SIE exam flashcards

99 free cards in the four sections of FINRA's outline. Turn a card, say whether you knew it, and the ones you miss come back sooner.

How to use the deck

Pick a section, or study all 99 cards together.
Say the answer out loud, then turn the card and be honest about whether you knew it.
Come back each day. Cards you know come back after 1, 3, 7, 16 and 35 days; cards you miss come back in a few turns.

Every card, as notes

Knowledge of Capital Markets: 12 of 75 questions

What does SIPC cover when a broker-dealer fails?: Up to $500,000 per customer, of which no more than $250,000 can be cash.
What is a self-regulatory organization (SRO)?: A body that writes and enforces rules for its own members under SEC oversight. FINRA is the SRO for broker-dealers.
What does the MSRB do?: Writes the rules for firms dealing in municipal securities and for municipal advisors. It does not enforce them.
What does a transfer agent do?: Keeps the issuer's list of shareholders and issues and cancels certificates when shares change hands.
What is the Options Clearing Corporation (OCC)?: The issuer of every listed option, and the guarantor that the other side of each contract will perform.
Broker or dealer: a firm sells from its own inventory and adds a markup.: Dealer, acting as principal. A broker acts as agent and charges a commission.
Who is an accredited investor (an individual)?: Net worth over $1 million not counting the home; income over $200,000 ($300,000 joint) in each of the last two years, expected again; or a Series 7, 65 or 82 in good standing.
What is the third market?: Exchange-listed securities traded over the counter.
Primary or secondary market: which raises money for the issuer?: The primary market, where new securities are sold. Secondary trades are between investors.
Firm commitment underwriting: who keeps unsold shares?: The underwriters. They buy the whole issue from the issuer and resell it.
What may a representative do in the cooling-off period?: Take indications of interest and hand out the preliminary prospectus. No sales.
What does a preliminary prospectus (red herring) leave out?: The final offering price.
Which securities are exempt from registration under the Securities Act of 1933?: Among others, municipal securities and U.S. government securities.
What is the intrastate exemption?: Rule 147: an offering made only to residents of the state where the issuer does its business.
What does a shelf registration allow?: Registering securities now and selling them in pieces later, without a new filing each time.
Blue-sky laws: State securities laws.
The Fed buys Treasuries in the open market. What usually follows?: Bank reserves rise and short-term interest rates tend to fall.
Monetary or fiscal policy: a tax cut passed by Congress.: Fiscal policy: government taxing and spending. Monetary policy is the Fed's.
Name three leading economic indicators.: Any of: building permits, stock prices, new orders, weekly jobless claims. They turn before the economy does.

Understanding Products and Their Risks: 33 of 75 questions

What can common stockholders usually do that bondholders cannot?: Vote, for example for the board of directors.
Liquidation: who is paid first, and who last?: Secured creditors first; common stockholders last, after unsecured debt, subordinated debt and preferred stock.
Cumulative voting: how many votes do you get?: Shares owned times seats up for election, which you can put on one candidate.
Cumulative preferred: what happens to a skipped dividend?: It builds up. All arrears must be paid before common stockholders get a dividend.
Rights or warrants: which are long term and priced above the market?: Warrants. Rights last a few weeks and are priced below the market.
What is an ADR?: A receipt for shares of a foreign company held by a U.S. bank, traded in the U.S. in dollars. Currency risk remains.
Conversion ratio of a convertible bond: Par divided by the conversion price. $1,000 at $40 a share is 25 shares.
Current yield: Annual interest divided by the bond's price.
Interest rates rise. What happens to existing fixed-rate bond prices?: They fall.
A bond trades at a discount. Order the coupon, current yield and yield to maturity.: Coupon, then current yield, then yield to maturity: lowest to highest.
Treasury bill: how does it pay its return?: Bought at a discount, it pays full face value at maturity, a year or less away.
How is interest on Treasury notes and bonds taxed?: Federal income tax applies; state and local income taxes do not.
What backs a general obligation municipal bond?: The issuer's full faith and credit and its power to tax.
Tax-equivalent yield: Municipal yield divided by (1 minus the tax rate).
Lowest S&P rating that is still investment grade: BBB−. Anything lower is high yield.
What is commercial paper?: Short-term, unsecured corporate debt, usually maturing in 270 days or less.
Which mortgage-backed securities carry the U.S. government's full faith and credit?: Ginnie Mae (GNMA) securities.
When does an issuer usually call its bonds?: After interest rates fall, so it can borrow again more cheaply.
Breakeven for a call buyer: Strike price plus premium.
Breakeven for a put buyer: Strike price minus premium.
Which option position has unlimited risk?: Selling an uncovered (naked) call.
Which option positions are bearish?: Buying a put and selling a call.
When is a put in the money?: When the stock is below the strike price. A call is in the money above it.
American-style exercise: The holder may exercise at any time up to expiration.
When must a customer get the Options Disclosure Document?: No later than when the account is approved for options trading.
How do you protect a stock you own against a fall?: Buy a put on it.
Net asset value (NAV) per share: Fund assets minus liabilities, divided by shares outstanding.
Sales charge as a percent: Offering price minus NAV, divided by the offering price.
Open-end or closed-end: which trades on an exchange, above or below NAV?: Closed-end. Open-end funds sell and redeem shares at the next computed NAV.
Which fund share class is the level load: no front-end charge, a higher 12b-1 fee every year, and a small charge if sold within about a year?: Class C.
How long does a letter of intent give to reach a breakpoint?: 13 months.
529 plan: how are qualified education withdrawals taxed?: They are free of federal income tax. Growth is tax deferred.
Why invest through a direct participation program?: Income and losses pass straight through to the partners for tax.
What risk does an ETN carry that an ETF does not?: The credit risk of the bank that issued the note.
Which risk can diversification not remove?: Market (systematic) risk.
Name the risk: bonds are called as rates fall and you reinvest for less.: Reinvestment risk. A call is one way it happens.
Purchasing power (inflation) risk: which carries more, a long-term fixed-rate bond or common stock?: The long-term fixed-rate bond: its payments never rise with prices.
Which securities carry prepayment risk when rates fall?: Mortgage-backed securities, because homeowners refinance.

