SIE (Securities Industry Essentials) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the SIE Exam with flashcards and multiple choice questions, each question offers hints and thorough explanations. Gear up for your exam now!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.


What violation is being instigated by suggesting to sell stock at a loss and then buy it back to report capital loss?

  1. Market Manipulation

  2. Insider Trading

  3. Wash Sale

  4. Pump and Dump

The correct answer is: Wash Sale

Suggesting to sell stock at a loss and then buying it back to report capital loss is known as a "wash sale". A wash sale occurs when an investor sells a security at a loss and within 30 days before or after the sale, buys a "substantially identical" security, either in the same account or in a different account. This transaction is a violation because it manipulates the reporting of capital losses, which can result in lower tax liability. It is important for investors to understand the rules around wash sales to avoid potential penalties. Market manipulation (A), insider trading (B), and pump and dump (D) are all different types of securities fraud and do not apply to this specific scenario.