Securities Industry Essentials Exam 2023-2024 For Dummies (2022)

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SecuritiesIndustryEssentialsExam2023-2024dummies

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SecuritiesIndustryEssentialsExam2023-2024ForDummies®withOnlinePracticePublishedby:JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030-5774,ww.wiley.comCopyright©2022byJohnWiley&Sons,Inc.,Hoboken,NewJerseyMediaandsoftwarecompilationcopyright©2022byJohnWiley&Sons,Inc.Allrightsreserved.PublishedsimultaneouslyinCanadaNopartofthispublicationmaybereproduced,storedinaretrievalsystemortransmittedinanyformorbyanymeans,electronic,mechanical,photocopying,recording,scanningorotherwise,exceptaspermittedunderSections107or108ofthe1976UnitedStatesCopyrightAct,withoutthepriorwrittenpermissionofthePublisher.RequeststothePublisherforpermissionshouldbeaddressedtothePermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030,(201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions.Trademarks:Wiley,ForDummies,theDummiesManlogo,Dummies.com,MakingEverythingEasier,andrelatedtradedressaretrademarksorregisteredtrademarksofJohnWiley&Sons,Inc.andmaynotbeusedwithoutwrittenpermission.Allothertrademarksarethepropertyoftheirrespectiveowners.JohnWiley&Sons,Inc.isnotassociatedwithanyproductorvendor‘mentionedinthisbook.LIMITOFLIABILITY/DISCLAIMEROFWARRANTY:WHILETHEPUBLISHERANDAUTHORSHAVEUSEDTHEIRBESTEFFORTSINPREPARINGTHISWORK,THEYMAKENOREPRESENTATIONSORWARRANTIESWITHRESPECTTOTHEACCURACYORCOMPLETENESSOFTHECONTENTSOFTHISWORKANDSPECIFICALLYDISCLAIMALLWARRANTIES,INCLUDINGWITHOUTLIMITATIONANYIMPLIEDWARRANTIESOFMERCHANTABILITYORFITNESSFORAPARTICULARPURPOSE.NOWARRANTYMAYBECREATEDOREXTENDEDBYSALESREPRESENTATIVES,WRITTENSALESMATERIALSORPROMOTIONALSTATEMENTSFORTHISWORK.THEFACTTHATANORGANIZATION,WEBSITE,ORPRODUCTISREFERREDTOINTHISWORKASACITATION'AND/ORPOTENTIALSOURCEOFFURTHERINFORMATIONDOESNOTMEANTHATTHEPUBLISHERANDAUTHORSENDORSE‘THEINFORMATIONORSERVICESTHEORGANIZATION,WEBSITE,ORPRODUCTMAYPROVIDEORRECOMMENDATIONSITMAYMAKE.THISWORKISSOLDWITHTHEUNDERSTANDINGTHATTHEPUBLISHERISNOTENGAGEDINRENDERINGPROFESSIONALSERVICES.THEADVICEANDSTRATEGIESCONTAINEDHEREINMAYNOTBESUITABLEFORYOURSITUATION.YOUSHOULDCONSULTWITHASPECIALISTWHEREAPPROPRIATE.FURTHER,READERSSHOULDBEAWARETHATWEBSITESLISTEDINTHISWORKMAYHAVECHANGEDORDISAPPEAREDBETWEENWHENTHISWORKWASWRITTENANDWHENITISREAD.NEITHERTHEPUBLISHERNORAUTHORSSHALLBELIABLEFORANYLOSSOFPROFITORANYOTHERCOMMERCIALDAMAGES,INCLUDINGBUTNOTLIMITEDTOSPECIAL,INCIDENTAL,CONSEQUENTIAL,OROTHERDAMAGES.Forgeneralinformationonourotherproductsandservices,pleasecontactourCustomerCareDepartmentwithintheU.S.at877-762-2974,outsidetheU.S.at317-572-3993,orfax317-572-4002.Fortechnicalsupport,pleasevisithttps://hubwiley.com/community/support/dummies.Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Somematerialincludedwithstandardprintversionsofthisbookmaynotbeincludedine-booksorinprint-on-demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedintheversionyoupurchased,youmaydownloadthismaterialathttp://booksupport.wiley.com.FormoreinformationaboutWileyproducts,visitwwwwiley.com.LibraryofCongressControlNumber:2022935735ISBN978-1-119-88685-3(pbk);ISBN978-1-119-88687-7(ebk);ISBN978-1-119-88686-0(ebk)1StudyX

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Introduction...Part1:GettingStartedwiththeSIEExam...................................5cuapTer1:IntroducingtheSIE(SecuritiesIndustryEssentials)Exam...........................7cHapTer2:PreparingfortheSIEExam......................o19cHapTEr3:ExaminingandMasteringQuestionTypes..................ooooiiiiieia....031CHAPTER4:SUMVIVINgTestDay............coooiiiiiiiiiiiiiAPart2:MasteringBasicSecurityInvestments.............................47cHapTER5:SecuritiesUnderwriting:TheProcessandtheTeamPlayers.......................49carter6:EquitySecurities:CorporateOwnership...........................cooooi....63cHapTer7:DebtSecurities:CorporateandU.S.Governmentloans...........................81chapter8:MunicipalBonds:LocalGovernmentSecurities...................ooooieee......99Part3:DelvingDeeper:SecurityInvestmentswithaTwist............121chapter:DeliveringDiversificationwithPackagedSecurities..............................123cHapTER10:WorkingwithDirectParticipationProgramsandREITs...........................143cuapTER11:Options:UnderstandingtheBasicsofPutsandCalls.............................155Part4:PlayingNicely:ServingYourCustomersandFollowingtheRules...a7cHapTER12:CustomerAccounts:DoingtheRightThing.....................................181CHAPTER13:SecuritiesAnalysis:DoingaLittleMarketResearch..............................197cHAPTER14:SecuritiesMarkets:TakingOrdersandExecutingTrades.........................217cHapTER15:MakingSuretheIRSGetsItsShare......................................0231cHapTER16:RulesandRegulations:NoFoolingAround.....................................243Part5:PuttingYourKnowledgetoGoodUse:PracticeExams.........279cHAPTER17:BringItOn:PracticeExam1............o.ooiii...281cHAPTER18:AnswersandExplanationstoPracticeExam1...................................295cHapTer19:NothingButNet:PracticeExam2................................ceee...0.305cHAPTER20:AnswersandExplanationstoPracticeExam2...................................321Part6:ThePartofTens......................................................33cHAPTER21:TenSIEExamTrapstoAvoid...iiiiieenen.....335cHAPTER22:TenWaystoStartYourCareerOffRight........................................339Index...383+StudyXy

