STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

FINRA has strict rules when it comes to communicating with customers. These rules encompass what you must say, what you must not say, and the requirement to keep and maintain records. FINRA's Content Outline for the Securities Industry Essentials exam lists Communications with Customers as an important item in Section 3.2.5. Bob Eder devotes a whole chapter in his Study for the Securities Industry Essentials (SIE) Exam to the rules on communicating with customers. Here is a sample from Bob Eder's book on "retail communications": "Principal Must Approve (3.2.5) Before a registered person may use any retail communication with the public, a registered principal must approve it in writing. The principal must give approval for retail communications before the earlier of either using the material or filing it with FINRA’s Advertising Regulation Department. Given that institutional investors are sophisticated investors, FINRA does not require that a principal give pr...

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...