Understanding Trading, Customer Accounts and Prohibited Activities: 23 of 75 questions

Which order limits a loss on a stock you own?: A sell stop below the market price.
Where can a buy limit order be filled?: At the limit price or lower.
Bid and ask: which does a market buyer pay?: The ask. A seller receives the bid.
Regular-way settlement for stocks and corporate bonds: T+1: one business day after the trade date.
Under T+1, how does the ex-dividend date relate to the record date?: They are the same day, so you must buy the business day before.
A 3-for-2 split on 100 shares bought at $60: 150 shares at $40 each. The total cost stays $6,000.
Total return: Income plus the change in price, divided by the cost.
What is a short sale?: Selling borrowed shares to buy back later. The possible loss has no limit.
Joint tenants with right of survivorship: one owner dies.: The whole account passes to the surviving owner.
UTMA account: One custodian and one minor, with the minor's Social Security number. Gifts are irrevocable.
Regulation T initial margin: 50% of the purchase price.
FINRA's minimum equity to open a margin account: $2,000, or the full purchase price if that is less.
Traditional IRA withdrawal before age 59½: Taxed as income, usually with a 10% penalty.
Roth IRA: Funded after tax; qualified withdrawals are tax free.
When does a representative need written discretionary authority?: Before choosing the security, the action (buy or sell) or the amount for a customer.
Three stages of money laundering, in order: Placement, layering, integration.
When is a Currency Transaction Report filed?: For cash over $10,000 in one business day.
Can a firm tell a customer it filed a Suspicious Activity Report?: No. SAR filings are confidential.
A new customer is on OFAC's Specially Designated Nationals list.: Do not open the account; block any assets and report to OFAC.
Regulation S-P: Privacy notices, and the customer's right to opt out of most sharing with nonaffiliated third parties.
When is a communication a retail communication under FINRA Rule 2210?: When it goes to more than 25 retail investors within 30 days. It needs principal approval first.
When can a representative cold call a home?: Between 8 a.m. and 9 p.m. in the person's local time.
When does Regulation Best Interest apply?: When a broker-dealer recommends a securities transaction or strategy to a retail customer.
Trading ahead of a customer's large order: Front running.
Who is liable when a tip on a merger leads to a trade?: Both the person who gave the tip and the person who traded on it.
Most the SEC can seek in a civil penalty for insider trading: Three times the profit gained or the loss avoided.
Buying a thin stock, spreading false good news, then selling: Pump and dump.
Who may not buy a new equity IPO under FINRA Rule 5130?: Restricted persons, such as broker-dealer employees.
A representative promises to make up a customer's loss.: A prohibited guarantee against loss.
Trading a discretionary account mainly to earn commissions: Churning.

Overview of the Regulatory Framework: 7 of 75 questions

Who can take the SIE?: Anyone aged 18 or older. No sponsoring firm is needed.
How long is a passed SIE valid?: Four years.
What does passing the SIE alone let you do?: Nothing that needs registration. You also need a qualification exam, such as the Series 7, and a member firm.
Which form registers a new representative?: Form U4.
How soon must Form U4 be updated after a reportable event?: Within 30 days; within 10 days if the event is a statutory disqualification.
When must Form U5 be filed after a representative leaves?: Within 30 days of termination, with a copy to the representative.
Why are associated persons fingerprinted?: For an FBI criminal background check (SEC Rule 17f-2).
Which conviction can cause a statutory disqualification?: A felony within the past ten years, among others.
How often is the Regulatory Element of continuing education due?: Every year, by December 31.
Who sets the Firm Element of continuing education?: The member firm, from its own needs analysis.
A representative wants to sell a private deal outside the firm, for pay.: Written notice and the firm's written approval first; the firm then treats it as its own business.
What must a firm do with a written customer complaint?: Keep a record of it and act on it under its complaint procedure.

Now try real questions

The free diagnostic has 20 questions weighted like the real exam and takes 25 minutes, with no account. You get your score by section and a short lesson on the one to fix first.

Take the free diagnostic See the course

Questions people ask

Are these SIE flashcards free?

Yes. All 99 cards are free with no account, and your progress stays in this browser.

How does the spaced repetition work?

A card you knew comes back after 1 day, then 3, 7, 16 and 35 days. A card you did not know comes back after three other cards, until you know it.

Are flashcards enough to pass the SIE?

They cover the facts and formulas. The exam also asks you to apply them in 75 scored multiple-choice questions, so practice questions under time matter too.

Which SIE topics have the most questions?

Products and their risks: 33 of the 75 scored questions. Then trading and accounts with 23, capital markets with 12 and the regulatory framework with 7.