SIE - Securities Industry Essentials Exam Cheat Sheet

Last revised: September 28, 2026

Cheat sheet: FINRA SIE reference for products, markets, orders, risks, accounts, regulations, and prohibited practices.

Use the tables to review subjects you have studied. Expand the notes for explanations and examples. If a formula or rule is unfamiliar, learn it in your study materials before testing it in practice; recognizing a summary is different from applying it.

Scope and study context

Refresh the highest-yield facts before topic drills.
Spot common exam traps before mock exams.
Connect product features, risks, accounts, orders, and regulations.
Build an error log from original practice questions and detailed explanations.

The SIE rewards practical recognition: What is the product? Who is involved? What risk is present? What rule or conduct issue controls the answer?

Calculation checks: setup, units, interpretation

Task	Worked example	Mistake to avoid
Current yield	A 6% bond with $1,000 par pays $60 annually. At $960, current yield is $60 / $960 = 6.25%.	Dividing by par gives coupon rate, not current yield; current yield is not yield to maturity.
Fund offering price	With NAV $18.80 and a sales charge of 6% of offering price, POP = $18.80 / 0.94 = $20.00.	Multiplying NAV by 1.06 uses the wrong sales-charge base.
Holding-period return	Buy at $40, receive $2 income, sell at $43: ($3 + $2) / $40 = 12.5%, ignoring fees and taxes.	Price appreciation alone misses income; dividing by ending value changes the denominator.
Long call at expiration	Strike $50 plus premium $3 gives $53 breakeven. At $55, intrinsic value is $5 and profit is $2 per share, or $200 for a standard 100-share contract.	Intrinsic value is not net profit; keep per-share and per-contract amounts separate.
Stock split	100 shares with $3,000 total basis become 200 shares after a 2-for-1 split; basis becomes $15 per share.	Total basis does not double merely because share count doubles.

Cover the result column and redo each example with changed inputs. Explain why the denominator or contract multiplier applies. These are original learning examples, not official FINRA questions or an official calculation-frequency estimate.

Current business-gift rule

FINRA Rule 3220’s annual business-related gift limit increased to $300 per recipient, effective March 30, 2026. Apply the rule’s scope and aggregation requirements, recordkeeping, and any stricter firm policy. Distinguish covered gifts from exclusions and business entertainment; the dollar amount alone does not settle every scenario. FINRA Regulatory Notice 26-05 .

Fast Exam Map

Area	What to recognize quickly	Typical exam task
Securities products	Equity, debt, funds, options, annuities, retirement products	Match product features, risks, tax treatment, and investor objectives
Markets and trading	Primary/secondary markets, exchanges, OTC, orders, settlement	Choose order type, identify market participant roles, read basic trade scenarios
Customer accounts	Account types, documentation, margin basics, retirement accounts	Identify required authorization, ownership effect, fiduciary duty, or account limitation
Regulations and conduct	Securities Acts, SROs, AML, communications, prohibited activities	Spot violations, required disclosures, and proper firm/representative behavior
Economics and risk	Interest rates, inflation, Fed actions, yield curve, risk types	Predict bond price movement, rank product risk, identify macroeconomic impact

Regulatory and Market Structure Reference

Entity or rule set	Core role	SIE cues and traps
SEC	Federal securities regulator; oversees securities markets, issuers, exchanges, broker-dealers, investment companies, and advisers	Created under the Securities Exchange Act of 1934; broad antifraud authority
FINRA	Self-regulatory organization for broker-dealers and associated persons	Administers qualification exams and enforces broker-dealer conduct rules
MSRB	Writes rules for municipal securities dealers and municipal advisors	MSRB writes rules; enforcement is handled by other regulators such as FINRA, SEC, or bank regulators
Federal Reserve Board	Monetary policy and margin rules	Reg T initial margin is a common exam cue
SIPC	Protects customers if a broker-dealer fails financially	Does not protect against market losses or bad investment choices
FDIC	Protects bank deposits at insured banks	Does not insure stocks, bonds, mutual funds, ETFs, or variable annuities
OCC	Issues, standardizes, and clears listed options	Buyer has rights; writer has obligations
IRS	Tax rules for income, gains, retirement accounts, and education savings	Know general tax character; avoid assuming all tax-advantaged products are tax-free

Key Securities Laws

Law or regulation	Main focus	Exam-ready distinction
Securities Act of 1933	New issue registration and prospectus delivery	“Paper Act”; primary market disclosure
Securities Exchange Act of 1934	Secondary trading, exchanges, broker-dealers, SEC creation, antifraud rules	“People and markets Act”; includes Rule 10b-5 antifraud concepts
Trust Indenture Act of 1939	Corporate bond indentures	Protects bondholders through written promises and trustee structure
Investment Company Act of 1940	Mutual funds, closed-end funds, UITs	Product regulation for investment companies
Investment Advisers Act of 1940	Investment adviser registration and conduct	Advisers are paid for securities advice
Securities Investor Protection Act of 1970	SIPC and customer protection in broker-dealer liquidation	Brokerage failure protection, not investment protection
USA PATRIOT Act / AML rules	Customer identification and anti-money laundering programs	Know CIP, suspicious activity red flags, OFAC screening, and escalation

Market Participants and Roles

Term	Meaning	Trap
Issuer	Entity that creates and sells securities	Issuer receives proceeds in primary market sales
Underwriter	Broker-dealer that helps distribute new issues	Buys from issuer or uses best efforts to sell
Broker	Acts as agent for a customer and charges commission	Agent capacity means customer trade, not firm inventory
Dealer	Acts as principal from firm inventory and charges markup/markdown	Principal capacity means firm is on the other side
Market maker	Dealer quoting firm bid and ask prices	Provides liquidity but may profit from spread
Designated market maker / specialist	Exchange participant maintaining fair and orderly markets	Exchange-based role, not the same as an OTC dealer
Institutional investor	Bank, insurance company, registered investment company, investment adviser, or other large institutional account	Communication classification differs from retail communications
Retail investor	Any person other than an institutional investor	Triggers retail communication rules when audience threshold is met

Primary vs Secondary Markets

Market	What happens	Proceeds go to	Common terms
Primary market	New securities sold for the first time	Issuer	IPO, APO, underwriting, prospectus
Secondary market	Existing securities trade among investors	Selling investor	Exchange, OTC, market maker, bid/ask
Third market	Exchange-listed securities traded OTC	Selling investor	Institutional block trades, broker-dealer market making
Fourth market	Direct institution-to-institution trading	Selling investor	No exchange or broker-dealer intermediation in the trade

New Issue Process and Underwriting

Concept	Meaning	Exam point
Registration statement	Filed with SEC for registered offerings	Contains issuer and offering information
Cooling-off period	Period after filing and before effectiveness	No sales; indications of interest may be accepted but are not binding
Preliminary prospectus / red herring	Disclosure document before effective date	Does not include final price; used to gauge interest
Final prospectus	Required disclosure after effectiveness	Contains final offering details
Tombstone ad	Limited announcement of offering	Not a full sales piece
Firm commitment underwriting	Underwriter buys securities from issuer and resells	Underwriter assumes unsold inventory risk
Best efforts underwriting	Underwriter acts as agent to sell as much as possible	Issuer bears risk securities may not sell
All-or-none	Offering canceled unless all shares are sold	Investor funds returned if condition not met
Mini-max	Minimum must sell, then up to maximum may sell	Offering proceeds only released after minimum met
Syndicate	Group of underwriters	Shares distribution responsibility and risk
Selling group	Assists syndicate in sales	Does not assume underwriting risk in the same way
Stabilization	Underwriter activity to support market price	Permitted only under strict rules; not ordinary manipulation
Restricted persons	Certain industry insiders restricted from buying hot IPOs	Free-riding and withholding are prohibited

Notes and examples

Public Offerings

Term	Meaning
IPO	First public offering of an issuer’s securities
Follow-on offering	Additional public offering by already public issuer
Prospectus	Disclosure document for public offering
Underwriting spread	Difference between public offering price and issuer proceeds
Syndicate	Group of underwriters distributing issue
Selling group	Dealers helping sell issue without underwriting commitment

Underwriting Commitment Types

Type	Underwriter Role	Risk
Firm commitment	Underwriter buys issue from issuer and resells	Underwriter bears unsold inventory risk
Best efforts	Underwriter acts as agent to sell as much as possible	Issuer bears risk of insufficient sales
All-or-none	Offering canceled unless all securities sold	Issuer receives funds only if entire issue sold
Mini-max	Minimum must be sold; maximum may be sold	Offering proceeds only if minimum met

Private Placements

Private placements are offerings not made through a full public registration process. They are typically sold to sophisticated or qualified investors and may have resale restrictions.

Exam traps:

Private placements are not the same as public offerings.
Restricted securities may not be freely resold immediately.
Lack of registration does not mean lack of antifraud rules.
Less liquidity and less public information usually mean higher risk.