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INTRODUCTION...AboutThisBOOK...ooiiiienFoolishAssumptions..................iii2IconsUsedinThisBOOK+.....oiiiietiie2BeyondtheBOOK............ooiiiil2WheretoGofromHere................ooiiiiinl3PART1:GETTINGSTARTEDWITHTHESIEEXAM..........................5eaerert:IntroducingtheSIE(SecuritiesIndustryEssentials)Exam.......7WhatIstheSIEExam,Anyway?.........o.oo7ProfilingtheSIEExam-Taker..........................ciiiiiiiiee......8One'sNotEnough:TacklingtheCorequisiteExams..............................8Series6:InvestmentCompanyandVariableProductsRepresentativeExam.....9Series7:GeneralSecuritiesRepresentativeExam............................9Series22:DPPRepresentativeExam........................ccooie.ll9Series57:SecuritiesTraderExam...............ooiiiiiiiiiiiiinaaeannn..9Series79:InvestmentBankingRepresentativeExam.........................9Series82:PrivateSecuritiesOfferingsRepresentativeExam..................10Series7+Series86+Series87:ResearchAnalystExam......................10Series99:OperationsProfessionalExam..................................10SigningUp...o.ooeee10Fillingoutanapplicationtoenroll.........................................10It'sadate!Schedulingyourexam............................cPlanningforspecialaccommodations.....................................11Justincase:Cancelingasanoption.......................cooiiia...13TakingaPeekattheTestedTopics...13UnderstandingtheExamFormatandOtherExamDetails.......................14Reviewingtheexambasics..........................ll14Practicingontenadditionaltrialquestions.................................15Masteringthecomputerizedformatandfeatures...........................15Viewingexhibits.................lll16Instantgratification:Receivingandevaluatingyourscore....................16carrer:PreparingfortheSIEExam..........................19CoursesandTrainingMaterials:DeterminingtheBestWaytoStudy..............19Backtoschool:Attendingaprepcourse.....................ooeeena....19Selectingprepmaterialtostudyonyourown..............................21ManagingYourStudyTimeWisely...........................................23Blockingoutsometimetostudy..................cool...23It'saplan:Gettingintoastudyroutine....................................24Giveitarest:Takingshortbreaks.........................................24Stayingfocusedfromdaytoday...........................ll25Devotingtimetopracticetests......................ooiiiiiiiiia....25Avoidingstudygroups.............ieee...26Stayinginshape................iii...26ExploringStudyStrategies...26DevelopingSolidTest-TakingSkills...........................................27Readthequestioncarefully................027Lookforphrasesthatleadtothetopictested..............................27TableofContents

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Workwithwhatyouhave......................o.oo27Don'tobsess;markforreview.................o.oo.28Keeptrackoftime.................................i........28Mastertheprocessofelimination........................................29Maintainyourconcentration...................cocoa.29Thinkcarefullybeforechangingyouranswers..............................29Usethescrappaperwisely..........................ol29KnowingWhenYou'reReady............................oiii....30carer:EXaminingandMasteringQuestionTypes........................31FamiliarizingYourselfwithQuestionFormats..................................31Workingwiththestraightshooters:Thestraightforwardquestions............32Encounteringquirkyquestionswithqualifiers..............................33Romanhell:Complexmultiple-choicequestions............................34Lookingatexhibits:Diagramquestions....................................36ShreddingtheQuestions:TipsandTricks.....................................37Focusingonkeyinformation..................................0.0037Answermethis:Pickingthecorrectanswer................................38Don'tmakethesamemistaketwice.....................oooiiiiii...40cuarrera:SUNVivingTestDay...4ComposingYourselftheDayBefore.............................oa4]MakingtheMostoftheMorning.............................................43ArrivingontheScene.................iii...43Takingadvantageofonelastchancetocram...............................43Signingin...oo...43Gettingseated.........oc...44TacklingtheSIE........LL44RevealingYourResults:Drumroll,Please......................................45PART2:MASTERINGBASICSECURITYINVESTMENTS...................47carters:SecuritiesUnderwriting:TheProcessandtheTeamPlayers....49BringingNewIssuestotheMarket...........................................49Startingout:Whattheissuerdoes........................................49Callingtheroll:Introducingtheteamplayers...............................53Gettingtheskinnyontheissueandissuer:Theprospectus..................54Countingthesecuritiesalongtheway.....................................55GettingUptoSpeedontheTypesofSecuritiesOfferings.......................55ReviewingExemptions...................iii...56Exemptsecurities...............icici...56Exempttransactions..............co.iiiiiiiiieee.57TestingYourKnowledge.......................coiii.59Practicequestions....................icici.59Answersandexplanations.................o.oo...62carters:EQUitySecurities:CorporateOwnership...........................63BeginningwiththeBasics:CommonStock....................................63Understandingastockholder'svotingrights................................64Categorizingsharescorporationscansell..................................66Establishingtheparvalueofcommonstock................................66Consideringcorporateactions.....................coiiiiiiiiiiia......67Splittingcommonstock................iii...68Sharingcorporateprofitsthroughdividends...............................69viiiSecuritiesIndustryEssentialsExam2023-2024ForDummieswithOnlinePractice

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GettingPreferentialTreatment:PreferredStock...............................71Consideringcharacteristicsofpreferredstock..............................71Gettingfamiliarwithtypesofpreferredstock..............................72SecuritieswithaTwist..........oiiiiiiieee74Openingnationalborders:ADRs....................cooiiiiiiiii....74Rights:Therighttobuynewsharesatadiscount...........................74Warrants:Therighttobuystockatafixedprice............................75TestingYourKnowledge...75Practicequestions....................iii75Answersandexplanations.....................oii...78waren:DebtSecurities:CorporateandU.S.GovernmentLoans......81TacklingBondTerms,Types,andTraits........................ocooenon.......81Rememberingbondterminology........................0...82Followingbondissueandmaturityschedules..............................83Comparingsecuredandunsecuredbonds.................................84MakingBasicBondPriceandYieldCalculations................................85Nominalyield(couponrate).....................coociiiiiiiiein.......86Currentyield..............ie...86Yieldtomaturity(basis)..................ol...86Yieldtocallo.oo87YieldtOWOrStoo.vvteeee87Totalreturn..oooeee.87BasisPoint.............ea...87DeterminingtheBestInvestment:ComparingBonds...........................88Consideringbondcreditratings..........................................88Contrastingcallableandputbonds.......................................89Poppingthetoponconvertiblebonds.....................................90ExploringU.S.GovernmentSecurities......................cooiiienie.....91UnderstandingthetypesofU.S.governmentsecurities......................91Lookingatagencysecurities................o.oo.92PlayingItSafe:Short-TermLoansorMoneyMarketInstruments.................93TestingYourKnowledge.....................oii.94PracticeqUestions..................iii.94Answersandexplanations...................cooe..l97eaeers:MunicipalBonds:LocalGovernmentSecurities..................99GeneralObligationBonds:BackingBondswithTaxes..........................99GeneralcharacteristicsofGOS.................oooiiiiiiiaaen.00.100AnalyzingGObonds..........................oie...100RevenueBonds:RaisingMoneyforUtilitiesandSuch..........................101Generalcharacteristicsofrevenuebonds.................................102Analyzingrevenuebonds...............o.oo102ThePrimaryMarket:BringingNewMunicipalBondstoMarket.................103Allocationoforders..............oiiiiiiiiiiiiiieee.104Definitionsfornewissues...................oil.104ExaminingOtherTypesofMunicipalBondsontheTest........................105TaxingBABs:TaxableMunicipalBonds......................................106MunicipalNotes:SecuringShort-TermFinancing..............................106TakingaCloserLookatMunicipalFundSecurities.............................107Section529savingsplans...............o.oo.107ABLE@CCOUNTSo.ootiteiieeeeieeeeiieeineeeeee0.108UnderstandingtheTaxesonMunicipalBonds................................109BR-tucyx

