Securities Industry Essentials Exam 2023-2024 For Dummies (2022)
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Securities
Industry
Essentials Exam
2023–2024
with Online Practice
by Steven M. Rice
Industry
Essentials Exam
2023–2024
with Online Practice
by Steven M. Rice
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Securities Industry Essentials Exam 2023–2024 For Dummies® with Online Practice
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2022 by John Wiley & Sons, Inc., Hoboken, New Jersey
Media and software compilation copyright © 2022 by John Wiley & Sons, Inc. All rights reserved.
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the
1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for
permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,
(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress
are trademarks or registered trademarks of John Wiley & Sons, Inc. and may not be used without written permission. All other
trademarks are the property of their respective owners. John Wiley & Sons, Inc. is not associated with any product or vendor
mentioned in this book.
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: WHILE THE PUBLISHER AND AUTHORS HAVE USED THEIR BEST EFFORTS
IN PREPARING THIS WORK, THEY MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR
COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY
MAY BE CREATED OR EXTENDED BY SALES REPRESENTATIVES, WRITTEN SALES MATERIALS OR PROMOTIONAL STATEMENTS
FOR THIS WORK. THE FACT THAT AN ORGANIZATION, WEBSITE, OR PRODUCT IS REFERRED TO IN THIS WORK AS A CITATION
AND/OR POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE PUBLISHER AND AUTHORS ENDORSE
THE INFORMATION OR SERVICES THE ORGANIZATION, WEBSITE, OR PRODUCT MAY PROVIDE OR RECOMMENDATIONS IT MAY
MAKE. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING
PROFESSIONAL SERVICES. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR YOUR SITUATION.
YOU SHOULD CONSULT WITH A SPECIALIST WHERE APPROPRIATE. FURTHER, READERS SHOULD BE AWARE THAT WEBSITES
LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS
READ. NEITHER THE PUBLISHER NOR AUTHORS SHALL BE LIABLE FOR ANY LOSS OF PROFIT OR ANY OTHER COMMERCIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR OTHER DAMAGES.
For general information on our other products and services, please contact our Customer Care Department within the U.S. at
877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit https://hub.
wiley.com/community/support/dummies.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard
print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or
DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com.
For more information about Wiley products, visit www.wiley.com.
Library of Congress Control Number: 2022935735
ISBN 978-1-119-88685-3 (pbk); ISBN 978-1-119-88687-7 (ebk); ISBN 978-1-119-88686-0 (ebk)
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2022 by John Wiley & Sons, Inc., Hoboken, New Jersey
Media and software compilation copyright © 2022 by John Wiley & Sons, Inc. All rights reserved.
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the
1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for
permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,
(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress
are trademarks or registered trademarks of John Wiley & Sons, Inc. and may not be used without written permission. All other
trademarks are the property of their respective owners. John Wiley & Sons, Inc. is not associated with any product or vendor
mentioned in this book.
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: WHILE THE PUBLISHER AND AUTHORS HAVE USED THEIR BEST EFFORTS
IN PREPARING THIS WORK, THEY MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR
COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY
MAY BE CREATED OR EXTENDED BY SALES REPRESENTATIVES, WRITTEN SALES MATERIALS OR PROMOTIONAL STATEMENTS
FOR THIS WORK. THE FACT THAT AN ORGANIZATION, WEBSITE, OR PRODUCT IS REFERRED TO IN THIS WORK AS A CITATION
AND/OR POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE PUBLISHER AND AUTHORS ENDORSE
THE INFORMATION OR SERVICES THE ORGANIZATION, WEBSITE, OR PRODUCT MAY PROVIDE OR RECOMMENDATIONS IT MAY
MAKE. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING
PROFESSIONAL SERVICES. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR YOUR SITUATION.
YOU SHOULD CONSULT WITH A SPECIALIST WHERE APPROPRIATE. FURTHER, READERS SHOULD BE AWARE THAT WEBSITES
LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS
READ. NEITHER THE PUBLISHER NOR AUTHORS SHALL BE LIABLE FOR ANY LOSS OF PROFIT OR ANY OTHER COMMERCIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR OTHER DAMAGES.
For general information on our other products and services, please contact our Customer Care Department within the U.S. at
877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit https://hub.
wiley.com/community/support/dummies.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard
print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or
DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com.
For more information about Wiley products, visit www.wiley.com.
Library of Congress Control Number: 2022935735
ISBN 978-1-119-88685-3 (pbk); ISBN 978-1-119-88687-7 (ebk); ISBN 978-1-119-88686-0 (ebk)
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Contents at a Glance
Introduction 1
Part 1: Getting Started with the SIE Exam 5
CHAPTER 1: Introducing the SIE (Securities Industry Essentials) Exam 7
CHAPTER 2: Preparing for the SIE Exam 19
CHAPTER 3: Examining and Mastering Question Types 31
CHAPTER 4: Surviving Test Day 41
Part 2: Mastering Basic Security Investments 47
CHAPTER 5: Securities Underwriting: The Process and the Team Players 49
CHAPTER 6: Equity Securities: Corporate Ownership 63
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 81
CHAPTER 8: Municipal Bonds: Local Government Securities 99
Part 3: Delving Deeper: Security Investments with a Twist 121
CHAPTER 9: Delivering Diversification with Packaged Securities 123
CHAPTER 10: Working with Direct Participation Programs and REITs 143
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 155
Part 4: Playing Nicely: Serving Your Customers
and Following the Rules 179
CHAPTER 12: Customer Accounts: Doing the Right Thing 181
CHAPTER 13: Securities Analysis: Doing a Little Market Research 197
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 217
CHAPTER 15: Making Sure the IRS Gets Its Share 231
CHAPTER 16: Rules and Regulations: No Fooling Around 243
Part 5: Putting Your Knowledge to Good Use: Practice Exams 279
CHAPTER 17: Bring It On: Practice Exam 1 281
CHAPTER 18: Answers and Explanations to Practice Exam 1 295
CHAPTER 19: Nothing But Net: Practice Exam 2 305
CHAPTER 20: Answers and Explanations to Practice Exam 2 321
Part 6: The Part of Tens 333
CHAPTER 21: Ten SIE Exam Traps to Avoid 335
CHAPTER 22: Ten Ways to Start Your Career Off Right 339
Index 343
Introduction 1
Part 1: Getting Started with the SIE Exam 5
CHAPTER 1: Introducing the SIE (Securities Industry Essentials) Exam 7
CHAPTER 2: Preparing for the SIE Exam 19
CHAPTER 3: Examining and Mastering Question Types 31
CHAPTER 4: Surviving Test Day 41
Part 2: Mastering Basic Security Investments 47
CHAPTER 5: Securities Underwriting: The Process and the Team Players 49
CHAPTER 6: Equity Securities: Corporate Ownership 63
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 81
CHAPTER 8: Municipal Bonds: Local Government Securities 99
Part 3: Delving Deeper: Security Investments with a Twist 121
CHAPTER 9: Delivering Diversification with Packaged Securities 123
CHAPTER 10: Working with Direct Participation Programs and REITs 143
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 155
Part 4: Playing Nicely: Serving Your Customers
and Following the Rules 179
CHAPTER 12: Customer Accounts: Doing the Right Thing 181
CHAPTER 13: Securities Analysis: Doing a Little Market Research 197
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 217
CHAPTER 15: Making Sure the IRS Gets Its Share 231
CHAPTER 16: Rules and Regulations: No Fooling Around 243
Part 5: Putting Your Knowledge to Good Use: Practice Exams 279
CHAPTER 17: Bring It On: Practice Exam 1 281
CHAPTER 18: Answers and Explanations to Practice Exam 1 295
CHAPTER 19: Nothing But Net: Practice Exam 2 305
CHAPTER 20: Answers and Explanations to Practice Exam 2 321
Part 6: The Part of Tens 333
CHAPTER 21: Ten SIE Exam Traps to Avoid 335
CHAPTER 22: Ten Ways to Start Your Career Off Right 339
Index 343
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Table of Contents vii
Table of Contents
INTRODUCTION 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 2
Beyond the Book 2
Where to Go from Here 3
PART 1: GETTING STARTED WITH THE SIE EXAM 5
CHAPTER 1: Introducing the SIE (Securities Industry Essentials) Exam 7
What Is the SIE Exam, Anyway? 7
Profiling the SIE Exam-Taker 8
One’s Not Enough: Tackling the Corequisite Exams 8
Series 6: Investment Company and Variable Products Representative Exam 9
Series 7: General Securities Representative Exam 9
Series 22: DPP Representative Exam 9
Series 57: Securities Trader Exam 9
Series 79: Investment Banking Representative Exam 9
Series 82: Private Securities Offerings Representative Exam 10
Series 7 + Series 86 + Series 87: Research Analyst Exam 10
Series 99: Operations Professional Exam 10
Signing Up 10
Filling out an application to enroll 10
It’s a date! Scheduling your exam 11
Planning for special accommodations 11
Just in case: Canceling as an option 13
Taking a Peek at the Tested Topics 13
Understanding the Exam Format and Other Exam Details 14
Reviewing the exam basics 14
Practicing on ten additional trial questions 15
Mastering the computerized format and features 15
Viewing exhibits 16
Instant gratification: Receiving and evaluating your score 16
CHAPTER 2: Preparing for the SIE Exam 19
Courses and Training Materials: Determining the Best Way to Study 19
Back to school: Attending a prep course 19
Selecting prep material to study on your own 21
Managing Your Study Time Wisely 23
Blocking out some time to study 23
It’s a plan: Getting into a study routine 24
Give it a rest: Taking short breaks 24
Staying focused from day to day 25
Devoting time to practice tests 25
Avoiding study groups 26
Staying in shape 26
Exploring Study Strategies 26
Developing Solid Test-Taking Skills 27
Read the question carefully 27
Look for phrases that lead to the topic tested 27
Table of Contents
INTRODUCTION 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 2
Beyond the Book 2