Exempt Securities vs Exempt Transactions

Category	Examples	What is exempt?	Trap
Exempt securities	U.S. government securities, municipal securities, bank securities, certain commercial paper	Usually exempt from SEC registration under the 1933 Act	Antifraud rules still apply
Exempt transactions	Private placements, intrastate offerings, certain small offerings	Transaction exemption, not necessarily security exemption	Resale may be restricted
Private placement	Securities sold to limited eligible investors	No public offering registration	Often restricted securities; not freely resold immediately
Regulation A offering	Exempt public offering framework for smaller issuers	Simplified offering process	Still subject to disclosure and antifraud principles
Regulation D offering	Private placement safe harbor	Often involves accredited investors	Not the same as registered IPO
Rule 144	Resale of restricted/control securities	Provides conditions for public resale	Affiliate/control status matters

Equity Securities

Product	Main features	Investor profile	Key risks and traps
Common stock	Ownership, voting rights, residual claim on assets, dividends if declared	Growth, capital appreciation, voting participation	Lowest claim in liquidation; dividends not guaranteed
Preferred stock	Fixed dividend preference, priority over common, usually limited voting	Income investor wanting equity-like security with fixed income features	Interest-rate sensitive; less upside than common
Cumulative preferred	Missed dividends accumulate and must be paid before common dividends	Income-focused investor	Only preferred dividends accumulate if cumulative
Convertible preferred	May convert into common stock	Income plus upside potential	Lower stated dividend than comparable nonconvertible preferred
Callable preferred	Issuer may redeem	Issuer flexibility	Call risk when rates fall
Participating preferred	May receive extra dividends under conditions	Income plus potential additional payout	Less common; read scenario carefully
Rights	Short-term privilege to buy new shares, often below market	Existing shareholder maintaining ownership percentage	Short life; rights are issued to existing shareholders
Warrants	Long-term right to buy shares at set price	Speculative upside	Often issued with bonds or preferred stock; no voting/dividends
ADR	U.S.-traded receipt representing foreign shares	Foreign exposure through U.S. markets	Currency, political, and foreign market risk

Notes and examples

Common Stockholder Rights

Right	Meaning	Trap
Voting right	Vote for directors and major corporate actions	Preferred stock usually has limited or no voting rights
Dividend right	Receive dividends if declared by board	No guaranteed dividend
Preemptive right	Maintain proportional ownership when new shares are issued, if granted	Not automatic in every corporation
Residual claim	Claim assets after creditors and preferred shareholders	Common shareholders are last in liquidation
Inspection right	Review certain corporate records	Does not mean access to all internal records

Dividend Dates

Date	Meaning	Exam cue
Declaration date	Board declares dividend	Creates dividend obligation
Ex-dividend date	First day buyer is not entitled to the declared dividend	Buy before ex-date to receive dividend
Record date	Company checks records to determine owners entitled to dividend	Ownership record date, not trade date alone
Payable date	Dividend is paid	Cash or stock distribution occurs

Common Stock

Feature	Review Point
Ownership	Represents ownership in a corporation
Voting	Usually includes voting rights
Dividends	Not guaranteed; declared by the board
Risk	Highest claim risk among corporate securities
Growth potential	Higher upside than debt or preferred stock
Liquidation priority	Paid after creditors and preferred shareholders

Common stock is best associated with capital appreciation, voting rights, and market risk.

Preferred Stock

Feature	Review Point
Classification	Equity security, not debt
Dividend	Usually fixed, but not guaranteed
Voting	Usually limited or no voting rights
Income	Often purchased for income
Priority	Paid before common stock, after creditors
Interest-rate sensitivity	Can behave like fixed-income securities

Preferred Type	Key Point
Cumulative preferred	Missed dividends accumulate and must be paid before common dividends
Noncumulative preferred	Missed dividends do not accumulate
Participating preferred	May receive extra dividends beyond stated rate
Convertible preferred	Can be converted into common stock
Callable preferred	Issuer can redeem shares, often when rates decline
Adjustable-rate preferred	Dividend adjusts based on a benchmark

Rights and Warrants

Security	Issued To	Duration	Purpose	Exam Trap
Rights	Existing shareholders	Short-term	Buy new shares before public offering	Usually below market price
Warrants	Often issued with another security	Longer-term	Buy stock at a set price	More speculative than rights

ADRs

American Depositary Receipts represent shares of a foreign company trading in U.S. markets.

Key risks:

Currency risk
Political risk
Foreign market risk
Accounting and disclosure differences

REITs

Real Estate Investment Trusts provide exposure to real estate or real-estate-related assets.

Type	Focus
Equity REIT	Owns properties; income from rents
Mortgage REIT	Owns mortgages or mortgage-backed investments
Hybrid REIT	Mix of equity and mortgage exposure

REIT traps:

REITs trade like securities and can lose value.
REITs are not the same as direct property ownership.
Publicly traded REITs can provide liquidity; nontraded REITs may not.

Debt Securities

Bond Terminology

Term	Meaning	Exam cue
Par / face value	Amount repaid at maturity, commonly quoted as 100 or $1,000	Bond price 95 means $950 per $1,000 par
Coupon / nominal yield	Stated interest rate on par value	Does not change after issuance for fixed-rate bonds
Current yield	Annual interest divided by current market price	Changes as market price changes
Yield to maturity	Total return if held to maturity, accounting for price discount/premium	Best comprehensive yield for noncallable bonds
Yield to call	Return if bond is called at call date	Important for premium callable bonds
Accrued interest	Interest earned since last coupon payment	Buyer pays seller accrued interest
Indenture	Contract between issuer and bondholders	Contains covenants, collateral, maturity, call provisions
Trustee	Acts for bondholders	Required under corporate bond indenture rules
Call feature	Issuer can redeem early	Bad for investor when rates fall
Put feature	Investor can force issuer to redeem early	Good for investor when rates rise
Sinking fund	Issuer sets aside funds to retire debt	Reduces credit risk but may create call-like risk
Convertible bond	Bond can convert into common stock	Lower coupon in exchange for conversion privilege

Notes and examples

Bond Price and Yield Relationship

Bond status	Relationship	Exam shortcut
At par	Coupon rate = current yield = yield to maturity	Price equals face value
Discount bond	Coupon rate < current yield < yield to maturity	Price below par; yield rises
Premium bond	Coupon rate > current yield > yield to maturity	Price above par; yield falls
Rates rise	Existing bond prices fall	Long maturity and low coupon fall more
Rates fall	Existing bond prices rise	Callable bonds may be called

Debt Product Matrix

Product	Backing / structure	Income tax cue	Major risks
Treasury bills	U.S. government short-term discount obligations	Federal taxable; generally exempt from state/local tax	Purchasing power risk, reinvestment risk
Treasury notes	U.S. government intermediate-term coupon debt	Federal taxable; generally exempt from state/local tax	Interest-rate risk
Treasury bonds	U.S. government long-term coupon debt	Federal taxable; generally exempt from state/local tax	Higher interest-rate risk due to long maturity
TIPS	Treasury principal adjusts with inflation	Federal taxable; inflation adjustment may be taxable	Lower deflation protection than misunderstood; market price still fluctuates
STRIPS	Zero-coupon Treasury components	Taxable accretion may occur without cash payment	High interest-rate risk, phantom income
GNMA securities	Mortgage-backed securities with U.S. government backing	Federal taxable	Prepayment and extension risk
Agency / GSE securities	Issued or guaranteed by agencies or government-sponsored enterprises	Tax treatment varies	Credit, interest-rate, prepayment risk
Corporate mortgage bond	Secured by real property	Fully taxable interest	Credit and interest-rate risk
Equipment trust certificate	Secured by equipment	Fully taxable interest	Industry and collateral risk
Debenture	Unsecured corporate debt	Fully taxable interest	Credit risk higher than secured debt
Subordinated debenture	Lower-priority unsecured debt	Fully taxable interest	Higher credit risk due to lower claim
Income bond	Interest paid only if issuer has sufficient earnings	Fully taxable interest when paid	High credit risk
Municipal GO bond	Backed by issuer’s taxing power	Generally federally tax-exempt	Political/tax base risk
Municipal revenue bond	Backed by project or facility revenues	Generally federally tax-exempt	Revenue/project risk
Private activity municipal bond	Supports private-use projects	May have AMT implications	Credit and tax complexity
Money market instrument	Short-term debt such as T-bills, commercial paper, CDs, repos	Varies by issuer	Lower interest-rate risk, but not risk-free

Municipal Bond Distinctions

Municipal type	Backed by	Approval / analysis focus	Trap
General obligation bond	Full faith, credit, and taxing power of issuer	Tax base, debt levels, voter or legislative approval where applicable	Not backed by a specific project revenue stream
Revenue bond	User fees or project revenues	Feasibility study, debt service coverage, covenants	Not backed by general taxing power
Double-barreled bond	Revenue source plus government backing	Both revenue and taxing support	Stronger than single revenue pledge
Special tax bond	Specific tax, such as gasoline or sales tax	Stability of dedicated tax revenue	Not the same as ad valorem property tax GO support
Special assessment bond	Taxes on properties benefiting from project	Local property benefit	Narrow backing source
TAN / RAN / BAN	Short-term municipal notes	Timing of taxes, revenues, or bond issuance	Notes are short-term financing tools

Corporate Bonds

Bond Type	Key Feature
Secured bond	Backed by specific collateral
Mortgage bond	Backed by real property
Equipment trust certificate	Backed by equipment
Debenture	Unsecured corporate debt
Subordinated debenture	Lower priority unsecured debt
Convertible bond	May convert into common stock
Callable bond	Issuer may redeem early
Income bond	Pays interest only if issuer has sufficient income

Liquidation Priority

In a corporate liquidation, claims generally rank:

Secured creditors
Unsecured creditors / debtholders
Subordinated debtholders
Preferred shareholders
Common shareholders

Exam trap: bondholders are creditors; stockholders are owners.

U.S. Government Securities

Security	Typical Maturity Profile	Key Feature
Treasury bills	Short-term	Issued at discount; no stated coupon
Treasury notes	Intermediate-term	Pays interest
Treasury bonds	Long-term	Pays interest
TIPS	Inflation-adjusted principal	Helps address inflation risk
STRIPS	Zero-coupon Treasury components	Interest is implicit, not paid currently

U.S. Treasury securities are backed by the U.S. government, but they still have market risk if sold before maturity.

Agency Securities

Agency securities are issued or guaranteed by government agencies or government-sponsored enterprises. They often have high credit quality but are not all identical in backing, structure, or risk.

Common risks:

Interest-rate risk
Prepayment risk
Extension risk
Credit or guarantee differences depending on issuer

Municipal Bonds

Municipal securities are issued by states, cities, counties, authorities, and other municipal issuers.

Type	Backed By	Key Exam Cue
General obligation bond	Taxing power of issuer	Voter approval, property taxes, full faith and credit
Revenue bond	Revenue from project or facility	Toll road, airport, hospital, utility, lease revenue

Municipal Bond Tax Basics

Income Type	General Treatment to Know
Municipal bond interest	Often federally tax-exempt
In-state municipal interest	May receive state/local tax advantages for residents
Capital gains	Generally taxable
Private activity bond interest	May have alternative minimum tax implications

Exam trap: tax exemption usually applies to interest, not necessarily to gains from selling the bond.