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Comparingmunicipalandcorporatebondsequally........................109Scot-free!Takingalookattripletax-freemunicipalbonds...................110FollowingMunicipalBondRules............................................110Confirmations..........ooiiiiiiieee.110Advertisingandrecordkeeping....................ooITCOMMISSIONSLettieeee112GatheringMunicipalBondInfo.........................lL112Thebondresolution(indenture)............covuiiiiiiinniinneenn....112Legalopinion...........i112Officialstatement...113“G"That'saWholeLotofRules...................oociiiiiienn113TestingYourKnowledge............................ooia.0116Practicequestions.......................iiiiiiiie..n0116Answersandexplanations...................o.oo.119PART3:DELVINGDEEPER:SECURITYINVESTMENTSWITHATWISTanweer:DeliveringDiversificationwithPackagedSecurities...........123LookingatInvestmentCompanyRegistration................................123DiversifyingthroughManagementInvestmentCompanies.....................124Comparingopen-andclosed-endfunds..................................124Keepingyourcustomer'sinvestmentobjectivesinmind....................126Dealingwithdiscounts............................oie...128Figuringthesaleschargeandpublicofferingpriceofopen-endfunds........130ConsideringOtherInvestmentCompanyOptions.............................132Face-amountcertificatecompanies.....................................0132Unitinvestmenttrusts...........ooiiiiiiiiiiiiaiiiiiieaiiaeine..2132Exchange-tradedproducts..................o.oo...133Investmentcompanyrules17a-6and17a-7...............................134AddingAnnuitiestoaPortfolio......................lll134Lookingatfixedannuities....................oll134Focusingonvariableannuities..........................................135Puttingmoneyinto(andreceivingmoneyfrom)annuities...................135UnderstandingtheInvestmentComponentofVariableLifeInsuranceProducts...137TestingYourKnowledge........................oil.137Practicequestions........................iii...138Answersandexplanations...14]euarrer10:WorkingwithDirectParticipationProgramsandREITs........143SearchingforIdentity:WhatDPPsAre(AndAren't)............................144TheDPPCharacters:GeneralandLimitedPartners...........................144PushingthroughPartnershipPaperwork....................................145Partnershipagreement.........................c.oiiiciiiiiee.....145Certificateoflimitedpartnership........................................146Subscriptionagreement..................oie...146PassiveIncomeandLosses:LookingatTaxesonPartnerships..................146EvaluatingDPPs........ooieee.147CheckingOutTypesofPartnerships.........................................147Buildingonreal-estatepartnershipinfo..................................147Gearingupwithequipmentleasing......................................148Strengtheningyourgrasponoilandgas..................................149XSecuritiesIndustryEssentialsExam2023-2024ForDummieswithOnlinePractice

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ReducingReal-estateRiskwithREITs........................................150TestingYourKnowledge...150Practicequestions....................icici...152Answersandexplanations......................ool...154cuarrer11:Options:UnderstandingtheBasicsofPutsandCalls...........155BrushingUponOptionBasics...................ocoeiiiieieainan......155Readinganoption...................iii...156Lookingatcalloptions:Therighttobuy..................................157Checkingoutputoptions:Therighttosell................................157Gettingyourmoneyback:Optionsin-,at-,orout-of-the-money..............157Payingthepremium:Thecostofanoption...............................159IncorporatingStandardOptionMath........................................160Callssame:Buyingorsellingcalloptions..................................161Putsswitch:Buyingorsellingputoptions.................................163Tradingoptions:Openingandclosingtransactions.........................166GainingAdditionalOptionInsight...........................................168ClearingthroughtheOCC................................oieee......168That'sODD:Optionsriskdisclosuredocument............................168Gettingthego-ahead:Registeredoptionsprincipal.........................168Optionsaccountagreement.................c.oeveineeaenannenon......168Orderticket..........oiiiieee.169Lasttrade,lastexercise,andexpirationofanoption.......................169Exerciseandassignment...................cocoa...169Additionaldefinitions.................oe170Someadditionaloptionrules.................o.ooITTestingYourKnowledge...172Practicequestions....................oii...173Answersandexplanations.......................coceel..176PART4:PLAYINGNICELY:SERVINGYOURCUSTOMERSANDFOLLOWINGTHERULES.............................l.079cuarrer122CustomerAccounts:DoingtheRightThing....................481FollowingProtocolWhenOpeningAccounts.................................181Filingthefactsonthenewaccountform..................................181Gatheringotherimportantcustomerinfo.................................183Wordonthestreet:Offeringnumberedaccounts..........................184SelectingtheAppropriateTypeofAccount...................................184Singleandjointaccounts..................oii...184TrUSEACCOUNTS+o.ootiteeeeeeeeeeeee.185Discretionaryaccounts..............oviiiiiiiiiieiiaiiaiieee......186Corporateaccounts.........uuiieitieee...186Institutionalaccounts............ooiiiiiiieel.187Partnershipaccounts...............ccc...187Cashormarginaccount.................oooiiiiiiiiieaeanieneo.......187WorkingwithMarginAccounts...............................o0oae........188Disclosuresandagreements:Gettingmarginpaperworkoutoftheway......188Introducinglongandshortmarginaccounts..............................189RegulationT:FollowingtheFed'srulesforpurchasingmarginaccounts........189Makingmargincall..................ol...190Openingamarginaccount:Theinitialrequirements........................190ObeyingtheTelephoneActof1991........................................0191BR-tucyx

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TestingYourKnowledge.......................oii.192Practicequestions..................iii.192Answersandexplanations.....................oe.l195cuarter13:SecuritiesAnalysis:DoingaLittleMarketResearch............197GettingtoKnowYourSecuritiesandMarkets:SecuritiesAnalysisBasics.........197Regardingsystematicandnonsystematicrisk.............................198Mitigatingrisk.............199Decidingwhattobuy:Fundamentalanalysis..............................201Decidingwhentobuy:Technicalanalysis.................................203FollowingtheGreen:MoneySupplyandMonetaryPolicy......................205Influencingthemoneysupply...........................................206OpeningtheFederalReserveBoard'stoolbox.............................207ReadingEconomicIndicators...208Leadingindicators....................oii...208Coincident(coincidental)indicators...........c.oieeiiiiieniennneen......209Laggingindicators..................icici...209GDPandGNP:Measuringgoodsandservices.............................209HowEconomicFactorsAffectSecurities......................cooiiinnai......210Cyclical...e202210Defensive......o.oo.210GrowthLooe.210YourPrincipalEconomicTheoryPrimer......................................210TestingYourKnowledge.......................o210Practicequestions...................i210Answersandexplanations...................ooo.214cuarter14:SecuritiesMarkets:TakingOrdersandExecutingTrades...217ShoppingatPrimaryandSecondaryMarkets.................................217Buyingnewintheprimarymarket.......................................218Buyingusedinthesecondarymarket....................................218MakingtheTrade.....................iii...218Auctioningsecuritiesatsecuritiesexchanges..............................218Negotiatingtradesoverthecounter.....................................219UnderstandingtheRoleofaBroker-Dealer..................................220Anintroducingbroker.............oll220Aclearing(carrying)broker...................o220Aprimebroker............220ReceivingandExecutingCustomerOrders...................................221Reviewingbasicordertypes...................o.oo221Factoringinorderfeatures..................................o.........223Followingcustomers’ordersorusingyourdiscretion.......................224ItTakesAllKinds:RecognizingDifferentTypesofInvestors.....................226Retailinvestors.............oo.226AccreditediNVeSTOrS.......ooitiiiiiiii220226Institutionalinvestors............coil.226TestingYourKnowledge...............ooiii227Practicequestions.................iii.227Answersandexplanations...................oie...230xiiSecuritiesIndustryEssentialsExam2023-2024ForDummieswithOnlinePractice