Where to Go from Here 3
PART 1: GETTING STARTED WITH THE SIE EXAM 5
CHAPTER 1: Introducing the SIE (Securities Industry Essentials) Exam 7
What Is the SIE Exam, Anyway? 7
Profiling the SIE Exam-Taker 8
One’s Not Enough: Tackling the Corequisite Exams 8
Series 6: Investment Company and Variable Products Representative Exam 9
Series 7: General Securities Representative Exam 9
Series 22: DPP Representative Exam 9
Series 57: Securities Trader Exam 9
Series 79: Investment Banking Representative Exam 9
Series 82: Private Securities Offerings Representative Exam 10
Series 7 + Series 86 + Series 87: Research Analyst Exam 10
Series 99: Operations Professional Exam 10
Signing Up 10
Filling out an application to enroll 10
It’s a date! Scheduling your exam 11
Planning for special accommodations 11
Just in case: Canceling as an option 13
Taking a Peek at the Tested Topics 13
Understanding the Exam Format and Other Exam Details 14
Reviewing the exam basics 14
Practicing on ten additional trial questions 15
Mastering the computerized format and features 15
Viewing exhibits 16
Instant gratification: Receiving and evaluating your score 16
CHAPTER 2: Preparing for the SIE Exam 19
Courses and Training Materials: Determining the Best Way to Study 19
Back to school: Attending a prep course 19
Selecting prep material to study on your own 21
Managing Your Study Time Wisely 23
Blocking out some time to study 23
It’s a plan: Getting into a study routine 24
Give it a rest: Taking short breaks 24
Staying focused from day to day 25
Devoting time to practice tests 25
Avoiding study groups 26
Staying in shape 26
Exploring Study Strategies 26
Developing Solid Test-Taking Skills 27
Read the question carefully 27
Look for phrases that lead to the topic tested 27
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viii Securities Industry Essentials Exam 2023–2024 For Dummies with Online Practice
Work with what you have 27
Don’t obsess; mark for review 28
Keep track of time 28
Master the process of elimination 29
Maintain your concentration 29
Think carefully before changing your answers 29
Use the scrap paper wisely 29
Knowing When You’re Ready 30
CHAPTER 3: Examining and Mastering Question Types 31
Familiarizing Yourself with Question Formats 31
Working with the straight shooters: The straightforward questions 32
Encountering quirky questions with qualifiers 33
Roman hell: Complex multiple-choice questions 34
Looking at exhibits: Diagram questions 36
Shredding the Questions: Tips and Tricks 37
Focusing on key information 37
Answer me this: Picking the correct answer 38
Don’t make the same mistake twice 40
CHAPTER 4: Surviving Test Day 41
Composing Yourself the Day Before 41
Making the Most of the Morning 43
Arriving on the Scene 43
Taking advantage of one last chance to cram 43
Signing in 43
Getting seated 44
Tackling the SIE 44
Revealing Your Results: Drumroll, Please. . . 45
PART 2: MASTERING BASIC SECURITY INVESTMENTS 47
CHAPTER 5: Securities Underwriting: The Process and the Team Players 49
Bringing New Issues to the Market 49
Starting out: What the issuer does 49
Calling the roll: Introducing the team players 53
Getting the skinny on the issue and issuer: The prospectus 54
Counting the securities along the way 55
Getting Up to Speed on the Types of Securities Offerings 55
Reviewing Exemptions 56
Exempt securities 56
Exempt transactions 57
Testing Your Knowledge 59
Practice questions 59
Answers and explanations 62
CHAPTER 6: Equity Securities: Corporate Ownership 63
Beginning with the Basics: Common Stock 63
Understanding a stockholder’s voting rights 64
Categorizing shares corporations can sell 66
Establishing the par value of common stock 66
Considering corporate actions 67
Splitting common stock 68
Sharing corporate profits through dividends 69
Work with what you have 27
Don’t obsess; mark for review 28
Keep track of time 28
Master the process of elimination 29
Maintain your concentration 29
Think carefully before changing your answers 29
Use the scrap paper wisely 29
Knowing When You’re Ready 30
CHAPTER 3: Examining and Mastering Question Types 31
Familiarizing Yourself with Question Formats 31
Working with the straight shooters: The straightforward questions 32
Encountering quirky questions with qualifiers 33
Roman hell: Complex multiple-choice questions 34
Looking at exhibits: Diagram questions 36
Shredding the Questions: Tips and Tricks 37
Focusing on key information 37
Answer me this: Picking the correct answer 38
Don’t make the same mistake twice 40
CHAPTER 4: Surviving Test Day 41
Composing Yourself the Day Before 41
Making the Most of the Morning 43
Arriving on the Scene 43
Taking advantage of one last chance to cram 43
Signing in 43
Getting seated 44
Tackling the SIE 44
Revealing Your Results: Drumroll, Please. . . 45
PART 2: MASTERING BASIC SECURITY INVESTMENTS 47
CHAPTER 5: Securities Underwriting: The Process and the Team Players 49
Bringing New Issues to the Market 49
Starting out: What the issuer does 49
Calling the roll: Introducing the team players 53
Getting the skinny on the issue and issuer: The prospectus 54
Counting the securities along the way 55
Getting Up to Speed on the Types of Securities Offerings 55
Reviewing Exemptions 56
Exempt securities 56
Exempt transactions 57
Testing Your Knowledge 59
Practice questions 59
Answers and explanations 62
CHAPTER 6: Equity Securities: Corporate Ownership 63
Beginning with the Basics: Common Stock 63
Understanding a stockholder’s voting rights 64
Categorizing shares corporations can sell 66
Establishing the par value of common stock 66
Considering corporate actions 67
Splitting common stock 68
Sharing corporate profits through dividends 69
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Table of Contents ix
Getting Preferential Treatment: Preferred Stock 71
Considering characteristics of preferred stock 71
Getting familiar with types of preferred stock 72
Securities with a Twist 74
Opening national borders: ADRs 74
Rights: The right to buy new shares at a discount 74
Warrants: The right to buy stock at a fixed price 75
Testing Your Knowledge 75
Practice questions 75
Answers and explanations 78
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 81
Tackling Bond Terms, Types, and Traits 81
Remembering bond terminology 82
Following bond issue and maturity schedules 83
Comparing secured and unsecured bonds 84
Making Basic Bond Price and Yield Calculations 85
Nominal yield (coupon rate) 86
Current yield 86
Yield to maturity (basis) 86
Yield to call 87
Yield to worst 87
Total return 87
Basis point 87
Determining the Best Investment: Comparing Bonds 88
Considering bond credit ratings 88
Contrasting callable and put bonds 89
Popping the top on convertible bonds 90
Exploring U.S. Government Securities 91
Understanding the types of U S government securities 91
Looking at agency securities 92
Playing It Safe: Short-Term Loans or Money Market Instruments 93
Testing Your Knowledge 94
Practice questions 94
Answers and explanations 97
CHAPTER 8: Municipal Bonds: Local Government Securities 99
General Obligation Bonds: Backing Bonds with Taxes 99
General characteristics of GOs 100
Analyzing GO bonds 100
Revenue Bonds: Raising Money for Utilities and Such 101
General characteristics of revenue bonds 102
Analyzing revenue bonds 102
The Primary Market: Bringing New Municipal Bonds to Market 103
Allocation of orders 104
Definitions for new issues 104
Examining Other Types of Municipal Bonds on the Test 105
Taxing BABs: Taxable Municipal Bonds 106
Municipal Notes: Securing Short-Term Financing 106
Taking a Closer Look at Municipal Fund Securities 107
Section 529 savings plans 107
ABLE accounts 108
LGIPs 108
Understanding the Taxes on Municipal Bonds 109
Getting Preferential Treatment: Preferred Stock 71
Considering characteristics of preferred stock 71
Getting familiar with types of preferred stock 72
Securities with a Twist 74
Opening national borders: ADRs 74
Rights: The right to buy new shares at a discount 74
Warrants: The right to buy stock at a fixed price 75
Testing Your Knowledge 75
Practice questions 75
Answers and explanations 78
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 81
Tackling Bond Terms, Types, and Traits 81
Remembering bond terminology 82
Following bond issue and maturity schedules 83
Comparing secured and unsecured bonds 84
Making Basic Bond Price and Yield Calculations 85
Nominal yield (coupon rate) 86
Current yield 86
Yield to maturity (basis) 86
Yield to call 87
Yield to worst 87
Total return 87
Basis point 87
Determining the Best Investment: Comparing Bonds 88
Considering bond credit ratings 88
Contrasting callable and put bonds 89
Popping the top on convertible bonds 90
Exploring U.S. Government Securities 91
Understanding the types of U S government securities 91
Looking at agency securities 92
Playing It Safe: Short-Term Loans or Money Market Instruments 93
Testing Your Knowledge 94
Practice questions 94
Answers and explanations 97
CHAPTER 8: Municipal Bonds: Local Government Securities 99
General Obligation Bonds: Backing Bonds with Taxes 99
General characteristics of GOs 100
Analyzing GO bonds 100
Revenue Bonds: Raising Money for Utilities and Such 101
General characteristics of revenue bonds 102
Analyzing revenue bonds 102
The Primary Market: Bringing New Municipal Bonds to Market 103
Allocation of orders 104
Definitions for new issues 104
Examining Other Types of Municipal Bonds on the Test 105
Taxing BABs: Taxable Municipal Bonds 106
Municipal Notes: Securing Short-Term Financing 106
Taking a Closer Look at Municipal Fund Securities 107
Section 529 savings plans 107
ABLE accounts 108
LGIPs 108
Understanding the Taxes on Municipal Bonds 109
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x Securities Industry Essentials Exam 2023–2024 For Dummies with Online Practice
Comparing municipal and corporate bonds equally 109
Scot-free! Taking a look at triple tax-free municipal bonds 110
Following Municipal Bond Rules 110
Confirmations 110
Advertising and record keeping 111
Gifts 111
Commissions 112
Gathering Municipal Bond Info 112
The bond resolution (indenture) 112
Legal opinion 112
Official statement 113
“G” That’s a Whole Lot of Rules 113
Testing Your Knowledge 116
Practice questions 116
Answers and explanations 119
PART 3: DELVING DEEPER: SECURITY INVESTMENTS
WITH A TWIST 121
CHAPTER 9: Delivering Diversification with Packaged Securities 123
Looking at Investment Company Registration 123
Diversifying through Management Investment Companies 124
Comparing open- and closed-end funds 124
Keeping your customer’s investment objectives in mind 126