Money Market Instruments

Money market instruments are short-term debt instruments.

Instrument	Issuer / Use
Treasury bills	U.S. government short-term financing
Commercial paper	Corporate short-term financing
Negotiable CDs	Bank-issued short-term instruments
Bankers’ acceptances	Trade finance
Repurchase agreements	Short-term collateralized borrowing
Money market funds	Investment companies holding short-term instruments

Money market funds are securities; they are not bank deposits.

Core Formulas

Use formulas as recognition tools. The SIE is not a heavy quantitative exam, but these relationships appear often.

\[ \text{Current yield} = \frac{\text{annual interest}}{\text{current market price}} \]\[ \text{Dividend yield} = \frac{\text{annual dividend}}{\text{current market price}} \]\[ \text{Taxable-equivalent yield} = \frac{\text{tax-free yield}}{1 - \text{marginal tax rate}} \]\[ \text{Conversion ratio} = \frac{\text{par value}}{\text{conversion price}} \]\[ \text{Long margin equity} = \text{market value} - \text{debit balance} \]\[ \text{Short margin equity} = \text{credit balance} - \text{short market value} \]

Calculation	Plain-English shortcut	Example cue
Current yield	Annual bond interest divided by current price	5% bond at 900: $50 / $900
Dividend yield	Annual dividend divided by current stock price	$2 dividend on $40 stock = 5%
Taxable-equivalent yield	Tax-free yield divided by after-tax percentage kept	Higher tax bracket makes muni yield more attractive
Conversion ratio	Par divided by conversion price	$1,000 par / $25 conversion price = 40 shares
Option premium total	Quoted premium times 100 shares for standard equity option	Premium 3 = $300
Gain or loss on stock	Sale proceeds minus cost basis	Include commissions/fees conceptually if tested
Bond discount/premium	Compare price to 100 / $1,000 par	92 = discount; 105 = premium

Options Basics

Option Rights and Obligations

Position	Market view	Right or obligation	Maximum gain	Maximum loss	Breakeven
Long call	Bullish	Right to buy	Unlimited	Premium paid	Strike + premium
Short call	Bearish/neutral	Obligation to sell	Premium received	Unlimited if uncovered	Strike + premium
Long put	Bearish	Right to sell	Strike minus premium, if stock falls to zero	Premium paid	Strike - premium
Short put	Bullish/neutral	Obligation to buy	Premium received	Strike minus premium, if stock falls to zero	Strike - premium

Notes and examples

Moneyness

Option	In the money	At the money	Out of the money
Call	Market price above strike	Market price equals strike	Market price below strike
Put	Market price below strike	Market price equals strike	Market price above strike

Options Vocabulary

Term	Meaning	Exam trap
Premium	Price paid by buyer and received by writer	Standard listed equity option premium is usually multiplied by 100
Intrinsic value	Amount option is in the money	Out-of-the-money options have no intrinsic value
Time value	Premium minus intrinsic value	Declines as expiration approaches
Exercise	Buyer uses the option right	Call buyer buys; put buyer sells
Assignment	Writer is required to fulfill obligation	Call writer sells; put writer buys
Opening purchase	Establishes long option position	Buyer pays premium
Opening sale	Establishes short option position	Writer receives premium
Closing purchase	Closes short option position	Writer buys back option
Closing sale	Closes long option position	Buyer sells option
Covered call	Long stock plus short call	Income strategy; upside capped
Protective put	Long stock plus long put	Downside protection; premium is insurance cost
Straddle	Call and put on same stock, strike, and expiration	Long straddle expects volatility; short straddle expects stability

Calls and Puts

Option	Buyer Has	Seller Has	Buyer Outlook
Call	Right to buy	Obligation to sell	Bullish
Put	Right to sell	Obligation to buy	Bearish

Option buyers pay premiums. Option sellers receive premiums.

Basic Option Positions

Position	Market Outlook	Max Loss	Max Gain	Breakeven
Long call	Bullish	Premium paid	Unlimited upside potential	Strike + premium
Short call	Neutral to bearish	Unlimited upside risk	Premium received	Strike + premium
Long put	Bearish	Premium paid	Large, limited by stock falling to zero	Strike - premium
Short put	Neutral to bullish	Large, limited by stock falling to zero	Premium received	Strike - premium
Covered call	Neutral to moderately bullish	Stock downside reduced by premium	Limited above strike	Stock cost - premium
Protective put	Bullish but wants protection	Limited below put strike, adjusted by premium	Upside reduced by premium	Stock cost + premium

Intrinsic Value

Option	Intrinsic Value
Call	Market price - strike price, if positive
Put	Strike price - market price, if positive

If intrinsic value is zero, the option is out-of-the-money or at-the-money.

Options Decision Rules

Buy calls when bullish.
Buy puts when bearish.
Sell covered calls to generate income on stock owned.
Buy protective puts to hedge long stock.
Sellers have obligations.
Buyers have rights.
Long options have limited loss: the premium.
Naked short options can create substantial risk.

Exam trap: do not confuse exercising an option with closing an option. Closing means offsetting the position in the market.

Investment Companies and Packaged Products

Product	Structure	Pricing / trading	Best-fit objective	Key traps
Open-end mutual fund	Continuously issues and redeems shares	Bought/redeemed at NAV, possibly plus sales charge	Diversification, professional management	No intraday trading; no secondary market trading
Closed-end fund	Fixed shares after IPO	Trades on exchange at premium or discount to NAV	Exchange-traded diversified exposure	Price may differ from NAV
ETF	Exchange-traded portfolio	Intraday exchange trading; often tracks index	Low-cost, tax-efficient, tradable diversification	Can trade at small premium/discount; brokerage commissions may apply
UIT	Fixed unmanaged portfolio with termination date	Redeemable units; portfolio generally not actively managed	Defined portfolio exposure	Not actively managed like a mutual fund
Money market fund	Short-term high-quality debt portfolio	Seeks stable NAV but not guaranteed	Liquidity and current income	Not FDIC insured unless held as bank deposit product, which funds are not
REIT	Owns or finances real estate	Trades like stock if publicly traded	Real estate income and diversification	Real estate, interest-rate, and liquidity risk
DPP / limited partnership	Pass-through business structure	Often illiquid	Income, tax attributes, specialized exposure	Limited liquidity, suitability concerns, passive loss complexity
Variable annuity	Insurance contract with separate account investments	Value fluctuates with subaccount performance	Tax-deferred retirement accumulation	Surrender charges, expenses, market risk; not suitable for short-term liquidity
Fixed annuity	Insurance contract with fixed credited rate	General account of insurer	Principal stability and guaranteed income features	Inflation and insurer credit risk
Index annuity	Credited based partly on index formula	Insurance product, not direct index ownership	Downside protection with limited upside	Caps, participation rates, surrender charges

Notes and examples

Class	Typical charge structure	Investor fit	Trap
Class A	Front-end sales charge; lower ongoing expenses	Larger or long-term investments, especially with breakpoints	Breakpoint sales are prohibited
Class B	Contingent deferred sales charge; higher ongoing expenses; may convert	Smaller investment with medium holding period	Back-end charge declines over time
Class C	Level load / higher ongoing expenses	Shorter holding period	Long holding period can become expensive
No-load	No front-end or back-end sales charge	Cost-sensitive investors	Still may have operating expenses

Mutual Fund Sales Charge Terms

Term	Meaning	Exam cue
NAV	Assets minus liabilities divided by shares outstanding	Redemption price for open-end fund
POP	Public offering price	NAV plus sales charge for front-end load fund
Breakpoint	Reduced sales charge at investment thresholds	Must disclose available breakpoint
Letter of intent	Investor states intent to invest enough over time for breakpoint	Allows breakpoint now; escrow may apply
Rights of accumulation	Prior eligible purchases count toward breakpoint	Helps reduce future sales charges
12b-1 fee	Distribution/service fee from fund assets	Included in expense ratio
Expense ratio	Ongoing fund operating expenses	Lower expenses improve net return, all else equal
Prospectus	Required disclosure document	Must be provided according to offering rules

Open-End Mutual Funds

Open-end mutual funds continuously issue and redeem shares at net asset value, plus any applicable sales charge.

Feature	Review Point
Pricing	Forward-priced at next calculated NAV after order received
Shares	Redeemable with fund
Sales load	May be front-end, back-end, level, or no-load
Prospectus	Required disclosure document
Breakpoints	Reduced sales charge at higher investment amounts
NAV	Fund assets minus liabilities divided by shares outstanding

\[ \text{NAV} = \frac{\text{Assets} - \text{Liabilities}}{\text{Shares Outstanding}} \]

Share Class	Typical Sales Charge Pattern	Common Use
Class A	Front-end sales charge; lower ongoing expenses	Larger or long-term investments
Class B	Deferred sales charge; higher ongoing expenses	Smaller investments, but often less favored over time
Class C	Level ongoing charge; possible short deferred charge	Shorter expected holding period

Exam trap: recommending multiple smaller purchases to avoid breakpoints is improper. Customers should receive available breakpoint benefits when eligible.

Closed-End Funds

Feature	Review Point
Shares	Fixed number after initial offering
Trading	Trade on exchanges or in secondary market
Price	Market price may be above or below NAV
Redemption	Investors sell to other investors, not back to fund

ETFs

Exchange-traded funds usually track an index, sector, commodity, or strategy and trade intraday.

ETF Feature	Review Point
Pricing	Market price changes throughout the trading day
Liquidity	Traded on exchanges
Expenses	Often lower than actively managed funds
Tax efficiency	Often relatively tax efficient
Risk	Subject to market, tracking, liquidity, and product-specific risks

ETF trap: an ETF can trade at a premium or discount to NAV, especially in stressed or thin markets.

UITs

Unit Investment Trusts generally have a fixed portfolio and a defined termination date.

Feature	Review Point
Portfolio	Fixed, unmanaged or minimally managed
Units	Redeemable
Objective	Often income or defined portfolio exposure
Term	Has termination date

Variable Annuities

Variable annuities are insurance-company products with investment subaccounts.

