SIE Exam
Securities Industry Essentials Exam; foundational exam for securities professionals.
Getting Started: Navigating the SIE Exam
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Securities Industry Essentials (SIE) Exam — key terms, tricks & tips
Everything from the course in one searchable place: 237 entries. Use it to review before a practice test or look up a word you forgot.
237 results
FINRA
Financial Industry Regulatory Authority; regulator of broker-dealers.
Getting Started: Navigating the SIE Exam
Corequisite
An exam that must be passed in addition to another for full qualification.
Getting Started: Navigating the SIE Exam
Top-Off Exam
Specialized FINRA exam (e.g., Series 7) taken after the SIE for specific roles.
Getting Started: Navigating the SIE Exam
Prometric
Third-party company that administers FINRA and other exams.
Getting Started: Navigating the SIE Exam
Pretest Questions
Unscored questions on the exam used for future exam development.
Getting Started: Navigating the SIE Exam
Sponsorship
Requirement by a FINRA member firm to take most 'top-off' exams.
Getting Started: Navigating the SIE Exam
What is the SIE Exam? Structure & Scoring
SIE: S-core I-s E-asy (70%)!
Getting Started: Navigating the SIE Exam
What is the SIE Exam? Structure & Scoring
The SIE Exam is a corequisite for most representative-level exams. Memorize the 70% passing score and the retake waiting periods: 30 days (1st/2nd fail), 180 days (3rd+ fail).
Getting Started: Navigating the SIE Exam
What is the SIE Exam? Structure & Scoring
Confusing the SIE Exam with a full license – it's only the first step.
Getting Started: Navigating the SIE Exam
What is the SIE Exam? Structure & Scoring
Not knowing the content area weightings and studying disproportionately.
Getting Started: Navigating the SIE Exam
What is the SIE Exam? Structure & Scoring
Ignoring the 10 pretest questions, as you won't know which ones they are.
Getting Started: Navigating the SIE Exam
Active Learning
Engaging with material to process and recall information.
Getting Started: Navigating the SIE Exam
Passive Learning
Absorbing information without active engagement.
Getting Started: Navigating the SIE Exam
Practice Exam
Simulated test to assess knowledge and exam readiness.
Getting Started: Navigating the SIE Exam
Study Schedule
Planned timetable for organizing study sessions.
Getting Started: Navigating the SIE Exam
Knowledge Gaps
Areas where understanding or recall is weak.
Getting Started: Navigating the SIE Exam
Time Management
Organizing and planning how to divide your time.
Getting Started: Navigating the SIE Exam
Effective Study Strategies & Practice Exams for SIE
To REMEMBER effective study: R-E-M-E-M-B-E-R: Review, Explain, Make Flashcards, Evaluate, Make a Schedule, Break it Down, Explain Again, Re-test!
Getting Started: Navigating the SIE Exam
Effective Study Strategies & Practice Exams for SIE
The SIE Exam frequently tests your ability to identify the *best* course of action in a given scenario. Practice questions help you develop this critical thinking skill, which is more than just recalling facts.
Getting Started: Navigating the SIE Exam
Effective Study Strategies & Practice Exams for SIE
Only reading the textbook without active recall or practice questions.
Getting Started: Navigating the SIE Exam
Effective Study Strategies & Practice Exams for SIE
Ignoring difficult topics and only reviewing what you already know well.
Getting Started: Navigating the SIE Exam
Effective Study Strategies & Practice Exams for SIE
Cramming all your studying into the last few days before the exam.
Getting Started: Navigating the SIE Exam
SEC
Primary federal regulator of securities markets.
Capital Markets Fundamentals
MSRB
SRO that writes rules for municipal securities.
Capital Markets Fundamentals
Broker-Dealer
Firm that facilitates securities transactions for clients or itself.
Capital Markets Fundamentals
Broker
Acts as an agent for clients, charging a commission.
Capital Markets Fundamentals
Dealer
Acts as a principal, trading from its own inventory.
Capital Markets Fundamentals
SIPC
Protects customers against brokerage firm failure.
Capital Markets Fundamentals
Issuer
Entity that sells securities to raise capital.