Dealing with discounts 128
Figuring the sales charge and public offering price of open-end funds 130
Considering Other Investment Company Options 132
Face-amount certificate companies 132
Unit investment trusts 132
Exchange-traded products 133
Investment company rules 17a-6 and 17a-7 134
Adding Annuities to a Portfolio 134
Looking at fixed annuities 134
Focusing on variable annuities 135
Putting money into (and receiving money from) annuities 135
Understanding the Investment Component of Variable Life Insurance Products 137
Testing Your Knowledge 137
Practice questions 138
Answers and explanations 141
CHAPTER 10: Working with Direct Participation Programs and REITs 143
Searching for Identity: What DPPs Are (And Aren’t) 144
The DPP Characters: General and Limited Partners 144
Pushing through Partnership Paperwork 145
Partnership agreement 145
Certificate of limited partnership 146
Subscription agreement 146
Passive Income and Losses: Looking at Taxes on Partnerships 146
Evaluating DPPs 147
Checking Out Types of Partnerships 147
Building on real-estate partnership info 147
Gearing up with equipment leasing 148
Strengthening your grasp on oil and gas 149
Comparing municipal and corporate bonds equally 109
Scot-free! Taking a look at triple tax-free municipal bonds 110
Following Municipal Bond Rules 110
Confirmations 110
Advertising and record keeping 111
Gifts 111
Commissions 112
Gathering Municipal Bond Info 112
The bond resolution (indenture) 112
Legal opinion 112
Official statement 113
“G” That’s a Whole Lot of Rules 113
Testing Your Knowledge 116
Practice questions 116
Answers and explanations 119
PART 3: DELVING DEEPER: SECURITY INVESTMENTS
WITH A TWIST 121
CHAPTER 9: Delivering Diversification with Packaged Securities 123
Looking at Investment Company Registration 123
Diversifying through Management Investment Companies 124
Comparing open- and closed-end funds 124
Keeping your customer’s investment objectives in mind 126
Dealing with discounts 128
Figuring the sales charge and public offering price of open-end funds 130
Considering Other Investment Company Options 132
Face-amount certificate companies 132
Unit investment trusts 132
Exchange-traded products 133
Investment company rules 17a-6 and 17a-7 134
Adding Annuities to a Portfolio 134
Looking at fixed annuities 134
Focusing on variable annuities 135
Putting money into (and receiving money from) annuities 135
Understanding the Investment Component of Variable Life Insurance Products 137
Testing Your Knowledge 137
Practice questions 138
Answers and explanations 141
CHAPTER 10: Working with Direct Participation Programs and REITs 143
Searching for Identity: What DPPs Are (And Aren’t) 144
The DPP Characters: General and Limited Partners 144
Pushing through Partnership Paperwork 145
Partnership agreement 145
Certificate of limited partnership 146
Subscription agreement 146
Passive Income and Losses: Looking at Taxes on Partnerships 146
Evaluating DPPs 147
Checking Out Types of Partnerships 147
Building on real-estate partnership info 147
Gearing up with equipment leasing 148
Strengthening your grasp on oil and gas 149
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Table of Contents xi
Reducing Real-estate Risk with REITs 150
Testing Your Knowledge 151
Practice questions 152
Answers and explanations 154
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 155
Brushing Up on Option Basics 155
Reading an option 156
Looking at call options: The right to buy 157
Checking out put options: The right to sell 157
Getting your money back: Options in-, at-, or out-of-the-money 157
Paying the premium: The cost of an option 159
Incorporating Standard Option Math 160
Calls same: Buying or selling call options 161
Puts switch: Buying or selling put options 163
Trading options: Opening and closing transactions 166
Gaining Additional Option Insight 168
Clearing through the OCC 168
That’s ODD: Options risk disclosure document 168
Getting the go-ahead: Registered options principal 168
Options account agreement 168
Order ticket 169
Last trade, last exercise, and expiration of an option 169
Exercise and assignment 169
Additional definitions 170
Some additional option rules 171
Testing Your Knowledge 172
Practice questions 173
Answers and explanations 176
PART 4: PLAYING NICELY: SERVING YOUR CUSTOMERS
AND FOLLOWING THE RULES 179
CHAPTER 12: Customer Accounts: Doing the Right Thing 181
Following Protocol When Opening Accounts 181
Filing the facts on the new account form 181
Gathering other important customer info 183
Word on the street: Offering numbered accounts 184
Selecting the Appropriate Type of Account 184
Single and joint accounts 184
Trust accounts 185
Discretionary accounts 186
Corporate accounts 186
Institutional accounts 187
Partnership accounts 187
Cash or margin account 187
Working with Margin Accounts 188
Disclosures and agreements: Getting margin paperwork out of the way 188
Introducing long and short margin accounts 189
Regulation T: Following the Fed’s rules for purchasing margin accounts 189
Making margin call 190
Opening a margin account: The initial requirements 190
Obeying the Telephone Act of 1991 191
Reducing Real-estate Risk with REITs 150
Testing Your Knowledge 151
Practice questions 152
Answers and explanations 154
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 155
Brushing Up on Option Basics 155
Reading an option 156
Looking at call options: The right to buy 157
Checking out put options: The right to sell 157
Getting your money back: Options in-, at-, or out-of-the-money 157
Paying the premium: The cost of an option 159
Incorporating Standard Option Math 160
Calls same: Buying or selling call options 161
Puts switch: Buying or selling put options 163
Trading options: Opening and closing transactions 166
Gaining Additional Option Insight 168
Clearing through the OCC 168
That’s ODD: Options risk disclosure document 168
Getting the go-ahead: Registered options principal 168
Options account agreement 168
Order ticket 169
Last trade, last exercise, and expiration of an option 169
Exercise and assignment 169
Additional definitions 170
Some additional option rules 171
Testing Your Knowledge 172
Practice questions 173
Answers and explanations 176
PART 4: PLAYING NICELY: SERVING YOUR CUSTOMERS
AND FOLLOWING THE RULES 179
CHAPTER 12: Customer Accounts: Doing the Right Thing 181
Following Protocol When Opening Accounts 181
Filing the facts on the new account form 181
Gathering other important customer info 183
Word on the street: Offering numbered accounts 184
Selecting the Appropriate Type of Account 184
Single and joint accounts 184
Trust accounts 185
Discretionary accounts 186
Corporate accounts 186
Institutional accounts 187
Partnership accounts 187
Cash or margin account 187
Working with Margin Accounts 188
Disclosures and agreements: Getting margin paperwork out of the way 188
Introducing long and short margin accounts 189
Regulation T: Following the Fed’s rules for purchasing margin accounts 189
Making margin call 190
Opening a margin account: The initial requirements 190
Obeying the Telephone Act of 1991 191
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xii Securities Industry Essentials Exam 2023–2024 For Dummies with Online Practice
Testing Your Knowledge 192
Practice questions 192
Answers and explanations 195
CHAPTER 13: Securities Analysis: Doing a Little Market Research 197
Getting to Know Your Securities and Markets: Securities Analysis Basics 197
Regarding systematic and nonsystematic risk 198
Mitigating risk 199
Deciding what to buy: Fundamental analysis 201
Deciding when to buy: Technical analysis 203
Following the Green: Money Supply and Monetary Policy 205
Influencing the money supply 206
Opening the Federal Reserve Board’s toolbox 207
Reading Economic Indicators 208
Leading indicators 208
Coincident (coincidental) indicators 209
Lagging indicators 209
GDP and GNP: Measuring goods and services 209
How Economic Factors Affect Securities 210
Cyclical 210
Defensive 210
Growth 210
Your Principal Economic Theory Primer 210
Testing Your Knowledge 211
Practice questions 211
Answers and explanations 214
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 217
Shopping at Primary and Secondary Markets 217
Buying new in the primary market 218
Buying used in the secondary market 218
Making the Trade 218
Auctioning securities at securities exchanges 218
Negotiating trades over the counter 219
Understanding the Role of a Broker–Dealer 220
An introducing broker 220
A clearing (carrying) broker 221
A prime broker 221
Receiving and Executing Customer Orders 221
Reviewing basic order types 221
Factoring in order features 223
Following customers’ orders or using your discretion 224
It Takes All Kinds: Recognizing Different Types of Investors 226
Retail investors 226
Accredited investors 226
Institutional investors 226
Testing Your Knowledge 227
Practice questions 227
Answers and explanations 230
Testing Your Knowledge 192
Practice questions 192
Answers and explanations 195
CHAPTER 13: Securities Analysis: Doing a Little Market Research 197
Getting to Know Your Securities and Markets: Securities Analysis Basics 197
Regarding systematic and nonsystematic risk 198
Mitigating risk 199
Deciding what to buy: Fundamental analysis 201
Deciding when to buy: Technical analysis 203
Following the Green: Money Supply and Monetary Policy 205
Influencing the money supply 206
Opening the Federal Reserve Board’s toolbox 207
Reading Economic Indicators 208
Leading indicators 208
Coincident (coincidental) indicators 209
Lagging indicators 209
GDP and GNP: Measuring goods and services 209
How Economic Factors Affect Securities 210
Cyclical 210
Defensive 210
Growth 210
Your Principal Economic Theory Primer 210
Testing Your Knowledge 211
Practice questions 211
Answers and explanations 214
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 217
Shopping at Primary and Secondary Markets 217
Buying new in the primary market 218
Buying used in the secondary market 218
Making the Trade 218
Auctioning securities at securities exchanges 218
Negotiating trades over the counter 219
Understanding the Role of a Broker–Dealer 220
An introducing broker 220
A clearing (carrying) broker 221
A prime broker 221
Receiving and Executing Customer Orders 221
Reviewing basic order types 221
Factoring in order features 223
Following customers’ orders or using your discretion 224
It Takes All Kinds: Recognizing Different Types of Investors 226
Retail investors 226
Accredited investors 226
Institutional investors 226
Testing Your Knowledge 227
Practice questions 227
Answers and explanations 230
Loading page 15...
