SIE Exam 2025/2026 For Dummies (2024)
SIE Exam 2025/2026 For Dummies (2024) helps you master your certification exam with realistic practice questions and detailed answers.
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SIE Exam
2025/2026
4th Edition
by Steven M. Rice
2025/2026
4th Edition
by Steven M. Rice
SIE Exam 2025/2026 For Dummies®
, 4th Edition
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2024 by John Wiley & Sons, Inc., Hoboken, New Jersey
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. SIE is a
registered trademark of FINRA. 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: THE PUBLISHER AND THE AUTHOR 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 WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO
WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES
CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT
THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF
PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE
SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT
THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF
FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE
ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE
THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK
WAS WRITTEN AND WHEN IT IS READ.
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: 2024936009
ISBN 978-1-394-26187-1 (pbk); ISBN 978-1-394-26188-8 (ebk); ISBN 978-1-394-26189-5 (ebk)
, 4th Edition
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2024 by John Wiley & Sons, Inc., Hoboken, New Jersey
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. SIE is a
registered trademark of FINRA. 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: THE PUBLISHER AND THE AUTHOR 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 WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO
WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES
CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT
THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF
PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE
SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT
THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF
FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE
ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE
THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK
WAS WRITTEN AND WHEN IT IS READ.
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: 2024936009
ISBN 978-1-394-26187-1 (pbk); ISBN 978-1-394-26188-8 (ebk); ISBN 978-1-394-26189-5 (ebk)
Contents at a Glance
Introduction 1
Part 1: Get Things Rolling: Starting Your SIE Journey 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 43
Part 2: Starting at the Beginning: Basic Security Investments 49
CHAPTER 5: Securities Underwriting: The Process and the Team Players 51
CHAPTER 6: Equity Securities: Corporate Ownership 65
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 85
CHAPTER 8: Municipal Bonds: Local Government Debt Securities 105
Part 3: Diving Deeper: Taking a Look at More Complex Securities 127
CHAPTER 9: Delivering Diversification with Packaged Securities 129
CHAPTER 10: Working with Direct Participation Programs (DPPs) and REITs 149
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 161
Part 4: Playing Nicely: Serving Your Client’s Needs and
Following the Rules 189
CHAPTER 12: Customer Accounts: Proper Handling of Accounts 191
CHAPTER 13: Securities Analysis: Doing a Little Market Research 207
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 227
CHAPTER 15: Making Sure the IRS Gets Its Share 245
CHAPTER 16: Rules and Regulations: No Fooling Around 259
Part 5: Putting Your Pencil to Paper: Practice Exams 295
CHAPTER 17: Ready, Set, Go!: Practice Exam 1 297
CHAPTER 18: Answers and Explanations to Practice Exam 1 311
CHAPTER 19: Nothing But Net: Practice Exam 2 321
CHAPTER 20: Answers and Explanations to Practice Exam 2 335
Part 6: The Part of Tens 347
CHAPTER 21: Ten SIE Exam Traps to Avoid 349
CHAPTER 22: Ten Ways to Start Your Career Off Right 353
Glossary 357
Index 377
Introduction 1
Part 1: Get Things Rolling: Starting Your SIE Journey 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 43