Capital Markets Fundamentals
Regulatory Entities & Market Participants
SEC: S-afety E-very C-ustomer. FINRA: F-air I-nvestor N-etwork R-egulates A-ll. MSRB: M-unicipal S-ecurities R-ules B-oard. SIPC: S-ecurities I-nvestor P-rotection C-ompany.
Capital Markets Fundamentals
Regulatory Entities & Market Participants
Memorize the specific roles of the SEC, FINRA, MSRB, and SIPC. Know that FINRA enforces MSRB rules for broker-dealers, and SIPC covers up to $500,000, including $250,000 cash, against firm failure, not market loss.
Capital Markets Fundamentals
Regulatory Entities & Market Participants
Confusing the SEC's role with FINRA's role; the SEC is the government regulator, FINRA is an SRO.
Capital Markets Fundamentals
Regulatory Entities & Market Participants
Believing SIPC protects against market losses; it only protects against brokerage firm insolvency.
Capital Markets Fundamentals
Regulatory Entities & Market Participants
Mixing up broker (agent) and dealer (principal) capacities and their associated charges (commission vs. markup/markdown).
Capital Markets Fundamentals
Primary Market
Where new securities are issued for the first time.
Capital Markets Fundamentals
Underwriter
Investment bank facilitating new security issuance.
Capital Markets Fundamentals
Firm Commitment
Underwriter buys entire issue, assumes all risk.
Capital Markets Fundamentals
Best Efforts
Underwriter sells as agent, no risk for unsold shares.
Capital Markets Fundamentals
Registration Statement
SEC filing detailing new security offering.
Capital Markets Fundamentals
Cooling-Off Period
Time for SEC review of registration statement.
Capital Markets Fundamentals
Red Herring Prospectus
Preliminary prospectus used to gauge interest.
Capital Markets Fundamentals
Final Prospectus
Complete disclosure document delivered at sale.
Capital Markets Fundamentals
Primary Market: Issuance & Underwriting
SEC: 'S'tatement, 'E'ffective, 'C'ooling-off. Remember the order: Registration Statement filed, then Cooling-Off period, then Effective date.
Capital Markets Fundamentals
Primary Market: Issuance & Underwriting
Memorize the sequence of events in a public offering: Issuer files registration, cooling-off period, effective date, offering date. Understand what can and cannot happen during the cooling-off period.
Capital Markets Fundamentals
Primary Market: Issuance & Underwriting
Confusing the primary market (new issues) with the secondary market (trading existing issues).
Capital Markets Fundamentals
Primary Market: Issuance & Underwriting
Believing the SEC 'approves' an offering; they only ensure adequate disclosure.
Capital Markets Fundamentals
Primary Market: Issuance & Underwriting
Thinking sales can be confirmed or money accepted during the cooling-off period.
Capital Markets Fundamentals
Secondary Market
Where previously issued securities are bought and sold.
Capital Markets Fundamentals
Liquidity
Ease with which an asset can be converted to cash.
Capital Markets Fundamentals
Exchange Market
Organized marketplace with centralized trading.
Capital Markets Fundamentals
Over-the-Counter (OTC)
Decentralized market where trades occur directly between parties.
Capital Markets Fundamentals
Bid Price
Highest price a buyer is willing to pay.
Capital Markets Fundamentals
Ask Price
Lowest price a seller is willing to accept.
Capital Markets Fundamentals
Spread
Difference between the bid and ask price.
Capital Markets Fundamentals
Market Maker
Dealer providing liquidity by quoting bid/ask prices.
Capital Markets Fundamentals
Secondary Market: Trading & Quotations
Remember 'S' for Secondary, 'S' for Selling (existing securities). The Primary market is for 'P' for Primary, 'P' for Purchasing (newly issued securities).
Capital Markets Fundamentals
Secondary Market: Trading & Quotations
The SIE exam often tests the fundamental difference between the primary and secondary markets: the issuer is involved in the primary market (issuing new securities), but NOT in the secondary market (trading existing securities). Look for questions that describe a transaction and ask you to identify the market.
Capital Markets Fundamentals
Secondary Market: Trading & Quotations
Confusing primary and secondary market functions: The issuer is only involved in the primary market.
Capital Markets Fundamentals
Secondary Market: Trading & Quotations
Believing all securities trade on exchanges: Many bonds and some stocks trade OTC.