Table of Contents xiii
CHAPTER 15: Making Sure the IRS Gets Its Share 231
Everything in Its Place: Checking Out Tax and Income Categories 231
Touring the tax categories 231
Looking at types of income 232
Noting Taxes on Investments 232
Interest income 232
Dividends 233
At the sale: Capital gains and losses 234
Exploring Retirement Plan Tax Advantages 236
Qualified versus nonqualified plans 236
IRA types and contribution limits 237
401(k) and 403(b) 238
Testing Your Knowledge 239
Practice questions 239
Answers and explanations 242
CHAPTER 16: Rules and Regulations: No Fooling Around 243
Meeting the Market Watchdogs: Securities Regulatory Organizations 243
The Securities and Exchange Commission 244
Self-regulatory organizations 245
State regulators 245
Department of the Treasury/IRS 246
FINRA Registration and Reporting Requirements 246
Filling out the U4 form 246
Missing the mark: Grounds for disqualification 247
Handing over your fingerprints 248
Continuing education 248
Leaving your firm: Resignation and termination 249
Skipping a step: Who’s exempt from FINRA registration 249
Adhering to reporting requirements 249
Trading by the Book When the Account Is Open 250
Filling out an order ticket 251
Checking your calendar: Payment and settlement dates 253
Safeguarding investor info: Regulation S-P 254
Confirming a trade 254
Acting in your customers’ best interest 255
Borrowing from or lending to 256
Following up with account statements 257
Keeping your dividend dates straight 257
Handling complaints 259
Disseminating info: Appropriate communications 260
Keeping clear records 260
Committing Other Important Rules to Memory 261
Sticking to the 5 percent markup policy 261
Avoiding violations 263
Following the money: Anti-money-laundering rules 265
Complying with AML rules 266
Working with public info: Following insider trading rules 267
CHAPTER 15: Making Sure the IRS Gets Its Share 231
Everything in Its Place: Checking Out Tax and Income Categories 231
Touring the tax categories 231
Looking at types of income 232
Noting Taxes on Investments 232
Interest income 232
Dividends 233
At the sale: Capital gains and losses 234
Exploring Retirement Plan Tax Advantages 236
Qualified versus nonqualified plans 236
IRA types and contribution limits 237
401(k) and 403(b) 238
Testing Your Knowledge 239
Practice questions 239
Answers and explanations 242
CHAPTER 16: Rules and Regulations: No Fooling Around 243
Meeting the Market Watchdogs: Securities Regulatory Organizations 243
The Securities and Exchange Commission 244
Self-regulatory organizations 245
State regulators 245
Department of the Treasury/IRS 246
FINRA Registration and Reporting Requirements 246
Filling out the U4 form 246
Missing the mark: Grounds for disqualification 247
Handing over your fingerprints 248
Continuing education 248
Leaving your firm: Resignation and termination 249
Skipping a step: Who’s exempt from FINRA registration 249
Adhering to reporting requirements 249
Trading by the Book When the Account Is Open 250
Filling out an order ticket 251
Checking your calendar: Payment and settlement dates 253
Safeguarding investor info: Regulation S-P 254
Confirming a trade 254
Acting in your customers’ best interest 255
Borrowing from or lending to 256
Following up with account statements 257
Keeping your dividend dates straight 257
Handling complaints 259
Disseminating info: Appropriate communications 260
Keeping clear records 260
Committing Other Important Rules to Memory 261
Sticking to the 5 percent markup policy 261
Avoiding violations 263
Following the money: Anti-money-laundering rules 265
Complying with AML rules 266
Working with public info: Following insider trading rules 267
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xiv Securities Industry Essentials Exam 2023–2024 For Dummies with Online Practice
The Investor’s Bankruptcy Shield: FDIC and SIPC Coverage 268
Holding a customer’s mail 268
Business continuity plans and emergency contact information 269
Testing Your Knowledge 269
Practice questions 270
Answers and explanations 276
PART 5: PUTTING YOUR KNOWLEDGE TO GOOD USE:
PRACTICE EXAMS 279
CHAPTER 17: Bring It On: Practice Exam 1 281
CHAPTER 18: Answers and Explanations to Practice Exam 1 295
Making the Grade 304
Answer Key for Practice Exam 1 304
CHAPTER 19: Nothing But Net: Practice Exam 2 305
CHAPTER 20: Answers and Explanations to Practice Exam 2 321
Knowing the Score 330
Answer Key for Practice Exam 2 331
PART 6: THE PART OF TENS 333
CHAPTER 21: Ten SIE Exam Traps to Avoid 335
Easing Up on the Studying 335
Assuming the Question’s Intent 336
Reading into the Question 336
Becoming Distracted When Others Finish 336
Not Dressing for Comfort 337
Forgetting to Breathe 337
Trying to Work Out Equations in Your Head Instead of Writing Them Down 337
Spending Too Much Time on One Question 338
Changing Your Answers for the Wrong Reasons 338
Calculating Your Final Score Prematurely 338
CHAPTER 22: Ten Ways to Start Your Career Off Right 339
Win at the Numbers Game 339
Be an Apprentice 340
Do Your Homework 340
Treat the Minnow Like a Whale 340
Smile When You Dial 340
When a Security Falls, Don’t Be a Stranger 340
Put In the Hours 341
Broaden Your Horizons 341
Pay Yourself First 341
Set Some Goals: The Brass Ring 342
INDEX 343
The Investor’s Bankruptcy Shield: FDIC and SIPC Coverage 268
Holding a customer’s mail 268
Business continuity plans and emergency contact information 269
Testing Your Knowledge 269
Practice questions 270
Answers and explanations 276
PART 5: PUTTING YOUR KNOWLEDGE TO GOOD USE:
PRACTICE EXAMS 279
CHAPTER 17: Bring It On: Practice Exam 1 281
CHAPTER 18: Answers and Explanations to Practice Exam 1 295
Making the Grade 304
Answer Key for Practice Exam 1 304
CHAPTER 19: Nothing But Net: Practice Exam 2 305
CHAPTER 20: Answers and Explanations to Practice Exam 2 321
Knowing the Score 330
Answer Key for Practice Exam 2 331
PART 6: THE PART OF TENS 333
CHAPTER 21: Ten SIE Exam Traps to Avoid 335
Easing Up on the Studying 335
Assuming the Question’s Intent 336
Reading into the Question 336
Becoming Distracted When Others Finish 336
Not Dressing for Comfort 337
Forgetting to Breathe 337
Trying to Work Out Equations in Your Head Instead of Writing Them Down 337
Spending Too Much Time on One Question 338
Changing Your Answers for the Wrong Reasons 338
Calculating Your Final Score Prematurely 338
CHAPTER 22: Ten Ways to Start Your Career Off Right 339
Win at the Numbers Game 339
Be an Apprentice 340
Do Your Homework 340
Treat the Minnow Like a Whale 340
Smile When You Dial 340
When a Security Falls, Don’t Be a Stranger 340
Put In the Hours 341
Broaden Your Horizons 341
Pay Yourself First 341
Set Some Goals: The Brass Ring 342
INDEX 343
Loading page 17...
Introduction 1
Introduction
So you want to be a securities industry professional such as a stockbroker? The good
news is that a career in the securities field can be extremely lucrative and rewarding. The
not-so-good news is that anyone who plans to become a stockbroker and sell securities in
any of the 50 states must first pass the Securities Industry Essentials (SIE) exam and one of the
top-off exams. Even the SIE exam alone is quite a challenge for most people. To pass the SIE,
you have to commit time and effort.
I passed all my securities exams the first time with very high scores, but they all required weeks
of study and sacrifice. Those who aren’t totally prepared on exam day are in for an unpleasant
wake-up call. As a test prep instructor and tutor, I always had a few students in every class who
had enrolled after they already failed one of their exams. Most of them initially expected the same
easy ride that they’d experienced in high school or college. Not only were they wrong, but they
also had to pay a significant amount of money to reregister for the exam and wait another
30 days — a rule of the Financial Industry Regulatory Authority (FINRA) — before they could
retake the exam.
Back to the good news again. You’re obviously interested in doing well, so you probably won’t be
one of those people. This book can help you pass the SIE exam and achieve your goal.
About This Book
This book should be all you need to pass the exam, although I certainly encourage you to view
other materials and take whatever exams you can get your hands on. But as a word of caution,
if you’re reviewing and taking tests from other books, please make sure that they’re on target.
I’ve seen more than a couple of books presenting information that is definitely not included in
the SIE outline.
I cover the topics that appear on the test, offer formulas as needed, provide definitions, and go
over the information you need to know. I also include lots of tips and a few memory tricks. But
the real benefit of this book is finding out how to study and think through problems as well as you
possibly can. That’s why I help you choose a study program, explain how to handle specific
question types, warn you about common mistakes, connect concepts, and show you how to pull
questions apart and get to the bottom of what’s being asked. Then you get to apply this knowledge
in two full-length practice tests so you get a taste of the SIE exam experience.
This is a reference book, and most sections are self-contained. In other words, you can read a
section and understand it without looking over the text that comes before it. When some back-
ground information is helpful, I give cross-references to related topics. Therefore, you can pretty
much jump in and out whenever you find topics you like (and when you find those you don’t). And
like all good tour guides, I also point you to some other sites of interest — topics you can explore
further on your own. If you’re short on time (as you probably are) and aren’t ready for a break just
yet, you can skip the sidebars, those little gray boxes that contain interesting but nonessential
information.
Introduction
So you want to be a securities industry professional such as a stockbroker? The good
news is that a career in the securities field can be extremely lucrative and rewarding. The
not-so-good news is that anyone who plans to become a stockbroker and sell securities in
any of the 50 states must first pass the Securities Industry Essentials (SIE) exam and one of the
top-off exams. Even the SIE exam alone is quite a challenge for most people. To pass the SIE,
you have to commit time and effort.
I passed all my securities exams the first time with very high scores, but they all required weeks
of study and sacrifice. Those who aren’t totally prepared on exam day are in for an unpleasant
wake-up call. As a test prep instructor and tutor, I always had a few students in every class who
had enrolled after they already failed one of their exams. Most of them initially expected the same
easy ride that they’d experienced in high school or college. Not only were they wrong, but they
also had to pay a significant amount of money to reregister for the exam and wait another
30 days — a rule of the Financial Industry Regulatory Authority (FINRA) — before they could
retake the exam.
Back to the good news again. You’re obviously interested in doing well, so you probably won’t be
one of those people. This book can help you pass the SIE exam and achieve your goal.
About This Book
This book should be all you need to pass the exam, although I certainly encourage you to view
other materials and take whatever exams you can get your hands on. But as a word of caution,
if you’re reviewing and taking tests from other books, please make sure that they’re on target.
I’ve seen more than a couple of books presenting information that is definitely not included in
the SIE outline.
I cover the topics that appear on the test, offer formulas as needed, provide definitions, and go
over the information you need to know. I also include lots of tips and a few memory tricks. But
the real benefit of this book is finding out how to study and think through problems as well as you
possibly can. That’s why I help you choose a study program, explain how to handle specific
question types, warn you about common mistakes, connect concepts, and show you how to pull
questions apart and get to the bottom of what’s being asked. Then you get to apply this knowledge
in two full-length practice tests so you get a taste of the SIE exam experience.