Part 2: Starting at the Beginning: Basic Security Investments 49
CHAPTER 5: Securities Underwriting: The Process and the Team Players 51
CHAPTER 6: Equity Securities: Corporate Ownership 65
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 85
CHAPTER 8: Municipal Bonds: Local Government Debt Securities 105
Part 3: Diving Deeper: Taking a Look at More Complex Securities 127
CHAPTER 9: Delivering Diversification with Packaged Securities 129
CHAPTER 10: Working with Direct Participation Programs (DPPs) and REITs 149
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 161
Part 4: Playing Nicely: Serving Your Client’s Needs and
Following the Rules 189
CHAPTER 12: Customer Accounts: Proper Handling of Accounts 191
CHAPTER 13: Securities Analysis: Doing a Little Market Research 207
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 227
CHAPTER 15: Making Sure the IRS Gets Its Share 245
CHAPTER 16: Rules and Regulations: No Fooling Around 259
Part 5: Putting Your Pencil to Paper: Practice Exams 295
CHAPTER 17: Ready, Set, Go!: Practice Exam 1 297
CHAPTER 18: Answers and Explanations to Practice Exam 1 311
CHAPTER 19: Nothing But Net: Practice Exam 2 321
CHAPTER 20: Answers and Explanations to Practice Exam 2 335
Part 6: The Part of Tens 347
CHAPTER 21: Ten SIE Exam Traps to Avoid 349
CHAPTER 22: Ten Ways to Start Your Career Off Right 353
Glossary 357
Index 377
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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: GET THINGS ROLLING: STARTING YOUR SIE JOURNEY 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 (Top-Off) 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 10
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 11
It’s a date! Scheduling your exam 11
Planning for special accommodations 12
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: GET THINGS ROLLING: STARTING YOUR SIE JOURNEY 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 (Top-Off) 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 10
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 11
It’s a date! Scheduling your exam 11
Planning for special accommodations 12
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 SIE Exam 2025/2026 For Dummies
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 38
Focusing on key information 38
Answer me this: Picking the correct answer 38
Don’t make the same mistake twice 41
CHAPTER 4: Surviving Test Day 43
Composing Yourself the Day Before 43
Making the Most of the Morning 45
Arriving on the Scene When Taking the Exam at a Physical Location 45
Taking advantage of one last chance to cram 45
Signing in 45
Getting seated 46
Tackling the SIE 46
Revealing Your Results: Drumroll, Please . . . 47
PART 2: STARTING AT THE BEGINNING: BASIC SECURITY
INVESTMENTS 49
CHAPTER 5: Securities Underwriting: The Process and
the Team Players 51
Bringing New Issues to the Market 51
Starting out: What the issuer does 51
Roll call: Introducing the team players 55
Getting the skinny on the issue and issuer: The prospectus 56
Counting the securities along the way 57
Getting Up to Speed on the Types of Securities Offerings 57
Reviewing Exemptions 58
Exempt securities 58
Exempt transactions 59
Testing Your Knowledge 61
Practice questions 61
Answers and explanations 64
CHAPTER 6: Equity Securities: Corporate Ownership 65
Beginning with the Basics: Common Stock 65
Understanding a shareholder’s voting rights 66
Categorizing shares corporations can sell 68
Establishing the par value of common stock 68
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 38
Focusing on key information 38
Answer me this: Picking the correct answer 38
Don’t make the same mistake twice 41
CHAPTER 4: Surviving Test Day 43
Composing Yourself the Day Before 43
Making the Most of the Morning 45
Arriving on the Scene When Taking the Exam at a Physical Location 45
Taking advantage of one last chance to cram 45
Signing in 45
Getting seated 46
Tackling the SIE 46
Revealing Your Results: Drumroll, Please . . . 47
PART 2: STARTING AT THE BEGINNING: BASIC SECURITY
INVESTMENTS 49
CHAPTER 5: Securities Underwriting: The Process and