Capital Markets Fundamentals
Secondary Market: Trading & Quotations
Not understanding the role of market makers: They are crucial for providing liquidity, not just executing orders like a broker.
Capital Markets Fundamentals
Option
Derivative right to buy/sell an asset.
Capital Markets Fundamentals
Call Option
Right to buy an underlying asset.
Capital Markets Fundamentals
Put Option
Right to sell an underlying asset.
Capital Markets Fundamentals
Strike Price
Predetermined price for option exercise.
Capital Markets Fundamentals
Exchange Traded Note (ETN)
Unsecured debt tracking an index; issuer credit risk.
Capital Markets Fundamentals
Depositary Receipt (DR)
Certificate representing foreign company shares.
Capital Markets Fundamentals
American Depositary Receipt (ADR)
DRs traded in the U.S. market.
Capital Markets Fundamentals
Leveraged ETN
Aims for multiple of daily index return.
Capital Markets Fundamentals
Investment Products: Options, ETNs, & DRs
For Options: 'CALL to BUY, PUT to SELL.' Remember the 'U' in 'PUT' for 'SELL' (like 'shut').
Capital Markets Fundamentals
Investment Products: Options, ETNs, & DRs
On the exam, remember that an ETN's primary risk is credit risk, as it is an unsecured debt obligation of the issuing bank. Also, leveraged and inverse ETNs are generally unsuitable for buy-and-hold investors due to daily rebalancing.
Capital Markets Fundamentals
Investment Products: Options, ETNs, & DRs
Confusing an option's right with an obligation; it's always a right for the buyer.
Capital Markets Fundamentals
Investment Products: Options, ETNs, & DRs
Forgetting that ETNs carry issuer credit risk, unlike ETFs which hold underlying assets.
Capital Markets Fundamentals
Investment Products: Options, ETNs, & DRs
Assuming leveraged and inverse ETNs are suitable for long-term investment; they are not due to compounding.
Capital Markets Fundamentals
Common Stock
Represents ownership, voting rights, residual claim.
Understanding Investment Products
Preferred Stock
Fixed dividend, no voting, priority claim over common.
Understanding Investment Products
Dividend
Portion of company earnings paid to shareholders.
Understanding Investment Products
Capital Appreciation
Increase in the market value of an asset.
Understanding Investment Products
Preemptive Right
Right to maintain proportionate ownership in new issues.
Understanding Investment Products
Liquidation
Process of selling assets to pay off debts.
Understanding Investment Products
Market Risk
Risk of overall market decline affecting all investments.
Understanding Investment Products
Business Risk
Risk of a specific company performing poorly.
Understanding Investment Products
Equity Securities: Characteristics & Risks
To remember the order of claims in liquidation, think: 'S-U-P-C': Secured, Unsecured, Preferred, Common. Imagine a 'super' company that pays its 'C'ash last!
Understanding Investment Products
Equity Securities: Characteristics & Risks
The SIE exam often tests the order of claims in liquidation. Remember: Secured Creditors > Unsecured Creditors (including bondholders) > Preferred Stockholders > Common Stockholders. This hierarchy is critical.
Understanding Investment Products
Equity Securities: Characteristics & Risks
Confusing voting rights: Common stock typically has voting rights, preferred stock generally does not.
Understanding Investment Products
Equity Securities: Characteristics & Risks
Misunderstanding dividend priority: Preferred stockholders are paid before common stockholders.
Understanding Investment Products
Equity Securities: Characteristics & Risks
Ignoring the order of claims in liquidation: This hierarchy is frequently tested and crucial for client advice.
Understanding Investment Products
Par Value
The face value of a bond, typically $1,000.
Understanding Investment Products
Coupon Rate
The annual interest rate paid on a bond's par value.
Understanding Investment Products
Maturity Date
The date when a bond's principal is repaid.
Understanding Investment Products
Current Yield
Annual interest payment divided by the bond's current market price.
Understanding Investment Products
Yield-to-Maturity (YTM)
Total return if a bond is held until maturity.
Understanding Investment Products
Interest Rate Risk
Risk of bond price changes due to interest rate fluctuations.