Feature	Review Point
Investment risk	Borne by contract owner
Subaccounts	Similar to mutual fund portfolios
Tax treatment	Tax-deferred growth
Withdrawals	May be taxable and subject to charges
Death benefit	Insurance feature may apply
Suitability concern	Long-term product with fees and surrender charges

Variable annuity trap: variable annuities are securities because investment performance varies with subaccount performance.

Fixed Annuities vs. Variable Annuities

Feature	Fixed Annuity	Variable Annuity
Investment risk	Insurer bears primary investment risk	Investor bears investment risk
Return	Fixed or declared by insurer	Varies with subaccounts
Securities registration	Generally not treated as a security product	Treated as a security product
Main appeal	Predictability	Growth potential with tax deferral

Product Selection Matrix

Investor need	Usually consider	Usually avoid or question
Capital preservation and liquidity	T-bills, money market instruments, insured bank deposits	Long-term bonds, common stock, illiquid DPPs
Current taxable income	Corporate bonds, preferred stock, bond funds	Growth stocks with no dividends
Federal tax-exempt income	Municipal bonds or municipal bond funds	Corporate bonds if after-tax yield is lower
Growth	Common stock, growth funds, ETFs	Products with capped upside if growth is primary goal
Inflation protection	TIPS, equities, real assets/REITs	Long fixed-rate bonds
Speculation	Options, low-priced stocks, sector ETFs	Products sold as “safe” or guaranteed
Diversification	Mutual funds, ETFs, balanced funds	Concentrated single security positions
Retirement tax deferral	IRAs, employer plans, annuities where appropriate	Tax-deferred annuity inside tax-deferred account unless justified by features
Short-term emergency liquidity	Cash equivalents, money market instruments	Variable annuities, limited partnerships, long-term bonds
Real estate exposure	REITs, real estate funds	Directly treating REITs as guaranteed income products

Trading Markets, Quotes, and Settlement

Concept	Meaning	Exam cue
Bid	Price dealer is willing to pay	Customer sells at bid
Ask / offer	Price dealer is willing to sell at	Customer buys at ask
Spread	Ask minus bid	Dealer compensation and liquidity indicator
Round lot	Standard trading unit, commonly 100 shares	Odd lots are less than round lots
Long sale	Seller owns or is deemed to own security	Mark order long
Short sale	Sale of borrowed security	Requires locate and has unlimited loss potential
Regular-way settlement	Most covered U.S. securities trades settle T+1, the next business day	Count business days; distinguish trade execution from settlement
Cash settlement	Same-day settlement	Used when parties agree or product rules require
When-issued trading	Trading before security is issued	Settlement occurs after issuance
Ex-dividend	Buyer no longer gets declared dividend	First day stock trades without dividend entitlement

Order Types

Order	Use when investor wants	Execution certainty	Price certainty	Trap
Market order	Immediate execution	High	Low	Execution price can move rapidly
Buy limit	Buy at or below limit price	Lower	High	May not execute
Sell limit	Sell at or above limit price	Lower	High	May not execute
Sell stop	Protect long position or enter short after decline	Becomes market once triggered	Low after trigger	Stop price is not guaranteed execution price
Buy stop	Protect short position or buy after breakout	Becomes market once triggered	Low after trigger	Placed above current market
Stop-limit	Trigger creates limit order	Lower	High	May trigger but not execute
Day order	Valid only for trading day	Depends on order terms	Depends on order terms	Expires if not executed
GTC order	Remains open until canceled or firm expiration	Depends on order terms	Depends on order terms	Must be monitored
IOC	Execute immediately all or part; cancel rest	Medium	Depends on limit/market	Partial execution allowed
FOK	Execute immediately in full or cancel	Lower	Depends on limit/market	No partial execution
AON	Execute only full quantity	Lower	Depends on limit/market	Not necessarily immediate
Not held	Broker has time and price discretion	Depends on broker judgment	Depends on broker judgment	Does not permit discretion over security, side, or quantity

Notes and examples

Order Placement Shortcuts

Scenario	Likely order
“Buy now regardless of small price movement”	Market buy
“Buy only if price falls to 40 or lower”	Buy limit 40
“Sell only if price rises to 60 or higher”	Sell limit 60
“Protect long stock if it falls below 45”	Sell stop 45
“Protect short stock if it rises above 55”	Buy stop 55
“Trigger at 45 but do not sell below 44”	Sell stop-limit 45 stop / 44 limit
“Give broker discretion over timing and price today”	Not held order
“Guarantee price but not execution”	Limit or stop-limit
“Maximize execution likelihood, not price certainty”	Market order

Margin Accounts

Concept	Meaning	Exam cue
Margin account	Customer borrows from broker-dealer secured by securities	Magnifies gains and losses
Reg T initial margin	Federal Reserve initial equity requirement for margin stock purchases	Commonly tested as 50% for eligible stock purchases
Debit balance	Amount customer owes broker in long margin account	Interest charged on debit
Credit balance	Proceeds and deposits in short margin account	Used in short equity calculation
Hypothecation	Customer pledges securities as collateral	Authorized in margin agreement
Rehypothecation	Broker-dealer re-pledges customer securities within permitted limits	Requires margin agreement authority
Maintenance margin	Minimum equity after purchase	If equity falls below requirement, customer receives margin call
Margin call	Demand for additional equity	Failure may lead to liquidation
Short margin	Borrow and sell security, later buy back	Loss potential is unlimited
Retirement account	Generally not a borrowing margin account	Avoid recommending borrowing in retirement accounts

Customer Accounts

Account type	Ownership / authority	Key exam point
Individual	One owner	Owner controls trading and receives tax reporting
Joint tenants with rights of survivorship	Equal undivided ownership; survivor receives deceased owner’s interest	Common for spouses; avoids probate for account assets
Tenants in common	Each owner has stated percentage; deceased owner’s share goes to estate	No automatic survivor ownership
Transfer on death	Beneficiary receives assets after death	Beneficiary has no trading authority during owner’s life
Custodial UGMA/UTMA	Custodian manages irrevocable gift for minor	One custodian and one minor; minor owns assets
Trust	Trustee acts for beneficiaries under trust document	Need trust powers; fiduciary duty applies
Estate	Executor/administrator acts for estate	Requires court documentation
Corporate	Authorized officer trades under corporate resolution	Need entity authority documentation
Partnership	Authorized partner trades under partnership agreement	Confirm authority and limitations
Discretionary account	Representative may decide action, asset, or amount	Requires written customer authorization, firm acceptance, and supervision
Fiduciary account	Person acts for another’s benefit	Must follow governing document and prudent standards
Numbered account	Account uses number/name code for privacy	Firm must still know beneficial owner
Cash account	Customer pays in full	No borrowing against securities
Margin account	Customer may borrow	Requires margin agreement

Notes and examples

New Account and Customer Information

Item	Why it matters	Trap
Customer identity	CIP and account opening	Must make reasonable identity verification
Date of birth / legal age	Capacity to contract	Minors need custodial structure
Tax ID / Social Security number	Tax reporting and backup withholding	Missing or incorrect TIN creates issues
Address and contact information	Records, statements, notices	P.O. box alone may be insufficient for identity purposes
Employment / affiliation	Conflicts and insider issues	Industry employees may require employer notification/approval
Investment objective	Product and strategy alignment	“Speculation” is not the same as “income”
Risk tolerance	Volatility and loss capacity	Conservative investor and speculative options mismatch
Financial status	Suitability context	Liquidity needs matter
Trusted contact	Helps address suspected exploitation or diminished capacity	Trusted contact is not authorized to trade
Beneficial owner	AML and control	Numbered or entity account does not eliminate disclosure need

Basic Account Types

Account Type	Key Point	Common Trap
Individual	One owner	Only owner has authority unless authorization exists
Joint tenants with rights of survivorship	Deceased owner’s interest passes to surviving owner(s)	Not controlled by will for that interest
Tenants in common	Deceased owner’s interest passes to estate	Ownership shares may be unequal
Custodial account	Adult custodian manages for minor	One custodian and one minor per account
Trust account	Trustee acts for beneficiaries	Need trust documentation and trustee authority
Corporate account	Entity account	Need corporate authorization
Partnership account	Entity account	Need partnership authorization
Retirement account	Tax-advantaged account	Contribution/distribution rules matter
Margin account	Customer borrows from broker-dealer	Requires margin agreement and exposes customer to margin calls

Cash vs. Margin Accounts

Feature	Cash Account	Margin Account
Borrowing	No securities loan from broker-dealer	Customer may borrow against securities
Risk	Limited to paid-for securities	Leverage increases gains and losses
Documents	Standard new account documentation	Margin agreement required
Short sales	Generally require margin	Short seller borrows shares
Interest	No margin interest	Customer pays interest on debit balance

Margin Formulas to Recognize

Long margin account:

Long market value - debit balance = equity

Short margin account:

Credit balance - short market value = equity

Margin traps:

Margin magnifies both gains and losses.
A margin call requires additional equity.
Firms may impose stricter house requirements.
Customers can lose more quickly in leveraged positions.
Short sellers have theoretically unlimited loss potential because the stock can rise indefinitely.