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cuarrer1s:MakingSuretheIRSGetsItsShare...............................231EverythinginItsPlace:CheckingOutTaxandIncomeCategories................231Touringthetaxcategories...................cocoon...231Lookingattypesofincome.................ll.232NotingTaxesonInvestments..................coouiiiiiiineienaenan......232Interestincome...........oiieel.232Dividends..........o.oo00.233Atthesale:Capitalgainsandlosses......................................234ExploringRetirementPlanTaxAdvantages...................................236Qualifiedversusnonqualifiedplans......................................236IRAtypesandcontributionlimits........................................237401(k)and403(b).....ooo...238TestingYourKnowledge..........................oiiii.....239Practicequestions....................iii...239Answersandexplanations.................oie...242cuarrer16:RulesandRegulations:NoFoolingAround......................243MeetingtheMarketWatchdogs:SecuritiesRegulatoryOrganizations.............243TheSecuritiesandExchangeCommission................................244Self-regulatoryorganizations.........................ol...245Stateregulators................iiieee.245DepartmentoftheTreasury/IRS.........................................246FINRARegistrationandReportingRequirements..............................246FillingouttheU4form............................cooia........246Missingthemark:Groundsfordisqualification............................247Handingoveryourfingerprints..........................................248Continuingeducation...................iii...248Leavingyourfirm:Resignationandtermination...........................249Skippingastep:Who'sexemptfromFINRAregistration.....................249Adheringtoreportingrequirements....................oo...249TradingbytheBookWhentheAccountisOpen..............................250Fillingoutanorderticket..........................iia...250Checkingyourcalendar:Paymentandsettlementdates....................253Safeguardinginvestorinfo:RegulationS-P................................254Confirmingatrade.....................iii...254Actinginyourcustomers’bestinterest...................................255Borrowingfromorlendingto..................................256Followingupwithaccountstatements....................................257Keepingyourdividenddatesstraight.....................................257Handlingcomplaints......................oo...259Disseminatinginfo:Appropriatecommunications..........................260Keepingclearrecords.....................iii...260CommittingOtherImportantRulestoMemory...............................261Stickingtothe5percentmarkuppolicy...................................261Avoidingviolations..................iii...263Followingthemoney:Anti-money-launderingrules........................265ComplyingwithAMLrules..............................................266Workingwithpublicinfo:Followinginsidertradingrules....................267TableofContents

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TheInvestor'sBankruptcyShield:FDICandSIPCCoverage.....................268Holdingacustomer'smail..............................................268Businesscontinuityplansandemergencycontactinformation..............269TestingYourKnowledge.......................iii...269Practicequestions......................occa...270Answersandexplanations...................o.oo...276PART5:PUTTINGYOURKNOWLEDGETOGOODUSE:PRACTICEEXAMS.........i.279cuarrer17:BringItOn:PracticeExam1........................................281cuarrer1:ANSWersandExplanationstoPracticeExam1..................295MakingtheGrade....................iii...304AnswerKeyforPracticeExam1................coool...304cuarrer19:NothingButNet:PracticeExam2................................305cuaere20:AnswersandExplanationstoPracticeExam2.................321KnowingtheScore...............o.oo.330AnswerKeyforPracticeExam2..............oooiiiiiiiiiieeiieeene..2331PART6:THEPARTOFTENS...............................................333cuarrer21:TenSIEExamTrapstoAvoid.......................................335EasingUpontheStudying.............................oiiiiioo......335AssumingtheQuestion'sintent............................................336ReadingintotheQuestion.................................................336BecomingDistractedWhenOthersFinish....................................336NotDressingforComfort......................co...io.....337ForgettingtoBreathe.................................................00337TryingtoWorkOutEquationsinYourHeadInsteadofWritingThemDown.......337SpendingTooMuchTimeonOneQuestion..................................338ChangingYourAnswersfortheWrongReasons..............................338CalculatingYourFinalScorePrematurely....................................338cuarter222TenWaystoStartYourCareerOffRight........................339WinattheNumbersGame.................ooiiiiieiiiiiiaaianen......339BeanApprentice...............oo...iii...340DoYourHomework.......o.ooeee00340TreattheMinnowLikeaWhale.........................oii.....340SmileWhenYouDial...0.0340WhenaSecurityFalls,Don'tBeaStranger...................................340PutintheHours............ooo34BroadenYourHorizons..............ooiiiiiiiiiiiiiiii234PayYourselfFirst................3SetSomeGoals:TheBrassRing......342INDEXoo343xivSecuritiesIndustryEssentialsExam2023-2024ForDummieswithOnlinePractice1StudyX