Understanding Investment Products
Default Risk
Risk that an issuer cannot make payments.
Understanding Investment Products
Premium
A bond trading above its par value.
Understanding Investment Products
Debt Securities: Bonds & Their Features
To remember the inverse relationship: 'Interest Rates RISE, Bond Prices FALL like a rock! Interest Rates FALL, Bond Prices RISE like a balloon!'
Understanding Investment Products
Debt Securities: Bonds & Their Features
The SIE exam frequently tests the inverse relationship between interest rates and bond prices. Remember: if rates go up, bond prices go down, and vice versa. Also, differentiate between nominal yield, current yield, and yield-to-maturity.
Understanding Investment Products
Debt Securities: Bonds & Their Features
Confusing the nominal yield with current yield or YTM.
Understanding Investment Products
Debt Securities: Bonds & Their Features
Forgetting the inverse relationship between interest rates and bond prices.
Understanding Investment Products
Debt Securities: Bonds & Their Features
Not understanding that a bond's par value is typically $1,000 unless stated otherwise.
Understanding Investment Products
Open-End Fund
Mutual fund; continuously issues/redeems shares at NAV.
Understanding Investment Products
Closed-End Fund
Fixed shares; trades on exchanges at market price.
Understanding Investment Products
Net Asset Value (NAV)
Per share value of a fund's assets minus liabilities.
Understanding Investment Products
Unit Investment Trust (UIT)
Fixed portfolio, unmanaged, terminates on a set date.
Understanding Investment Products
Exchange Traded Fund (ETF)
Fund that trades on exchanges like stocks; tracks index.
Understanding Investment Products
Real Estate Investment Trust (REIT)
Company owning income-producing real estate; high dividends.
Understanding Investment Products
Investment Companies & Other Vehicles
For REITs, remember 'REIT = Real Estate Income Tax-advantaged'. They give you income from real estate and avoid corporate tax by passing it to you!
Understanding Investment Products
Investment Companies & Other Vehicles
The SIE exam frequently tests the differences between open-end and closed-end funds, especially regarding how their share prices are determined (NAV vs. market price). Also, remember the 90% distribution rule for REITs.
Understanding Investment Products
Investment Companies & Other Vehicles
Confusing the pricing mechanism of open-end (NAV) and closed-end (market price) funds.
Understanding Investment Products
Investment Companies & Other Vehicles
Assuming all investment companies are actively managed; UITs are not.
Understanding Investment Products
Investment Companies & Other Vehicles
Forgetting that ETFs trade throughout the day, unlike mutual funds.
Understanding Investment Products
Derivative
Financial contract whose value is based on an underlying asset.
Understanding Investment Products
Future
Obligation to buy/sell an asset at a future date.
Understanding Investment Products
Annuity
Contract providing a stream of income, often for retirement.
Understanding Investment Products
Qualified Plan
Employer-sponsored retirement plan with tax advantages.
Understanding Investment Products
IRA
Individual Retirement Account for personal savings.
Understanding Investment Products
Vesting
Employee ownership of employer contributions.
Understanding Investment Products
RMD
Required Minimum Distribution from retirement plans.
Understanding Investment Products
Derivatives, Insurance, Annuities & Retirement Plans
For Options: 'Call Up' (Call = buy up) and 'Put Down' (Put = sell down).
Understanding Investment Products
Derivatives, Insurance, Annuities & Retirement Plans
The SIE exam often tests the difference between term and whole life insurance, and the tax treatment of Traditional vs. Roth IRAs. Pay attention to when contributions are taxed and when withdrawals are taxed.
Understanding Investment Products
Derivatives, Insurance, Annuities & Retirement Plans
Confusing the 'right' of an option with the 'obligation' of a future.
Understanding Investment Products
Derivatives, Insurance, Annuities & Retirement Plans
Mixing up the tax treatment of Traditional vs. Roth IRAs.
Understanding Investment Products
Derivatives, Insurance, Annuities & Retirement Plans
Believing all retirement plans offer the same tax benefits or contribution limits.
Understanding Investment Products
Settlement Date
Date when securities and cash are exchanged.
Trading, Accounts, and Prohibited Actions
Regular Way Settlement
Standard settlement period (T+2 for equities, T+1 for options).