Retirement and Education Accounts

Account / plan	Main tax concept	Best-fit use	Trap
Traditional IRA	Possible deductible contribution; tax-deferred growth; taxable distributions	Retirement savings with current tax benefit potential	Early distributions may trigger tax and penalty
Roth IRA	After-tax contribution; qualified distributions tax-free	Retirement savings with future tax-free potential	Contribution eligibility depends on tax rules
Rollover IRA	Receives eligible retirement plan assets	Preserve tax deferral	Direct rollover avoids common withholding problems
401(k)	Employer-sponsored salary deferral plan	Workplace retirement savings	Plan rules govern investments and distributions
403(b)	Retirement plan for certain nonprofit/public education employees	Tax-deferred workplace savings	Often uses mutual funds or annuities
457 plan	Deferred compensation for certain governmental/nonprofit employees	Supplemental retirement savings	Distribution rules differ from 401(k)/403(b)
SEP IRA	Employer-funded plan often for small businesses/self-employed	Simplified employer retirement contributions	Employer contribution rules apply
SIMPLE IRA	Small employer salary deferral plan	Small business retirement plan	Employer contribution obligation applies
529 plan	Tax-advantaged education savings	Qualified education expenses	State plan, donor control, beneficiary changes
Coverdell ESA	Education savings account	Qualified education expenses	Contribution limits and eligibility rules are restrictive

Tax Reference

Item	General treatment	Exam cue
Corporate bond interest	Taxable as ordinary income	Fully taxable income
Treasury interest	Taxable federally; generally exempt from state/local tax	Good state tax distinction
Municipal bond interest	Generally federally tax-exempt	In-state bonds may receive state/local tax benefit
Private activity bond interest	May be subject to AMT	Not all muni income has identical tax treatment
Qualified dividends	May receive favorable tax rate	Not guaranteed for every dividend
Short-term capital gain	Typically taxed at ordinary income rates	Holding period matters
Long-term capital gain	Typically receives preferential tax rate	Requires longer holding period
Capital loss	Can offset capital gains, subject to tax rules	Wash sale can disallow loss
Wash sale	Loss disallowed if substantially identical security is bought within 30 days before or after sale	Basis is adjusted; rule discourages tax-loss selling without economic change
Mutual fund distributions	Taxable if held in taxable account, even if reinvested	Reinvestment does not avoid tax
Zero-coupon bond accretion	Taxable income may accrue without cash payments	“Phantom income”
Annuity growth	Tax-deferred	Withdrawals may be taxable and penalized if early
Retirement distributions	Tax depends on account type and qualification	Traditional and Roth treatment differ

Notes and examples

Tax Review for SIE Candidates

Tax questions on the SIE are usually conceptual. Focus on recognizing the general treatment.

Item	General Tax Concept
Common stock dividend	Taxable income unless held in tax-advantaged account
Capital gain	Sale price above cost basis
Capital loss	Sale price below cost basis
Municipal bond interest	Often federally tax-exempt
Treasury interest	Federally taxable; often exempt from state/local income tax
Corporate bond interest	Taxable income
Zero-coupon bond	May create annual imputed interest taxation
Mutual fund distribution	Taxable to shareholder unless in tax-advantaged account
Variable annuity growth	Tax-deferred until withdrawal
Retirement account	Tax treatment depends on account type and distribution rules

Cost Basis and Splits

Event	Effect
Stock split	Total position value changes mechanically; per-share basis adjusts
Stock dividend	Shares increase; per-share basis generally adjusts
Cash dividend	Income event; stock price may adjust on ex-dividend date
Sale above basis	Capital gain
Sale below basis	Capital loss

Example: in a 2-for-1 split, shares double and per-share basis is cut in half. Total cost basis does not double.

Risks

Risk	Meaning	Highest-yield product cues
Market risk	Overall market decline	Common stocks, equity funds, ETFs
Business risk	Issuer’s business performs poorly	Common stock, corporate debt
Credit/default risk	Issuer cannot pay interest or principal	Corporate bonds, revenue bonds, lower-rated debt
Interest-rate risk	Bond prices fall when rates rise	Long-term bonds, low-coupon bonds, preferred stock
Reinvestment risk	Income must be reinvested at lower rates	Callable bonds, mortgage-backed securities
Call risk	Issuer redeems bond early when rates fall	Callable corporate/municipal bonds, callable preferred
Prepayment risk	Borrowers repay mortgages early	Mortgage-backed securities when rates fall
Extension risk	Prepayments slow, extending maturity	Mortgage-backed securities when rates rise
Inflation / purchasing power risk	Return fails to keep up with inflation	Long-term fixed income, cash
Liquidity risk	Cannot sell quickly at fair price	DPPs, thinly traded bonds, limited partnerships
Currency risk	Foreign exchange movement hurts return	ADRs, foreign funds, international bonds
Political/regulatory risk	Law or policy change hurts investment	Foreign securities, regulated industries, municipal projects
Systematic risk	Nondiversifiable market-wide risk	Cannot be eliminated by diversification
Unsystematic risk	Company- or industry-specific risk	Can be reduced by diversification
Opportunity cost	Choosing one investment prevents another	Low-yield conservative choices during rising markets

Notes and examples

Risks Quick Table

Risk	Meaning	Products Commonly Affected
Market risk	Security value declines due to market movement	Stocks, funds, ETFs, options
Business risk	Company-specific operating risk	Common stock, corporate bonds
Credit/default risk	Issuer may fail to pay	Corporate bonds, municipal bonds
Interest-rate risk	Bond price falls when rates rise	Bonds, preferred stock, bond funds
Reinvestment risk	Income/principal reinvested at lower rates	Callable bonds, income products
Call risk	Issuer redeems before maturity	Callable bonds, callable preferred
Inflation risk	Purchasing power declines	Fixed-income products
Liquidity risk	Cannot sell quickly at fair price	Thinly traded securities, DPPs, nontraded REITs
Currency risk	Exchange-rate changes affect value	ADRs, foreign funds
Political risk	Government or geopolitical events affect value	Foreign securities, munis, sector funds
Prepayment risk	Principal returned sooner than expected	Mortgage-backed securities
Extension risk	Principal returned later than expected	Mortgage-backed securities
Legislative risk	Law or tax changes affect value	Municipal bonds, retirement products
Systematic risk	Broad market risk not diversified away	Equity portfolios
Unsystematic risk	Company or industry-specific risk	Individual stocks, concentrated portfolios

Product-to-Risk Matching

If the Question Emphasizes…	Think First Of…
Rising rates	Falling bond prices
Falling rates	Call risk and reinvestment risk
Long maturity	Higher interest-rate risk
Low coupon	Higher interest-rate risk
Foreign investment	Currency and political risk
Thin trading	Liquidity risk
Mortgage-backed securities	Prepayment and extension risk
Fixed payments during inflation	Purchasing-power risk
Concentrated single stock	Business/unsystematic risk
Broad market decline	Systematic risk

Economics and Interest Rates

Concept	Meaning	Securities impact
Expansion	GDP and business activity rising	Equities may benefit; inflation pressure may rise
Contraction	Business activity declining	Defensive assets may outperform; credit risk may rise
Recession	Significant economic decline	Earnings and lower-quality credit may weaken
Inflation	General price level rising	Hurts purchasing power and long fixed-income securities
Deflation	General price level falling	Can signal weak demand; debt burden rises in real terms
Fed easing	Policy designed to lower rates/increase money supply	Bond prices tend to rise; borrowing easier
Fed tightening	Policy designed to raise rates/reduce inflation	Bond prices tend to fall; borrowing cost rises
Normal yield curve	Short rates lower than long rates	Typical expansionary environment
Inverted yield curve	Short rates higher than long rates	Often viewed as recession warning
Flat yield curve	Short and long rates similar	Transition or uncertainty
CPI	Consumer inflation measure	Purchasing power and COLA cue
PPI	Producer inflation measure	Can signal future consumer inflation
GDP	Broad economic output	Growth/contraction indicator
Unemployment rate	Labor market condition	Often lagging indicator
Money supply	Amount of money available in economy	Fed policy and inflation cue

Communications with the Public

Communication type	Audience	Core rule idea
Correspondence	25 or fewer retail investors within a 30-calendar-day period	Subject to supervision and review procedures
Retail communication	More than 25 retail investors within a 30-calendar-day period	Generally requires principal approval before use, unless exception applies
Institutional communication	Institutional investors only	Requires written procedures and supervision
Public appearance	Seminar, webinar, TV, radio, unscripted forum	Must be fair, balanced, and not misleading
Research report	Analysis of securities or issuers	Conflicts and independence rules matter
Social media static content	Profile, background, prepared posts	Treated like advertising/retail communication if retail audience
Social media interactive content	Real-time interactive posts	Supervision rules still apply

Notes and examples

Communication Standards

Requirement	Meaning	Violation cue
Fair and balanced	Discuss benefits and risks	“High return with no risk”
No exaggerated claims	Avoid promissory or misleading language	“Guaranteed profit” in securities product
Basis for recommendations	Claims need reasonable support	Unsupported performance projections
Disclose material facts	Include risks, costs, limits, conflicts	Omitting surrender charges or liquidity restrictions
No misleading comparisons	Compare similar products fairly	Comparing taxable yield to tax-free yield without tax adjustment
Testimonials/endorsements	Must follow disclosure and supervision rules	Cherry-picked praise without context
Past performance	Not guarantee of future results	“This fund returned 12%, so it will again”

Communication Principles

All securities communications should be:

Fair and balanced
Not misleading
Clear about risks
Clear about costs and limitations
Free from exaggerated or unwarranted claims
Consistent with the customer’s situation when making a recommendation

Red-Flag Language

Be suspicious of answer choices or communications that say:

“Guaranteed profit”
“No risk”
“Can’t lose”
“Insider opportunity”
“Approved by FINRA as a good investment”
“Suitable for everyone”
“Tax-free in all cases”
“Safe alternative to cash” without explaining risk

FINRA rules generally focus on fair dealing, disclosure, supervision, and investor protection.