the Team Players 51
Bringing New Issues to the Market 51
Starting out: What the issuer does 51
Roll call: Introducing the team players 55
Getting the skinny on the issue and issuer: The prospectus 56
Counting the securities along the way 57
Getting Up to Speed on the Types of Securities Offerings 57
Reviewing Exemptions 58
Exempt securities 58
Exempt transactions 59
Testing Your Knowledge 61
Practice questions 61
Answers and explanations 64
CHAPTER 6: Equity Securities: Corporate Ownership 65
Beginning with the Basics: Common Stock 65
Understanding a shareholder’s voting rights 66
Categorizing shares corporations can sell 68
Establishing the par value of common stock 68
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Table of Contents ix
Considering corporate actions 69
Splitting common stock 70
Sharing corporate profits through dividends 71
Getting Preferential Treatment: Preferred Stock 73
Considering characteristics of preferred stock 74
Getting familiar with types of preferred stock 74
Securities with a Twist 76
Opening national borders: ADRs 76
Rights: The right to buy new shares at a discount 77
Warrants: The right to buy shares of stock at a fixed price 77
Testing Your Knowledge 78
Practice questions 78
Answers and explanations 82
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 85
Tackling Bond Terms, Types, and Traits 85
Covering bond terminology 86
Following bond issue and maturity schedules 87
Comparing secured and unsecured bonds 88
Making Basic Bond Price and Yield Calculations 89
Nominal yield (coupon rate) 90
Current yield 90
Yield to maturity (basis) 91
Yield to call 91
Yield to worst 91
Total return 91
Basis point 92
Accrued interest 92
Determining the Best Investment: Comparing Corporate Bonds 92
Considering bond credit ratings 92
Contrasting callable and putable (put) bonds 94
Popping the top on convertible bonds 95
Exploring U.S. Government Securities 95
Understanding the types of U S government securities 96
Looking at agency securities 97
Playing It Safe: Short-Term Loans or Money Market Instruments 97
Testing Your Knowledge 99
Practice questions 99
Answers and explanations 102
CHAPTER 8: Municipal Bonds: Local Government Debt Securities 105
General Obligation (GO) Bonds: Backing Bonds with Taxes 105
General characteristics of GOs 106
Analyzing GO bonds 106
Revenue Bonds: Raising Money for Utilities and Such 107
General characteristics of revenue bonds 108
Analyzing revenue bonds 108
The Primary Market: Bringing New Municipal Bonds to Market 109
Allocation of orders 110
Definitions for new issues 110
Examining Other Types of Municipal Bonds on the Test 111
Taxing Build America Bonds (BABs): Taxable Municipal Bonds 112
Municipal Notes: Securing Short-Term Financing 112
Considering corporate actions 69
Splitting common stock 70
Sharing corporate profits through dividends 71
Getting Preferential Treatment: Preferred Stock 73
Considering characteristics of preferred stock 74
Getting familiar with types of preferred stock 74
Securities with a Twist 76
Opening national borders: ADRs 76
Rights: The right to buy new shares at a discount 77
Warrants: The right to buy shares of stock at a fixed price 77
Testing Your Knowledge 78
Practice questions 78
Answers and explanations 82
CHAPTER 7: Debt Securities: Corporate and U.S. Government Loans 85
Tackling Bond Terms, Types, and Traits 85
Covering bond terminology 86
Following bond issue and maturity schedules 87
Comparing secured and unsecured bonds 88
Making Basic Bond Price and Yield Calculations 89
Nominal yield (coupon rate) 90
Current yield 90
Yield to maturity (basis) 91
Yield to call 91
Yield to worst 91
Total return 91
Basis point 92
Accrued interest 92
Determining the Best Investment: Comparing Corporate Bonds 92
Considering bond credit ratings 92
Contrasting callable and putable (put) bonds 94
Popping the top on convertible bonds 95
Exploring U.S. Government Securities 95
Understanding the types of U S government securities 96
Looking at agency securities 97
Playing It Safe: Short-Term Loans or Money Market Instruments 97
Testing Your Knowledge 99
Practice questions 99