Trading, Accounts, and Prohibited Actions
Cash Settlement
Same-day settlement (T+0).
Trading, Accounts, and Prohibited Actions
Ex-Dividend Date
Date before which stock must be bought to receive dividend.
Trading, Accounts, and Prohibited Actions
Record Date
Date company identifies shareholders for dividend.
Trading, Accounts, and Prohibited Actions
Stock Split
Increases shares, decreases price; total value unchanged.
Trading, Accounts, and Prohibited Actions
Reverse Stock Split
Decreases shares, increases price; total value unchanged.
Trading, Accounts, and Prohibited Actions
Tender Offer
Public offer to buy shares, often at a premium.
Trading, Accounts, and Prohibited Actions
Trading Mechanics, Settlement & Corporate Actions
To remember the dividend dates, think 'DRIP': Declaration, Record, Ex-dividend, Payable. Just remember Ex-dividend is actually *before* Record!
Trading, Accounts, and Prohibited Actions
Trading Mechanics, Settlement & Corporate Actions
The SIE exam frequently tests the ex-dividend date. Remember, it's typically one business day BEFORE the record date. To receive the dividend, you must purchase the stock BEFORE the ex-dividend date.
Trading, Accounts, and Prohibited Actions
Trading Mechanics, Settlement & Corporate Actions
Confusing the ex-dividend date with the record date. The ex-date comes first!
Trading, Accounts, and Prohibited Actions
Trading Mechanics, Settlement & Corporate Actions
Believing a stock split changes the total value of an investment.
Trading, Accounts, and Prohibited Actions
Trading Mechanics, Settlement & Corporate Actions
Assuming all securities settle T+2; remember government securities and options are T+1.
Trading, Accounts, and Prohibited Actions
Cash Account
Securities purchases paid in full, no borrowing.
Trading, Accounts, and Prohibited Actions
Margin Account
Allows borrowing from broker to buy securities.
Trading, Accounts, and Prohibited Actions
Principal Approval
Required for new accounts before first trade.
Trading, Accounts, and Prohibited Actions
JTWROS
Joint account; assets pass to surviving owner.
Trading, Accounts, and Prohibited Actions
UGMA/UTMA
Custodial accounts for minors' benefit.
Trading, Accounts, and Prohibited Actions
Custodian
Adult managing a minor's custodial account.
Trading, Accounts, and Prohibited Actions
USA PATRIOT Act
Requires identity verification for new customers.
Trading, Accounts, and Prohibited Actions
Customer Accounts: Types & Requirements
CASH is for full payment, MARGIN is for MORE (money you borrow).
Trading, Accounts, and Prohibited Actions
Customer Accounts: Types & Requirements
For UGMA/UTMA accounts, remember that the age of majority varies by state. On the exam, if a specific age isn't given, assume it's the standard 18 or 21, but focus on the concept of transfer at majority.
Trading, Accounts, and Prohibited Actions
Customer Accounts: Types & Requirements
Confusing the responsibilities of the custodian with the minor in a UGMA/UTMA account. The custodian controls, the minor owns.
Trading, Accounts, and Prohibited Actions
Customer Accounts: Types & Requirements
Forgetting that principal approval is required *before* the first trade in a new account, not after.
Trading, Accounts, and Prohibited Actions
Customer Accounts: Types & Requirements
Underestimating the risks associated with margin accounts; they amplify both gains and losses.
Trading, Accounts, and Prohibited Actions
Fraud
Intentional misrepresentation for financial gain.
Trading, Accounts, and Prohibited Actions
Manipulation
Artificially influencing security prices or activity.
Trading, Accounts, and Prohibited Actions
Ponzi Scheme
Fraudulent investment where new money pays old investors.
Trading, Accounts, and Prohibited Actions
Churning
Excessive trading for commissions, disregarding client goals.
Trading, Accounts, and Prohibited Actions
Pump and Dump
Inflating stock price with false info, then selling.
Trading, Accounts, and Prohibited Actions
Wash Sale
Simultaneous buy/sell to create artificial trading volume.
Trading, Accounts, and Prohibited Actions
Matched Orders
Colluding to create false appearance of market activity.
