Failed :( FINRA exam was sooo tricky!

I failed by 2%. I can’t believe it.

But there was some questions and topics that I didn’t even recognized!

This is what I can remember as soon as I walked out.

Municipal bond tax-exempt securities

There were lot of questions regarding municipal bonds and verbiage around tax-exempt securities (I was so used to reading non-exempt and exempt securities. But I think I may need to review those kinds of tricky vocabs.

"Customer wants high yield 9% corporate bond with least reinvestment risk, what municipal bond % would be appropriate for the customer?

that tripped me up because I am supposed to select one of the answer choices with % like 2.1%, 5%, 4% etc. I didn’t know how to answer this particular question

Regarding UTMA, a grandparents want to set up a trust that allows him to dictate what he can do with the account.

I think I understood what’s the UTMA is for. but the answer choices were confusing. Does the minor gets all the possession under the account upon majority? or all gifts are revocable in the account until child reached majority?

Covered Call
I think I need to review the covered calls because I had quite a few of them.

Client has strong position in energy stock but market is declining. What can client do to avoid this? Sell put, buy energy etf?

I had confusion about it because the ETF threw me off. I figured ETF is diversified or should sell put? Not sure of the answer

I had lot of questions revolving around the Prohibited activities because lot of those questions were not familiar to me. I understood what’s wrong and right but the relationship with customers come up a lot!

For example: RR can make changes to his U-4 under the following situation:

Got a speeding ticket, got subpoenaed for court appearance as witness, resolved issues with creditors/debtors whom he owed money (i am not sure what’s the wording)

that was something I wasn’t familiar with.

question with client giving RR a particular stock and Rr about finding a portfolio that look at the business and its fundamental along with surrounding economy…with answer choices about bottom-up, top-down, technical analysis, and sector analyis.

*i picked technical analysis. But this is a topic that i didn’t see in the text book.”

Anyway, sorry for rambling on.

There were so many tricky questions about covered calls, selling puts, ethical questions, and municipal bond stuff.

Any help with the above topics would be appreciated. I am going to take a couple of weeks break and get back at this.

I missed out on the entire month of Christmas holiday funs with family for this dumb exam. :frowning:

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Bummer, man! Sorry you have to re-take that test. I thought mine was pretty tricky as well. I had to slow down quite a bit and spend some time really thinking about each potential answer. Oh well, at least you’re not starting from scratch. Take a little break (but not too long of a break :wink: and get back to it, I suppose. Shoots!

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Hi @FoxMcCloud, I’m so sorry to hear that you narrowed missed passing your exam. I know how frustrating that is, but the good news is that you’re so close you’ll certainly pass on your next take.

I really appreciate your detailed notes on the tricky questions. This kind of feedback is perfect for us to improve the course and ensure that all these topics are well covered. These are outside of my knowledge as well, so @brandonrith, could you please take a look?

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@FoxMcCloud I am sorry that you did not pass. You got this though! Take a break and get ready to back into it. I passed the SIE a few months ago and am currently studying for S7 right now. Don’t feel bad it was for sure a tough exam and harder than I had anticipated as well. When I hit submit I was shocked it said pass. But I would for sure recommend getting in the mid to high 80s on Achievable exams. Also, check out Ken Finnen youtube channel along with Dean Tinney. They are S7/SIE tutors who are awesome resources. Even if you don’t watch all of their videos, Dean Tinney has a video where he explicates the entire FINRA SIE exam. In my opinion that specific video is a must watch for anyone.

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Thaat’s the thing. I was getting consistently 80’s. I’ll check out the Youtube vids. Thanks again.

Yeah, I slowed a lot. I ended up with 20 minutes left remaining. I used the time to review the flagged questions. Ended the exam with 10 minutes left remaining.

Absolutely.

I hope this feedback helps. There are so many trick questions about customer accounts and prohibited activities. I felt the exam weighed more toward municipal bonds and the trick words around the usage of “Tax-exempt” relating to “municipal bonds” and “corporate bonds”.

I got the analysis from the test center. It said that I have low performance in “understanding products and their risks”, and very low performance in “understanding trading, customer accounts and prohibited activities”. The remaining two were “knowledge of capital markets and overview of regulatory framework” which were “adequate performance”

Looking forward to Brandon’s response.

Thanks!

