FINRA Securities Industry Essentials (SIE)

The Securities Industry Essentials (SIE) Exam is a FINRA exam for prospective securities industry professionals. This introductory-level exam evaluates a candidate’s knowledge of fundamental securities industry information comprising concepts significant to working in the industry, such as varieties of products and their uncertainties; the formation of the securities industry markets, regulatory agencies, and their purposes; and prohibited practices.

The SIE exam is open to anyone aged 18 or older, comprising students and prospective applicants involved in explaining basic industry knowledge to prospective employers. Association with a firm is not required to take the SIE, and results are valid for four years.

Passing the SIE alone does not qualify an individual for registration with a FINRA member firm or to engage in the securities business. In order to become registered to engage in the securities business, an individual must pass the SIE and a qualification exam appropriate for the type of business the individual will engage in. The individual must be associated with a member firm to take a qualification exam.

Benefits of FINRA Securities Industry Essentials (SIE) certification

• Capability to differentiate yourself from your companions asking internships or jobs.
• Chance to jumpstart your career purposes.
• Urgent notice of your pass/fails status with performance feedback if you fail.
• Enhanced marketability in the financial services industry.

Exam Details: Securities Industry Essentials 

The FINRA Securities Industry Essentials (SIE) exam is delivered via computer. There will be 75 FINRA Securities Industry Essentials (SIE) exam questions which are in the form of multiple-choice questions. The candidate needs to score 70% marks in order to clear the SAP SIE exam. Also, the candidate will be given 1 hour and 45 minutes to complete the exam. The FINRA Securities Industry Essentials (SIE) exam cost is $60. 

How to register for the FINRA exam?

Students, individuals considering a securities-industry career, and formerly registered individuals who do not have SIE credit can enroll themselves for the SIE. To take the SIE:

1. Create an account.
2. Enroll for the SIE, paying with a credit card or ACH, or by redeeming a voucher.
3. Schedule your exam. You have the option to test either at a Prometric test center or online.

Course Outline: Securities Industry Essentials (SIE) Exam

The course outline of Securities Industry Essentials is comprised of the four sections. The table below lists the allocation of exam questions for each section.

FINRA Securities Industry Essentials (SIE) Exam updated Course Outline.

Section 1: Knowledge of Capital Markets

1.1 Regulatory Entities, Agencies and Market Participants

1.1.1 The Securities and Exchange Commission (SEC)

• The high-level purpose and mission of securities regulation
• Definition, jurisdiction and authority of the SEC

1.1.2 Self-regulatory Organizations (SROs)

• Purpose and mission of an SRO
• Jurisdiction and authority of SROs (e.g., CBOE, FINRA, MSRB)

1.1.3 Other Regulators and Agencies

• Department of the Treasury/IRS
• State regulators (e.g., NASAA)
• The Federal Reserve
• Securities Investor Protection Corporation (SIPC)
• Federal Deposit Insurance Corporation (FDIC)

1.1.4 Market Participants and their Roles

• Investors (e.g., accredited, institutional, retail)
• Broker-Dealers (e.g., introducing, clearing, prime brokers)
• Investment advisers
• Municipal advisors
• Issuers and underwriters
• Traders and market makers
• Custodians and trustees
• Transfer agents
• Depositories and clearing corporations (e.g., Depository Trust & Clearing Corporation (DTCC), Options Clearing Corporation (OCC))

1.2 Market Structure

1.2.1 Types of Markets

• The primary market
• Secondary market (e.g., electronic, over-the-counter (OTC), physical)
• The third market
• The fourth market

1.3 Economic Factors

1.3.1 The Federal Reserve Board’s Impact on Business Activity and Market Stability

• Monetary vs. fiscal policy
• Open market activities and impact on economy
• Different rates (e.g., interest rate, discount rate, federal funds rate)

1.3.2 Business Economic Factors

• Purpose of financial statements (e.g., balance sheet, income statement)
• Business cycle (e.g., contraction, trough, expansion, peak)
• Indicators (e.g., leading, lagging, coincident, inflation)
• Basic effects on bond and equity markets (e.g., cyclical, defensive, growth)
• Principal economic theories (e.g., Keynesian, Monetarist)

1.3.3 International Economic Factors

• U.S. balance of payments
• Gross domestic product (GDP), gross national product (GNP)
• Exchange rates

1.4 Offerings

• Roles of participants (e.g., investment bankers, underwriting syndicate, municipal advisors)
• Types of offerings
  • Public vs. private securities offering
  • Initial public offering (IPO), secondary offering and follow-on offering
  • Methods of distribution (e.g., best efforts, firm commitment)
• Shelf registrations and distributions (e.g., definition, purpose)
• Types and purpose of offering documents and delivery requirements (e.g., official statement, program disclosure document, prospectus)
• Regulatory filing requirements and exemptions (e.g., SEC, blue-sky laws)