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Introduction0youwanttobeasecuritiesindustryprofessionalsuchasastockbroker?Thegoodnewsisthatacareerinthesecuritiesfieldcanbeextremelylucrativeandrewarding.Thenot-so-goodnewsisthatanyonewhoplanstobecomeastockbrokerandsellsecuritiesinanyofthe50statesmustfirstpasstheSecuritiesIndustryEssentials(SIE)examandoneofthetop-offexams.EventheSIEexamaloneisquiteachallengeformostpeople.TopasstheSIE,youhavetocommittimeandeffort.1passedallmysecuritiesexamsthefirsttimewithveryhighscores,buttheyallrequiredweeksofstudyandsacrifice.Thosewhoaren'ttotallypreparedonexamdayareinforanunpleasantwake-upcall.Asatestprepinstructorandtutor,Ialwayshadafewstudentsineveryclasswhohadenrolledaftertheyalreadyfailedoneoftheirexams.Mostoftheminitiallyexpectedthesameeasyridethatthey’dexperiencedinhighschoolorcollege.Notonlyweretheywrong,buttheyalsohadtopayasignificantamountofmoneytoreregisterfortheexamandwaitanother30days—aruleoftheFinancialIndustryRegulatoryAuthority(FINRA)—beforetheycouldretaketheexam.Backtothegoodnewsagain.You'reobviouslyinterestedindoingwell,soyouprobablywon’tbeoneofthosepeople.ThisbookcanhelpyoupasstheSIEexamandachieveyourgoal.AboutThisBookThisbookshouldbeallyouneedtopasstheexam,althoughIcertainlyencourageyoutoviewothermaterialsandtakewhateverexamsyoucangetyourhandson.Butasawordofcaution,ifyou'rereviewingandtakingtestsfromotherbooks,pleasemakesurethatthey’reontarget.I'veseenmorethanacoupleofbookspresentinginformationthatisdefinitelynotincludedintheSIEoutline.1coverthetopicsthatappearonthetest,offerformulasasneeded,providedefinitions,andgoovertheinformationyouneedtoknow.Ialsoincludelotsoftipsandafewmemorytricks.Buttherealbenefitofthisbookisfindingouthowtostudyandthinkthroughproblemsaswellasyoupossiblycan.That'swhyIhelpyouchooseastudyprogram,explainhowtohandlespecificquestiontypes,warnyouaboutcommonmistakes,connectconcepts,andshowyouhowtopullquestionsapartandgettothebottomofwhat'sbeingasked.Thenyougettoapplythisknowledgeintwofull-lengthpracticetestssoyougetatasteoftheSIEexamexperience.Thisisareferencebook,andmostsectionsareself-contained.Inotherwords,youcanreadasectionandunderstanditwithoutlookingoverthetextthatcomesbeforeit.Whensomeback-groundinformationishelpful,Igivecross-referencestorelatedtopics.Therefore,youcanprettymuchjumpinandoutwheneveryoufindtopicsyoulike(andwhenyoufindthoseyoudon’t).Andlikeallgoodtourguides,Ialsopointyoutosomeothersitesofinterest—topicsyoucanexplorefurtheronyourown.Ifyou'reshortontime(asyouprobablyare)andaren’treadyforabreakjustyet,youcanskipthesidebars,thoselittlegrayboxesthatcontaininterestingbutnonessentialinformation.BA+study|

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Whilewritingthisbook,Imadeafewassumptionsaboutyouandwhyyoupickedupthisbook.Forstarters,Iassumethatyou'relookingforano-nonsensestudyguidetosupplementyourtextbookorprepcourse—onethatprovidesexpertinsideradvicealongwithatonofexamplequestionsandsomesampleexams.Looknofurther!Whetheryou'repreparingtotakethetestforthefirsttime,retakingthetestafteraless-than-stellarperformance,orlookingforarefresherbeforeyourecertify,thisisthebookforyou!Tomakethisbookeasiertoreadanduse,Iincludesomeiconstohelpyoufindandfathomkeyideasandinformation.ThisiconhighlightsexampleSIEtestquestions(whichIfollowwithhelpfulanswerexplanations).EXAMPLE©ThisiconisattachedtoshortcutsandinsideradviceforstudyingforandpassingtheSIEexam.ie®Thisiconpointstoinformationthat’sespeciallyimportanttoremembertodowellonthetest.REMEMBER@Thisiconwarnsyouawayfromactionsthatcanharmyourworkanddropyourscore.WARNINGInadditiontothematerialinthisbook,thisproductcomeswithaccesstosomereallyusefulonlinematerial.Foradditionaltipsandtricks,checkoutthisbook’sfreeCheatSheetbygoingtowww.dummies.comandtyping“SecuritiesIndustryEssentialsExamForDummiescheatsheet”inthesearchbox.Youalsogetaccesstoanonlinedatabaseofexamsforevenmorepractice.Togainaccesstotheexamsonline,allyouhavetodoisregister.Justfollowthesesimplesteps:1.RegisteryourbookorebookatDummies.comtogetyourpersonalidentificationnumber(PIN).2.Gotowww.dummies.com/go/getaccess.3.Chooseyourproductfromthedrop-downlistonthatpage.4.Followthepromptstovalidateyourproduct,andthencheckyouremailforaconfirmationmessagethatincludesyourPINandinstructionsforloggingin.2SecuritiesIndustryEssentialsExam2023-2024ForDummieswithOnlinePracticeneStudyXv

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Ifyoudonotreceivethisemailwithintwohours,pleasecheckyourspamfolderbeforecontact-ingusthroughourTechnicalSupportwebsiteathttp://support.wiley.comorbyphoneat877-762-2974.Nowyou'rereadytogo!Youcancomebacktothepracticematerialasoftenasyouwant;simplylogonwiththeusernameandpasswordyoucreatedduringyourinitiallogin.Youdon’tneedtoentertheaccesscodeasecondtime.Yourregistrationisgoodforoneyearfromthedayyouacti-vateyourPIN.WheretoGofromHereAlthoughyoucanreadthisbookfromstarttofinish,youcancertainlyworkyourwaythroughitinmorecreativeways.Whereyoustartisuptoyou,butplease,pleasedon’tstartwiththepracticefinalexams!Giveyourselfagoodgroundinginthecontenthereandthenusethepracticefinalexamstoevaluateyourunderstandingandshowyouwheretofocusyourstudies.Youcanfliptothetopicsyouthinkyouunderstandfairlywelltoboostyourconfidenceorskipdirectlytowhat-ever’sgivingyoutrouble;lettheindexandthetableofcontentsbeyourguides.IfyouhaveagoodunderstandingofhowtotaketheSIEexam,fromhowit’sstructuredtohowtotacklequestions,youcangodirectlytothechaptersinparts2and3,whichaddresstypesofsecurities.Ifyou'refeelingshakyonthelegalaspects,checkouttheFINRArulesandregulationsinPart4.Everyone,however,canprobablybenefitfromPart1'stest-takingbasicsandinfoonstudyplans.Whereveryougo,feelfreetotakedetourstoyourtextbooks,flashcards,FINRAwebsites,andanyotherresourcesformoreinformation.Justremembertocomebacksoyoudon’tmissanythinghere!BRIstudyxY|

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GettingStartedwiththeSIEExam

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ReviewthecomputerizedexamformatandtheproceduresforregisteringtotaketheSIEexam.Selecttherightstudycourseandmaterialstoprepareyourselfforexamday.Understandhowtoorganizeyourstudytimeefficientlyandeffectively—evenwhenyourtimeislimited.Examinetest-takingtipstomaximizeyourchancesofselectingthecorrectanswerchoices.Discoverwhattoexpectontestday(becausetheonlysurprisesthatdayshouldinvolvethetriumphantreturnofyoursociallife).+studyxy