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Hi @FoxMcCloud - so sorry the exam didn’t go your way. Here are my thoughts on the topics you mentioned:

Municipal bond tax-exempt securities

Municipal bonds are tax-exempt, as long as the investor is a resident of the state the bond is issued from. I agree with your analysis - try to add these terms into your vocabulary.

Customer wants high yield 9% corporate bond with least reinvestment risk, what municipal bond % would be appropriate for the customer?

Reinvestment risk occurs when an investor receives income from an investment, then reinvests it back into the market at a lower rate of return. If reinvestment risk is the only risk mentioned, then we’ll want to avoid investments that pay large amounts of income. The more income a bond pays, the more reinvestment risk potential. That’s why zero coupon bonds (like STRIPS) are considered to have no reinvestment risk. Therefore, the answer was likely the bond with the lowest coupon rate.

Also, securities that pay frequent income are subject to higher levels of this risk. For example, mortgage backed securities, which pay income monthly, are subject to high levels of reinvestment risk.

Regarding UTMA, a grandparents want to set up a trust that allows him to dictate what he can do with the account.

I think I understood what’s the UTMA is for. but the answer choices were confusing. Does the minor gets all the possession under the account upon majority? or all gifts are revocable in the account until child reached majority?

Custodial accounts (UTMAs and UGMAs) limit the control a person has over the beneficiary’s assets. In both accounts, the account must be turned over to the child at some point in time. UGMAs require them to be turned over to the new adult once they reach the age of majority (18 or 21 depending on the state), while UTMAs allow states to push back that date (sometimes up to age 25). Additionally, all contributions made to the custodial account are irrevocable gifts to the child, which cannot be taken back (ever). Essentially, the custodian must spend the money for the child’s benefit (outside of normal living expenses like food, clothing, etc), or they must turn those assets at the required time. Bottom line - these accounts don’t provide a ton of flexibility to the custodian.

I added few tidbits to the custodial account chapter (linked above) that clarifies a few of these things.

Covered Call
I think I need to review the covered calls because I had quite a few of them.

You’re probably right - here’s the chapter on covered calls. I also will DM you some extra resources that may help.

Client has strong position in energy stock but market is declining. What can client do to avoid this? Sell put, buy energy etf?

I had confusion about it because the ETF threw me off. I figured ETF is diversified or should sell put? Not sure of the answer

Well, an energy exchange traded fund (ETF) would be diversified across numerous energy companies, but isn’t terribly diversified overall. If the value of oil and gas (or whatever energy) falls, this ETF will take a big hit. Buying an energy ETF in this scenario would minimize some non-systematic risks, but still will be subject to the fluctuations of the energy market.

There are three good potential answers here. First, the investor could diversify themselves outside of the energy industry. For example, an investment in an S&P 500 ETF would be broadly diversified, and would reduce the risks specific to the energy industry. Second, they could buy a put as a hedging strategy. It would cost them money, but they would gain some “insurance” if the market price of the stock continued to fall. Third, they could place a sell stop order on the stock, which would sell the shares if they fell further in price.

It’s possible none of the answers I mentioned above were here, but the right answer most likely wouldn’t be either of the two you mentioned (investing in an energy ETF or selling a put, which is a bullish strategy).

I had lot of questions revolving around the Prohibited activities because lot of those questions were not familiar to me. I understood what’s wrong and right but the relationship with customers come up a lot!

For example: RR can make changes to his U-4 under the following situation:

Got a speeding ticket, got subpoenaed for court appearance as witness, resolved issues with creditors/debtors whom he owed money (i am not sure what’s the wording)

Generally speaking, the U4 is only updated if someone that normally must be included on the U4 changes. We discuss the U4 in this section, and part of the discussion involves statutory disqualifications. The answers here likely is the one involve creditors. Compromises with creditors must be disclosed on initial U4 applications, but also additionally if it occurs while the representative is operating in the industry.

Question with client giving RR a particular stock and Rr about finding a portfolio that look at the business and its fundamental along with surrounding economy…with answer choices about bottom-up, top-down, technical analysis, and sector analysis.

The answer to this one is either bottom-up or top-down, depending on how they phrased the question. Interesting you’re seeing this tested on the SIE, as it is already a tested topic on other financial exams. I’ll add a section to the Economic Factors chapter on this topics, plus add a handful of practice and exam questions ASAP.

Thanks for the feedback, @FoxMcCloud. You can get this done on your retake - stay focused and you’ll pass with flying colors in 30 days!

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