Answers and explanations 102
CHAPTER 8: Municipal Bonds: Local Government Debt Securities 105
General Obligation (GO) Bonds: Backing Bonds with Taxes 105
General characteristics of GOs 106
Analyzing GO bonds 106
Revenue Bonds: Raising Money for Utilities and Such 107
General characteristics of revenue bonds 108
Analyzing revenue bonds 108
The Primary Market: Bringing New Municipal Bonds to Market 109
Allocation of orders 110
Definitions for new issues 110
Examining Other Types of Municipal Bonds on the Test 111
Taxing Build America Bonds (BABs): Taxable Municipal Bonds 112
Municipal Notes: Securing Short-Term Financing 112
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x SIE Exam 2025/2026 For Dummies
Taking a Closer Look at Municipal Fund Securities 113
Section 529 savings plans 113
ABLE (Achieving a Better Life Experience) accounts 114
LGIPs (Local Government Investment Pools) 115
Understanding the Taxes on Municipal Bonds 115
Comparing municipal and corporate bonds equally 115
Scot-free! Taking a look at triple tax-free municipal bonds 116
Following Municipal Bond Rules 116
Confirmations 117
Advertising and record keeping 117
Gifts 117
Commissions 118
Gathering Municipal Bond Info 118
The bond resolution (indenture) 118
Legal opinion 118
Official statement 119
“G” That’s a Whole Lot of Rules 119
Testing Your Knowledge 122
Practice questions 122
Answers and explanations 125
PART 3: DIVING DEEPER: TAKING A LOOK AT MORE
COMPLEX SECURITIES 127
CHAPTER 9: Delivering Diversification with Packaged Securities 129
Looking at Investment Company Registration 129
Diversifying through Management Investment Companies 130
Comparing open- and closed-end funds 130
Keeping your customer’s investment objectives in mind 132
Dealing with discounts 134
Figuring the sales charge and public offering price of open-end funds 136
Considering Other Investment Company Options 138
Face-amount certificate companies 138
Unit investment trusts 138
Exchange-traded products (funds and notes) 138
Investment company rules 17a-6 and 17a-7 140
Adding Annuities to a Portfolio 140
Looking at fixed annuities 140
Focusing on variable annuities 141
Putting money into (and receiving money from) annuities 141
Understanding the Investment Component of Variable Life Insurance Products 143
Testing Your Knowledge 143
Practice questions 144
Answers and explanations 147
CHAPTER 10: Working with Direct Participation Programs
(DPPs) and REITs 149
Searching for Identity: What DPPs Are (and Aren’t) 150
The DPP Characters: General and Limited Partners 150
Pushing through Partnership Paperwork 151
Partnership agreement 151
Certificate of limited partnership 152
Subscription agreement 152
Taking a Closer Look at Municipal Fund Securities 113
Section 529 savings plans 113
ABLE (Achieving a Better Life Experience) accounts 114
LGIPs (Local Government Investment Pools) 115
Understanding the Taxes on Municipal Bonds 115
Comparing municipal and corporate bonds equally 115
Scot-free! Taking a look at triple tax-free municipal bonds 116
Following Municipal Bond Rules 116
Confirmations 117
Advertising and record keeping 117
Gifts 117
Commissions 118
Gathering Municipal Bond Info 118
The bond resolution (indenture) 118
Legal opinion 118
Official statement 119
“G” That’s a Whole Lot of Rules 119
Testing Your Knowledge 122
Practice questions 122
Answers and explanations 125
PART 3: DIVING DEEPER: TAKING A LOOK AT MORE
COMPLEX SECURITIES 127
CHAPTER 9: Delivering Diversification with Packaged Securities 129
Looking at Investment Company Registration 129
Diversifying through Management Investment Companies 130
Comparing open- and closed-end funds 130
Keeping your customer’s investment objectives in mind 132
Dealing with discounts 134
Figuring the sales charge and public offering price of open-end funds 136
Considering Other Investment Company Options 138
Face-amount certificate companies 138
Unit investment trusts 138
Exchange-traded products (funds and notes) 138
Investment company rules 17a-6 and 17a-7 140
Adding Annuities to a Portfolio 140
Looking at fixed annuities 140
Focusing on variable annuities 141
Putting money into (and receiving money from) annuities 141
