SIE Leak Questions

The correct answer is A, Form U4. Form U4 (Uniform Application for Securities Industry Registration or Transfer) must be kept current at all times and updated promptly—generally within 30 days—whenever a registered representative experiences a reportable event, including criminal matters such as a guilty plea.

Step-by-step, a guilty plea to an investment fraud scheme is considered a material disclosure event, even if the misconduct occurred years earlier. The key factor is the date of the guilty plea, not when the underlying activity occurred. This triggers the obligation to update Form U4 so regulators (such as FINRA and the SEC) have accurate and current information about the individual’s disciplinary history.

Choice B, Form U5, is used when a registered representative leaves a firm and is not relevant to ongoing disclosures. Choice C, arbitration disclosure, pertains to dispute resolution records, not regulatory filings. Choice D, written supervisory procedures (WSPs), are internal firm compliance documents and do not relate to individual disclosure updates.

Thus, any criminal event such as a guilty plea must be reported through an updated Form U4 within 30 days, making Answer A correct.

Step by Step Explanation:

Discount Bonds: These are issued or traded below par value. Over time, their price moves closer to par as they approach maturity, assuming yields remain constant.

Other Options:

Par Value Changes: The par value of a bond does not change over time; only its price fluctuates.

SEC and FINRA Bond Basics: SEC Discount Bonds.

A FINRA member is a broker-dealer that is registered with FINRA and regulated by a national securities association. Individuals employed by the member firm (e.g., registered representatives) are associated persons, not members themselves.

D is correct because FINRA membership applies to broker-dealers, not individuals.

A, B, and C are incorrect because they refer to individuals or roles within member firms, not the firms themselves.

The correct answer is C, $250,000 in cash in the customer ' s savings account. The SEC’s Customer Protection Rule (Rule 15c3-3 under the Securities Exchange Act of 1934) is designed to protect customer funds and securities held by broker-dealers, not assets held at banks.

Step-by-step, the rule requires broker-dealers to segregate customer securities and maintain a reserve of cash or qualified securities to safeguard customer assets in case the firm fails. This includes securities like stocks and bonds (Choices A and B), which are held in brokerage accounts and therefore fall under the rule’s protection.

Choice D, excess margin, is also covered because it represents customer funds held by the broker-dealer beyond what is required for margin purposes. These funds must be included in the reserve computation and are protected under the rule.

However, Choice C refers to cash held in a bank savings account, which is not under the custody of a broker-dealer. Instead, such deposits are typically protected by FDIC insurance, not the SEC’s Customer Protection Rule.

Therefore, assets held outside a brokerage relationship—like bank savings—are not covered by the Customer Protection Rule, making Answer C correct.