Section 2: Understanding Products and Their Risks

2.1 Products

2.1.1 Equity Securities

• Types of equities
  • Common stock
  • Preferred stock
  • Rights
  • Warrants
  • American Depositary Receipts (ADRs)

2.1.2 Debt Instruments

• Treasury securities (e.g., bills, notes, receipts, bonds)
• Agency (e.g., asset-backed and mortgage-backed securities)
• Corporate bonds
• Municipal securities
  • General obligation (GO) bonds
  • Revenue bonds
  • Others (e.g., special type bonds, taxable municipal securities, short-term obligations)
• Others (e.g., money market instruments, certificate of deposit (CD), bankers’ acceptance, commercial paper)

2.1.3 Options

• Types of options
  • Puts and calls
  • Equity vs. index

2.1.4 Packaged Products

• Investment companies
  • Types of investment companies
    • Closed-end funds
    • Open-end funds
    • Unit investment trusts (UITs)
    • Variable contracts/annuities

2.1.5 Municipal Fund Securities

• 529 Plans
  • Prepaid tuition
  • Savings plans
• Local government investment pools (LGIPs)
• ABLE accounts

2.1.6 Direct Participation Programs (DPPs)

• Types of DPPs
  • Limited partnerships
  • Tenants in common (TIC)

2.1.7 Real Estate Investment Trusts (REITs)

• Types of REITs
  • Private
  • Registered, non-listed
  • Listed

2.1.8 Hedge Funds

2.1.9 Exchange-traded Products (ETPs)

• Types of ETPs
  • Exchange-traded funds (ETFs)
  • Exchange-traded notes (ETNs)

2.2 Investment Risks

• Definition and Identification of Risk Types
  • Capital
  • Credit
  • Currency
  • Inflationary/purchasing power
  • Interest rate/reinvestment
  • Liquidity
  • Market/systematic
  • Non-systematic
  • Political
  • Prepayment
• Strategies for Mitigation of Risk
  • Diversification
  • Portfolio rebalancing
  • Hedging

Section 3: Understanding Trading, Customer Accounts and Prohibited Activities

3.1 Trading, Settlement and Corporate Actions

3.1.1 Orders and Strategies

• Types of orders (e.g., market, stop, limit, good-til-canceled (GTC), discretionary vs. non-discretionary, solicited vs. unsolicited)
• Buy and sell, bid-ask
• Trade capacity (e.g., principal, agency)
• Long and short, naked and covered
• Bearish and bullish

3.1.2 Investment Returns

• Components of return (e.g., interest, dividends, realized/unrealized gains, return on capital)
• Different types of dividends (e.g., cash, stock)
• Dividend payment dates (e.g., record date, ex-dividend date, payable date)
• Concepts of measurement (e.g., yield, yield to maturity (YTM), yield to call (YTC), total return, basis points)
• Cost basis requirements
• Benchmarks and indices

3.1.3 Trade Settlement

• Settlement time frames for various products (e.g., T, T + 1, T + 2)
• Physical vs. book entry (e.g., delivery and settlement)

3.1.4 Corporate Actions

• Types of corporate actions (e.g., splits, reverse splits, buybacks, tender offers, exchange offers, rights offerings, mergers and acquisitions (M&A))
• Impact of stock splits and reverse stock splits on market price and cost basis
• Adjustments to securities subject to corporate actions
• Delivery of notices and corporate action deadlines
• Proxies and proxy voting

3.2 Customer Accounts and Compliance Considerations

3.2.1 Account Types and Characteristics

• Cash
• Margin
• Options
• Discretionary vs. non-discretionary
• Fee-based vs. commission
• Educational accounts

3.2.2 Customer Account Registrations

• Individual
• Joint
• Corporate/institutional
• Trust (e.g., revocable, irrevocable)
• Custodial (e.g., UTMA)
• Partnerships
• Retirement (e.g., individual retirement account (IRA), qualified plans)
  • Types and characteristics
  • Required minimum distributions
  • Contributions

3.2.3 Anti-money Laundering (AML)

• Definition of money laundering
• Stages of money laundering (e.g., structuring, layering, placement)
• AML compliance program
• Suspicious Activity Report (SAR)
• Currency Transaction Report (CTR)
• FinCEN
• Office of Foreign Asset Control (OFAC) and the Specially Designated Nationals and Blocked Persons (SDNs) List

3.2.4 Books and Records and Privacy Requirements

• Books and records retention requirements
• Confirmations and account statements
• Holding of customer mail
• Business continuity plans (BCP)
• Customer protection and custody of assets
• Privacy requirements (e.g., Regulation S-P)
  • Nonpublic personal information
  • Confidentiality of information
  • Privacy notifications
  • Safeguard requirements

3.2.5 Communications with the Public and General Best Interest Obligations and Suitability Requirements

• Communications with the public and telemarketing
  • Classifications and general requirements
  • Do-not-call list
• Best interest obligations and suitability requirements
  • Know-your-customer (KYC)
  • General requirements (e.g., what constitutes a recommendation)