Trading, Accounts, and Prohibited Actions
Prohibited Activities: Fraud & Manipulation
F-R-A-U-D: False Representations Are Unlawful Deceptions. M-A-N-I-P-U-L-A-T-I-O-N: Market Activity Not Intended, Purposely Undermining Legitimate Activity, To Influence Other Now.
Trading, Accounts, and Prohibited Actions
Prohibited Activities: Fraud & Manipulation
For the exam, remember that fraud and manipulation are distinct but both involve deceit and harm. Key terms like 'churning,' 'pump and dump,' and 'wash sales' are frequently tested, so understand their definitions and how to identify them.
Trading, Accounts, and Prohibited Actions
Prohibited Activities: Fraud & Manipulation
Confusing fraud (deception) with manipulation (artificial market activity).
Trading, Accounts, and Prohibited Actions
Prohibited Activities: Fraud & Manipulation
Underestimating the severity of penalties for these activities.
Trading, Accounts, and Prohibited Actions
Prohibited Activities: Fraud & Manipulation
Failing to recognize red flags for common schemes like Ponzi or Pump and Dump.
Trading, Accounts, and Prohibited Actions
Money Laundering
Disguising illegal money's origin to make it seem legitimate.
Trading, Accounts, and Prohibited Actions
Bank Secrecy Act (BSA)
U.S. law combating money laundering; requires reporting.
Trading, Accounts, and Prohibited Actions
SAR (Suspicious Activity Report)
Report filed with FinCEN for suspected illegal financial activity.
Trading, Accounts, and Prohibited Actions
Structuring
Breaking large transactions into smaller ones to avoid reporting.
Trading, Accounts, and Prohibited Actions
Insider Trading
Trading on non-public, material information for personal gain.
Trading, Accounts, and Prohibited Actions
FinCEN
Financial Crimes Enforcement Network; collects and analyzes financial data.
Trading, Accounts, and Prohibited Actions
Placement
First stage of ML; introducing illicit funds into financial system.
Trading, Accounts, and Prohibited Actions
Anti-Money Laundering (AML) & Insider Trading
To remember the stages of Money Laundering: P.L.I. - Place it, Layer it, Integrate it!
Trading, Accounts, and Prohibited Actions
Anti-Money Laundering (AML) & Insider Trading
The exam often tests your understanding of the confidentiality surrounding a SAR. Remember, you can NEVER tell a client that a SAR has been filed about them. This is known as 'tipping off' and is illegal.
Trading, Accounts, and Prohibited Actions
Anti-Money Laundering (AML) & Insider Trading
Confusing the reporting threshold for CTRs ($10,000) with the threshold for filing a SAR (suspicion, no specific dollar amount required).
Trading, Accounts, and Prohibited Actions
Anti-Money Laundering (AML) & Insider Trading
Believing that only the 'tippee' (the person who trades) is liable for insider trading; the 'tipper' (the person who provides the information) is also liable.
Trading, Accounts, and Prohibited Actions
Anti-Money Laundering (AML) & Insider Trading
Disclosing to a client that a SAR has been filed about them; this is a serious violation called 'tipping off'.
Trading, Accounts, and Prohibited Actions
Retail Communication
To >25 retail investors in 30 days; strict rules.
Trading, Accounts, and Prohibited Actions
Correspondence
To <=25 retail investors in 30 days; supervised.
Trading, Accounts, and Prohibited Actions
Institutional Communication
To institutional investors only; fewest rules.
Trading, Accounts, and Prohibited Actions
Suitability
Recommendation must align with client's investment profile.
Trading, Accounts, and Prohibited Actions
Principal Pre-approval
Required for retail communications before use.
Trading, Accounts, and Prohibited Actions
Investment Profile
Client's financial situation, objectives, risk tolerance.
Trading, Accounts, and Prohibited Actions
Communicating with the Public & Suitability
Remember 'R.C.I.' for the order of strictness: Retail (most), Correspondence (medium), Institutional (least).
Trading, Accounts, and Prohibited Actions
Communicating with the Public & Suitability
Exam Tip: Remember the '25 retail investors in 30 days' rule to distinguish between retail communication and correspondence. Suitability is always about the customer's best interest.
