both halves of the sentence are false under their respective sources.
D. Reverses which half is false; the SEC does not approve securities, and that error is the one it dismisses.
Unit: SIE outline 1.1.3
Question 14Above the exam
A brokerage fails holding $600,000 for one customer, all of it cash, no securities. How much does SIPC pay?
How sure are you?
Correct: B. $250,000. When the whole claim is cash, the $250,000 cash sub-limit binds before the $500,000 total cap ever comes into play, because cash alone can never exceed its own sub-limit.
A. Ignores both caps and simply pays the full amount held.
C. Applies the $500,000 total cap as if it were the only limit. It forgets that an all-cash claim is governed by the tighter $250,000 cash sub-limit.
D. An invented midpoint figure with no basis in either cap.
Unit: SIE outline 1.1.3
Question 15Above the exam
A customer holds a $250,000 CD directly with a bank, and separately holds $400,000 in securities in a brokerage account at that bank's broker-dealer affiliate. The broker-dealer affiliate fails financially. The bank itself does not fail. What happens to the two holdings?
How sure are you?
Correct: A. The bank and the broker-dealer are legally separate entities. The bank did not fail, so the CD is unaffected; the brokerage failed, so SIPC applies to the $400,000 in securities, within its $500,000 cap.
B. SIPC only ever covers custody at a failed brokerage. A shared brand name does not extend SIPC's reach to a bank deposit.
C. The FDIC's excluded list names securities directly, and that exclusion does not change because the broker-dealer shares a parent with an FDIC bank.
D. FDIC insurance attaches to the deposit at the bank, not to the fortunes of an affiliated company. One entity's failure does not reach into the other's coverage.