This is a reference book, and most sections are self-contained. In other words, you can read a
section and understand it without looking over the text that comes before it. When some back-
ground information is helpful, I give cross-references to related topics. Therefore, you can pretty
much jump in and out whenever you find topics you like (and when you find those you don’t). And
like all good tour guides, I also point you to some other sites of interest — topics you can explore
further on your own. If you’re short on time (as you probably are) and aren’t ready for a break just
yet, you can skip the sidebars, those little gray boxes that contain interesting but nonessential
information.
Loading page 18...
2 Securities Industry Essentials Exam 2023–2024 For Dummies with Online Practice
Foolish Assumptions
While writing this book, I made a few assumptions about you and why you picked up this book.
For starters, I assume that you’re looking for a no-nonsense study guide to supplement your
textbook or prep course — one that provides expert insider advice along with a ton of example
questions and some sample exams. Look no further! Whether you’re preparing to take the test for
the first time, retaking the test after a less-than-stellar performance, or looking for a refresher
before you recertify, this is the book for you!
Icons Used in This Book
To make this book easier to read and use, I include some icons to help you find and fathom key
ideas and information.
This icon highlights example SIE test questions (which I follow with helpful answer
explanations).
This icon is attached to shortcuts and insider advice for studying for and passing the SIE exam.
This icon points to information that’s especially important to remember to do well on the test.
This icon warns you away from actions that can harm your work and drop your score.
Beyond the Book
In addition to the material in this book, this product comes with access to some really useful
online material. For additional tips and tricks, check out this book’s free Cheat Sheet by going to
www.dummies.com and typing “Securities Industry Essentials Exam For Dummies cheat sheet” in the
search box.
You also get access to an online database of exams for even more practice.
To gain access to the exams online, all you have to do is register. Just follow these simple steps:
1. Register your book or ebook at Dummies.com to get your personal identification
number (PIN).
2. Go to www.dummies.com/go/getaccess.
3. Choose your product from the drop-down list on that page.
4. Follow the prompts to validate your product, and then check your email for a
confirmation message that includes your PIN and instructions for logging in.
Foolish Assumptions
While writing this book, I made a few assumptions about you and why you picked up this book.
For starters, I assume that you’re looking for a no-nonsense study guide to supplement your
textbook or prep course — one that provides expert insider advice along with a ton of example
questions and some sample exams. Look no further! Whether you’re preparing to take the test for
the first time, retaking the test after a less-than-stellar performance, or looking for a refresher
before you recertify, this is the book for you!
Icons Used in This Book
To make this book easier to read and use, I include some icons to help you find and fathom key
ideas and information.
This icon highlights example SIE test questions (which I follow with helpful answer
explanations).
This icon is attached to shortcuts and insider advice for studying for and passing the SIE exam.
This icon points to information that’s especially important to remember to do well on the test.
This icon warns you away from actions that can harm your work and drop your score.
Beyond the Book
In addition to the material in this book, this product comes with access to some really useful
online material. For additional tips and tricks, check out this book’s free Cheat Sheet by going to
www.dummies.com and typing “Securities Industry Essentials Exam For Dummies cheat sheet” in the
search box.
You also get access to an online database of exams for even more practice.
To gain access to the exams online, all you have to do is register. Just follow these simple steps:
1. Register your book or ebook at Dummies.com to get your personal identification
number (PIN).
2. Go to www.dummies.com/go/getaccess.
3. Choose your product from the drop-down list on that page.
4. Follow the prompts to validate your product, and then check your email for a
confirmation message that includes your PIN and instructions for logging in.
Loading page 19...
Introduction 3
If you do not receive this email within two hours, please check your spam folder before contact-
ing us through our Technical Support website at http://support.wiley.com or by phone at
877-762-2974.
Now you’re ready to go! You can come back to the practice material as often as you want; simply
log on with the username and password you created during your initial login. You don’t need to
enter the access code a second time. Your registration is good for one year from the day you acti-
vate your PIN.
Where to Go from Here
Although you can read this book from start to finish, you can certainly work your way through it
in more creative ways. Where you start is up to you, but please, please don’t start with the practice
final exams! Give yourself a good grounding in the content here and then use the practice final
exams to evaluate your understanding and show you where to focus your studies. You can flip to
the topics you think you understand fairly well to boost your confidence or skip directly to what-
ever’s giving you trouble; let the index and the table of contents be your guides. If you have a good
understanding of how to take the SIE exam, from how it’s structured to how to tackle questions,
you can go directly to the chapters in parts 2 and 3, which address types of securities. If you’re
feeling shaky on the legal aspects, check out the FINRA rules and regulations in Part 4. Everyone,
however, can probably benefit from Part 1’s test-taking basics and info on study plans. Wherever
you go, feel free to take detours to your textbooks, flash cards, FINRA websites, and any other
resources for more information. Just remember to come back so you don’t miss anything here!
If you do not receive this email within two hours, please check your spam folder before contact-
ing us through our Technical Support website at http://support.wiley.com or by phone at
877-762-2974.
Now you’re ready to go! You can come back to the practice material as often as you want; simply
log on with the username and password you created during your initial login. You don’t need to
enter the access code a second time. Your registration is good for one year from the day you acti-
vate your PIN.
Where to Go from Here
Although you can read this book from start to finish, you can certainly work your way through it
in more creative ways. Where you start is up to you, but please, please don’t start with the practice
final exams! Give yourself a good grounding in the content here and then use the practice final
exams to evaluate your understanding and show you where to focus your studies. You can flip to
the topics you think you understand fairly well to boost your confidence or skip directly to what-
ever’s giving you trouble; let the index and the table of contents be your guides. If you have a good
understanding of how to take the SIE exam, from how it’s structured to how to tackle questions,
you can go directly to the chapters in parts 2 and 3, which address types of securities. If you’re
feeling shaky on the legal aspects, check out the FINRA rules and regulations in Part 4. Everyone,
however, can probably benefit from Part 1’s test-taking basics and info on study plans. Wherever
you go, feel free to take detours to your textbooks, flash cards, FINRA websites, and any other
resources for more information. Just remember to come back so you don’t miss anything here!
Loading page 20...
Loading page 21...
1Getting Started
with the SIE
Exam
with the SIE
Exam
Loading page 22...
IN THIS PART . . .
Review the computerized exam format and the
procedures for registering to take the SIE exam.
Select the right study course and materials to prepare
yourself for exam day.
Understand how to organize your study time efficiently
and effectively — even when your time is limited.
Examine test-taking tips to maximize your chances of
selecting the correct answer choices.
Discover what to expect on test day (because the only
surprises that day should involve the triumphant return
of your social life).
Review the computerized exam format and the
procedures for registering to take the SIE exam.
Select the right study course and materials to prepare
yourself for exam day.
Understand how to organize your study time efficiently
and effectively — even when your time is limited.
Examine test-taking tips to maximize your chances of
selecting the correct answer choices.
Discover what to expect on test day (because the only
surprises that day should involve the triumphant return
of your social life).
Loading page 23...
CHAPTER 1 Introducing the SIE (Securities Industry Essentials) Exam 7
Introducing the SIE
(Securities Industry
Essentials) Exam
Congratulations on your interest in becoming a financial professional! But before you can
lose yourself in the energy of the office, the eager voices of your clients, and the warm
glow of success, you have to face the SIE as well as one of the top-off (qualification) exams
such as the Series 7 or Series 6. In this chapter, I give you an overview of the SIE exam, including
its purpose, structure, format, scoring, and some helpful tips to guide you through the registra-
tion procedure.
The first four chapters go over things like what the exam is, how to study for it, how to take the
test, and so on. If you feel that you have a handle on those things, feel free to jump to Chapter 5
to get right into the meat and potatoes of what you need to learn.
What Is the SIE Exam, Anyway?
Initially, the information in the SIE (Securities Industry Essentials) exam was included in books
that covered the Series 6, Series 7, Series 22, and so on. The Financial Industry Regulatory Author-
ity (FINRA) had the idea to strip similar information from these exams and create the SIE
exam. What I’ve found is that besides stripping the information from these other exams, unfor-
tunately for you and other exam-takers, FINRA added a lot more information. What this means is
that you’ll have to study a lot of information to answer 75 randomized questions.
The SIE is an introductory-level exam designed to test your basic knowledge of the securities
industry and is open to anyone age 18 or older. Fortunately, association with a securities firm
isn’t required; individuals may take the SIE exam before or after being hired by a firm. You need
Chapter 1
IN THIS CHAPTER
» Introducing the SIE
» Taking a look at companion tests
» Registering to take the exam
» Uncovering topics tested on the
SIE exam
» Mastering the computerized exam
format
Introducing the SIE
(Securities Industry
Essentials) Exam
Congratulations on your interest in becoming a financial professional! But before you can
lose yourself in the energy of the office, the eager voices of your clients, and the warm
glow of success, you have to face the SIE as well as one of the top-off (qualification) exams
such as the Series 7 or Series 6. In this chapter, I give you an overview of the SIE exam, including
its purpose, structure, format, scoring, and some helpful tips to guide you through the registra-
tion procedure.
The first four chapters go over things like what the exam is, how to study for it, how to take the
test, and so on. If you feel that you have a handle on those things, feel free to jump to Chapter 5
to get right into the meat and potatoes of what you need to learn.
What Is the SIE Exam, Anyway?
Initially, the information in the SIE (Securities Industry Essentials) exam was included in books
that covered the Series 6, Series 7, Series 22, and so on. The Financial Industry Regulatory Author-
ity (FINRA) had the idea to strip similar information from these exams and create the SIE
exam. What I’ve found is that besides stripping the information from these other exams, unfor-
tunately for you and other exam-takers, FINRA added a lot more information. What this means is
that you’ll have to study a lot of information to answer 75 randomized questions.
The SIE is an introductory-level exam designed to test your basic knowledge of the securities
industry and is open to anyone age 18 or older. Fortunately, association with a securities firm
isn’t required; individuals may take the SIE exam before or after being hired by a firm. You need
Chapter 1
IN THIS CHAPTER
» Introducing the SIE
» Taking a look at companion tests
» Registering to take the exam
» Uncovering topics tested on the
SIE exam
» Mastering the computerized exam
format
Loading page 24...
8 PART 1 Getting Started with the SIE Exam
to know certain terminology used in the securities industry, different securities products, how
the market is structured, how the market functions, different regulatory agencies and their pur-
poses, as well as regulated and prohibited practices.
Because unsponsored individuals are allowed to take the exam, you can take a step toward becom-
ing a securities professional prior to being hired. (Although you can take the SIE exam and one of
the corequisite exams in any order, most people take the SIE first.)