Trading, Accounts, and Prohibited Actions
Communicating with the Public & Suitability
Confusing the '25 retail investors' threshold for retail communication versus correspondence.
Trading, Accounts, and Prohibited Actions
Communicating with the Public & Suitability
Believing that social media posts are exempt from communication rules.
Trading, Accounts, and Prohibited Actions
Communicating with the Public & Suitability
Recommending an investment based solely on its potential returns without considering the client's risk tolerance.
Trading, Accounts, and Prohibited Actions
SRO
Self-Regulatory Organization; sets and enforces rules for its members.
Regulatory Framework & Ethics
Municipal Securities
Debt obligations issued by states, cities, counties, and other government entities.
Regulatory Framework & Ethics
Enforcement
The act of compelling observance of laws, rules, or orders.
Regulatory Framework & Ethics
SROs, FINRA, MSRB & Their Roles
FINRA is the 'FIN'isher: It FINishes the job by both making and ENFORCING rules. MSRB is just the 'MR. B'uilder: It BUILDS rules but doesn't enforce them itself.
Regulatory Framework & Ethics
SROs, FINRA, MSRB & Their Roles
The exam often tests the specific enforcement roles: FINRA enforces its own rules AND MSRB rules for broker-dealers. The MSRB writes rules but does not enforce them; banking regulators enforce MSRB rules for banks.
Regulatory Framework & Ethics
SROs, FINRA, MSRB & Their Roles
Confusing FINRA's direct enforcement role with MSRB's rule-making only role.
Regulatory Framework & Ethics
SROs, FINRA, MSRB & Their Roles
Believing the MSRB enforces its own rules directly on all firms.
Regulatory Framework & Ethics
SROs, FINRA, MSRB & Their Roles
Not understanding that FINRA enforces MSRB rules for broker-dealers.
Regulatory Framework & Ethics
Blue Sky Laws
State securities laws regulating offerings and professionals.
Regulatory Framework & Ethics
Securities Act of 1933
Regulates new issues and requires full disclosure.
Regulatory Framework & Ethics
Securities Exchange Act of 1934
Created the SEC, regulates secondary market and B/Ds.
Regulatory Framework & Ethics
Investment Company Act of 1940
Regulates investment companies like mutual funds.
Regulatory Framework & Ethics
Investment Advisers Act of 1940
Regulates investment advisers and their conduct.
Regulatory Framework & Ethics
Uniform Securities Act (USA)
Model legislation for state securities laws.
Regulatory Framework & Ethics
Preemption
Federal law taking precedence over state law.
Regulatory Framework & Ethics
SEC, Other Regulators & Key Securities Laws
Think of the SEC as the 'Security' guard of the market, protecting investors from 'Scams' and ensuring 'Smooth' operations.
Regulatory Framework & Ethics
SEC, Other Regulators & Key Securities Laws
The exam often tests the distinction between the 1933 and 1934 Acts. Remember: '33 is for new issues (primary market), and '34 is for ongoing trading (secondary market) and created the SEC. Also, know that Blue Sky Laws are state-level regulations.
Regulatory Framework & Ethics
SEC, Other Regulators & Key Securities Laws
Confusing the roles of the SEC with SROs like FINRA. The SEC oversees SROs.
Regulatory Framework & Ethics
SEC, Other Regulators & Key Securities Laws
Attributing regulation of insurance products or commodities to the SEC.
Regulatory Framework & Ethics
SEC, Other Regulators & Key Securities Laws
Forgetting that state Blue Sky Laws exist alongside federal regulations.
Regulatory Framework & Ethics
Fiduciary Duty
Legal obligation to act in client's best interest.
Regulatory Framework & Ethics
Misrepresentation
Untrue statement or omission of material fact.
Regulatory Framework & Ethics
Market Manipulation
Artificially influencing security prices.
Regulatory Framework & Ethics
Front-Running
Broker trading ahead of client's large order.
Regulatory Framework & Ethics
Material Information
Information that affects investment decisions.
Regulatory Framework & Ethics
Ethical Conduct & Prohibited Practices
To remember the key prohibited practices, think of 'F-M-I-M': Fraud, Misrepresentation, Insider Trading, Market Manipulation. Each letter reminds you of a major ethical violation.