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INTHISCHAPTER»IntroducingtheSIE»Takingalookatcompaniontests»Registeringtotaketheexam»UncoveringtopicstestedontheSIEexam»MasteringthecomputerizedexamformatIntroducingtheSIE(SecuritiesIndstryEssentials)Examongratulationsonyourinterestinbecomingafinancialprofessional!Butbeforeyoucanloseyourselfintheenergyoftheoffice,theeagervoicesofyourclients,andthewarmglowofsuccess,youhavetofacetheSIEaswellasoneofthetop-off(qualification)examssuchastheSeries7orSeries6.Inthischapter,IgiveyouanoverviewoftheSIEexam,includingitspurpose,structure,format,scoring,andsomehelpfultipstoguideyouthroughtheregistra-tionprocedure.Thefirstfourchaptersgooverthingslikewhattheexamis,howtostudyforit,howtotakethetest,andsoon.Ifyoufeelthatyouhaveahandleonthosethings,feelfreetojumptoChapter5togetrightintothemeatandpotatoesofwhatyouneedtolearn.WhatIstheSIEExam,Anyway?Initially,theinformationintheSIE(SecuritiesIndustryEssentials)examwasincludedinbooksthatcoveredtheSeries6,Series7,Series22,andsoon.TheFinancialIndustryRegulatoryAuthor-ity(FINRA)hadtheideatostripsimilarinformationfromtheseexamsandcreatetheSIEexam.WhatI'vefoundisthatbesidesstrippingtheinformationfromtheseotherexams,unfor-tunatelyforyouandotherexam-takers,FINRAaddedalotmoreinformation.Whatthismeansisthatyou'llhavetostudyalotofinformationtoanswer75randomizedquestions.TheSIEisanintroductory-levelexamdesignedtotestyourbasicknowledgeofthesecuritiesindustryandisopentoanyoneage18orolder.Fortunately,associationwithasecuritiesfirmisn’trequired;individualsmaytaketheSIEexambeforeorafterbeinghiredbyafirm.YouneedCHAPTER1IntroducingtheSIE(SecuritiesIndustryEssentials)Exam|€v+Studyxy

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toknowcertainterminologyusedinthesecuritiesindustry,differentsecuritiesproducts,howthemarketisstructured,howthemarketfunctions,differentregulatoryagenciesandtheirpur-poses,aswellasregulatedandprohibitedpractices.Becauseunsponsoredindividualsareallowedtotaketheexam,youcantakeasteptowardbecom-ingasecuritiesprofessionalpriortobeinghired.(AlthoughyoucantaketheSIEexamandoneofthecorequisiteexamsinanyorder,mostpeopletaketheSIEfirst.)Theexam’spurposeistoprotecttheinvestingpublicbyensuringthattheindividualswhosellorgiveinformationaboutsecuritieshavemasteredtheskillsandgeneralknowledgethatcompetentpracticingrepresentativesneedtohave.TheSIEexamitselfisacomputer-basedexamgivenbyPrometric(www.prometric.com/finra)attestcentersthroughouttheUnitedStatesorinyourdesiredlocation(seethe“Soyouwanttotakethetestatyourlocation”sidebarlaterinthischapter).The75-questionexam,administeredbyFINRA,is105minutesinduration.Ascoreof70percentorbettergetscandidatesapassinggradeandputsbigsmilesontheirfaces.AfteryoupasstheSIE,theresultsremainvalidforfouryearsfromthedateyoupass.ThepassingrateforthosetakingtheSIEexamforthefirsttimeisaround74percent.Ifyouincludethosewhohavetakentheexammorethanonce,it’scloserto82percent.ThesectionslaterinthischapterexplainthesetupoftheSIEexamandgivearundownofhowtoregisterfortheexam.Ifyouhaveotherquestions,calltheFINRAsupportteamat(240)386-4040orvisitwww.finra.org/industry/qualification-exams.TheSIEexamisacorequisiteexamforpeoplewhowanttobecomeinvestmentcompanyreps,generalsecuritiesreps,directparticipationprogram(DPP)reps,securitiestraders,investmentbankingreps,privatesecuritiesofferingsreps,researchanalysts,oroperationsprofessionals.ThepurposeoftheSIEexamwastostriptheinformationthatwassimilarinalltheaforemen-tionedexamstomakeiteasierforpeopletoaddlicensestotheirrésumés.Sotobecomeasecuri-tiesprofessional,youneedtopasstheSIEexam,oneoftheexamslistedinthenextsection,andtypicallytheNorthAmericanSecuritiesAdministratorsAssociation(NASAA)Series63or66exam.Peoplewhohavealongandsordidhistoryofembezzlement,forgery,andfraudaregenerallydisqualifiedandprecludedfromtakingtheexam.Candidatesmustdiscloseanycriminalrecords,andtheFINRAreviewsapplicationsonacase-by-casebasis.’.HOne'sNotEnough:TacklingtheTheSIEexamisjustyourstartingpoint.Tobecomeanindustryprofessional,youhavetotakeoneofthetop-offexamsand,inmostcases,theSeries63orSeries66stateexam.Asfaraswhichtop-offexam(s)you'llhavetotake,theanswerdependsonthejobyouwantand/orarehiredtodo.AfteryoupasstheSIEexam,thefinancialinstitutionthathiresyouwilltellyouwhichexamsyouneedtotakeandwillhelpyouschedulethem.8PART1GettingStartedwiththeSIEExam+StudyXy

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InadditiontotakingtheSIEexamandoneofthetop-offorcorequisiteexamslistedinthefol-lowingsections,you'lllikelyhavetotakeeithertheNASAASeries63examortheNASAASeries66exam.Theseexamsgointostatesecuritieslawsasopposedtofederalsecuritieslaws,whichrememserarethefocusofexamsliketheSIE.ThedifferencebetweentheSeries63andSeries66isthattheSeries66allowsholderstobecomeinvestmentadvisersaswell.Youremployerwillletyouknowwhichexamitwantsyoutotake.Moreandmorebroker-dealerswanttheiragentstotaketheSeries66.Don’tworrytoomuch;neitheroftheseexamsarethebeaststhatsomeoftheotherlistedexamsare.Series6:InvestmentCompanyandVariableProductsRepresentativeExamSeries6isthelicenserequiredbymostbanksandinsurancecompanies.Thislicenseallowstheholdertosellproductssuchasmutualfunds,variableannuities,andvariablelifeinsurance(alongwithhavinganinsurancelicense).Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_6_Content_Outline.pdf.Series7:GeneralSecuritiesRepresentativeExamSeries7isthelicenseexamthatmostpeoplewillbetaking.Thislicenseisrequiredbymostbroker-dealers.TheSeries7allowsyoutosellequitysecurities,mutualfunds,bonds,directpar-ticipationprograms,options,andsoon.Toseethecompleteoutlineofwhat'scovered,gotowww.finra.org/sites/default/files/Series_7_Content_Outline.pdf.Asasidenote,ifyou'retakingtheSeries7examaftertakingtheSIE,I'vealsowrittenSeries7[Exam2022-2023ForDummies,5thEdition(JohnWiley&Sons,Inc.),whichislaidoutinthesamelogicalwayasthisbookforeaseofstudying.TipSeries22:DPPRepresentativeExamIfyou'replanningtofocusyourcareeronsellingdirectparticipationprograms(DPPs),theSeries22examistheoneforyou.ThislicenseallowsyoutosolicitandselllimitedpartnershipinterestinDPPssuchasrealestate,oilandgas,andequipmentleasing.Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_22_Content_Outline.pdf.Series57:SecuritiesTraderExamTheSeries57licenseallowsholderstoexecutetradesinsecurities.Typically,aSeries57-licensedpersonworksinthetradingdepartment,executingtradesforindividualsorfirms.Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_57_Content_Outline.pdf.Series79:InvestmentBankingRepresentativeExamTheSeries79InvestmentBankingRepresentativeexamallowsholderstoworkintheinvestmentbankingrealm.Assuch,theholders’functionsmayincludeadvisingorfacilitatingequityordebtsecuritiesofferingsthroughpublicofferings,privateplacements,andmergersandacquisitions.CHAPTER1IntroducingtheSIE(SecuritiesIndustryEssentials)Examv©v—~StudyXY

