SIE — Securities Industry Essentials Exam Blueprint

How to Use This Exam Blueprint

Use this independent Exam Blueprint as a practical study map for the FINRA SIE — Securities Industry Essentials Exam. The goal is not to memorize isolated definitions. The goal is to recognize a product, market rule, account fact, risk, or prohibited conduct issue inside an exam-style scenario.

Mark each area as:

• Green: You can explain it, apply it to a short scenario, and avoid common traps.
• Yellow: You recognize the term but still miss details, comparisons, or exceptions.
• Red: You cannot yet choose between close answer choices without guessing.

For any rule, threshold, form deadline, settlement cycle, contribution limit, coverage amount, or regulatory number, confirm the current value in your active study materials. This checklist focuses on topic readiness and decision logic rather than changing numerical thresholds.

Exam identity and readiness target

Topic-area readiness map

Capital markets and market participants

Core participants to know

Primary vs secondary market checklist

You should be able to answer:

• Is the issuer receiving proceeds, or is one investor selling to another?
• Is the transaction a new issue, resale, public offering, or private placement?
• Is the broker-dealer acting as underwriter, agent, dealer, or market maker?
• Does the customer receive a prospectus or other offering disclosure?
• Are resale restrictions or investor qualification issues likely to matter?
• Is the price set by offering terms, auction, negotiation, or market trading?
• Is the security listed, exchange-traded, OTC, or directly redeemable?

Capital formation topics to review

Products and risks checklist

Equity securities

Debt securities

Investment companies and pooled products

Options basics

You should be able to:

• Identify whether an option is in the money, at the money, or out of the money.
• Separate intrinsic value from time value at a basic level.
• Know that option buyers pay premiums and have rights.
• Know that option sellers receive premiums and have obligations.
• Recognize hedging vs speculation.
• Recognize that options can expire worthless.
• Identify when assignment creates a purchase or sale obligation.

Risk readiness checklist

Match the risk to the product

Risk comparison prompts

Can you explain these without looking them up?

• Why bond prices usually fall when interest rates rise.
• Why long-term bonds are generally more interest-rate sensitive than short-term bonds.
• Why lower-rated debt usually offers higher yield.
• Why callable bonds may hurt investors when interest rates decline.
• Why a municipal bond may appeal to a high-tax-bracket investor, but not automatically to every investor.
• Why a money market fund, bank deposit, and Treasury bill are not the same thing.
• Why diversification reduces unsystematic risk but does not eliminate market risk.
• Why high yield, liquidity, and principal protection are often competing objectives.

Trading, orders, and market mechanics

Order type checklist

Quote and execution readiness

Dividends and corporate actions

Be ready to sequence and interpret:

• Declaration date: board announces dividend.
• Ex-dividend concept: buyer no longer receives the declared dividend if purchasing on or after the ex-date.
• Record date: issuer identifies owners entitled to dividend.
• Payable date: dividend is distributed.
• Stock split: share count and price adjust proportionally.
• Reverse split: fewer shares at a proportionally higher price.
• Rights offering: current shareholders may receive a purchase privilege.
• Tender offer: shareholders may be asked to sell shares under stated terms.
• Stock dividend: investor receives additional shares rather than cash.

Customer accounts and documentation

Account types to distinguish

Account opening and maintenance checklist

• Identify the customer: name, address, date of birth or entity data, tax identification, and required identity checks.
• Gather investment profile facts: objective, risk tolerance, time horizon, liquidity needs, financial status, tax status, experience.
• Determine account ownership and authority.
• Know when written discretionary authorization is required.
• Know when a power of attorney or trading authorization matters.
• Recognize margin documentation and risk disclosures at a concept level.
• Recognize options approval and disclosure requirements at a concept level.
• Know that customer complaints, address changes, and beneficiary changes require careful documentation.
• Understand that firms must supervise account activity and registered person conduct.
• Avoid assuming verbal permission always satisfies required written authorization.

Discretion vs non-discretion

Regulatory framework and conduct

Regulator and organization map

Prohibited practice checklist

You should be able to spot these quickly:

• Insider trading: Trading or tipping based on material nonpublic information.
• Front-running: Trading ahead of a known customer or block order.
• Churning: Excessive trading to generate compensation.
• Unauthorized trading: Trading without customer authorization.
• Unsuitable recommendation: Recommendation inconsistent with customer profile.
• Misrepresentation: False or misleading statement about a security, account, guarantee, or risk.
• Omission of material fact: Leaving out information needed to make a statement not misleading.
• Guaranteeing against loss: Promising a customer cannot lose money.
• Sharing in customer account: Sharing profits/losses improperly or without required approval.
• Borrowing from or lending to customer: Recognize restrictions and approval issues.
• Commingling: Mixing firm, representative, and customer funds or securities improperly.
• Conversion: Misuse or theft of customer assets.
• Selling away: Private securities transaction outside the firm without required notice/approval.
• Outside business activity: Business activity outside the firm requiring notice and supervision analysis.
• Market manipulation: Pump-and-dump, painting the tape, matched orders, rumor spreading.
• Freeriding/withholding concept: Improper allocation or retention of new issues.
• Pay-to-play or political contribution issues: Recognize conflict and restriction concepts; verify current thresholds if tested.
• Forgery or falsification: Altering documents, signatures, records, or customer instructions.
• Improper complaint handling: Failing to escalate or document customer complaints.