Understanding the Investment Component of Variable Life Insurance Products 143
Testing Your Knowledge 143
Practice questions 144
Answers and explanations 147
CHAPTER 10: Working with Direct Participation Programs
(DPPs) and REITs 149
Searching for Identity: What DPPs Are (and Aren’t) 150
The DPP Characters: General and Limited Partners 150
Pushing through Partnership Paperwork 151
Partnership agreement 151
Certificate of limited partnership 152
Subscription agreement 152
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Table of Contents xi
Passive Income and Losses: Looking at Taxes on Partnerships 152
Evaluating DPPs 153
Checking Out Types of Partnerships 153
Building on real-estate partnership info 153
Gearing up with equipment leasing 154
Strengthening your grasp on oil and gas 155
Reducing Real-Estate Risk with REITs 156
Testing Your Knowledge 157
Practice questions 158
Answers and explanations 160
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 161
Brushing Up on Option Basics 161
Reading an option 162
Looking at call options: The right to buy 163
Checking out put options: The right to sell 163
Getting your money back: Options in-, at-, or out-of-the-money 164
Paying the premium: The cost of an option 165
Incorporating Standard Option Math 167
Calls same: Buying or selling call options 167
Puts switch: Buying or selling put options 170
Trading options: Opening and closing transactions 172
Got it covered: Stock/option contracts 174
Index options 175
Gaining Additional Option Insight 176
Clearing through the OCC 177
That’s ODD: Options risk disclosure document 177
Getting the go-ahead: Registered options principal 177
Options account agreement 177
Order ticket 177
Last trade, last exercise, and expiration of an option 178
Exercise and assignment 178
Additional definitions 179
Some additional option rules 180
Testing Your Knowledge 181
Practice questions 182
Answers and explanations 185
PART 4: PLAYING NICELY: SERVING YOUR CLIENT’S
NEEDS AND FOLLOWING THE RULES 189
CHAPTER 12: Customer Accounts: Proper Handling of Accounts 191
Following Protocol When Opening Accounts 191
Filing the facts on the new account form 191
Gathering other important customer info 193
Word on the street: Street name accounts 194
Selecting the Appropriate Type of Account 194
Single and joint accounts 194
Trust accounts 195
Discretionary accounts 196
Corporate accounts 196
Institutional accounts 197
Partnership accounts 197
Cash or margin account 197
Passive Income and Losses: Looking at Taxes on Partnerships 152
Evaluating DPPs 153
Checking Out Types of Partnerships 153
Building on real-estate partnership info 153
Gearing up with equipment leasing 154
Strengthening your grasp on oil and gas 155
Reducing Real-Estate Risk with REITs 156
Testing Your Knowledge 157
Practice questions 158
Answers and explanations 160
CHAPTER 11: Options: Understanding the Basics of Puts and Calls 161
Brushing Up on Option Basics 161
Reading an option 162
Looking at call options: The right to buy 163
Checking out put options: The right to sell 163
Getting your money back: Options in-, at-, or out-of-the-money 164
Paying the premium: The cost of an option 165
Incorporating Standard Option Math 167
Calls same: Buying or selling call options 167
Puts switch: Buying or selling put options 170
Trading options: Opening and closing transactions 172
Got it covered: Stock/option contracts 174
Index options 175
Gaining Additional Option Insight 176
Clearing through the OCC 177
That’s ODD: Options risk disclosure document 177
Getting the go-ahead: Registered options principal 177
Options account agreement 177
Order ticket 177
Last trade, last exercise, and expiration of an option 178
Exercise and assignment 178
Additional definitions 179
Some additional option rules 180
Testing Your Knowledge 181
Practice questions 182
Answers and explanations 185
PART 4: PLAYING NICELY: SERVING YOUR CLIENT’S
NEEDS AND FOLLOWING THE RULES 189
CHAPTER 12: Customer Accounts: Proper Handling of Accounts 191
Following Protocol When Opening Accounts 191
Filing the facts on the new account form 191
Gathering other important customer info 193