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Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_79_Content_Outline.pdf.Series82:PrivateSecuritiesOfferingsRepresentativeExamIfyou'replanningtosellsecuritiesprivatelyasopposedtopublicly,Series82istheexamyou’llneedtopass.Thisexamtestsyouontheknowledgeneededtoperformfunctionsofaprivatesecuritiesofferingsrep,includingthesolicitationandsaleofRegulationDprivateplacementsecuritiesaspartofaprimaryoffering.Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_82_Content_Outline.pdf.Series7+Series86+Series87:ResearchAnalystExamIfyoulovetakingexams,thisistheoneforyou.YouhavetopassnotonlytheSIEexam,butalsotheSeries7,Series86,Series87,andeithertheSeries63orSeries66.Yikes!Ifyouwanttobearesearchanalyst,however,thisrouteistheoneyou'llneedtogo.Aresearchanalystisrequiredtopreparewrittenand/orelectroniccommunicationsthatshowananalysisofcompanysecuritiesandindustrysectors.Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_7_Content_Outline.pdfandwww.finra.org/sites/default/files/Series_86-87_Content_Outline.pdf.Series99:OperationsProfessionalExamPeoplewhohaveaSeries99licensehaveprovedthattheyhavetheknowledgeneededtoperformthecriticalfunctionsofanoperationsprofessional.Assuch,theirfunctionsincludeclientonboarding(welcomingnewclients,addressingclientconcerns,makingsureclientsunderstandtheservicesavailabletothem,andsoon),receiptanddeliveryofsecuritiesandfunds,accounttransfers,reinvestmentanddisbursementoffunds,andsoon.Toseethecompleteoutlineofwhat’scovered,gotowww.finra.org/sites/default/files/Series_99_Content_Outline.pdf.OneofthethingsIreallylikeabouttheSIEexamisthatyoudon’tneedtobesponsoredtotakeit(mostoftheothersecuritiesexamsrequiresponsorshipbyabrokeragefirm,bank,insurancecompany,andsoon),whichmeansthatyoucantaketheexamonyourownpriortobeinghired.Thisstrategyallowsyoutogetaleguponthecompetitionandalsoshowsyourfutureemployerthatyou'renotfoolingaround.FillingoutanapplicationtoenrollTheeasiestwaytoenrolltotaketheSIEistogotowww.finra.org/registration-exams-ce/qualification-exams/securities-industry-essentials-exam.Scrolldowntothebottomofthepage;lookfortheEnrollmentOptionssection;andfollowtheinstructionsforindividuals,whichincludecreatinganaccount,enrollingfortheSIE,andpayingfortheexam(bycreditcardorAutomatedClearingHouse[ACH]transfer).10PART1GettingStartedwiththeSIEExam~-~LStudyXY

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’.It'sadate!SchedulingyourexamAfteryou'vecompletedtheonlineapplicationandreceivedyourenrollmentnotification,youcanscheduleanappointmenttotaketheexambycontactingthePrometrictestingcenter.Locatethetestcenternearestyoubycalling(800)578-6273duringbusinesshoursorbyvisitingwww.prometric.com/FINRA,whereyoucanmakeanappointmenttotaketheexamataPromet-rictestcenteroronline(remotely).Atthepresenttime,onlinetestingisonlyacoupleofyearsold.Seethesidebar“Soyouwanttotakethetestatyourlocation”attheendofthischapterforinformationontakingtheexamonline.Likeenrollmentinothersecuritiesexams,yourSIEexamenrollmentisvalidfor120days;youhavetotaketheexamwithinthistimeframe.Whenschedulingyourexamappointment,bereadytoprovidethefollowinginformation:3YournameandSocialSecuritynumberand/orFINRAnumber3Thenameofthesecuritiesexamyou'reregisteringtotake3YourdesiredtestdateGettinganappointmentusuallytakesonetotwoweeks,dependingonthetimeofyear.(YoumaywaitlongerinthesummerthanaroundChristmastime.)Prometricwillconfirmyourappoint-mentonthephoneorviaemail.1highlysuggestputtingpressureonyourselfandschedulingtheexamalittlesoonerthanyouthinkyou'llbereadytotakeit;youcanalwaysmovethetestdateback.(You'llbechargedifyoucancelwithintenbusinessdaysofyourtestdate.)Youknowyourselfbest,butIthinkthatmostTIPstudentsstudybetterwhentheyhaveatargettestdate.Youhaveachoiceofwheretotaketheexam.Ifyou'reatravelin’man(orwoman),youmaywanttoscheduleyourexamatalocationfaraway(maybeeveninadifferentstate)togetthetestdateyouwant.Ifyou’rehavingtroubleschedulingthedateand/orlocationofyourchoice,rememberthatyoucantakeitonacomputerofyourchoice(athomeorwork,atafamilymember’shouse,andsoon).Seethesidebar“Soyouwanttotakethetestatyourlocation”laterinthischapter.Afteryouhaveyourtestdateset,youmayfindthatyou'rereadysoonerorlaterthanyoursched-uledappointment.Theexam-centeradministratorsareusuallyprettyaccommodatingaboutchangingappointmentsand/orlocationsaslongasyoucallbeforenoonatleasttwobusinessdaysbeforeyourtestdate,butafeemaybeinvolved.Youcangetanextensionfromthe120-dayenrollmentonlyifyoucallwithintendaysofyourenrollmentexpirationandifnoearliertestdatesareavailable.PlanningforspecialaccommodationsIfyourequirespecialaccommodationswhentakingyoursecuritiesexam,youcan’tscheduleyourexamonline.YouhavetocontacttheFINRASpecialConditionsTeamat(800)999-6647orfilloutthespecial-accommodationsformatwww.finra.org/sites/default/files/SA-Eligibility—Questionairre.pdf.Readonforinfoonwhatthetestadministratorscandoifyouhaveadis-abilityorifEnglishisn’tyourfirstlanguage.CHAPTER1IntroducingtheSIE(SecuritiesIndustryEssentials)ExamSn-StudyX

