Finra SIE Exam - Topic 5 Question 19 Discussion

Actual exam question for Finra's SIE exam

Question #: 19
Topic #: 5

[All SIE Questions]

An investor wants to purchase mutual fund shares, but she is concerned about the tax efficiency of the fund. Which of the following disclosures required under industry regulations will help the investor make an informed decision?

AThe fund's turnover ratio

BSales charges and breakpoint discount opportunities

CThe commissions that the fund pays on each transaction

DProjections of future dividend and capital gains distributions

Show Suggested Answer

Suggested Answer: A

Step by Step Explanation:

Turnover Ratio: Indicates how frequently the fund manager buys and sells securities. A high turnover ratio may result in higher capital gains distributions, impacting tax efficiency.

Incorrect Options:

B: Sales charges affect cost but not tax efficiency.

C: Commission details are unrelated to the fund's tax efficiency.

D: Projections of distributions are speculative and not disclosed under regulations.

SEC Mutual Fund Guide: SEC Mutual Funds.

by Rosendo at Jan 05, 2026, 05:16 AM

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Claudia

3 days ago

I'm not sure the commissions paid on transactions are that relevant for tax efficiency.

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Corrie

8 days ago

Projections of future distributions would be super helpful to understand the potential tax impact.

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Lasandra

13 days ago

The turnover ratio is definitely the most important disclosure for evaluating tax efficiency.

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Dana

18 days ago

I feel like projections of future distributions might help, but they don’t really reflect the current tax efficiency of the fund.

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Francine

23 days ago

I practiced a question similar to this, and I believe the turnover ratio is the right choice since it directly impacts capital gains taxes.

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Lajuana

29 days ago

I'm not entirely sure, but I remember something about sales charges being more related to costs rather than tax efficiency.

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Antonio

1 month ago

I think the turnover ratio is important because it can indicate how frequently the fund buys and sells securities, which affects taxes.

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Laurel

1 month ago

I'm a little confused - I thought the sales charges were more about the upfront costs, not the tax efficiency. The turnover ratio and distributions seem like the key disclosures here.

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Lorriane

1 month ago

The commissions the fund pays seem less relevant for evaluating tax efficiency. I'd focus on the turnover ratio and distribution projections.

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Rodolfo

2 months ago

Definitely need to look at the turnover ratio, but the sales charges and breakpoint discounts are also important. That affects the overall cost and returns.

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Dean

2 months ago

I'm not sure if the turnover ratio is the only thing to look at. The projections of future distributions could also give a good sense of the tax impact.

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Juliana

2 months ago

The turnover ratio would be really helpful to know the tax efficiency of the fund. I think that's the key disclosure to focus on.

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