STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

Taking the Securities Industry Essentials Exam soon? Then be prepared for questions on Types of Orders, such as market orders, limit orders and stop orders. FINRA publishes an SIE Test Content Outline, and in Section 3.1.1 lists Types of Orders. Bob Eder presents a full treatment of Types of Orders  in his Study for the Securities Industry Essentials (SIE) Exam . Here is a brief sample of Bob Eder's discussion: "Stop Orders (3.1.1) "A stop order is really a market order that waits, or depends, on some other trade execution in the same stock to first happen before the stop order can be executed. "Stop Orders Have Triggers "A stop order is "activated," "triggered," or "elected" once the indicated stop price is reached or breached by some other trade. Once a trade touches the stop price or there has been a "trade-through" (i.e., a trade below the stop price on a sell stop order, or a trade above the stop price on a buy ...

The SEC has rules regarding the requirement that registered reps maintain confidentiality about the financial positions of their customers. This is called Regulation S-P. FINRA's Content Outline for the Securities Industry Essentials Exam (SIE) includes privacy regulations in Section 3.2.4. This means that an SIE candidate should expect to see questions on privacy requirements on the SIE exam. Bob Eder has detailed information about Regulation S-P in his  Study for the Securities Industry Essentials (SIE) Exam . Here is a sample of Bob Eder's discussion on maintaining  privacy of financial information of  customers : "Regulation S-P                                                             ...

When you go to sit for the Securities Industry Essentials (SIE) exam, be prepared for questions on interest-rate risk. FINRA publishes a Content Outline for the SIE exam, and includes Investment Risks that you should know under Section 2.2. One of those required-to-know risks is investment-rate risk. Bob Eder has full coverage of investment risks in his Study for the Securities Industry Essentials Exam on pages 145-151. Here is a sample of Bob Eder's discussion of interest-rate risk: Interest Rate Risk                                          (2.2) This is the risk that interest rates will go up and cause bond prices to go down. If interest rates go up, the prices of bonds will go down. This happens because a bond that pays four percent will lose value if other bonds pay a higher rate, say, five perce...

Don't go to sit for the Securities Industry Essentials exam without being familiar with strategies designed to reduce or mitigate investment risks. These strategies include hedging, diversifying, and rebalancing one's portfolio. FINRA specifically includes these mitigation strategies in its SIE Content Outline under Section 2.2. This indicates that the SIE contains questions asking about these strategies. Bob Eder discusses these mitigation strategies in his book Study for the Securities Industry Essentials (SIE) Exam on page 151. Here is a sample of Bob Eder's treatment: "Hedging (2.2)" "How to protect a stock portfolio against unexpected declines? Options are the way many traders protect their stock positions, either long or short. For greatest protection of long stock positions, purchase puts either on stocks or on stock indices. For greatest protection of short stock position, consider purchase of calls." Here is the link to FINRA's Content Ou...

If you plan to sit for the Securities Industry Essentials exam, be aware that there are questions on exchange-traded funds (ETFs) and exchanged-traded notes (ETNs), including the differences between the two. FINRA's  specifies Exchange Traded Products (ETPs) in Section 2.1.9 of its SIE Content Outline. Here's an example of what Bob Eder says in his SIE study manual, Study for the Securities Industry Essentials Exam , on pages 131-137: "ETF's Are Not Mutual Funds While most ETF's are considered open-end investment companies and must register under the Investment Company Act as such, the SEC does not consider them to be "mutual funds." Consequently, the rules regarding ETF's are different from those regulating mutual funds. For example, an investor can buy or sell shares of an ETF anytime during the trading day, i.e., during exchange hours of trading. Shares of a mutual fund, by contrast, can be purchased or sold only once daily as of the closing of e...

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...

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. Thes...

Are you planning on sitting for the Securities Industry Essentials (SIE) exam? If the answer is yes, then study up on the types and workings of real estate investment trusts, or REITs. FINRA's Content Outline clearly lists real estate investment trusts as included in the SIE exam under Section 2.1.7. Bob Eder covers REITs in detail on pages 129-131 of his Study for the Securities Industry Essentials (SIE) Exam . For example, here is Bob Eder's definition of an REIT: "Real Estate Investment Trusts (2.1.7) These REIT’S are pooled investments that purchase real estate and real estate mortgages. Many REIT’s are traded on exchanges, such as the NYSE. Thus, these exchange-listed REIT's are very liquid. An investor can purchase or sell shares anytime during the trading day. However, not all REIT's are listed on an exchange or on Nasdaq, and not all REIT's have the same high liquidity." Here is the link to FINRA's Content Outline for the SIE exam.   See the...

Must you be prepared for questions on the Securities Industry Essentials exam about Direct Participation Programs (DPP)? Yes, the SIE exam has questions about DPPs. First of all, what is a direct participation program? It is an investment or asset in which the partners or investors share in the profits and losses of the enterprise, without a middleman, such as a corporation, intervening between investor and investment. A good example is a limited partnership. In such partnership, the partners share in any profits as well as losses, if there are any. This is an advantage. There is no double taxation. All gains and losses pass through directly to the partners. As to disadvantages, an investment in a limited partnership is by and large illiquid. This means that there is no ready or liquid market to sell a limited partnership once a person has purchased it. FINRA's Content Outline includes direct participation programs and limited partnerships in Section 2.1.6. Here is the link to FINR...

