SIE EXAM STRESSES UNDERSTANDING PRODUCTS AND THEIR RISKS

If you are planning to take the Securities Industry Essentials (SIE) Exam, you need to know where the test puts its oompf and emphasis. It is Section 2 on Understanding Products and Their Risks. Section 2 comprises 44 percent of the SIE's questions, or 33 questions out of 75, the largest section of all.

 In this post, I want to talk about investment risks. Section 2.2 indicates that its questions cover the definition and identification of certain risks.

 For example, if a customer asks you about capital risk, how would you respond? You should know that capital risk means that a person could lose all or a good chunk of his/her investment capital. So Joe Schlobodnick invests $100,000, his life savings and all his IRA monies, into common stock of XYZ Corp. at $100 per share. Shortly thereafter, XYZ common shares fall to zero! Improbable? Maybe, but happenings like this are not rare. Joe Schlobodnick has lost all of his invested capital. This is capital risk.

 The SIE exam asks about credit risk, currency risk, inflation risk. These are but some of the risks that FINRA's Study Outline for the SIE Exam stresses. You should become familiar with the entire list and be able to define each one. You probably will encounter these risks on the SIE exam.

We indicate here only a few of the risks covered in the SIE's section on Understanding Products and Their Risks. Bob Eder's Study for the Securities Industry Essentials (SIE) Exam covers the subject in detail in Chapter 8, Investment Risks. 

Bob Eder's book, Study for the Securities Industry Essentials (SIE) Exam, can help you prepare for the SIE test. It is available through Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

Here is the link to FINRA's Study Outline for the SIE exam. Note Section 2.2 on Investment Risks.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is a member of the Utah State Bar, currently on inactive status.

Comments

Post a Comment

Popular posts from this blog

SIE EXAM INCLUDES QUESTIONS ON DEPOSITORY CLEARING CORPORATIONS, SO BE PREPARED!

Planning to take the Securities Industry Essentials (SIE) exam soon? Be prepared for questions asking about depository clearing corporations. Can you say in one sentence the purpose and function of the Depository Trust & Clearing Corporation (DTC)? No response? Then you are like most SIE candidates, so don't feel too bad! Bob Eder's Study for the SIE Exam covers the definition and functions of the DTC, as well as the Options Clearing Corporation and ACATS. Here is a section from Bob Eder's book taken from page 12: Depository Trust & Clearing Corp. (DTCC) (1.1.4)  "The Depository Trust provides clearing and transfer services to the brokerage industry in the U.S. and throughout the world. With volume of securities trades approaching millions on a daily basis, imagine brokerage operations without a centralized entity that could match buys with sells, and keep brokerage firm back offices running smoothly and efficiently. What chaos without an organization like the
Read more

TAKING THE SIE EXAM? DID YOU KNOW THAT THE LARGEST SECTION OF THE TEST IS SECTION 2 PRODUCTS AND THEIR RISKS?

Have you looked at FINRA's SIE Exam Content Outline or Test Specifications? You would find that the largest percentage of questions on the SIE Exam comes from Section 2, Understanding Products and Their Risks . Forty-four percent of the questions on your test will come from this Section. For example, Section 2 covers Equity Securities, including knowledge of voting rights, convertible securities, and selling control or restricted stock. Bob Eder in his Study for the Securities Industry Essentials (SIE) Exam has detailed coverage of these items. Here is a sample of Bob Eder's treatment: Control Stock (2.1.1) Control stock denotes shares that have been purchased by a control person or by an affiliated person. When a person owns shares in a company in which he/she is an officer, controlling person, termed an "affiliated person," there are also restrictions on the sale of that stock. The SEC calls the shares, "control shares." Only control or affiliated perso
Read more

SEC CHARGES 10 BROKER/DEALERS/INVESTMENT ADVISERS WITH FAILURE TO KEEP RECORDS OF "OFF-CHANNEL COMMUNICATIONS" WITH CLIENTS

FINRA makes available a Content Outline for the Securities Industry Essentials (SIE) Exam for those planning to sit for the exam. This Content Outline describes the subject matter of the SIE Exam. The SIE Content Outline includes Section 3.2.4 which covers Books and Records Regulations, and it encompasses the use of social media to communicate with clients, digital messaging, and internet communications. From time to time, the SEC issues press releases about penalties and charges brought against broker/dealers and advisers. Here is a recent one that imposes penalties on 10 firms for inadequate Record-Keeping of electronic communications, called "Off-Channel Communications." We include the SEC Release here because it demonstrates that a broker or adviser must treat the rules as having real life consequences, potentially bringing serious penalties and large fines for non-observance. Students who plan on sitting for the SIE Exam should pay careful attention to the SEC Release as
Read more