What is the difference between the SEC and FINRA on the SIE exam?

The SEC is a federal government agency created by the Securities Exchange Act of 1934; it oversees the whole industry, including the self-regulatory organizations. FINRA is an SRO: a non-governmental membership organization, overseen by the SEC, that writes and enforces rules for broker-dealers and administers exams like the SIE.

What does the Fed do that matters for the SIE?

The Federal Reserve conducts monetary policy with three tools — open market operations, the discount rate and reserve requirements — and sets margin requirements for securities under Regulation T. Tightening raises interest rates and tends to push bond and stock prices down; easing does the opposite.

SIE Capital Markets — Section 1 — about 12 of your 75 scored questions

Knowledge of Capital Markets is the SIE's foundation: who regulates the industry, who the players are, how primary and secondary markets work, and how the Fed and the economy move prices. It's 16% of the exam, and most of it is vocabulary you'll reuse in every other section.

Try 20 free questions Practice Capital Markets

Share of the exam: 16%
Questions on exam day: ≈ 12 of 75
Practice questions in Admezo: 48
Passing score (whole exam): 70%

What FINRA tests in Section 1

The knowledge areas of the SIE content outline for Knowledge of Capital Markets. FINRA weighs this section at 16% of the exam.

Regulatory entities: the SEC, SROs (FINRA, MSRB, Cboe), other agencies (Treasury/IRS, Federal Reserve, SIPC, FDIC, state regulators)
Market participants and their roles: investors, broker-dealers, investment advisers, municipal advisors, issuers, underwriters, transfer agents, custodians, market makers, clearing firms, DTCC
Types of markets: primary vs. secondary, first, second, third and fourth markets, physical exchanges vs. OTC
Economic factors: the Federal Reserve Board and monetary policy (fed funds rate, discount rate, reserve requirements, open market operations), fiscal policy, business cycle, inflation, interest rates, exchange rates and the balance of trade
Offerings: public offerings and the registration process, shelf registrations, prospectus requirements, underwriting commitments, exempt securities and transactions (Regulation D, Rule 144, Regulation A), the role of the syndicate

In the Admezo bank: 9 topics, 48 questions

1.1.1 The SEC
1.1.2 Self-regulatory Organizations
1.1.3 Other Regulators and Agencies
1.1.4 Market Participants and Their Roles
1.2.1 Types of Markets
1.3.1 The Federal Reserve Board
1.3.2 Business Economic Factors
1.3.3 International Economic Factors
1.4 Offerings

Key facts to know

SEC — Securities Act of 1933: The Securities Act of 1933 governs the primary market: new issues must be registered with the SEC unless an exemption applies, and investors must receive a prospectus.
SEC — Securities Exchange Act of 1934: The Securities Exchange Act of 1934 created the SEC, governs the secondary market and requires broker-dealers to register; it also gives the Federal Reserve authority over margin (Regulation T).
SEC — Securities Act of 1933: The SEC never approves or passes on the merits of a security: representing otherwise is unlawful (Section 23 of the 1933 Act).
FINRA SIE content outline, 1.1.3: SIPC protects customers of a failed broker-dealer up to $500,000 per separate customer, of which at most $250,000 may be cash. It does not cover market losses.
FINRA SIE content outline, 1.3.1: The Federal Reserve's tools are the discount rate, reserve requirements and open market operations; the fed funds rate is a target, not a rate the Fed sets directly.
FINRA SIE content outline, 1.4: Regulation D (private placements) and Rule 144 (resale of restricted and control securities) are the exemptions most often tested; Rule 144 volume limits are the greater of 1% of outstanding shares or the average weekly volume over the prior four weeks.

Three practice questions with answers

From the Admezo bank for Knowledge of Capital Markets, outside the 20 free questions, as they appear in the app once answered — with the rule and a link to the source. Rules checked October 27, 2026.

1 / 31Multiple choice1. Knowledge of Capital Markets — 1.3.2 Business Economic Factors
In which phase of the business cycle does economic activity reach its lowest point before beginning to recover?
- Peak
- Expansion
- Trough (correct answer)
- Contraction
Correct answer: C
The business cycle moves through expansion, peak, contraction (recession) and trough. The trough is the bottom of the cycle, after which expansion resumes; the peak is the high point before contraction begins.
Source: finra.orgQuestion bank checked October 27, 2026
2 / 31Multiple choice1. Knowledge of Capital Markets — 1.3.2 Business Economic Factors
ABC Corp's balance sheet shows current assets of $2,400,000, total assets of $9,000,000, current liabilities of $1,500,000 and long-term debt of $3,000,000. What is the company's current ratio?
- 0.63
- 1.60 (correct answer)
- 2.00
- 6.00
Correct answer: B
The current ratio measures short-term liquidity on the balance sheet and is calculated as current assets divided by current liabilities. Total assets and long-term debt are not part of the ratio.
Calculation
```
Current ratio = current assets / current liabilities
= $2,400,000 / $1,500,000
= 1.60
Result: 1.60
```
Source: finra.orgQuestion bank checked October 27, 2026
3 / 31Multiple choice1. Knowledge of Capital Markets — 1.3.1 The Federal Reserve Board
Which of the following Federal Reserve tools is used least frequently because even small changes have a large and disruptive effect on the banking system?
- Changing the reserve requirement (correct answer)
- Open market operations
- Changing the discount rate
- Setting the federal funds target range
Correct answer: A
The reserve requirement determines the fraction of deposits banks must hold rather than lend, so even a small change multiplies through the banking system via the money multiplier. The Fed therefore relies mainly on open market operations for day-to-day adjustments and changes reserve requirements rarely.
Source: finra.orgQuestion bank checked October 27, 2026

Practice all 48 Capital Markets questions

How to prepare for Capital Markets

Study tips, not a promise: Admezo doesn't guarantee a result beyond its pass guarantee.

Learn who does what
Half of Section 1 is matching an entity to a role: the SEC registers broker-dealers, the Fed sets margin, SIPC protects accounts, the MSRB writes municipal rules but can't enforce them, transfer agents keep the shareholder records. Build a table and quiz yourself on it.
Primary vs. secondary, then the four markets
Issuer gets the money: primary. Investors trade with each other: secondary. Then the exchange (first), OTC (second), exchange-listed traded OTC (third) and institution-to-institution via ECNs (fourth). The exam loves these distinctions.
Think in cause and effect for the economy
Questions rarely ask for a definition: they ask what happens to bond prices when the Fed tightens, or to exports when the dollar weakens. Trace each lever through interest rates and prices before you answer.

Capital Markets: frequently asked questions

Knowledge of Capital Markets is 16% of the SIE, so about 12 of the 75 scored questions.

Practice Capital Markets in the real format

48 explained questions on Knowledge of Capital Markets, mock exams weighted like the SIE, and a dashboard that shows exactly which topics to review.

Try 20 free questions Practice Capital Markets

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The other sections of the SIE

For the big picture — format, enrollment, retakes and fees — read the SIE exam overview, or browse the 20 free questions with answers.

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Sources: FINRA SIE content outline, Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1940, Regulation T, FINRA and MSRB rules, as in force on October 27, 2026.