SIE Reviews Questions

A private securities transaction generally involves an associated person participating in the sale of securities outside the regular scope of their member firm’s business, often referred to as “selling away.” Under FINRA rules, such activity typically requires prior written notice to the firm and, if compensation is involved, firm approval and supervision. Participating in the sale of promissory notes to raise money for a small business is a classic example of a securities transaction that falls into this category, making D correct. Promissory notes can be securities depending on their structure and context, and selling them to investors outside firm supervision raises significant investor protection concerns.

Choices A, B, and C are generally outside business activities that may require disclosure to the firm, but they are not necessarily securities transactions. Selling insurance (especially term life and property/casualty) is typically an insurance activity, not a securities sale (though variable products are securities). Providing accounting/tax services is a professional service, not a securities transaction. Teaching a class is an outside activity, not a securities sale. These may require firm reporting under outside business activity rules, but they are not inherently private securities transactions.

SIE-wise, this question tests your ability to identify when an activity crosses the line from ordinary outside business activity into selling securities away from firm oversight. The high-risk, heavily tested example is the representative selling notes or other investments to customers through a separate business or personal arrangement—this requires firm preapproval and supervision.

Treasury bills (T-bills) are short-term debt securities issued at a discount to par value. The difference between the purchase price and the par value represents the investor’s interest income, which is realized when the T-bill matures.

C is correct because T-bills are issued at a discount and mature at par.

A is incorrect because T-bills are not sold at par value.

B and D are incorrect because T-bills do not pay periodic interest; the return is based on the discount.

Treasury securities (Treasury bills, notes, and bonds) are obligations of the U.S. government. A key testable feature is their tax treatment: interest earned on Treasuries is subject to federal income tax (though it is generally exempt from state and local income taxes). That makes choice B correct.

Choice A is incorrect because FDIC insurance applies to bank deposit products (e.g., bank CDs, savings accounts) held at insured depository institutions, within insurance limits. Treasury securities are not bank deposits; they are direct government securities, so “FDIC-insured” is not the right concept. Treasuries are considered to have very low credit risk due to U.S. government backing, but that is different from FDIC insurance.

Choice C is incorrect because Treasuries trade in both the primary market (when issued by the Treasury) and the secondary market (after issuance). In fact, Treasuries are among the most actively traded securities in the world, and secondary-market trading is a major source of liquidity and price discovery. Investors can buy newly issued Treasuries at auction (primary) or purchase existing Treasuries from other investors and dealers (secondary).

Choice D is incorrect because securities issued by states and municipalities are municipal securities (muni bonds/notes), not Treasury securities. Treasuries are issued by the U.S. Department of the Treasury, while municipal bonds are issued by states, cities, counties, and other political subdivisions or authorities.

On the SIE, this question targets product knowledge: issuer identity, trading markets, and tax characteristics of government vs. municipal vs. bank products.