Prohibited and Unethical Practices

Practice	Meaning	Exam clue
Insider trading	Trading on material nonpublic information	Tip, tippee, merger rumor from confidential source
Front-running	Trading ahead of customer/block order	Representative buys before entering customer buy order
Churning	Excessive trading to generate commissions	High turnover inconsistent with objective
Unauthorized trading	Trade without customer authorization	Discretion must be written and approved
Selling away	Securities business outside firm without approval	Private deal not recorded through broker-dealer
Outside business activity violation	Outside compensation activity without required notice	Paid side business undisclosed to firm
Private securities transaction violation	Securities transaction away from firm without required notice/approval	“I’ll sell you shares in my friend’s startup”
Market manipulation	Artificially affecting price or volume	Pump and dump, matched orders, wash trades
Marking the close	Trades intended to influence closing price	End-of-day price manipulation
Painting the tape	Creating false appearance of activity	Trades with no real change in beneficial ownership
Spoofing/layering	Placing orders to mislead market participants	Orders entered with intent to cancel
Breakpoint sale	Selling mutual fund amount just below breakpoint	Customer misses lower sales charge
Guaranteeing against loss	Promising customer cannot lose	Securities returns generally cannot be guaranteed by rep
Sharing in customer account	Sharing profits/losses without permitted conditions	Requires firm approval and proportionate contribution if allowed
Borrowing from/lending to customer	Personal loan arrangement with customer	Only allowed under firm rules and permitted relationships
Commingling	Mixing customer and firm assets improperly	Customer asset protection violation
Conversion	Misusing customer funds/securities	Theft or unauthorized use
Falsifying records	Altering documents or signatures	Never sign for customer
Rumor spreading	Circulating unverified market-moving information	Especially dangerous with thinly traded securities
Using discretion improperly	Choosing security/amount/action without authorization	Time and price discretion alone is different

AML, CIP, and Red Flags

Topic	What to know	Red flags
CIP	Firm must verify customer identity at account opening	Reluctance to provide ID, inconsistent information
Beneficial ownership	Identify people who own/control legal entity customers	Shell entities with unclear control
OFAC screening	Check for prohibited persons/entities	Potential sanctions match
Suspicious activity	Escalate and report through firm procedures	Structuring, unexplained wires, rapid in/out transfers
Money laundering stages	Placement, layering, integration	Cash-like funds enter, move through transactions, reappear as legitimate
Third-party transactions	Require scrutiny	Wires to unrelated parties or high-risk jurisdictions
Senior exploitation	Financial abuse of vulnerable adult	Sudden new contact, unusual withdrawals, confusion, coercion
Account takeover	Unauthorized access/control	Changed contact info plus urgent transfer request

Customer Protection and Insurance

Protection	Covers	Does not cover	Exam trap
SIPC	Missing customer cash/securities if broker-dealer fails, up to coverage limits	Market losses, unsuitable recommendations, issuer bankruptcy	SIPC is not FDIC
FDIC	Insured bank deposits at insured banks	Securities, mutual funds, ETFs, annuities	Bank-sold securities are not FDIC insured
Excess SIPC	Additional private insurance some firms buy	Still generally does not cover market loss	Firm-specific, not automatic
Fidelity bond	Protects firm against employee dishonesty	Not an investor performance guarantee	Firm protection, not product guarantee
Clearing firm custody	Holds and clears customer assets for introducing broker	Does not eliminate market risk	Introducing and clearing firms have different roles

Account Transfers, Statements, and Confirmations

Document / process	Purpose	Exam point
Trade confirmation	Details transaction after execution	Capacity, price, commission/markup, settlement, security details
Account statement	Periodic holdings, activity, balances	Customer should review for errors/unauthorized activity
Customer complaint record	Written customer grievance	Must be handled under firm procedures
ACATS transfer	Automated customer account transfer between firms	Helps move assets from one broker-dealer to another
DRS	Direct registration system	Security registered directly on issuer books
Proxy statement	Shareholder voting information	Common stockholders vote; proxy solicits voting authority
Annual report / 10-K	Audited annual issuer information	More comprehensive than quarterly report
10-Q	Quarterly issuer report	Unaudited quarterly update
8-K	Current report of material events	Timely disclosure of significant events

Suitability-Style Decision Points

Although the SIE is not a full representative-level suitability exam, it frequently tests whether a product logically fits a stated objective.

If the customer says…	Watch for…	Better answer direction
“I cannot lose principal.”	Market risk, credit risk, liquidity risk	Insured deposits or very conservative short-term instruments, not common stock
“I need tax-free income.”	Tax bracket and state residency	Municipal bonds/funds; compare taxable-equivalent yield
“I need money next month.”	Liquidity and market risk	Cash equivalents, not annuities or DPPs
“I want aggressive growth.”	Risk tolerance and time horizon	Common stock/growth funds, not fixed annuity
“I want income and can accept rate risk.”	Credit quality and duration	Bonds, bond funds, preferred stock
“I fear inflation.”	Fixed income purchasing power risk	TIPS, equities, real assets, inflation-aware allocation
“I want to trade during the day.”	Mutual fund pricing	ETFs or listed stocks, not open-end mutual funds
“I want foreign exposure in U.S. markets.”	Currency and political risk	ADRs or international funds
“I want tax deferral.”	Costs, surrender charges, retirement account context	Retirement accounts or annuities if features justify
“I want options income.”	Approval level and risk	Covered call is lower risk than uncovered call, but not risk-free

High-Yield Distinctions

Distinction	Choose this answer when…
Broker vs dealer	Broker is agent and earns commission; dealer is principal and earns markup/markdown
Primary vs secondary	Issuer receives proceeds only in primary market
Common vs preferred	Common has voting and growth; preferred has fixed dividend priority
Right vs warrant	Rights are short-term and for existing shareholders; warrants are longer-term and often attached to other securities
GO vs revenue municipal bond	GO uses taxing power; revenue uses project revenue
Treasury vs municipal tax	Treasury interest is federal taxable/state exempt; muni interest is generally federal exempt
Open-end vs closed-end fund	Open-end redeems at NAV; closed-end trades in market at premium/discount
ETF vs mutual fund	ETF trades intraday; mutual fund prices once at NAV after market close
Variable annuity vs mutual fund	Variable annuity is insurance contract with tax deferral and expenses; mutual fund is investment company security
Call vs put	Call is right to buy; put is right to sell
Buyer vs writer	Buyer has right and pays premium; writer has obligation and receives premium
Limit vs stop	Limit sets acceptable price; stop triggers a market order
Stop vs stop-limit	Stop improves execution chance after trigger; stop-limit improves price control but may not execute
Discretion vs time/price	Choosing security/action/amount requires written discretionary authority; time/price discretion for the day is different
SIPC vs FDIC	SIPC covers brokerage failure; FDIC covers bank deposits
Exempt security vs exempt transaction	Security exemption follows the instrument; transaction exemption follows how it is sold
Systematic vs unsystematic risk	Systematic cannot be diversified away; unsystematic can be reduced through diversification

Common Trap Checklist

Do not treat tax-exempt as risk-free.
Do not treat SIPC as protection from market loss.
Do not assume preferred stock has the same upside or voting rights as common stock.
Do not confuse yield to maturity with current yield.
For bonds, remember: rates up, prices down.
For premium bonds: coupon > current yield > YTM.
For discount bonds: coupon < current yield < YTM.
A market order seeks execution, not price protection.
A limit order protects price, not execution.
A stop order becomes a market order after trigger.
A stop-limit may never execute after trigger.
A call buyer is bullish; a put buyer is bearish.
An uncovered short call has unlimited loss potential.
Open-end mutual funds do not trade intraday.
Closed-end funds and ETFs may trade at premium or discount to NAV.
A variable annuity is not a mutual fund, even though subaccounts may resemble funds.
Retirement account tax treatment depends on account type and distribution qualification.
A trusted contact is not automatically an authorized trader.
Written customer complaints must be escalated under firm procedures.
Private securities transactions and outside business activities require firm notice and possible approval.
Antifraud rules still apply to exempt securities and exempt transactions.

Final Review Sequence

Memorize the broker/dealer, primary/secondary, common/preferred, GO/revenue, open-end/closed-end, and call/put distinctions.
Drill the bond yield-price relationships until automatic.
Practice order-type scenarios using trigger, execution certainty, and price certainty.
Review prohibited practices as scenario recognition, not definitions only.
Rework missed questions by product type, rule type, and customer objective.

Next step: use this Cheat Sheet as a checklist, then complete timed SIE practice sets and review every missed question against the matching table above.

High-Yield SIE Map

Area	Must Know	Common Trap
Capital markets	Primary vs. secondary markets, broker-dealers, exchanges, market makers, regulators	Confusing an issuer transaction with an investor-to-investor trade
Equity securities	Common stock, preferred stock, rights, warrants, ADRs, REITs	Treating preferred stock like a bond; it is still equity
Debt securities	Coupon, maturity, yield, credit quality, call features, secured vs. unsecured debt	Forgetting bond prices and yields move inversely
Municipal securities	GO vs. revenue bonds, tax treatment, MSRB role	Thinking the MSRB enforces all rules directly
Investment companies	Mutual funds, ETFs, closed-end funds, UITs, sales charges, NAV	Confusing open-end mutual fund pricing with ETF/closed-end trading
Options	Calls vs. puts, rights vs. obligations, bullish/bearish positions	Reversing buyer rights and seller obligations
Customer accounts	Cash, margin, joint, custodial, retirement, entity accounts	Assuming every account has the same authority and documentation
Trading and orders	Market, limit, stop, stop-limit, long/short, settlement, dividends	Thinking a limit order guarantees execution
Regulations and conduct	Insider trading, manipulation, suitability concepts, AML, communications	Choosing a “sales” answer when the rule requires investor protection

Exam Mindset: How SIE Questions Usually Work

Most SIE questions test recognition and judgment, not deep calculation. Read each question in this order:

Identify the product - stock, bond, fund, option, annuity, municipal security, government security.
Identify the customer objective or risk - income, growth, liquidity, preservation, speculation, tax sensitivity.
Identify the market or transaction - primary, secondary, exchange, OTC, margin, short sale.
Identify the rule issue - disclosure, recommendation, communication, registration, prohibited conduct.
Eliminate extremes - guaranteed profits, no risk, “always,” “never,” and answers that ignore disclosure.

SIE trap: the “best” answer is often the one that protects the customer, requires disclosure, or avoids a conflict of interest.

Capital Markets Cheat Sheet

Primary vs. Secondary Markets

Market	What Happens	Key Participants	Exam Cue
Primary market	Issuer sells new securities to raise capital	Issuer, underwriter, investors	IPO, new issue, proceeds go to issuer
Secondary market	Investors trade existing securities	Buyers, sellers, broker-dealers, exchanges, market makers	Proceeds go to selling investor
Third market	Exchange-listed securities trade OTC	Broker-dealers, institutions	Listed stock, OTC execution
Fourth market	Institution-to-institution trades without broker-dealer intermediation	Large institutions	Direct institutional trading

Notes and examples

Who Does What?

