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SIE Insider Trading

Insider trading on the SIE turns on material non-public information. The exam tests the mosaic theory — public data plus a skilled analyst’s impressions is legitimate — against tipper–tippee liability, and the penalties available under the Insider Trading and Securities Fraud Enforcement Act.

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Understanding Trading, Customer Accounts and Prohibited Activities · 31%115 questions14% hard
31%of the exam is Understanding Trading, Customer Accounts and Prohibited Activities, the section this topic sits in.
115questions on this topic in the PrepScore bank.
37%are apply-level questions — the dominant cognitive demand here.
6are EXCEPT / NOT items, where the answer is the odd one out.
What the SIE asks

What you actually need to know

  • What makes information material, and what makes it non-public.
  • Mosaic theory: combining public sources and non-material impressions is permitted.
  • Tipper and tippee liability, and how it passes down a chain.
  • Civil penalties up to three times the profit gained or loss avoided.
How this topic behaves

What 115 questions on it look like

14% of the bank for this topic is rated hard — well above the exam average. Budget more time here than its blueprint weight alone suggests.

scenario27%
compliance judgment27%
concept25%
comparison21%

Question-type mix across the 115 questions in this topic.

From the bank

Three real insider trading questions

With the explanation — which is the part that teaches.

compliance judgment · medium · analyze

An analyst combines an issuer's public 10-K, published industry shipment data, and impressions from a tour of a public showroom to conclude the stock is undervalued, then recommends it. Why is this conduct generally permissible?

  1. AA recommendation is permissible only if the analyst also files the conclusion with the SEC first
  2. BAny information an analyst personally gathers automatically becomes public
  3. CThe analyst reached a conclusion by assembling individually public pieces of information rather than trading on any single piece of material nonpublic informationcorrect
  4. DAnalysts are statutorily exempt from the insider-trading rules
Why C is correct

The mosaic theory allows an analyst to combine separate items of public information to form a non-public conclusion; this is legitimate analysis, not insider trading, because no material nonpublic information was used.

scenario · medium · analyze

A representative learns confidential merger information from an issuer employee before public announcement and buys the issuer's stock for a personal account. Which prohibited conduct concept is involved?

  1. AA REIT liquidity comparison
  2. BA continuing education participation deadline
  3. CInsider trading using material nonpublic informationcorrect
  4. DA 529 direct-sold plan election
Why C is correct

Trading while aware of confidential, material nonpublic merger information is an insider trading concept at an introductory level.

concept · medium · recall

Which statement best defines material nonpublic information?

  1. AInformation already broadly disseminated in a company's press release and exchange filings
  2. BImportant information not available to the public that a reasonable investor would likely consider in making an investment decisioncorrect
  3. CA mutual fund's daily NAV after it has been published to investors
  4. DA customer complaint that has no connection to an issuer or security
Why B is correct

Material nonpublic information is important information not available to the public that a reasonable investor would likely consider when making an investment decision.

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FAQ

Insider Trading questions

Is an analyst allowed to combine public data into a conclusion?

Yes. The mosaic theory permits assembling public information and non-material observations into a view no single source states, which is why that pattern appears so often in SIE questions.

What makes information material?

A reasonable investor would consider it important in deciding whether to buy or sell, or it would significantly alter the total mix of information available.

Who can be liable for insider trading?

Both the person who passes the information and the person who trades on it — tipper and tippee — and liability can extend down a chain of recipients.
Last reviewed 2026-08-28. Exam facts sourced to FINRA’s SIE exam page and the FINRA SIE content outline. Question counts describe the PrepScore bank, not the exam.
Same section
Orders and Strategies151 questionsOther Prohibited Activities150 questionsAnti-money Laundering (AML)145 questionsCommunications with the Public and General Best Interest Obligations and Suitability Requirements139 questions

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