Securities Industry Essentials (SIE) Flashcards
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How many scored questions are on the SIE exam, and how long do you have?
75 scored questions, and you have 105 minutes (1 hour 45 minutes) to complete them.
What score do you need to pass the SIE, and what does it cost?
You need 70% to pass, and the exam fee is $80.
What is the difference between an equity security and a debt security?
An equity security (stock) represents ownership in a company. A debt security (bond) represents a loan to an issuer that must be repaid with interest.
What is the primary market vs. the secondary market?
The primary market is where issuers sell newly created securities to raise capital (e.g., an IPO). The secondary market is where investors trade previously issued securities among themselves.
What is the role of the SEC?
The Securities and Exchange Commission is the federal regulator that oversees the securities industry, enforces securities laws, and protects investors.
What is a self-regulatory organization (SRO)? Give an example.
An SRO is a member-run organization that regulates its members under SEC oversight. FINRA is the primary SRO for broker-dealers.
What is the difference between a market order and a limit order?
A market order executes immediately at the best available price. A limit order executes only at a specified price or better.
What does a preferred stock offer that common stock generally does not?
Preferred stock pays a fixed dividend and has priority over common stock for dividends and in liquidation, but usually lacks voting rights.
What is a municipal bond, and what is its key tax feature?
A municipal bond is a debt security issued by a state or local government. Its interest is generally exempt from federal income tax.
What is systematic risk vs. unsystematic risk?
Systematic (market) risk affects the entire market and cannot be diversified away. Unsystematic (specific) risk affects a single company or industry and can be reduced through diversification.
What is the purpose of the Anti-Money Laundering (AML) program and the Bank Secrecy Act?
To detect and prevent money laundering. Firms must file Suspicious Activity Reports (SARs) and follow Customer Identification Program (CIP) rules to verify customer identity.
What is an open-end investment company (mutual fund)?
A mutual fund continuously issues and redeems shares at net asset value (NAV). It does not trade on an exchange; investors buy and redeem directly with the fund.
What is the difference between a call option and a put option?
A call gives the holder the right to buy the underlying at the strike price. A put gives the holder the right to sell the underlying at the strike price.
What is insider trading, and why is it prohibited?
Insider trading is buying or selling a security based on material, nonpublic information. It is illegal because it undermines fair and equal access to information in the markets.
What is the general relationship between bond prices and interest rates?
They move inversely: when market interest rates rise, existing bond prices fall; when rates fall, bond prices rise.