Participant	Role
Issuer	Entity that sells securities to raise capital
Underwriter	Helps issuer distribute securities in a public offering
Broker	Acts as agent, executing trades for customers
Dealer	Acts as principal, buying/selling from its own inventory
Market maker	Provides liquidity by quoting bid and ask prices
Clearing firm	Processes trades, custody, settlement, statements, and records
Transfer agent	Maintains issuer shareholder records, cancels and issues certificates
Custodian	Holds customer assets for safekeeping
Depository	Centralized securities custody and book-entry transfer system
Investment adviser	Provides securities advice for compensation
Municipal advisor	Advises municipal entities on municipal financial products or issuance

Entity	Main Role	Trap
FINRA	Regulates broker-dealers and registered representatives	FINRA is not the issuer of the exam content in your study materials unless stated by FINRA
SEC	Federal securities regulator	Oversees securities markets and many securities professionals
MSRB	Writes rules for municipal securities firms and municipal advisors	MSRB generally writes rules; enforcement is handled by other regulators
Federal Reserve	Monetary policy and banking system influence	Interest-rate changes affect securities markets
CFTC	Regulates futures and certain derivatives markets	Do not confuse futures regulation with securities regulation
SIPC	Protects customers if a broker-dealer fails, within applicable limits	Does not protect against market losses
FDIC	Insures eligible bank deposits, within applicable limits	Does not insure securities investments

Economic and Market Indicators

Concept	Meaning	SIE Relevance
GDP	Broad measure of economic output	Growth vs. recession analysis
CPI	Consumer inflation measure	Inflation reduces purchasing power
Unemployment	Labor market condition	Lagging economic indicator
Interest rates	Cost of money	Major driver of bond prices and equity valuations
Yield curve	Relationship between short- and long-term rates	Normal, flat, inverted, or steepening curve
Inflation	Rising general price level	Hurts fixed-income purchasing power
Deflation	Falling general price level	Can signal economic weakness
Recession	Broad economic contraction	Defensive investments may be favored
Expansion	Economic growth	Cyclical companies may benefit

Notes and examples

Monetary vs. Fiscal Policy

Policy Type	Controlled By	Tools / Examples	Market Effect
Monetary policy	Federal Reserve	Interest rates, money supply, open market operations	Affects borrowing costs, bond prices, liquidity
Fiscal policy	Government / Congress	Taxing and spending	Affects deficits, demand, and sectors tied to spending

Interest Rate Decision Rule

When interest rates rise:

Existing bond prices generally fall.
New bonds are issued with higher coupons.
Borrowing becomes more expensive.
Rate-sensitive sectors may weaken.
Long-maturity bonds usually move more than short-maturity bonds.

When interest rates fall:

Existing bond prices generally rise.
Issuers may call high-coupon callable bonds.
Reinvestment risk increases for income investors.

Securities Products: Debt and Fixed Income

Core Bond Vocabulary

Term	Meaning
Par value	Amount paid at maturity, commonly quoted as 100 or 1,000 depending on context
Coupon	Stated annual interest rate on the bond
Maturity	Date principal is due
Current yield	Annual interest divided by current market price
Yield to maturity	Return if held to maturity, considering price, coupon, and principal repayment
Yield to call	Return if callable bond is called before maturity
Discount	Bond trades below par
Premium	Bond trades above par
Callable	Issuer may redeem early
Putable	Investor may force issuer to repurchase
Convertible	Bond can be converted into common stock

Notes and examples

Bond Price and Yield Relationship

Bond prices and yields move inversely.

\[ \text{Current Yield} = \frac{\text{Annual Interest}}{\text{Current Market Price}} \]

If a bond’s coupon is 6% and its market price rises, its current yield falls. If the market price falls, current yield rises.

Premium, Discount, and Par Relationships

Bond Price	Coupon vs. Market Yield	Yield Relationship
Premium	Coupon is higher than market rates	Coupon rate > current yield > yield to maturity
Discount	Coupon is lower than market rates	Coupon rate < current yield < yield to maturity
Par	Coupon approximates market rates	Coupon rate ≈ current yield ≈ yield to maturity

Interest Rate Risk

Bond Feature	Interest Rate Risk
Longer maturity	Higher
Lower coupon	Higher
Shorter maturity	Lower
Higher coupon	Lower

Long-term, low-coupon bonds are usually more sensitive to interest-rate changes.

Call Risk and Reinvestment Risk

Callable bonds are likely to be called when interest rates fall. That creates reinvestment risk because the investor may have to reinvest at lower rates.

Investor Concern	Risk
Rates fall and bond is called	Call risk
Proceeds must be reinvested at lower rates	Reinvestment risk
Rates rise and bond price falls	Interest-rate risk
Inflation erodes coupon purchasing power	Purchasing-power risk

Orders and Trading

Common Order Types

Order	Meaning	Main Benefit	Main Risk
Market order	Execute promptly at best available price	High likelihood of execution	Price not guaranteed
Limit order	Buy/sell at specified price or better	Price protection	Execution not guaranteed
Stop order	Becomes market order once stop price is triggered	Can protect or enter momentum trade	Triggered order may execute far from stop
Stop-limit order	Becomes limit order once stop price is triggered	Combines trigger with price limit	May not execute
Day order	Good for current trading day	Simple time limit	Expires if not executed
GTC order	Remains open until executed or canceled, subject to firm rules	Longer working order	Must monitor changes
Fill-or-kill	Immediate complete execution or cancellation	Avoids partial fills	Often not executed
Immediate-or-cancel	Execute all or part immediately; cancel remainder	Allows partial execution	Remainder canceled

Notes and examples

Buy and Sell Order Price Logic

Order	Placed Where?	Typical Use
Buy limit	Below current market	Buy only at lower price or better
Sell limit	Above current market	Sell only at higher price or better
Buy stop	Above current market	Protect short position or enter breakout
Sell stop	Below current market	Protect long position or enter downside move

Long vs. Short

Position	Investor Wants	Risk
Long stock	Price to rise	Price can fall to zero
Short stock	Price to fall	Price can rise without theoretical limit

Short sale sequence:

Borrow shares.
Sell borrowed shares.
Later buy shares to cover.
Return borrowed shares.

Settlement, Record Dates, and Dividends

Most covered U.S. securities trades settle T+1, the next business day, effective May 28, 2024. A Friday trade normally settles Monday if Monday is a business day. FINRA settlement guide .

For an ordinary cash dividend below 25% of the security’s value, announced in time, the ex-dividend date normally equals a business-day record date. If the record date is a non-delivery day, the ex-date is generally the preceding business day. Large distributions can have a different sequence, including an ex-date after payment. Use the declared dates and distribution type rather than assuming ex-date and record date always occur on separate days. FINRA Rule 11140 .

Date	Meaning
Declaration	Board announces the dividend and relevant dates
Ex-dividend	A purchase on or after this date does not carry the dividend entitlement
Record	Issuer determines holders of record; often the same business day as ex-date under T+1
Payable	Distribution is paid; special distributions may have later ex-dates

Example: an ordinary dividend has a Thursday record/ex-date. A Wednesday regular-way purchase settles Thursday and carries the dividend. A Thursday purchase is ex-dividend. Assume business days, timely announcement, and no special-distribution exception.

Regulation and Conduct

Major Securities Laws and Frameworks

Law / Framework	High-Yield Purpose
Securities Act of 1933	New issue registration and disclosure; antifraud provisions
Securities Exchange Act of 1934	Secondary market regulation; created SEC framework
Trust Indenture Act of 1939	Corporate debt indenture protections for certain public debt offerings
Investment Company Act of 1940	Regulation of investment companies
Investment Advisers Act of 1940	Regulation of investment advisers
Securities Investor Protection Act	Customer protection if broker-dealer fails
USA PATRIOT Act / AML rules	Customer identification and anti-money laundering responsibilities
State securities laws	State-level securities regulation, often called Blue Sky laws

Notes and examples

Prohibited and Unethical Practices

Practice	Meaning	Exam Cue
Insider trading	Trading on material nonpublic information	Confidential merger, earnings, tender offer information
Front-running	Trading ahead of a known customer/block order	Firm or rep benefits before customer execution
Churning	Excessive trading to generate commissions	Activity inconsistent with customer objectives
Unauthorized trading	Trading without customer authorization	No prior approval
Market manipulation	Artificially affecting price or volume	Rumors, matched orders, painting the tape
Pump and dump	Hype security, then sell at inflated price	Promotional fraud
Selling away	Private securities transaction outside firm approval	Rep sells investment not on firm platform
Outside business activity	Business activity outside firm	Requires proper notice/approval process
Conversion	Misuse or theft of customer funds/securities	Taking customer assets
Commingling	Improper mixing of customer and firm funds/securities	Custody violation
Guaranteeing against loss	Improper promise to protect customer from market loss	“I’ll make you whole”
Sharing in customer account	Sharing profits/losses without required approvals	Conflict and approval issue
Breakpoint sale violation	Structuring mutual fund purchases to avoid discounts	Customer denied lower sales charge
Selling dividends	Encouraging fund purchase just before distribution as if it is free income	NAV drops after distribution
Backing away	Market maker fails to honor firm quote	Quotation violation
Free-riding	Buying and selling without paying	Cash account violation concept

Material Nonpublic Information

Information is generally material if a reasonable investor would consider it important in making an investment decision.

Examples:

Pending merger or acquisition
Significant earnings surprise
Major regulatory approval or denial
Bankruptcy or severe financial distress
Major management change
Significant litigation
Tender offer information

Exam rule: if information is material and nonpublic, do not trade or tip others.

AML, Privacy, and Customer Identification

AML Red Flags

Red Flag	Why It Matters
Customer refuses identifying information	CIP concern
Unusual wire activity	Possible laundering
Rapid movement of funds with no business purpose	Suspicious activity
Transactions just below reporting thresholds	Structuring concern
Third-party wires inconsistent with customer profile	Source-of-funds concern
Foreign jurisdictions with high-risk indicators	Enhanced diligence concern
No concern for risk, fees, or losses	Possible illicit purpose

Privacy Basics

Firms must protect customer information and follow applicable privacy notice and information-sharing rules.

Common trap: customer information cannot be casually shared because it would help a sale.

Suitability Concepts and Customer Profiles

Even when a question is not a full suitability analysis, the SIE often expects you to connect investments to customer needs.

