STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

One thing about the Securities Industry Essentials (SIE) exam, it asks questions about debt securities, specifically about Treasury bills, notes and bonds. Some SIE candidates study only stocks, but that overlooks the importance of becoming familiar with bonds on the SIE exam. How do I know this about the SIE Exam? I know this from FINRA's Content Outline for the SIE Exam. Section 2.1.2 indicates that test candidates should know how debt securities operate, and in particular, a candidate must be able to explain credit spreads and compare characteristics of short-term bonds and long-term bonds. Bob Eder in his Study for the Securities Industry Essentials (SIE) Exam presents a full treatment of Treasury securities including coverage of credit spreads. Here is a sample of Bob Eder's treatment: Bond Credit Spreads                                                  ...

Before you go and sit for the Securities Industry Essentials (SIE) exam, make sure you know about different risk types. Be able to define and identify each of these types. FINRA publishes a Content Outline on its web site for the SIE exam, and in section 2.2 specifically mentions 10 different investment risks. Thus, FINRA is telling SIE candidates that they need to know these and be able to define and identify them. Bob Eder has a detailed analysis of each risk in his Study for the Securities Industry Exam on pages 145-151. Here is an example from Bob Eder's book: Management Risk (2.2) This is the risk of the uncertainty of the quality and ability of management overseeing the investment. A corporate management team may make good or bad decisions that will affect profits and stock prices. Although everyone knows that future happenings are related only tenuously to past history, the track record of management in the past often indicates improved chance of success in the future. H...

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 abou...