CAN YOU DESCRIBE THE DIFFERENCES BETWEEN ETFS AND ETNS? KNOW THE DIFFERENCES FOR THE SIE EXAM!

Plan on taking the Securities Industry Essentials (SIE) exam? If so, be able to distinguish the differences between exchange-traded funds (ETFs) and exchange-traded notes (ETNs). FINRA's Content Outline for the SIE exam lists both ETNs and ETFs in Section 2.1.9.

Bob Eder presents a detailed description of ETFs and ETNs in his book Study for the Securities Industry Essentials Exam on pages 131-137, including differentiating characteristics of the two types of exchange-traded products (ETPs).

Here is a sample paragraph from Bob Eder's book on the complexity of ETNs:

"Complexity (2.1.9)

Do not suggest or recommend an ETN to an investor who does not understand or cannot understand how an ETN works, or to a person who is not able to realistically gauge the risk of an ETN. You must first make a determination that the customer can understand the product, and you must document your determination by putting it in writing, giving the reasons and basis for your determination. These ETN's are complex instruments. They are not for everyone. Many stock investors have no concept how ETN's are issued, what the issuing bank's obligations are, how ETN's are purchased and sold, and the effect of changes in an index's value on the value of the ETN in the market place."

Here is the link to FINRA's Content Outline for the SIE exam. See the references to ETFs and ETNs in FINRA's Content Outline, section 2.1.9.

Study for the Securities Industry Essentials (SIE) Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's SIE manual, Study for the Securities Industry Essentials (SIE) Exam, or questions in general about the SIE exam, for example,  about ETFs and ETNs, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. See Bob Eder's Author Page on Amazon.com.


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