The exam’s purpose is to protect the investing public by ensuring that the individuals who sell or
give information about securities have mastered the skills and general knowledge that competent
practicing representatives need to have.
The SIE exam itself is a computer-based exam given by Prometric (www.prometric.com/finra)
at test centers throughout the United States or in your desired location (see the “So you want to
take the test at your location” sidebar later in this chapter). The 75-question exam, administered
by FINRA, is 105 minutes in duration. A score of 70 percent or better gets candidates a passing
grade and puts big smiles on their faces. After you pass the SIE, the results remain valid for four
years from the date you pass. The passing rate for those taking the SIE exam for the first time is
around 74 percent. If you include those who have taken the exam more than once, it’s closer to
82 percent.
The sections later in this chapter explain the setup of the SIE exam and give a rundown of how to
register for the exam. If you have other questions, call the FINRA support team at (240) 386-4040
or visit www.finra.org/industry/qualification-exams.
Profiling the SIE Exam-Taker
The SIE exam is a corequisite exam for people who want to become investment company reps,
general securities reps, direct participation program (DPP) reps, securities traders, investment
banking reps, private securities offerings reps, research analysts, or operations professionals.
The purpose of the SIE exam was to strip the information that was similar in all the aforemen-
tioned exams to make it easier for people to add licenses to their résumés. So to become a securi-
ties professional, you need to pass the SIE exam, one of the exams listed in the next section, and
typically the North American Securities Administrators Association (NASAA) Series 63 or 66
exam.
People who have a long and sordid history of embezzlement, forgery, and fraud are generally
disqualified and precluded from taking the exam. Candidates must disclose any criminal records,
and the FINRA reviews applications on a case-by-case basis.
One’s Not Enough: Tackling the
CoRequisite Exams
The SIE exam is just your starting point. To become an industry professional, you have to take one
of the top-off exams and, in most cases, the Series 63 or Series 66 state exam. As far as which
top-off exam(s) you’ll have to take, the answer depends on the job you want and/or are hired to
do. After you pass the SIE exam, the financial institution that hires you will tell you which exams
you need to take and will help you schedule them.
to know certain terminology used in the securities industry, different securities products, how
the market is structured, how the market functions, different regulatory agencies and their pur-
poses, as well as regulated and prohibited practices.
Because unsponsored individuals are allowed to take the exam, you can take a step toward becom-
ing a securities professional prior to being hired. (Although you can take the SIE exam and one of
the corequisite exams in any order, most people take the SIE first.)
The exam’s purpose is to protect the investing public by ensuring that the individuals who sell or
give information about securities have mastered the skills and general knowledge that competent
practicing representatives need to have.
The SIE exam itself is a computer-based exam given by Prometric (www.prometric.com/finra)
at test centers throughout the United States or in your desired location (see the “So you want to
take the test at your location” sidebar later in this chapter). The 75-question exam, administered
by FINRA, is 105 minutes in duration. A score of 70 percent or better gets candidates a passing
grade and puts big smiles on their faces. After you pass the SIE, the results remain valid for four
years from the date you pass. The passing rate for those taking the SIE exam for the first time is
around 74 percent. If you include those who have taken the exam more than once, it’s closer to
82 percent.
The sections later in this chapter explain the setup of the SIE exam and give a rundown of how to
register for the exam. If you have other questions, call the FINRA support team at (240) 386-4040
or visit www.finra.org/industry/qualification-exams.
Profiling the SIE Exam-Taker
The SIE exam is a corequisite exam for people who want to become investment company reps,
general securities reps, direct participation program (DPP) reps, securities traders, investment
banking reps, private securities offerings reps, research analysts, or operations professionals.
The purpose of the SIE exam was to strip the information that was similar in all the aforemen-
tioned exams to make it easier for people to add licenses to their résumés. So to become a securi-
ties professional, you need to pass the SIE exam, one of the exams listed in the next section, and
typically the North American Securities Administrators Association (NASAA) Series 63 or 66
exam.
People who have a long and sordid history of embezzlement, forgery, and fraud are generally
disqualified and precluded from taking the exam. Candidates must disclose any criminal records,
and the FINRA reviews applications on a case-by-case basis.
One’s Not Enough: Tackling the
CoRequisite Exams
The SIE exam is just your starting point. To become an industry professional, you have to take one
of the top-off exams and, in most cases, the Series 63 or Series 66 state exam. As far as which
top-off exam(s) you’ll have to take, the answer depends on the job you want and/or are hired to
do. After you pass the SIE exam, the financial institution that hires you will tell you which exams
you need to take and will help you schedule them.
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CHAPTER 1 Introducing the SIE (Securities Industry Essentials) Exam 9
In addition to taking the SIE exam and one of the top-off or corequisite exams listed in the fol-
lowing sections, you’ll likely have to take either the NASAA Series 63 exam or the NASAA Series
66 exam. These exams go into state securities laws as opposed to federal securities laws, which
are the focus of exams like the SIE. The difference between the Series 63 and Series 66 is that the
Series 66 allows holders to become investment advisers as well. Your employer will let you know
which exam it wants you to take. More and more broker-dealers want their agents to take the
Series 66. Don’t worry too much; neither of these exams are the beasts that some of the other
listed exams are.
Series 6: Investment Company and Variable
Products Representative Exam
Series 6 is the license required by most banks and insurance companies. This license allows the
holder to sell products such as mutual funds, variable annuities, and variable life insurance (along
with having an insurance license). To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_6_Content_Outline.pdf.
Series 7: General Securities
Representative Exam
Series 7 is the license exam that most people will be taking. This license is required by most
broker-dealers. The Series 7 allows you to sell equity securities, mutual funds, bonds, direct par-
ticipation programs, options, and so on. To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_7_Content_Outline.pdf.
As a side note, if you’re taking the Series 7 exam after taking the SIE, I’ve also written Series 7
Exam 2022-2023 For Dummies, 5th Edition (John Wiley & Sons, Inc.), which is laid out in the same
logical way as this book for ease of studying.
Series 22: DPP Representative Exam
If you’re planning to focus your career on selling direct participation programs (DPPs), the Series
22 exam is the one for you. This license allows you to solicit and sell limited partnership interest
in DPPs such as real estate, oil and gas, and equipment leasing. To see the complete outline of
what’s covered, go to www.finra.org/sites/default/files/Series_22_Content_Outline.pdf.
Series 57: Securities Trader Exam
The Series 57 license allows holders to execute trades in securities. Typically, a Series 57–licensed
person works in the trading department, executing trades for individuals or firms. To see the
complete outline of what’s covered, go to www.finra.org/sites/default/files/Series_57_
Content_Outline.pdf.
Series 79: Investment Banking
Representative Exam
The Series 79 Investment Banking Representative exam allows holders to work in the investment
banking realm. As such, the holders’ functions may include advising or facilitating equity or debt
securities offerings through public offerings, private placements, and mergers and acquisitions.
In addition to taking the SIE exam and one of the top-off or corequisite exams listed in the fol-
lowing sections, you’ll likely have to take either the NASAA Series 63 exam or the NASAA Series
66 exam. These exams go into state securities laws as opposed to federal securities laws, which
are the focus of exams like the SIE. The difference between the Series 63 and Series 66 is that the
Series 66 allows holders to become investment advisers as well. Your employer will let you know
which exam it wants you to take. More and more broker-dealers want their agents to take the
Series 66. Don’t worry too much; neither of these exams are the beasts that some of the other
listed exams are.
Series 6: Investment Company and Variable
Products Representative Exam
Series 6 is the license required by most banks and insurance companies. This license allows the
holder to sell products such as mutual funds, variable annuities, and variable life insurance (along
with having an insurance license). To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_6_Content_Outline.pdf.
Series 7: General Securities
Representative Exam
Series 7 is the license exam that most people will be taking. This license is required by most
broker-dealers. The Series 7 allows you to sell equity securities, mutual funds, bonds, direct par-
ticipation programs, options, and so on. To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_7_Content_Outline.pdf.
As a side note, if you’re taking the Series 7 exam after taking the SIE, I’ve also written Series 7
Exam 2022-2023 For Dummies, 5th Edition (John Wiley & Sons, Inc.), which is laid out in the same
logical way as this book for ease of studying.
Series 22: DPP Representative Exam
If you’re planning to focus your career on selling direct participation programs (DPPs), the Series
22 exam is the one for you. This license allows you to solicit and sell limited partnership interest
in DPPs such as real estate, oil and gas, and equipment leasing. To see the complete outline of
what’s covered, go to www.finra.org/sites/default/files/Series_22_Content_Outline.pdf.
Series 57: Securities Trader Exam
The Series 57 license allows holders to execute trades in securities. Typically, a Series 57–licensed
person works in the trading department, executing trades for individuals or firms. To see the
complete outline of what’s covered, go to www.finra.org/sites/default/files/Series_57_
Content_Outline.pdf.
Series 79: Investment Banking
Representative Exam
The Series 79 Investment Banking Representative exam allows holders to work in the investment
banking realm. As such, the holders’ functions may include advising or facilitating equity or debt
securities offerings through public offerings, private placements, and mergers and acquisitions.
Loading page 26...
10 PART 1 Getting Started with the SIE Exam
To see the complete outline of what’s covered, go to www.finra.org/sites/default/files/
Series_79_Content_Outline.pdf.
Series 82: Private Securities Offerings
Representative Exam
If you’re planning to sell securities privately as opposed to publicly, Series 82 is the exam you’ll
need to pass. This exam tests you on the knowledge needed to perform functions of a private
securities offerings rep, including the solicitation and sale of Regulation D private placement
securities as part of a primary offering. To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_82_Content_Outline.pdf.
Series 7 + Series 86 + Series 87:
Research Analyst Exam
If you love taking exams, this is the one for you. You have to pass not only the SIE exam, but also
the Series 7, Series 86, Series 87, and either the Series 63 or Series 66. Yikes! If you want to be a
research analyst, however, this route is the one you’ll need to go. A research analyst is required
to prepare written and/or electronic communications that show an analysis of company securities
and industry sectors. To see the complete outline of what’s covered, go to www.finra.org/sites/
default/files/Series_7_Content_Outline.pdf and www.finra.org/sites/default/files/
Series_86-87_Content_Outline.pdf.