Word on the street: Street name accounts 194
Selecting the Appropriate Type of Account 194
Single and joint accounts 194
Trust accounts 195
Discretionary accounts 196
Corporate accounts 196
Institutional accounts 197
Partnership accounts 197
Cash or margin account 197
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xii SIE Exam 2025/2026 For Dummies
Working with Margin Accounts 198
Disclosures and agreements: Getting margin paperwork out of the way 198
Introducing long and short margin accounts 198
Regulation T: Following the Fed’s rules for purchasing margin accounts 199
Making margin call 199
Opening a margin account: The initial requirements 200
Obeying the Telephone Consumer Protection Act of 1991
(Telephone Act of 1991) 201
Testing Your Knowledge 202
Practice questions 202
Answers and explanations 205
CHAPTER 13: Securities Analysis: Doing a Little Market Research 207
Getting to Know Your Securities and Markets: Securities Analysis Basics 207
Regarding systematic and nonsystematic risk 208
Strategies for mitigating risk 209
Deciding what to buy: Fundamental analysis 211
Deciding when to buy: Technical analysis 213
Following the Green: Money Supply and Monetary Policy 216
Influencing the money supply 216
Opening the Federal Reserve Board’s toolbox 217
Reading Economic Indicators 218
Leading indicators 219
Coincident (coincidental) indicators 219
Lagging indicators 219
GDP and GNP: Measuring goods and services 220
How Economic Factors Affect Securities 220
Cyclical 220
Defensive 221
Growth 221
Your Principal Economic Theory Primer 221
Testing Your Knowledge 221
Practice questions 222
Answers and explanations 225
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 227
Shopping at Primary and Secondary Markets 227
Buying new in the primary market 228
Buying used in the secondary market 228
Making the Trade 228
Auctioning securities at securities exchanges 228
Negotiating trades over the counter 229
Understanding the Role of a Broker–Dealer 230
An introducing broker 231
A clearing (carrying) broker 231
A prime broker 231
Receiving and Executing Customer Orders 232
Reviewing basic order types 232
Factoring in order features 234
Following customers’ orders or using your discretion 235
It Takes All Kinds: Recognizing Different Types of Investors 236
Retail investors 237
Accredited investors 237
Institutional investors 237
Working with Margin Accounts 198
Disclosures and agreements: Getting margin paperwork out of the way 198
Introducing long and short margin accounts 198
Regulation T: Following the Fed’s rules for purchasing margin accounts 199
Making margin call 199
Opening a margin account: The initial requirements 200
Obeying the Telephone Consumer Protection Act of 1991
(Telephone Act of 1991) 201
Testing Your Knowledge 202
Practice questions 202
Answers and explanations 205
CHAPTER 13: Securities Analysis: Doing a Little Market Research 207
Getting to Know Your Securities and Markets: Securities Analysis Basics 207
Regarding systematic and nonsystematic risk 208
Strategies for mitigating risk 209
Deciding what to buy: Fundamental analysis 211
Deciding when to buy: Technical analysis 213
Following the Green: Money Supply and Monetary Policy 216
Influencing the money supply 216
Opening the Federal Reserve Board’s toolbox 217
Reading Economic Indicators 218
Leading indicators 219
Coincident (coincidental) indicators 219
Lagging indicators 219
GDP and GNP: Measuring goods and services 220
How Economic Factors Affect Securities 220
Cyclical 220
Defensive 221
Growth 221
Your Principal Economic Theory Primer 221
Testing Your Knowledge 221
Practice questions 222
Answers and explanations 225
CHAPTER 14: Securities Markets: Taking Orders and Executing Trades 227
Shopping at Primary and Secondary Markets 227
Buying new in the primary market 228
Buying used in the secondary market 228
Making the Trade 228
Auctioning securities at securities exchanges 228
Negotiating trades over the counter 229
Understanding the Role of a Broker–Dealer 230
An introducing broker 231
A clearing (carrying) broker 231
A prime broker 231
Receiving and Executing Customer Orders 232
Reviewing basic order types 232