How many candidates walking in to take the Securities Industry Essentials exam have never heard about municipal fund securities? I bet a lot. Why? Because many SIE study guides make no mention of them. FINRA's Content Outline clearly indicates that FINRA considers knowledge of municipal fund securities to be required for the SIE exam. See 2.1.5 of FINRA's Content Outline. For example, what are the three types of municipal fund securities? Answer: the three types are local government investment pools, 529 programs, and Able accounts. Question: what is the purpose of Able accounts? Bob Eder has a full description of municipal fund securities, including Able accounts, on pages 119 to 124 in his Study for the Securities Industry Essentials Exam . Here is Bob Eder's description of Able accounts: "ABLE Programs (2.1.5) "Can states or their agencies establish tax-advantaged programs to help disabled individuals maintain their health and independence? Yes! Monies put in...

Never heard of municipal fund securities? Then be forewarned, the Securities Industry Essentials exam covers these securities and expects you to know what they are, how they are defined, and what they include. Many SIE study manuals skip them altogether. Make sure that your study manual discusses and explains them.  Bob Eder devotes six whole pages to Municipal Fund Securities on pages 119 through 124 in his Study for the Securities Industry Essentials Exam, including practice questions testing the reader on his/her understanding and grasp of the text. Here is a Bob Eder paragraph on one type of municipal fund securities, local government investment pools, taken from Bob Eder's book: "Local Government Investment Pools (LGIP's) (2.1.5) Who creates local government investment pools? Answer: A state or local government creates these LGIP's as trusts for the benefit of participating local governments within the state. These LGIP's are considered to be municipal secur...

  The Securities Industry Essentials (SIE) exam covers lots of nuts and bolts that hold the securities industry together and alive. One of the most important nuts and bolts is the Depository Trust and Clearing Corporation that assists in the back office of every brokerage firm.  The Depository Trust (DTCC) provides clearing and transfer services to the brokerage industry in the U.S. and throughout the world. FINRA's SIE Content Outline includes knowledge of the DTCC in section 1.1.4.  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 DTCC! What does the DTCC do? DTCC automates the recording of each trade and gives an exact report to each participating exchange. It also reports customers' positions in each of their securities to each brokerage firm...

The Securities Industry Essentials (SIE) includes questions on SEC Rule 144. This rule governs the sale of control stock and restricted shares by certain shareholders affiliated with, or connected to, a publicly traded company. Don't believe me? Check section 2.1.1 of FINRA's Content Outline for the SIE exam. Under Required Knowledge, FINRA lists SEC Rule 144. Therefore, before going in to sit for the SIE exam, make sure you are prepared with knowledge of Rule 144. Bob Eder's Study for the Securities Industry Essentials Exam contains three pages of discussion on the aspects of Rule 144, including requirements that must be met before the sale of either control stock or restricted shares. Here is the link to FINRA's Content Outline for the SIE exam.   See the references to SEC Rule 144 under section 2.1.1 (Required Knowledge) of FINRA's Content Outline. Study for the Securities Industry Essentials (SIE) Exam  is available from Amazon in both paperback and Kindle e-bo...

The Securities Industry Essentials exam asks questions on many different topics pertaining to the securities business. One such topic is the offering of new issues of stocks and bonds to the general public. These new offerings raise capital for the issuing companies which allows them to pursue new ventures or increase the size of their present businesses. FINRA's Content Outline for the SIE exam covers new offerings in paragraph 1.4. If you plan to sit for the SIE exam, do not neglect studying this section on underwriting before you go and take the test. Paragraph 1.4 of the Content Outline discusses the roles of participants in new offerings, such as investment bankers, underwriting syndicates, and municipal advisers. You should know and understand what each of these participants do. Bob Eder's book, Study for the Securities Industry Essentials (SIE) Exam, covers this subject in detail. For example, here is a paragraph from Bob Eder's SIE book: "Underwriting Syndica...

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, ...

Study Guide Reference Numbers for the SIE exam. We follow the syllabus and content outline published by FINRA for the Securities Industry Essentials (SIE) exam. As an aid for our readers, we have included FINRA outline numbers for reference both in the text and in the two exams at the end of the book. The SIE exam does not quiz a candidate on the outline numbers. We insert them in our book solely for those readers who want to refer to the outline. Furthermore, these references demonstrate to you our reader that we have not inserted extraneous material that is not covered by the SIE exam. We list the outline numbers listed in FINRA's Study Guide, such as (1.2.3) or (2.4.2). If you wish, you can freely disregard these reference numbers, but they can help you, if you wish, locate the topic in FINRA's Study Guide. Here is the link to FINRA's Content Outline for the SIE exam. Study for the Securities Industry Essentials (SIE) Exam  is available from Amazon in both paperback and ...

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...

Study for the Securities Industry Essentials Exam by Bob Eder J.D. includes discussion of Regulation Best Interest, or Regulation BI, which now applies to dealing with retail customers.  Regulation Best Interest now requires every registered representative to view his/her recommendations through the prism of whether such recommendation is in the retail customer's best interests. Regulation BI went into effect on June 30, 2020. Prior to this date, a representative was required merely to assure that his/her recommendations met the test of suitability.  Furthermore, there was no requirement to present a retail customer with conflicts of interest in writing. Regulation BI now requires this disclosure. Regulation BI applies to recommendations also on which type of accounts to recommend to retail customers, not just to securities recommendations. This means before a representative puts a retail customer into a mutual fund account, or into a margin account, or into a wrap fee accoun...