Series 99: Operations Professional Exam
People who have a Series 99 license have proved that they have the knowledge needed to perform
the critical functions of an operations professional. As such, their functions include client
onboarding (welcoming new clients, addressing client concerns, making sure clients understand
the services available to them, and so on), receipt and delivery of securities and funds, account
transfers, reinvestment and disbursement of funds, and so on. To see the complete outline of
what’s covered, go to www.finra.org/sites/default/files/Series_99_Content_Outline.pdf.
Signing Up
One of the things I really like about the SIE exam is that you don’t need to be sponsored to take it
(most of the other securities exams require sponsorship by a brokerage firm, bank, insurance
company, and so on), which means that you can take the exam on your own prior to being hired.
This strategy allows you to get a leg up on the competition and also shows your future employer
that you’re not fooling around.
Filling out an application to enroll
The easiest way to enroll to take the SIE is to go to www.finra.org/registration-exams-ce/
qualification-exams/securities-industry-essentials-exam. Scroll down to the bottom of
the page; look for the Enrollment Options section; and follow the instructions for individuals,
which include creating an account, enrolling for the SIE, and paying for the exam (by credit card
or Automated Clearing House [ACH] transfer).
To see the complete outline of what’s covered, go to www.finra.org/sites/default/files/
Series_79_Content_Outline.pdf.
Series 82: Private Securities Offerings
Representative Exam
If you’re planning to sell securities privately as opposed to publicly, Series 82 is the exam you’ll
need to pass. This exam tests you on the knowledge needed to perform functions of a private
securities offerings rep, including the solicitation and sale of Regulation D private placement
securities as part of a primary offering. To see the complete outline of what’s covered, go to www.
finra.org/sites/default/files/Series_82_Content_Outline.pdf.
Series 7 + Series 86 + Series 87:
Research Analyst Exam
If you love taking exams, this is the one for you. You have to pass not only the SIE exam, but also
the Series 7, Series 86, Series 87, and either the Series 63 or Series 66. Yikes! If you want to be a
research analyst, however, this route is the one you’ll need to go. A research analyst is required
to prepare written and/or electronic communications that show an analysis of company securities
and industry sectors. To see the complete outline of what’s covered, go to www.finra.org/sites/
default/files/Series_7_Content_Outline.pdf and www.finra.org/sites/default/files/
Series_86-87_Content_Outline.pdf.
Series 99: Operations Professional Exam
People who have a Series 99 license have proved that they have the knowledge needed to perform
the critical functions of an operations professional. As such, their functions include client
onboarding (welcoming new clients, addressing client concerns, making sure clients understand
the services available to them, and so on), receipt and delivery of securities and funds, account
transfers, reinvestment and disbursement of funds, and so on. To see the complete outline of
what’s covered, go to www.finra.org/sites/default/files/Series_99_Content_Outline.pdf.
Signing Up
One of the things I really like about the SIE exam is that you don’t need to be sponsored to take it
(most of the other securities exams require sponsorship by a brokerage firm, bank, insurance
company, and so on), which means that you can take the exam on your own prior to being hired.
This strategy allows you to get a leg up on the competition and also shows your future employer
that you’re not fooling around.
Filling out an application to enroll
The easiest way to enroll to take the SIE is to go to www.finra.org/registration-exams-ce/
qualification-exams/securities-industry-essentials-exam. Scroll down to the bottom of
the page; look for the Enrollment Options section; and follow the instructions for individuals,
which include creating an account, enrolling for the SIE, and paying for the exam (by credit card
or Automated Clearing House [ACH] transfer).
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CHAPTER 1 Introducing the SIE (Securities Industry Essentials) Exam 11
It’s a date! Scheduling your exam
After you’ve completed the online application and received your enrollment notification, you can
schedule an appointment to take the exam by contacting the Prometric testing center. Locate
the test center nearest you by calling (800) 578-6273 during business hours or by visiting
www.prometric.com/FINRA, where you can make an appointment to take the exam at a Promet-
ric test center or online (remotely).
At the present time, online testing is only a couple of years old. See the sidebar “So you want to
take the test at your location” at the end of this chapter for information on taking the exam
online.
Like enrollment in other securities exams, your SIE exam enrollment is valid for 120 days; you
have to take the exam within this time frame. When scheduling your exam appointment, be ready
to provide the following information:
» Your name and Social Security number and/or FINRA number
» The name of the securities exam you’re registering to take
» Your desired test date
Getting an appointment usually takes one to two weeks, depending on the time of year. (You may
wait longer in the summer than around Christmastime.) Prometric will confirm your appoint-
ment on the phone or via email.
I highly suggest putting pressure on yourself and scheduling the exam a little sooner than you
think you’ll be ready to take it; you can always move the test date back. (You’ll be charged if you
cancel within ten business days of your test date.) You know yourself best, but I think that most
students study better when they have a target test date.
You have a choice of where to take the exam. If you’re a travelin’ man (or woman), you may want
to schedule your exam at a location far away (maybe even in a different state) to get the test date
you want. If you’re having trouble scheduling the date and/or location of your choice, remember
that you can take it on a computer of your choice (at home or work, at a family member’s house,
and so on). See the sidebar “So you want to take the test at your location” later in this chapter.
After you have your test date set, you may find that you’re ready sooner or later than your sched-
uled appointment. The exam-center administrators are usually pretty accommodating about
changing appointments and/or locations as long as you call before noon at least two business
days before your test date, but a fee may be involved.
You can get an extension from the 120-day enrollment only if you call within ten days of your
enrollment expiration and if no earlier test dates are available.
Planning for special accommodations
If you require special accommodations when taking your securities exam, you can’t schedule your
exam online. You have to contact the FINRA Special Conditions Team at (800) 999-6647 or fill out
the special-accommodations form at www.finra.org/sites/default/files/SA-Eligibility-
Questionairre.pdf. Read on for info on what the test administrators can do if you have a dis-
ability or if English isn’t your first language.
It’s a date! Scheduling your exam
After you’ve completed the online application and received your enrollment notification, you can
schedule an appointment to take the exam by contacting the Prometric testing center. Locate
the test center nearest you by calling (800) 578-6273 during business hours or by visiting
www.prometric.com/FINRA, where you can make an appointment to take the exam at a Promet-
ric test center or online (remotely).
At the present time, online testing is only a couple of years old. See the sidebar “So you want to
take the test at your location” at the end of this chapter for information on taking the exam
online.
Like enrollment in other securities exams, your SIE exam enrollment is valid for 120 days; you
have to take the exam within this time frame. When scheduling your exam appointment, be ready
to provide the following information:
» Your name and Social Security number and/or FINRA number
» The name of the securities exam you’re registering to take
» Your desired test date
Getting an appointment usually takes one to two weeks, depending on the time of year. (You may
wait longer in the summer than around Christmastime.) Prometric will confirm your appoint-
ment on the phone or via email.
I highly suggest putting pressure on yourself and scheduling the exam a little sooner than you
think you’ll be ready to take it; you can always move the test date back. (You’ll be charged if you
cancel within ten business days of your test date.) You know yourself best, but I think that most
students study better when they have a target test date.
You have a choice of where to take the exam. If you’re a travelin’ man (or woman), you may want
to schedule your exam at a location far away (maybe even in a different state) to get the test date
you want. If you’re having trouble scheduling the date and/or location of your choice, remember
that you can take it on a computer of your choice (at home or work, at a family member’s house,
and so on). See the sidebar “So you want to take the test at your location” later in this chapter.
After you have your test date set, you may find that you’re ready sooner or later than your sched-
uled appointment. The exam-center administrators are usually pretty accommodating about
changing appointments and/or locations as long as you call before noon at least two business
days before your test date, but a fee may be involved.
You can get an extension from the 120-day enrollment only if you call within ten days of your
enrollment expiration and if no earlier test dates are available.
Planning for special accommodations
If you require special accommodations when taking your securities exam, you can’t schedule your
exam online. You have to contact the FINRA Special Conditions Team at (800) 999-6647 or fill out
the special-accommodations form at www.finra.org/sites/default/files/SA-Eligibility-
Questionairre.pdf. Read on for info on what the test administrators can do if you have a dis-
ability or if English isn’t your first language.
Loading page 28...
12 PART 1 Getting Started with the SIE Exam
Depending on your testing center, you may have to receive authorization to bring medical devices
and supplies — such as insulin pumps, eyedrops, and inhalers — into the testing room. If you
need authorization, call your local Prometric testing center, and a staff member will be able to
guide you on the approval process.
Americans with Disabilities Act (ADA) candidates
If you’re disabled or learning-impaired, FINRA provides testing modifications and aids in com-
pliance with the provisions of the Americans with Disabilities Act (ADA). To qualify for ADA
provisions, your disabilities have to permanently limit a major life activity, such as learning,
speech, hearing, or vision.
To apply for special accommodations, you need to submit documentation from your physician or
licensed health-care professional to the FINRA, requesting the special arrangements. Addition-
ally, you have to submit the FINRA Special Accommodations Eligibility Questionnaire and Special
Accommodations Verification Request Form for all special arrangement requests. You can find
links to these forms at www.finra.org/industry/special-accommodations.
You may request the accommodations you want. Possible aids include
» Extra time
» A written exam (pencil and paper)
» A reader, writer, or recorder
» A sign-language interpreter
» A large-print exam booklet
» Wheelchair-accessible locations
FINRA reserves the right to make final decisions about accommodations on a case-by-case basis.
TEST-CENTER AMENITIES
The test centers are required to comply with FINRA site guidelines, but some of the older centers may
not have the amenities that the newer ones do (such as lockers and earplugs). To protect yourself from
a variety of unpleasant, unexpected site surprises on exam day, the FINRA website (www.finra.org)
offers general information, including test-center security guidelines (including candidate ID requirements,
personal items allowed, and provided aids), test-center rules of conduct, and so on. For more-specific
questions, such as whether a cafeteria, vending machines, or lockers are on site, ask the center’s adminis-
trator when you schedule your test date.
This book was written a couple of years into the COVID-19 pandemic. As of now, pretty much all the
closed testing centers have reopened at either full or limited capacity. Certainly, due to state and local
government mandates, some testing sites may be more affected than others. The situation remains fluid
and may change as the number of virus-infected people increases or decreases. I suggest that you check
the following link for the latest Prometric updates: www.prometric.com/corona-virus-update. In
addition, FINRA and NASAA recently set up an online testing service (discussed at the end of the chapter).
For the latest, go to www.finra.org/rules-guidance/key-topics/covid-19/exams.