Customer Information to Notice

Customer Factor	Why It Matters
Age and time horizon	Longer horizon may tolerate more volatility
Investment objective	Income, growth, preservation, speculation
Risk tolerance	Determines acceptable volatility and loss
Liquidity needs	Illiquid products may be inappropriate
Tax status	Taxable vs. tax-advantaged investments
Financial situation	Ability to bear risk
Investment experience	Complexity must be understood
Concentration	Diversification concerns
Existing holdings	Recommendation should fit total portfolio

Notes and examples

Objective-to-Product Matching

Objective	Products Often Considered	Caution
Capital preservation	T-bills, money market instruments, high-quality short-term debt	Inflation risk remains
Current income	Bonds, preferred stock, income funds, dividend stocks	Credit and rate risk
Growth	Common stock, equity funds, ETFs	Market volatility
Speculation	Options, low-priced stocks, aggressive sectors	High loss potential
Tax-sensitive income	Municipal bonds, municipal funds	Tax treatment depends on facts
Inflation protection	TIPS, equities, real assets exposure	Market risk still exists
Liquidity	Listed securities, money market funds	Liquidity varies by product

Exam trap: a product with tax benefits can still be unsuitable if risk, liquidity, or time horizon does not fit.

Quick Calculation Review

Calculation / Concept	Formula or Rule	Trap
Current yield	Annual interest / current market price	Uses market price, not par
Stock gain/loss	Sale proceeds - cost basis	Include adjusted basis after splits
Call breakeven	Strike + premium	Applies to calls
Put breakeven	Strike - premium	Applies to puts
Long call max loss	Premium paid	Buyer has right, not obligation
Long put max loss	Premium paid	Put buyer is bearish
Short call max gain	Premium received	Naked short call has unlimited risk
Short put max gain	Premium received	Risk if stock falls sharply
Long margin equity	LMV - debit	Market decline lowers equity
Short margin equity	Credit - SMV	Stock price rise lowers equity
NAV	Assets - liabilities, divided by shares	Mutual fund priced at next NAV
Bond premium	Price above par	YTM lower than coupon
Bond discount	Price below par	YTM higher than coupon

Common SIE Traps

Product Traps

Preferred stock is equity, even though it has a fixed dividend.
Bond interest is a legal obligation; common stock dividends are not.
Mutual funds redeem at NAV; ETFs and closed-end funds trade at market prices.
Money market funds are securities, not FDIC-insured bank deposits.
REITs are not risk-free real estate substitutes.
Variable annuities are securities because returns vary with subaccount performance.
TIPS address inflation risk, but market value can still fluctuate.
Callable bonds benefit issuers, not investors, when rates fall.

Notes and examples

Risk Traps

Higher yield usually means higher risk.
Long-term bonds have more interest-rate risk than short-term bonds.
Diversification reduces unsystematic risk, not systematic market risk.
Liquidity risk is about the ability to sell quickly at a fair price.
SIPC does not protect against poor investment performance.
FDIC and SIPC protect different things.

Order Traps

A market order seeks prompt execution at the available price; it does not guarantee price or execution in a halted or unavailable market.
A limit order permits execution only at the limit or better; it may remain unfilled.
A stop order becomes a market order after being triggered.
A stop-limit order may fail to execute after being triggered.
Buy stops are placed above the market.
Sell stops are placed below the market.

Conduct Traps

Good intentions do not excuse unauthorized trading.
A customer’s verbal complaint can still be a serious supervisory concern.
Material nonpublic information cannot be used even if the customer would benefit.
A representative cannot guarantee a customer against market loss.
Outside business and private securities transactions require proper firm handling.
Communications must be balanced; risk disclosure cannot be hidden.

Fast Decision Rules

If the Question Mentions an Issuer Raising Money

Think primary market.

IPO
Follow-on offering
Underwriting
Prospectus
Proceeds to issuer

Notes and examples

If the Question Mentions Investors Trading With Each Other

Think secondary market.

Exchange or OTC trade
Broker-dealer execution
Market maker quotes
Proceeds to selling investor

If the Question Mentions Rising Rates

Think:

Existing bond prices fall.
Long maturities suffer more.
Low coupons suffer more.
Callable bonds are less likely to be called.
New bonds may offer higher yields.

If the Question Mentions Falling Rates

Existing bond prices rise.
Callable bonds may be called.
Reinvestment risk increases.
Issuers refinance higher-cost debt.

If the Question Mentions a Customer Wanting Tax-Free Income

Municipal bonds or municipal bond funds may be relevant.
Confirm tax bracket, state residency, risk tolerance, and liquidity needs.
Do not assume all municipal returns are tax-free in every respect.

If the Question Mentions “Guaranteed”

Be careful.

U.S. government securities have government backing, but market prices can fluctuate.
Fixed annuities depend on insurer claims-paying ability.
SIPC does not guarantee investment value.
Broker-dealers and representatives generally cannot guarantee customers against market loss.

Mini Workflow for Product Questions

    flowchart TD
	    A[Read the question stem] --> B{Is it asking about product features?}
	    B -->|Yes| C[Identify security type: equity, debt, fund, option, annuity]
	    B -->|No| D{Is it asking about conduct or regulation?}
	    C --> E[Match objective: growth, income, preservation, speculation, tax]
	    E --> F[Match risk: market, credit, rate, liquidity, inflation, currency]
	    F --> G[Eliminate answers that ignore risk or disclosure]
	    D -->|Yes| H[Look for prohibited practice, disclosure duty, or customer protection issue]
	    D -->|No| I[Check market, account, order, or calculation clues]
	    H --> G
	    I --> G

Final 48-Hour Review Checklist

Use this list before moving into full mock exams.

Products

Common vs. preferred stock
Rights vs. warrants
ADR risks
REIT types
Corporate bond types
Treasury securities
Municipal GO vs. revenue bonds
Mutual funds vs. ETFs vs. closed-end funds
UIT features
Variable annuity features
Options buyer vs. seller rights and obligations

Notes and examples

Risks

Interest-rate risk
Credit/default risk
Call and reinvestment risk
Inflation risk
Liquidity risk
Currency and political risk
Prepayment and extension risk
Systematic vs. unsystematic risk

Markets and Trading

Primary vs. secondary markets
Broker vs. dealer
Market maker role
Order types
Long vs. short positions
Dividend date sequence
Settlement concept
Margin basics

Regulation and Conduct

Insider trading
Churning
Front-running
Manipulation
Unauthorized trading
Selling away
Outside business activities
Communications with the public
AML red flags
SIPC vs. FDIC
FINRA, SEC, MSRB roles

How to Turn This Review Into Score Improvement

A cheat sheet helps most when paired with active recall. After reviewing a section:

Do a short set of topic drills on that area.
Review every missed question with detailed explanations.
Write down the rule or product feature you missed.
Redo similar original practice questions until you can explain the answer without looking.
Take a mixed quiz to confirm you can recognize the concept outside its topic label.

Best use pattern:

Step	Activity	Goal
1	Read one cheat sheet section	Refresh core facts
2	Complete topic drills	Expose weak spots
3	Review explanations	Fix reasoning, not just answers
4	Add to error log	Prevent repeat misses
5	Take mixed practice	Build exam-style recognition

Use this page as an independent companion practice tool: review the tables, then move directly into a question bank with topic drills, mock exams, original practice questions, and detailed explanations.

Put the review into practice

Finance Prep

Start SIE - Securities Industry Essentials Exam on Web

Use the web app to preview question style, then practise the topics you need to revisit.

Original Finance Prep practice, independent from FINRA: not official FINRA questions, copied live-exam content, or exam dumps.

Current alignment Aligned to the relevant syllabus, exam elements, competency areas, and topic weights where they are available.

Practice modes Use topic drills, timed mocks, scenario questions, and focused review before deeper mixed practice.

Teaching explanations Explanations show the client, product, compliance, or calculation rule that makes the best answer defensible.

Stable bank Questions are prebuilt and reviewed before publication, so practice is stable and inspectable, not improvised during a quiz.

Study Plan

SIE - Securities Industry Essentials Exam Cheat Sheet

Calculation checks: setup, units, interpretation

Current business-gift rule

Fast Exam Map

Regulatory and Market Structure Reference

Key Securities Laws

Market Participants and Roles

Primary vs Secondary Markets

New Issue Process and Underwriting

Public Offerings

Underwriting Commitment Types

Private Placements

Exempt Securities vs Exempt Transactions

Equity Securities

Common Stockholder Rights

Dividend Dates

Common Stock

Preferred Stock

Rights and Warrants

ADRs

REITs

Debt Securities

Bond Terminology

Bond Price and Yield Relationship

Debt Product Matrix

Municipal Bond Distinctions

Corporate Bonds

Liquidation Priority

U.S. Government Securities

Agency Securities

Municipal Bonds

Municipal Bond Tax Basics

Money Market Instruments

Core Formulas

Options Basics

Option Rights and Obligations

Moneyness

Options Vocabulary

Calls and Puts

Basic Option Positions

Intrinsic Value

Options Decision Rules

Investment Companies and Packaged Products

Mutual Fund Share Classes and Sales Charges

Mutual Fund Sales Charge Terms

Open-End Mutual Funds

Mutual Fund Share Classes

Closed-End Funds

ETFs

UITs

Variable Annuities

Fixed Annuities vs. Variable Annuities

Product Selection Matrix

Trading Markets, Quotes, and Settlement

Order Types

Order Placement Shortcuts

Margin Accounts

Customer Accounts

New Account and Customer Information

Basic Account Types

Cash vs. Margin Accounts

Margin Formulas to Recognize

Retirement and Education Accounts

Tax Reference

Tax Review for SIE Candidates

Cost Basis and Splits

Risks

Risks Quick Table

Product-to-Risk Matching

Economics and Interest Rates

Communications with the Public

Communication Standards

Communication Principles

Red-Flag Language

Prohibited and Unethical Practices

AML, CIP, and Red Flags

Customer Protection and Insurance

Account Transfers, Statements, and Confirmations

Suitability-Style Decision Points

High-Yield Distinctions