STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

The Securities Industry Essentials (SIE) exam covers anti-money laundering, and the topic is found in FINRA's Content Outline in Section 3.2.3. Please take a look at this Content Outline because it lists all the subtopics under Anti-Money Laundering (AML) that you should study. For example, the Content Outline lists the stages of AML: structuring, layering and placement. You should know the meaning of each of these stages, and have examples in mind. Bob Eder's SIE manual, Study for the Securities Industry Exam, has full treatment of AML on pages 258-259.  Here is Bob Eder's definition of layering, one of the three AML stages: Layering "In this stage criminals try to transfer monies from one legitimate account to another, so as to make tracing difficult. Examples are the purchase of financial assets, like stocks and bonds; moving monies from one account to another; moving monies from one company to another, where the companies are under common control." Here is t...

In preparing for the Securities Industry Essentials exam (SIE), students can deprive themselves of an important study aid if their study manual does not contain a full glossary of terms. A glossary of terms is often missing in study manuals where the authors cut corners. A glossary is important because it allows the reader to use its content as a check list of important items in preparation for the SIE test. Bob Eder's Study for the SIE Exam has a full glossary. There are over 200 entries in Bob Eder's SIE glossary, beginning with 12b-1 fees and ending with Yield to Maturity. Consider Bob Eder's glossary where it covers balance of payments and balance of trade. These are difficult concepts for many SIE applicants. Here are the descriptions from Bob Eder's glossary: "Balance of Payments —this is not the same as balance of trade. BOP includes balance of trade, but also adds inflows coming into the U.S., and subtracts outflows, whether involving persons, companies, ...

Don't go in and sit for the Securities Industry Essentials e xam (SIE) without first mastering the definitions of, and the differences between, prime brokers, introducing brokers, and clearing brokers. Why? Because FINRA lists these topics as important in section 1.1.4 of its Content Outline for the SIE exam. Bob Eder covers these subjects on pages 15 and 16 of his book, Study for the SIE Exam . Here is a sample of his discussion: Introducing Brokers (1.1.4) These broker/dealers do not wish to maintain a back office handling paperwork, trade confirmations, handling of certificates and trade processing. They avoid this work by using a clearing broker to handle these functions. In effect, one can think of introducing brokers as branch offices and the clearing broker as the main office. The introducing broker will open an account for a client, then transmit all the information about the client, such as address, business, investment objective to the clearing brokerage firm. Here is the...

In the FINRA Content Outline for the Securities Industry Essentials Exam (SIE), FINRA lists knowledge required of candidates about the order of liquidation if a person or a corporation goes into bankruptcy. See Content Outline 2.1.1. Bob Eder discusses liquidation priority in his Study for the SIE Exam on page 40 and 41. There is a big difference in the treatment of loans which are secured  by some asset and loans which are unsecured. If a debtor goes into bankruptcy, it is very possible that unsecured creditors will not be paid back. However, with secured loans, the creditor almost always has the right to seize the asset securing the loan and avoid a loss. The creditor can sell the asset and keep the proceeds. What are some examples of secured loans? For our principal example, mortgage loans. Most homeowners owe monies that they borrowed from a bank or other financial institution to purchase their house. These loans are referred to as mortgage loans. They normally are fully secur...

For this post, we talk about some common mistakes when talking about put and call options. Since the SIE exam covers options, mastering correct terminology before sitting for the exam is important. Let's consider call options first. The purchaser of a call option, on an opening transaction, gains the right to purchase stock or some other asset, such as gold or bonds, at a certain specified price for a specified period of time. The seller of a call, on an opening transaction, is called the "writer," and is obligated to sell stock or some other asset. Now speaking of puts, the buyer of a put option, on an opening transaction, gains the right to sell stock or some other asset, at a certain specified price for a specified period of time. The seller of a put, on an opening transaction, is called the "writer," and is obligated to purchase stock or some other asset. Bob Eder's text  Study for the SIE Exam  contains a full discussion of put and call options in Chapt...

If you plan on taking the Securities Industry Essentials (SIE) exam, are you prepared for questions asking about "market structure"? FINRA lists Market Structure under 1.2 of its  SIE Content Outline . Market Structure includes types of markets in the securities industry. For example, what is the difference between the primary market and the secondary market? What does the third market entail, and who are the participants? How about the fourth market? Do you know the difference between the markets, such as the fourth market and the primary market? Bob Eder's text Study for the SIE Exam contains a full discussion of Market Structure on page four, five and six, giving examples and practice questions. Here is the link to FINRA's Content Outline for the SIE exam.  See especially Market Structure under 1.2 of FINRA's Content Outline. Study for the Securities Industry Essentials (SIE) Exam  is available from Amazon in both paperback and Kindle e-book versions.  Here is...

Exercise on most options on stocks settle by delivery of the underlying shares. This means that upon settlement, the writer of a call on GM stock must deliver or sell 100 shares of GM stock. The holder of a put on IBM stock will, upon settlement, deliver or sell 100 shares of IBM stock. However, when it comes to exercise of index options, such as puts and calls on the S&P 100 Index, settlement of exercise is done solely in cash, and not by delivery of the underlying index. Why? Because it would be nearly impossible to deliver the index. How exercise of options is settled is included in FINRA's Content Outline for the SIE exam. See 2.1.3 of the Content Outline. Bob Eder's  Study for the Securities Industry Essentials (SIE) Exam  closely follows FINRA's SIE Content Outline. It lists Content Outline  reference numbers  for each major paragraph in the text, and it links each of the questions in the two end-of-text tests to the SIE Content Outline. Why is this im...

When studying for the Securities Industry Essentials (SIE) exam, it is important to study those subjects that are tested on the exam. It would be a waste of time to study materials not on the exam. How do we know what is covered by the SIE exam? The answer is that FINRA publishes a Content Outline for the test. This is why Bob Eder's book Study for the SIE Exam indicates the references numbers of the Content Outline for each major paragraph in the text.  For example, the Content Outline for the SIE exam lists certain types of debt instruments that a candidate needs to know about. These include municipal securities, such as general obligation bonds, revenue bonds, and various other types. Bob Eder's book lists the Content Outline's references numbers - 2.1.2 - next to the topic heading.  Here is the link to FINRA's Content Outline for the SIE exam. Bob Eder J.D.'s book  Study for the Securities Industry Essentials (SIE) Exam  covers the important rules and regulatio...