Factoring in order features 234
Following customers’ orders or using your discretion 235
It Takes All Kinds: Recognizing Different Types of Investors 236
Retail investors 237
Accredited investors 237
Institutional investors 237
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Table of Contents xiii
Testing Your Knowledge 238
Practice questions 238
Answers and explanations 242
CHAPTER 15: Making Sure the IRS Gets Its Share 245
Everything in Its Place: Checking Out Tax and Income Categories 245
Touring the tax categories 246
Looking at types of income 246
Noting Taxes on Investments 246
Interest income 247
Dividends 247
At the sale: Capital gains and losses 248
Estate taxes 251
Exploring Retirement Plan Tax Advantages 251
Qualified versus nonqualified plans 251
IRA types and contribution limits 252
401(k) and 403(b) 253
Testing Your Knowledge 254
Practice questions 254
Answers and explanations 257
CHAPTER 16: Rules and Regulations: No Fooling Around 259
Meeting the Market Watchdogs: Securities Regulatory Organizations 259
The Securities and Exchange Commission 259
Self-regulatory organizations 261
State regulators 261
Department of the Treasury/IRS 262
FINRA Registration and Reporting Requirements 262
Filling out the U4 form 262
Missing the mark: Grounds for disqualification 263
Handing over your fingerprints 264
Continuing education 264
What happens when a rep resigns or is terminated 265
Skipping a step: Who’s exempt from FINRA registration 265
Adhering to reporting requirements 265
Trading by the Book When the Account Is Open 267
Filling out an order ticket 267
Checking your calendar: Payment and settlement dates 269
Safeguarding investor info: Regulation S-P 270
Confirming a trade 270
Acting in your customers’ best interest 272
Borrowing from or lending to 273
Following up with account statements 273
Keeping your dividend dates straight 274
Handling complaints 275
Disseminating info: Appropriate communications 276
Keeping clear records 277
Committing Other Important Rules to Memory 278
Sticking to the 5 percent markup policy 278
Avoiding violations 279
Following the money: Anti-money-laundering rules 282
Complying with AML rules 283
Working with public info: Following insider trading rules 283
Testing Your Knowledge 238
Practice questions 238
Answers and explanations 242
CHAPTER 15: Making Sure the IRS Gets Its Share 245
Everything in Its Place: Checking Out Tax and Income Categories 245
Touring the tax categories 246
Looking at types of income 246
Noting Taxes on Investments 246
Interest income 247
Dividends 247
At the sale: Capital gains and losses 248
Estate taxes 251
Exploring Retirement Plan Tax Advantages 251
Qualified versus nonqualified plans 251
IRA types and contribution limits 252
401(k) and 403(b) 253
Testing Your Knowledge 254
Practice questions 254
Answers and explanations 257
CHAPTER 16: Rules and Regulations: No Fooling Around 259
Meeting the Market Watchdogs: Securities Regulatory Organizations 259
The Securities and Exchange Commission 259
Self-regulatory organizations 261
State regulators 261
Department of the Treasury/IRS 262
FINRA Registration and Reporting Requirements 262
Filling out the U4 form 262
Missing the mark: Grounds for disqualification 263
Handing over your fingerprints 264
Continuing education 264
What happens when a rep resigns or is terminated 265
Skipping a step: Who’s exempt from FINRA registration 265
Adhering to reporting requirements 265
Trading by the Book When the Account Is Open 267
Filling out an order ticket 267
Checking your calendar: Payment and settlement dates 269
Safeguarding investor info: Regulation S-P 270
Confirming a trade 270
Acting in your customers’ best interest 272
Borrowing from or lending to 273
Following up with account statements 273
Keeping your dividend dates straight 274
Handling complaints 275
Disseminating info: Appropriate communications 276
Keeping clear records 277
Committing Other Important Rules to Memory 278
Sticking to the 5 percent markup policy 278
Avoiding violations 279
Following the money: Anti-money-laundering rules 282
Complying with AML rules 283
Working with public info: Following insider trading rules 283