Depending on your testing center, you may have to receive authorization to bring medical devices
and supplies — such as insulin pumps, eyedrops, and inhalers — into the testing room. If you
need authorization, call your local Prometric testing center, and a staff member will be able to
guide you on the approval process.
Americans with Disabilities Act (ADA) candidates
If you’re disabled or learning-impaired, FINRA provides testing modifications and aids in com-
pliance with the provisions of the Americans with Disabilities Act (ADA). To qualify for ADA
provisions, your disabilities have to permanently limit a major life activity, such as learning,
speech, hearing, or vision.
To apply for special accommodations, you need to submit documentation from your physician or
licensed health-care professional to the FINRA, requesting the special arrangements. Addition-
ally, you have to submit the FINRA Special Accommodations Eligibility Questionnaire and Special
Accommodations Verification Request Form for all special arrangement requests. You can find
links to these forms at www.finra.org/industry/special-accommodations.
You may request the accommodations you want. Possible aids include
» Extra time
» A written exam (pencil and paper)
» A reader, writer, or recorder
» A sign-language interpreter
» A large-print exam booklet
» Wheelchair-accessible locations
FINRA reserves the right to make final decisions about accommodations on a case-by-case basis.
TEST-CENTER AMENITIES
The test centers are required to comply with FINRA site guidelines, but some of the older centers may
not have the amenities that the newer ones do (such as lockers and earplugs). To protect yourself from
a variety of unpleasant, unexpected site surprises on exam day, the FINRA website (www.finra.org)
offers general information, including test-center security guidelines (including candidate ID requirements,
personal items allowed, and provided aids), test-center rules of conduct, and so on. For more-specific
questions, such as whether a cafeteria, vending machines, or lockers are on site, ask the center’s adminis-
trator when you schedule your test date.
This book was written a couple of years into the COVID-19 pandemic. As of now, pretty much all the
closed testing centers have reopened at either full or limited capacity. Certainly, due to state and local
government mandates, some testing sites may be more affected than others. The situation remains fluid
and may change as the number of virus-infected people increases or decreases. I suggest that you check
the following link for the latest Prometric updates: www.prometric.com/corona-virus-update. In
addition, FINRA and NASAA recently set up an online testing service (discussed at the end of the chapter).
For the latest, go to www.finra.org/rules-guidance/key-topics/covid-19/exams.
Loading page 29...
CHAPTER 1 Introducing the SIE (Securities Industry Essentials) Exam 13
English as a Second Language (ESL) candidates
If English is your second language, you can request additional time to take the exam when you
schedule your SIE test date. If FINRA approves, you receive a little extra time to complete the
exam. In general, FINRA gives an extra 30 minutes for exams shorter than 2 hours and an extra
hour for exams longer than 2 hours.
To qualify for extra time because English is your second language, fill out the form at www.finra.
org/sites/default/files/LEP-request-form.pdf.
Just in case: Canceling as an option
If something comes up or if you feel that you’re just not ready, you can cancel your appointment
to take the SIE exam without penalty if you do so at least ten business days before the exam date.
If a holiday falls within the cancellation period, you have to cancel an additional business day
earlier. If you’re scheduled to take the exam on a Wednesday, for example, you have to cancel on
Tuesday two weeks before your exam date. If a holiday falls between those dates, you have to
cancel on Monday two weeks before your exam date. For more information, visit www.finra.
org/industry/reschedule-or-cancel-your-appointment.
If you cancel after the prescribed deadline, if you don’t show up to take the exam, or if you show
up too late to take the exam, you’ll be charged a cancellation fee equal to the cost of the exam fee
you paid. I’m sure that the old “I forgot” excuse has been tried, but I’ve never heard of it being
effective.
Taking a Peek at the Tested Topics
As a practical exam, the SIE requires you to master vocabulary; handle customer accounts; under-
stand the rules and regulations that govern the securities industry; and, yes, work with some
math formulas (although very few). For ease of use, and because humans have a limited life span,
this book focuses on the information you need to pass the SIE exam. Here’s an overview of what
to expect:
» The underwriting process — how new securities come to market (Chapter 5)
» Common and preferred stock (Chapter 6)
» Corporate bonds and U.S. government securities (Chapter 7)
» Securities issued by local governments (municipal bonds) (Chapter 8)
» Investment companies, including mutual and closed-end funds (Chapter 9)
» DPPs (limited partnerships) (Chapter 10)
» Options (Chapter 11)
» Customer accounts (Chapter 12)
» Analyzing the benefits and risks associated with investments; making appropriate recommen-
dations to customers (Chapter 13)
» Following how new securities are brought to the market and how existing securities are traded
in the market (Chapter 14)
English as a Second Language (ESL) candidates
If English is your second language, you can request additional time to take the exam when you
schedule your SIE test date. If FINRA approves, you receive a little extra time to complete the
exam. In general, FINRA gives an extra 30 minutes for exams shorter than 2 hours and an extra
hour for exams longer than 2 hours.
To qualify for extra time because English is your second language, fill out the form at www.finra.
org/sites/default/files/LEP-request-form.pdf.
Just in case: Canceling as an option
If something comes up or if you feel that you’re just not ready, you can cancel your appointment
to take the SIE exam without penalty if you do so at least ten business days before the exam date.
If a holiday falls within the cancellation period, you have to cancel an additional business day
earlier. If you’re scheduled to take the exam on a Wednesday, for example, you have to cancel on
Tuesday two weeks before your exam date. If a holiday falls between those dates, you have to
cancel on Monday two weeks before your exam date. For more information, visit www.finra.
org/industry/reschedule-or-cancel-your-appointment.
If you cancel after the prescribed deadline, if you don’t show up to take the exam, or if you show
up too late to take the exam, you’ll be charged a cancellation fee equal to the cost of the exam fee
you paid. I’m sure that the old “I forgot” excuse has been tried, but I’ve never heard of it being
effective.
Taking a Peek at the Tested Topics
As a practical exam, the SIE requires you to master vocabulary; handle customer accounts; under-
stand the rules and regulations that govern the securities industry; and, yes, work with some
math formulas (although very few). For ease of use, and because humans have a limited life span,
this book focuses on the information you need to pass the SIE exam. Here’s an overview of what
to expect:
» The underwriting process — how new securities come to market (Chapter 5)
» Common and preferred stock (Chapter 6)
» Corporate bonds and U.S. government securities (Chapter 7)
» Securities issued by local governments (municipal bonds) (Chapter 8)
» Investment companies, including mutual and closed-end funds (Chapter 9)
» DPPs (limited partnerships) (Chapter 10)
» Options (Chapter 11)
» Customer accounts (Chapter 12)
» Analyzing the benefits and risks associated with investments; making appropriate recommen-
dations to customers (Chapter 13)
» Following how new securities are brought to the market and how existing securities are traded
in the market (Chapter 14)
Loading page 30...
14 PART 1 Getting Started with the SIE Exam
» Risk considerations and income tax implications that stock market investors face (Chapter 15)
» Rules and regulations governing the purchase and sale of securities and the registered
representative’s responsibility for maintaining accurate records (Chapter 16)
FINRA has released a list of the distribution of questions on the SIE exam. See Table 1-1 for the
number of questions devoted to each topic as applied to a registered rep’s performance.
Pretty much each of these topics falls under multiple areas of study. To correctly answer ques-
tions that address the topic of handling customer accounts, for example, you have to know enough
about different types of stocks, bonds, and so on to guide your customers, including which invest-
ments are most beneficial to retirees and which work best for investors who are just entering the
workforce.
Although Table 1-1 shows the outline of the exam, this book (and most other study materials)
breaks the chapters down by similar content to make your life easier and keep you from having to
jump back and forth.
Understanding the Exam Format
and Other Exam Details
To make sure that you don’t walk into the testing center, take one look at the computer screen,
go into shock, and start drooling on the keyboard, I use the next few sections to cover some of
the testing details for the SIE exam.
Reviewing the exam basics
The SIE exam is a computerized, closed-book (in other words, no book) exam that lasts 1 hour
and 45 minutes. The exam consists of 85 multiple-choice questions, although only 75 of them
count toward your score (see the next section).
Certainly, you can take bathroom breaks at any time, but the clock continues to tick away, so you
may want to reconsider drinking a mega-jumbo iced latte the morning of your test.
For information on the types of questions to expect, see Chapter 3. Flip to Chapter 4 for an over-
view of how your exam day may progress.
TABLE 1-1 Distribution of SIE Exam Questions
Topic
Number of
Questions
Percentage of
Exam
Knowledge of capital markets 12 16
Understanding products and their risks 33 44
Understanding trading, customer accounts, and prohibited activities 23 31
Overview of regulatory framework 7 9
Total 75 100
» Risk considerations and income tax implications that stock market investors face (Chapter 15)
» Rules and regulations governing the purchase and sale of securities and the registered
representative’s responsibility for maintaining accurate records (Chapter 16)
FINRA has released a list of the distribution of questions on the SIE exam. See Table 1-1 for the
number of questions devoted to each topic as applied to a registered rep’s performance.
Pretty much each of these topics falls under multiple areas of study. To correctly answer ques-
tions that address the topic of handling customer accounts, for example, you have to know enough
about different types of stocks, bonds, and so on to guide your customers, including which invest-
ments are most beneficial to retirees and which work best for investors who are just entering the
workforce.
Although Table 1-1 shows the outline of the exam, this book (and most other study materials)
breaks the chapters down by similar content to make your life easier and keep you from having to
jump back and forth.
Understanding the Exam Format
and Other Exam Details
To make sure that you don’t walk into the testing center, take one look at the computer screen,
go into shock, and start drooling on the keyboard, I use the next few sections to cover some of
the testing details for the SIE exam.
Reviewing the exam basics
The SIE exam is a computerized, closed-book (in other words, no book) exam that lasts 1 hour
and 45 minutes. The exam consists of 85 multiple-choice questions, although only 75 of them
count toward your score (see the next section).
Certainly, you can take bathroom breaks at any time, but the clock continues to tick away, so you
may want to reconsider drinking a mega-jumbo iced latte the morning of your test.
For information on the types of questions to expect, see Chapter 3. Flip to Chapter 4 for an over-
view of how your exam day may progress.
TABLE 1-1 Distribution of SIE Exam Questions
Topic
Number of
Questions
Percentage of
Exam
Knowledge of capital markets 12 16
Understanding products and their risks 33 44
Understanding trading, customer accounts, and prohibited activities 23 31
Overview of regulatory framework 7 9
Total 75 100
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