Communications and disclosure checklist

Economic factors and monetary concepts

Economy and market indicators

Interest-rate and bond-price checks

• Rates up, existing bond prices generally down.
• Rates down, existing bond prices generally up.
• Longer maturity usually means greater interest-rate sensitivity.
• Lower coupon usually means greater interest-rate sensitivity.
• Callable bonds are more likely to be called when rates decline.
• Mortgage-backed securities face prepayment risk when rates fall.
• Premium and discount affect yield relationships.
• Credit downgrades generally pressure bond prices.
• Inflation expectations can push nominal yields higher.

Calculation and interpretation checks

The SIE can test basic financial math and interpretation. Focus on knowing what the number means, not just computing it.

Current yield

\[ \text{Current yield} = \frac{\text{annual interest or dividend income}}{\text{current market price}} \]

Readiness checks:

• If bond price falls and coupon stays the same, current yield rises.
• If bond price rises and coupon stays the same, current yield falls.
• Current yield does not include gain or loss at maturity.
• Current yield is different from coupon rate and yield to maturity.

Bond premium and discount relationships

For a bond at a discount, the usual relationship is:

\[ \text{coupon rate} < \text{current yield} < \text{yield to maturity} \]

For a bond at a premium, the usual relationship is:

\[ \text{coupon rate} > \text{current yield} > \text{yield to maturity} \]

Readiness checks:

• At par, coupon rate, current yield, and yield to maturity are generally aligned.
• Discount bonds pull yield to maturity above current yield because of accretion toward par.
• Premium bonds pull yield to maturity below current yield because of amortization toward par.
• Callable premium bonds require attention to yield to call.

Tax-equivalent yield concept

\[ \text{Tax-equivalent yield} = \frac{\text{tax-exempt yield}}{1 - \text{marginal tax rate}} \]

Readiness checks:

• Use tax-equivalent yield when comparing tax-exempt income with taxable income.
• A higher tax bracket can make tax-exempt income more attractive.
• Tax-exempt does not mean risk-free.
• State and local tax treatment may differ; use facts provided in the question.

Stock split logic

\[ \text{new shares} = \text{old shares} \times \text{split ratio} \]\[ \text{new price} = \frac{\text{old price}}{\text{split ratio}} \]

Readiness checks:

• Total market value is unchanged immediately by the split itself.
• More shares at a lower price after a forward split.
• Fewer shares at a higher price after a reverse split.
• Cost basis per share adjusts proportionally.

Options breakevens

\[ \text{Call breakeven} = \text{strike price} + \text{premium} \]\[ \text{Put breakeven} = \text{strike price} - \text{premium} \]

Readiness checks:

• Long call profits above breakeven.
• Long put profits below breakeven.
• Option buyer’s maximum loss is the premium paid.
• Short option positions involve obligations and can carry substantial risk.
• Premium affects breakeven for both buyers and sellers.

“Can you do this?” applied readiness checklist

Product identification

• Given a security description, identify whether it is equity, debt, derivative, investment company, annuity, municipal, government, or alternative product.
• Distinguish common stock from preferred stock.
• Distinguish corporate bonds from municipal bonds.
• Distinguish general obligation bonds from revenue bonds.
• Distinguish Treasury securities from agency securities.
• Distinguish mutual funds from closed-end funds and ETFs.
• Distinguish fixed annuities from variable annuities.
• Distinguish rights from warrants.
• Distinguish ADRs from direct foreign ordinary shares.
• Distinguish options from the underlying securities.

Scenario judgment

• Identify the main risk in a product recommendation.
• Identify the customer fact that should control the answer.
• Choose the most conservative answer when a question involves insufficient customer information.
• Recognize that higher return usually comes with higher risk.
• Recognize when liquidity need conflicts with long-term or illiquid products.
• Recognize when tax advantage is not the only factor.
• Recognize when a communication is misleading even if technically true.
• Recognize when customer permission does not eliminate a rule violation.
• Recognize when firm approval is required before outside activity or private securities activity.
• Recognize when a trade requires special approval, documentation, or disclosure.