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xiv SIE Exam 2025/2026 For Dummies
The Investor’s Bankruptcy Shield: FDIC and SIPC Coverage 284
Holding a customer’s mail 285
Business continuity plans and emergency contact information 285
Testing Your Knowledge 286
Practice questions 286
Answers and explanations 292
PART 5: PUTTING YOUR PENCIL TO PAPER: PRACTICE EXAMS 295
CHAPTER 17: Ready, Set, Go!: Practice Exam 1 297
Practice Exam Answer Sheet 299
CHAPTER 18: Answers and Explanations to Practice Exam 1 311
Making the Grade 320
Answer Key for Practice Exam 1 320
CHAPTER 19: Nothing But Net: Practice Exam 2 321
Practice Exam Part 2 Answer Sheet 323
CHAPTER 20: Answers and Explanations to Practice Exam 2 335
Knowing the Score 344
Answer Key for Practice Exam 2 345
PART 6: THE PART OF TENS 347
CHAPTER 21: Ten SIE Exam Traps to Avoid 349
Easing Up on the Studying 349
Assuming the Question’s Intent 350
Reading into the Question 350
Becoming Distracted When Others Finish 350
Not Dressing for Comfort 350
Forgetting to Breathe 351
Trying to Work Out Equations in Your Head Instead of Writing Them Down 351
Spending Too Much Time on One Question 351
Changing Your Answers for the Wrong Reasons 352
Calculating Your Final Score Prematurely 352
CHAPTER 22: Ten Ways to Start Your Career Off Right 353
Win at the Numbers Game 353
Be an Apprentice 354
Do Your Homework 354
Treat the Minnow Like a Whale 354
Smile When You Dial 354
When a Security Falls, Don’t Be a Stranger 354
Put In the Hours 355
Broaden Your Horizons 355
Pay Yourself First 355
Set Some Goals: The Brass Ring 356
GLOSSARY 357
INDEX 377
The Investor’s Bankruptcy Shield: FDIC and SIPC Coverage 284
Holding a customer’s mail 285
Business continuity plans and emergency contact information 285
Testing Your Knowledge 286
Practice questions 286
Answers and explanations 292
PART 5: PUTTING YOUR PENCIL TO PAPER: PRACTICE EXAMS 295
CHAPTER 17: Ready, Set, Go!: Practice Exam 1 297
Practice Exam Answer Sheet 299
CHAPTER 18: Answers and Explanations to Practice Exam 1 311
Making the Grade 320
Answer Key for Practice Exam 1 320
CHAPTER 19: Nothing But Net: Practice Exam 2 321
Practice Exam Part 2 Answer Sheet 323
CHAPTER 20: Answers and Explanations to Practice Exam 2 335
Knowing the Score 344
Answer Key for Practice Exam 2 345
PART 6: THE PART OF TENS 347
CHAPTER 21: Ten SIE Exam Traps to Avoid 349
Easing Up on the Studying 349
Assuming the Question’s Intent 350
Reading into the Question 350
Becoming Distracted When Others Finish 350
Not Dressing for Comfort 350
Forgetting to Breathe 351
Trying to Work Out Equations in Your Head Instead of Writing Them Down 351
Spending Too Much Time on One Question 351
Changing Your Answers for the Wrong Reasons 352
Calculating Your Final Score Prematurely 352
CHAPTER 22: Ten Ways to Start Your Career Off Right 353
Win at the Numbers Game 353
Be an Apprentice 354
Do Your Homework 354
Treat the Minnow Like a Whale 354
Smile When You Dial 354
When a Security Falls, Don’t Be a Stranger 354
Put In the Hours 355
Broaden Your Horizons 355
Pay Yourself First 355
Set Some Goals: The Brass Ring 356
GLOSSARY 357
INDEX 377
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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 as well as one of
the required top-off exams. (Yes, you need to pass both the SIE exam and the respective top-off
exam(s) to earn the license(s) you want.) 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
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 ques-
tion types, warn you about common mistakes, connect concepts, and show you how to pull ques-
tions 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 as well as one of
the required top-off exams. (Yes, you need to pass both the SIE exam and the respective top-off
exam(s) to earn the license(s) you want.) 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
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 ques-
tion types, warn you about common mistakes, connect concepts, and show you how to pull ques-
tions 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.
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