STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

In sitting for the Securities Industry Essentials (SIE) Exam, sometimes candidates, in their desire to cover all bases, fail to learn about the terminology of buying and selling securities. For example, every securities trade is either an opening trade or a closing trade. This applies not only to trading stocks, but to all other types of securities such as options and bonds. An opening trade is when Trader Joe purchases 100 shares of XYZ Corp for $50 per share. Before the trade, Trader Joe had no financial interest in XYZ stock. Now, after this opening trade, he has a long position of 100 XYZ shares. With a long position in XYZ stock, Trader Joe hopes the share price of XYZ goes up. Thus Trader Joe has initiated a bullish position. Assume thereafter that XYZ shares do rise in value to $90. Trader Joe decides to take his profits, so he sells his XYZ shares at 90. This sale is called a closing trade or a closing transaction. Why "closing"? Because the sell transaction closes ou...

FINRA publishes a Content Outline for the Securities Industry Essentials (SIE) Exam, and Section 1.4 covers types of offerings, role of participants, and Shelf Offerings and Shelf Registrations. FINRA thus tells SIE candidates that questions on Shelf Offerings may appear on their exams. Bob Eder discusses Shelf Offerings in his Study for the Securities Industry Essentials (SIE) Exam . Here is a sample of Bob Eder's treatment: "Shelf Registrations —The SEC allows many companies to register new issues called "shelf registrations." These shelf registrations allow companies to file all the new-issue paperwork with the SEC, and then to issue shares at any time during a three-year window. Shelf registrations utilize Form S-3 to file new issues. Shelf registrations have both good features and bad features. They allow a company to quickly issue new shares, given that the new issue paperwork is already on file with the SEC, but they can cause existing shareholders to suffer a...

If you plan to take the Securities Industry Essentials (SIE) Exam, you should make sure that you study and know about the rules of Securities Investor Protection Corporation, or SIPC. Why do you need to know about SIPC? The answer is that rules of SIPC are included in FINRA's Content Outline for the SIE Exam. You need to know what is covered by SIPC protection, how it is covered, and to what extent. For example, are money market funds covered? Here is what SIPC itself says about money market funds: "ARE MONEY MARKET MUTUAL FUNDS PROTECTED BY SIPC? ARE THEY SUBJECT TO THE $250,000 CASH LIMIT? "Money market mutual fund shares held in a customer’s account at a brokerage firm qualify as “securities” under the Securities Investor Protection Act (SIPA) and therefore are subject to the $500,000 limit of protection, not the $250,000 limit applicable to cash. It is important to remember that, although many investors treat money market funds like cash, they are securities and, as...

Why should you study the rules of SIPC if you are taking the Securities Industry Essentials (SIE) Exam? The answer is that exam questions about SIPC could likely show up on your exam. Why do I say this? I say it because FINRA publishes a 2024 Content Outline for the Securities Industry Essentials Exam, and FINRA specifically mentions SIPC rules  in Section 1.1.3 of the Content Outline. According to SIPC rules, the following persons are not eligible for SIPC relief in the event that they hold an account with a brokerage firm that goes into SIPC liquidation. Here is what SIPC says about those ineligible: "Most customers with cash and securities missing from customer accounts are eligible for SIPC protection. SIPC's funds may not be used to pay the claim of any customer of a brokerage firm in liquidation under the Securities Investor Protection Act if that customer is: A general partner, officer, or director of the firm. The beneficial owner of five percent or more of any class o...