SIE Cheat Sheet.

If the question says … the answer is …

• If a registration statement is filed but not yet effective, then the representative may send the preliminary prospectus and take a non-binding indication of interest, nothing more.
• If the Federal Reserve buys securities, then reserves rise and rates ease; if it sells, the reverse. Taxing and spending are never the Fed's.
• If the underwriter returns unsold shares to the issuer, then it is best efforts and the issuer holds the risk; if it buys the whole issue, it is a firm commitment.
• If claims are ranked in a liquidation, then secured debt, then general debentures, then subordinated debentures, then preferred, then common.
• If a cumulative preferred skipped dividends, then the arrears plus the current year are paid before common, with no interest added.
• If rates fell and the bond is callable or mortgage-backed, then the risk is call or prepayment, followed by reinvestment; purchasing-power risk needs rising consumer prices.
• If the annuity uses the separate account, then the owner bears the investment risk and a prospectus is required; the general account means the insurer bears it.
• If a fund's shares trade at a discount to NAV, then it is a closed-end fund; open-end shares are always bought and redeemed at NAV.
• If the stock gaps through a stop-limit's stop price, then the order is elected but can go unexecuted; a plain stop would have filled at the market.
• If the customer named the security and the action and left only time and price, then the order is not discretionary and no written authorization is needed.
• If trades change no one's real ownership but paint the tape, then it is manipulation, not churning; churning needs a controlled account and commissions.
• If deposits are split to stay under the reporting line, then escalate to AML staff and never tell the customer a report may be filed.

Numbers that decide questions

FINRA states 70 as the passing score on a scaled 0–100 basis; a candidate's raw percentage correct is not published.

Outline weights

• Knowledge of Capital Markets (16%), with 12 of the 75 scored items
• Understanding Products and Their Risks (44%), with 33 of the 75
• Trading, Customer Accounts and Prohibited Activities (31%), with 23 of the 75
• Overview of the Regulatory Framework (9%), with 7 of the 75

Test-day, reschedule, and retake rules