Trading and account handling

• Choose market vs limit vs stop vs stop-limit based on objective.
• Explain bid, ask, and spread.
• Identify agent vs principal capacity.
• Recognize markup, markdown, and commission language.
• Explain why a market order emphasizes execution over price.
• Explain why a limit order emphasizes price over execution.
• Identify short sale risk.
• Identify margin account borrowing and liquidation risk at a concept level.
• Determine when written discretionary authority is required.
• Identify who may trade in a joint, custodial, trust, or corporate account.

Regulatory conduct

• Identify insider trading from a fact pattern.
• Identify churning from excessive trading and compensation motive.
• Identify unauthorized trading even if the trade was profitable.
• Identify front-running before customer order execution.
• Identify selling away and outside business activity.
• Identify misrepresentation and omission.
• Identify improper guarantees.
• Identify improper borrowing, lending, or sharing with customers.
• Identify customer complaint escalation issues.
• Identify AML red flags conceptually.

Scenario and decision-point checks

Common traps and weak areas

Product traps

• Assuming preferred stock is debt because it pays a stated dividend.
• Assuming all government-related securities have identical backing.
• Assuming municipal bonds are always federally, state, and locally tax-free for every investor.
• Assuming bond funds mature like individual bonds.
• Assuming closed-end funds redeem at NAV like mutual funds.
• Assuming ETFs always trade exactly at NAV.
• Assuming money market funds are the same as insured bank deposits.
• Assuming REITs are direct ownership of a specific building.
• Assuming variable annuities guarantee investment performance.
• Assuming DPPs are liquid because they are securities.

Bond traps

• Confusing coupon rate with current yield.
• Forgetting price and yield move inversely.
• Ignoring call risk when a bond is priced at a premium.
• Ignoring reinvestment risk when rates fall.
• Ignoring extension risk in mortgage-backed products when rates rise.
• Treating all municipal bonds as backed by taxes.
• Forgetting that revenue bonds depend on project revenues.
• Confusing credit risk with interest-rate risk.

Options traps

• Forgetting buyer has right, seller has obligation.
• Using call breakeven for a put.
• Forgetting that long option maximum loss is premium.
• Treating covered calls as risk-free.
• Missing assignment risk for short options.
• Confusing hedging with speculation.
• Ignoring time value decay conceptually.

Account and rule traps

• Treating time/price discretion as the same as full discretion.
• Taking an order from someone not authorized on the account.
• Making a recommendation before collecting adequate customer facts.
• Assuming verbal permission cures missing written authorization.
• Sharing in customer profits or losses without recognizing restrictions.
• Accepting customer funds into a personal account.
• Failing to escalate a written customer complaint.
• Treating social media posts as personal rather than regulated communications.
• Believing that customer sophistication eliminates disclosure obligations.
• Believing that profitable misconduct is not misconduct.

Final-week checklist

Content review

• Revisit every yellow and red topic in the readiness map.
• Make a one-page comparison chart for equity, debt, funds, options, annuities, and municipal products.
• Rework missed bond yield and options breakeven questions.
• Review risk definitions until you can match each risk to a scenario.
• Review account authorization and discretion rules.
• Review prohibited practices as scenario patterns, not just definitions.
• Review communications and disclosure categories.
• Confirm any current rule numbers, timeframes, settlement cycles, contribution limits, or coverage amounts in your active materials.

Practice review

• Complete mixed-topic practice sets rather than studying only one chapter at a time.
• For every missed question, write the reason: content gap, misread fact, calculation error, or trap answer.
• Redo missed questions after a delay to confirm you learned the rule.
• Practice eliminating answers that are too extreme, too narrow, or ignore the customer facts.
• Practice reading the final sentence first when a question is long.
• Flag questions where two answers seem correct and identify the deciding fact.
• Time yourself enough to build steady pacing without rushing.

Readiness self-check

You are close to ready when you can consistently:

• Explain the difference between broker, dealer, market maker, and underwriter.
• Identify whether a transaction is primary or secondary market.
• Compare major security products by risk, return, liquidity, and tax logic.
• Interpret basic bond price/yield relationships.
• Calculate current yield and basic options breakevens.
• Choose appropriate order types from customer goals.
• Identify who has authority to trade in an account.
• Recognize when firm approval, written authorization, or disclosure is needed.
• Spot insider trading, churning, front-running, selling away, and misrepresentation.
• Explain why an answer is correct without relying on memorized wording.

Practical next step

Use this Exam Blueprint to choose your next practice set: start with your weakest readiness area, complete a mixed group of questions, and review every miss by product, risk, account rule, or prohibited-practice pattern. Continue until your mistakes are no longer clustered in the same topics.