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ThetestcentersarerequiredtocomplywithFINRAsiteguidelines,butsomeoftheoldercentersmaynothavetheamenitiesthattheneweronesdo(suchaslockersandearplugs).Toprotectyourselffromavarietyofunpleasant,unexpectedsitesurprisesonexamday,theFINRAwebsite(www.finra.org)offersgeneralinformation,includingtest-centersecurityguidelines(includingcandidateIDrequirements,personalitemsallowed,andprovidedaids),test-centerrulesofconduct,andsoon.Formore-specificquestions,suchaswhetheracafeteria,vendingmachines,orlockersareonsite,askthecenter'sadminis-tratorwhenyouscheduleyourtestdate.ThisbookwaswrittenacoupleofyearsintotheCOVID-19pandemic.Asofnow,prettymuchalltheclosedtestingcentershavereopenedateitherfullorlimitedcapacity.Certainly,duetostateandlocalgovernmentmandates,sometestingsitesmaybemoreaffectedthanothers.Thesituationremainsfluidandmaychangeasthenumberofvirus-infectedpeopleincreasesordecreases.|suggestthatyoucheckthefollowinglinkforthelatestPrometricupdates:www.prometric.com/corona-virus-update.Inaddition,FINRAandNASAArecentlysetupanonlinetestingservice(discussedattheendofthechapter).Forthelatest,gotowww.finra.org/rules-guidance/key-topics/covid-19/exams.Dependingonyourtestingcenter,youmayhavetoreceiveauthorizationtobringmedicaldevicesandsupplies—suchasinsulinpumps,eyedrops,andinhalers—intothetestingroom.Ifyouneedauthorization,callyourlocalPrometrictestingcenter,andastaffmemberwillbeabletowarningguideyouontheapprovalprocess.AmericanswithDisabilitiesAct(ADA)candidatesIfyou'redisabledorlearning-impaired,FINRAprovidestestingmodificationsandaidsincom-pliancewiththeprovisionsoftheAmericanswithDisabilitiesAct(ADA).ToqualifyforADAprovisions,yourdisabilitieshavetopermanentlylimitamajorlifeactivity,suchaslearning,speech,hearing,orvision.Toapplyforspecialaccommodations,youneedtosubmitdocumentationfromyourphysicianorlicensedhealth-careprofessionaltotheFINRA,requestingthespecialarrangements.Addition-ally,youhavetosubmittheFINRASpecialAccommodationsEligibilityQuestionnaireandSpecialAccommodationsVerificationRequestFormforallspecialarrangementrequests.Youcanfindlinkstotheseformsatwww.finra.org/industry/special-accommodations.Youmayrequesttheaccommodationsyouwant.Possibleaidsinclude»Extratime3Awrittenexam(pencilandpaper)3Areader,writer,orrecorder»Asign-languageinterpreter3Alarge-printexambooklet3Wheelchair-accessiblelocationsFINRAreservestherighttomakefinaldecisionsaboutaccommodationsonacase-by-casebasis.12PART1GettingStartedwiththeSIEExam~-—~StudyXY

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EnglishasaSecondLanguage(ESL)candidatesIfEnglishisyoursecondlanguage,youcanrequestadditionaltimetotaketheexamwhenyouscheduleyourSIEtestdate.IfFINRAapproves,youreceivealittleextratimetocompletetheexam.Ingeneral,FINRAgivesanextra30minutesforexamsshorterthan2hoursandanextrahourforexamslongerthan2hours.ToqualifyforextratimebecauseEnglishisyoursecondlanguage,fillouttheformatwww.finra.org/sites/default/files/LEP-request-form.pdf.Justincase:CancelingasanoptionIfsomethingcomesuporifyoufeelthatyou’rejustnotready,youcancancelyourappointmenttotaketheSIEexamwithoutpenaltyifyoudosoatleasttenbusinessdaysbeforetheexamdate.Ifaholidayfallswithinthecancellationperiod,youhavetocancelanadditionalbusinessdayearlier.Ifyou'rescheduledtotaketheexamonaWednesday,forexample,youhavetocancelonTuesdaytwoweeksbeforeyourexamdate.Ifaholidayfallsbetweenthosedates,youhavetocancelonMondaytwoweeksbeforeyourexamdate.Formoreinformation,visitwww.finra.org/industry/reschedule-or-cancel-your-appointment.Ifyoucancelaftertheprescribeddeadline,ifyoudon’tshowuptotaketheexam,orifyoushowuptoolatetotaketheexam,you’llbechargedacancellationfeeequaltothecostoftheexamfeeyoupaid.I'msurethattheold“Iforgot”excusehasbeentried,butI’veneverheardofitbeingwarningeffective.Asapracticalexam,theSIErequiresyoutomastervocabulary;handlecustomeraccounts;under-standtherulesandregulationsthatgovernthesecuritiesindustry;and,yes,workwithsomemathformulas(althoughveryfew).Foreaseofuse,andbecausehumanshavealimitedlifespan,thisbookfocusesontheinformationyouneedtopasstheSIEexam.Here'sanoverviewofwhattoexpect:3Theunderwritingprocess—hownewsecuritiescometomarket(Chapter5)3Commonandpreferredstock(Chapter6)3CorporatebondsandU.S.governmentsecurities(Chapter7)9»Securitiesissuedbylocalgovernments(municipalbonds)(Chapter8)3Investmentcompanies,includingmutualandclosed-endfunds(Chapter9)3DPPs(limitedpartnerships)(Chapter10)3Options(Chapter11)3Customeraccounts(Chapter12)3Analyzingthebenefitsandrisksassociatedwithinvestments;makingappropriaterecommen-dationstocustomers(Chapter13)3Followinghownewsecuritiesarebroughttothemarketandhowexistingsecuritiesaretradedinthemarket(Chapter14)CHAPTER1IntroducingtheSIE(SecuritiesIndustryEssentials)Examwv+StudyXY

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3Riskconsiderationsandincometaximplicationsthatstockmarketinvestorsface(Chapter15)3Rulesandregulationsgoverningthepurchaseandsaleofsecuritiesandtheregisteredrepresentative'sresponsibilityformaintainingaccuraterecords(Chapter16)FINRAhasreleasedalistofthedistributionofquestionsontheSIEexam.SeeTable1-1forthenumberofquestionsdevotedtoeachtopicasappliedtoaregisteredrep’sperformance.Prettymucheachofthesetopicsfallsundermultipleareasofstudy.Tocorrectlyanswerques-tionsthataddressthetopicofhandlingcustomeraccounts,forexample,youhavetoknowenoughaboutdifferenttypesofstocks,bonds,andsoontoguideyourcustomers,includingwhichinvest-mentsaremostbeneficialtoretireesandwhichworkbestforinvestorswhoarejustenteringtheworkforce.AlthoughTable1-1showstheoutlineoftheexam,thisbook(andmostotherstudymaterials)breaksthechaptersdownbysimilarcontenttomakeyourlifeeasierandkeepyoufromhavingtojumpbackandforth.TaBLe1-1DistributionofSIEExamQuestionsNumberofPercentageofTopicQuestionsExamKnowledgeofcapitalmarkets1216Understandingproductsandtheirrisks33a4Understandingtrading,customeraccounts,andprohibitedactivities~~2331Overviewofregulatoryframework79Total75100Tomakesurethatyoudon’twalkintothetestingcenter,takeonelookatthecomputerscreen,gointoshock,andstartdroolingonthekeyboard,IusethenextfewsectionstocoversomeofthetestingdetailsfortheSIEexam.ReviewingtheexambasicsTheSIEexamisacomputerized,closed-book(inotherwords,nobook)examthatlasts1hourand45minutes.Theexamconsistsof85multiple-choicequestions,althoughonly75ofthemcounttowardyourscore(seethenextsection).Certainly,youcantakebathroombreaksatanytime,buttheclockcontinuestotickaway,soyoumaywanttoreconsiderdrinkingamega-jumboicedlattethemorningofyourtest.nrForinformationonthetypesofquestionstoexpect,seeChapter3.FliptoChapter4foranover-viewofhowyourexamdaymayprogress.1PART1GettingStartedwiththeSIEExam|’4¢+StudyXy

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