Regulatory Framework & Ethics
Ethical Conduct & Prohibited Practices
The exam often tests your ability to identify prohibited practices from scenarios. Look for keywords like 'false statements,' 'omissions of material fact,' 'trading on non-public information,' or 'artificially influencing prices.'
Regulatory Framework & Ethics
Ethical Conduct & Prohibited Practices
Confusing misrepresentation (false statements) with simple errors (unintentional mistakes). Misrepresentation implies intent or reckless disregard.
Regulatory Framework & Ethics
Ethical Conduct & Prohibited Practices
Underestimating the severity of insider trading; it applies to anyone with material non-public information, not just corporate executives.
Regulatory Framework & Ethics
Ethical Conduct & Prohibited Practices
Believing that 'everyone does it' excuses unethical behavior; regulatory bodies have zero tolerance for such practices.
Regulatory Framework & Ethics
Form U4
Application for securities industry registration.
Regulatory Framework & Ethics
Form U5
Notice of termination of securities registration.
Regulatory Framework & Ethics
Regulatory Element
FINRA CE, every 3 years, regulatory focus.
Regulatory Framework & Ethics
Firm Element
Firm CE, annually, product/firm focus.
Regulatory Framework & Ethics
Supervisory Principal
Designated person overseeing registered reps.
Regulatory Framework & Ethics
Written Supervisory Procedures (WSPs)
Firm's documented plan for supervision.
Regulatory Framework & Ethics
Associated Person
Anyone employed by a broker-dealer.
Regulatory Framework & Ethics
Registration, Continuing Education & Supervision
U4: 'You're 4' getting started! U5: 'You're 5'ishing up! Regulatory CE: 'Reg'ularly every 3 years. Firm CE: 'Firm'ly every year.
Regulatory Framework & Ethics
Registration, Continuing Education & Supervision
The SIE Exam will test your knowledge of the timelines for filing Forms U4 and U5 (30 days for updates/terminations) and the frequency of Continuing Education (Regulatory Element: 2nd anniversary, then every 3 years; Firm Element: annually).
Regulatory Framework & Ethics
Registration, Continuing Education & Supervision
Confusing the filing deadlines for U4 updates and U5 terminations.
Regulatory Framework & Ethics
Registration, Continuing Education & Supervision
Mixing up the frequency or content of the Regulatory Element versus the Firm Element of CE.
Regulatory Framework & Ethics
Registration, Continuing Education & Supervision
Underestimating the importance of a firm's supervisory responsibilities; it's a core regulatory duty.
Regulatory Framework & Ethics
Customer Complaint
Any written grievance from a customer.
Regulatory Framework & Ethics
FINRA Rule 4513
Rule defining and requiring complaint recordkeeping.
Regulatory Framework & Ethics
FINRA Rule 4530
Rule requiring reporting of certain events to FINRA.
Regulatory Framework & Ethics
Arbitration
Binding dispute resolution by a neutral third party.
Regulatory Framework & Ethics
Mediation
Non-binding process to facilitate dispute settlement.
Regulatory Framework & Ethics
Principal
A supervisor responsible for overseeing registered reps.
Regulatory Framework & Ethics
Censure
Formal reprimand for rule violations.
Regulatory Framework & Ethics
Customer Complaints & Disciplinary Actions
To remember the key reporting rule: '30 Days for THIEVES' – Theft, Misappropriation, Forgery allegations in writing must be reported to FINRA within 30 days.
Regulatory Framework & Ethics
Customer Complaints & Disciplinary Actions
Exam Tip: Memorize that written complaints alleging theft, misappropriation, or forgery MUST be reported to FINRA within 30 calendar days. All written complaints must be kept on file for 4 years.
Regulatory Framework & Ethics
Customer Complaints & Disciplinary Actions
Ignoring verbal complaints because they are not 'written' – all complaints need to be addressed, even if only written ones trigger formal reporting.
Regulatory Framework & Ethics
Customer Complaints & Disciplinary Actions
Failing to report a written complaint involving theft or misappropriation to FINRA within 30 days.
Regulatory Framework & Ethics
Customer Complaints & Disciplinary Actions
Not retaining customer complaint records for the required four-year period.
Regulatory Framework & Ethics