3.3 Prohibited Activities

3.3.1 Market Manipulation

• Definition of market manipulation
• Types of market manipulation (e.g., market rumors, pump and dump, front running, excessive trading, marking the close, marking the open, backing away, freeriding)

3.3.2 Insider Trading

• Definition of insider trading
• Definition of material nonpublic information
• Identifying involved parties
• Penalties (e.g., fines, expulsion, incarceration)

3.3.3 Other Prohibited Activities

• Restrictions preventing associated persons from purchasing initial public offerings (IPOs)
• Use of manipulative, deceptive or other fraudulent devices
• Improper use of customers’ securities or funds
  • Borrowing from customers
  • Sharing in customer accounts
• Financial exploitation of seniors
• Activities of unregistered persons
  • Prohibition against paying commissions to unregistered persons
  • Prohibition against solicitation of customers and taking orders
• Falsifying or withholding documents
  • Signatures of convenience
  • Responding to regulatory requests
• Prohibited activities related to maintenance of books and records (e.g., falsifying records and improper maintenance/retention of records)

Section 4: Overview of the Regulatory Framework

4.1 SRO Regulatory Requirements for Associated Persons

4.1.1 Registration and Continuing Education

• SRO qualification and registration requirements
  • Definition of registered vs. non-registered person
  • Permitted activities of registered and non-registered persons
  • Ineligibility for membership or association
  • Background checks
  • Fingerprinting
  • Statutory disqualification
  • Failing to register an associated person
• State registration requirements (e.g., blue-sky laws)
• Continuing Education (CE) requirement
  • Firm Element
  • Regulatory Element

4.2 Employee Conduct and Reportable Events

4.2.1 Employee Conduct

• Form U4 and Form U5 (e.g., purpose, when to update forms)
• Consequences of filing misleading information or omitting information
• Customer complaints
• Potential red flags

4.2.2 Reportable Events

• Outside business activities
• Private securities transactions
• Reporting of political contributions and consequences for exceeding dollar contribution thresholds
• Dollar and value limits for gifts and gratuities and non-cash compensation
• Business entertainment
• Felony, financial-related misdemeanors, liens, bankruptcy

Exam Policy

The candidate should also visit the official website of FINRA and the official page of the policies of FINRA. The page provides many important details such as FINRA Website Privacy Policy, Collection, and Dissemination of Personal Information, Regulatory Policy, Information Security, Policy Changes, etc. 

Securities Industry Essentials (SIE) FAQ

FINRA Securities Industry Essentials (SIE) Study Guide

The development steps which are necessary in order to successfully pass the FINRA Securities Industry Essentials (SIE) exam are:

FINRA Official Website 

Touring the FINRA official website is an important step while preparing for the exam like Securities Industry Essentials (SIE). Also, the official website provides a lot of essential information and sources which is very helpful in preparing for the FINRA Securities Industry Essentials (SIE) exam. Further, resources such as study guides, courses, sample papers, training programs, whitepapers, documentation, faqs, etc. The candidate can find all such important things on the official page.

FINRA E-learning Courses 

FINRA develops a wide range of e-learning courses for registered representatives, supervisors, operations staff, compliance personnel, and other employees. These online courses uniquely blend FINRA’s knowledge of securities rules and regulations with the industry’s expertise on how those rules are practically applied to the job. FINRA’s e-learning courses lead users through common compliance situations and include scenarios and decision points that help users make sure they understand course content. 

FINRA e-learning courses are 20- to 30-minute interactive online courses that offer an affordable and convenient solution for Firm Element and other training. Courses are available for retail registered representatives, institutional registered representatives, operations professionals, wholesalers, and compliance professionals.

FINRA Webinars 

FINRA webinars are free, online video programs delivered right to your desktop. Webinars include panel discussions with FINRA staff and/or industry experts, and feature online resource materials that participants can access from their own computers.

FINRA Course Outline

The course outline is the next step in the preparation guide for the FINRA SIE exam. You will find the study guide for the FINRA Securities Industry Essentials (SIE) exam at the official website of the FINRA. As mentioned earlier, the Exam Outline is the most important part of any certification exam. You can easily locate the exam outline in the study guide as well. Also, make sure to view if there are any important notices, you must be updated on any new changes. 

Join a Study Group 

Joining a group study or an online community will also be useful for the candidate. It will help them to do more hard work. Also, studying in the group will help them to stay connected with the other people who are on the same pathway as them. Also, the discussion of such study groups will benefit the students in their exams.

Practice Test 

Practice tests are the one which ensures the candidate about their preparation. The FINRA Securities Industry Essentials (SIE) practice test will help the candidates to acknowledge their weak areas so that they can work on them. There are many FINRA Securities Industry Essentials (SIE) practice tests available on the internet nowadays, so the candidate can choose which they want. Also, SAP offers its own practice test. The candidate can start Preparing for FINRA Securities Industry Essentials (SIE) Now!

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