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SIE Other Prohibited Activities

This topic gathers the conduct rules that do not fit elsewhere: freeriding, churning, front-running, unauthorised trading, sharing in customer accounts, guaranteeing against loss, and selling away. SIE questions are almost always scenarios — you are shown conduct and asked to name the violation.

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Understanding Trading, Customer Accounts and Prohibited Activities · 31%150 questions10% hard
31%of the exam is Understanding Trading, Customer Accounts and Prohibited Activities, the section this topic sits in.
150questions on this topic in the PrepScore bank.
35%are apply-level questions — the dominant cognitive demand here.
10are EXCEPT / NOT items, where the answer is the odd one out.
What the SIE asks

What you actually need to know

  • Freeriding in a cash account: selling before paying for the purchase.
  • Churning — excessive trading for commission — and how it is judged against the account.
  • Selling away, and the written-notice requirement for private securities transactions.
  • Why guaranteeing a customer against loss is prohibited outright.
How this topic behaves

What 150 questions on it look like

10 questions are EXCEPT or NOT items. Reverse-worded questions are where careful candidates lose marks they had already earned; the fix is mechanical — read the stem twice before the options.

scenario42%
concept27%
comparison17%
compliance judgment14%

Question-type mix across the 150 questions in this topic.

From the bank

Three real other prohibited activities questions

With the explanation — which is the part that teaches.

scenario · medium · understand

A cash-account customer commits a freeriding violation by selling stock before paying for the purchase. Under Regulation T, what is the typical consequence the firm must impose on the account?

  1. AThe customer is automatically reported to the SEC for securities fraud
  2. BThe account is frozen for 90 days, during which purchases require cash deposited in advancecorrect
  3. CThe account is permanently closed to all future trading
  4. DThe account is converted to a margin account so the firm can extend credit
Why B is correct

A Regulation T freeriding/non-payment violation results in the account being frozen for 90 days, during which the customer must have sufficient cash on deposit before any purchase. It is not a permanent closure or a fraud referral.

compliance judgment · medium · apply

A firm employee creates false trade records and misleading customer statements to hide losses in a securities account. Which compliance judgment is most appropriate?

  1. AThe conduct is acceptable if the account later recovers
  2. BThe conduct is a routine ETF tracking difference
  3. CThe conduct is a 529 education savings feature
  4. DThe conduct may be a manipulative, deceptive, or fraudulent devicecorrect
Why D is correct

Creating false records and misleading customer statements to hide losses may constitute manipulative, deceptive, or fraudulent conduct.

concept · easy · understand

A customer buys shares in a cash account and sells those shares before paying for the purchase. Which prohibited-account concept is most directly involved?

  1. ABacking away
  2. BFreeridingcorrect
  3. CMarking the close
  4. DFiscal policy
Why B is correct

Freeriding occurs when a customer buys and sells a security before paying for the purchase, which is not permitted in a cash account under Regulation T concepts.

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FAQ

Other Prohibited Activities questions

What is freeriding?

Buying a security in a cash account and selling it before paying for the purchase. Regulation T then requires the account to be frozen for 90 days.

What makes trading count as churning?

Excessive frequency or size relative to the customer’s objectives and resources, driven by the representative’s interest in commissions rather than the customer’s interest.

Can a representative guarantee a customer against loss?

No. It is prohibited regardless of the representative’s intent or the customer’s consent.
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.
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