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FINRA SIE — Securities Industry Essentials Exam Cheat Sheet (2026)
A free, printable FINRA SIE — Securities Industry Essentials exam cheat sheet: the 85 highest-yield points to know, grouped into 4 sections that follow the exam's content areas, each section with its published weight.
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- 1,149 free FINRA SIE — Securities Industry Essentials practice questions on the same material, every one explained.
- Last updated: August 2026.
Studying in order?
In the FINRA SIE (Securities Industry Essentials) guide: A named exam-traps list in each of the 27 chapters. Practice here stays free.
Knowledge of Capital Markets
16% of the exam- Primary market
- Issuer raises capital by selling newly created securities; the sale proceeds go to the company or government issuing them.
- Secondary market
- Existing securities change hands between investors; the issuer is not a party and receives none of the money.
- IPO
- An initial public offering is a private company's first sale of stock to the public, moving it into the primary market.
- Underwriter
- An investment bank that agrees to buy or market an issuer's securities and resell them to the public, often forming a syndicate to spread risk.· Securities Act of 1933
- Registration and prospectus
- New public offerings must be registered with the SEC, and buyers must receive a prospectus disclosing key financial and risk information.· Securities Act of 1933
- Cooling-off period
- After filing, a mandatory waiting period runs before the sale can be finalized; only a preliminary prospectus (red herring) may circulate.
- Regulation D
- Permits private placements sold mainly to accredited investors without full SEC registration, in exchange for limits on advertising and resale.· Securities Act of 1933
- Regulation A
- Allows smaller offerings to the public under a simplified disclosure document, sometimes called a mini-registration.· Securities Act of 1933
- Accredited investor
- An individual or entity meeting income or net-worth thresholds, presumed able to bear the risk of unregistered offerings.
- SEC
- The federal agency that enforces securities laws, reviews registrations, and oversees markets and firms.· Securities Exchange Act of 1934
- FINRA
- A self-regulatory organization that writes conduct rules for broker-dealers, licenses representatives, and enforces industry standards.
- MSRB
- Sets rules for firms dealing in municipal securities, though it relies on the SEC and FINRA for enforcement.
- FDIC vs. SIPC
- The FDIC insures bank deposits, while SIPC protects customer assets held at a failed brokerage up to set limits; neither covers investment losses from market moves.
- Open market operations
- The Fed buys government securities to add money to the system and lower rates, or sells them to drain money and raise rates.
- Discount rate and reserves
- The Fed sets the rate it charges banks for short-term loans and the reserves banks must hold, steering how freely credit flows.
- Easy vs. tight money
- Loosening policy lowers rates to spur borrowing and growth; tightening raises rates to cool the economy and fight inflation.
- Business cycle
- The economy cycles through expansion, peak, contraction (recession), and trough; two consecutive quarters of falling output signal recession.
- Inflation and CPI
- Inflation is a general rise in prices that erodes purchasing power, commonly measured by the Consumer Price Index.
- Fiscal vs. monetary policy
- Fiscal policy is Congress and the President using taxing and spending, while monetary policy is the Fed managing money and interest rates.
- Yield curve
- A normal curve slopes upward as longer maturities pay more; an inverted curve, where short rates exceed long rates, often warns of recession.
Understanding Products and Their Risks
44% of the exam- Common stock
- Ownership shares that usually carry voting rights and may pay variable dividends, with the lowest priority claim in bankruptcy.
- Preferred stock
- Pays a fixed dividend and ranks ahead of common in liquidation, but typically lacks voting rights and limited price appreciation.
- Rights and warrants
- Rights let existing shareholders buy new shares at a discount for a short window; warrants are longer-term certificates to buy stock at a set price.
- ADRs
- American Depositary Receipts let U.S. investors hold foreign company shares that trade in dollars, carrying currency risk.
- Bond basics
- The issuer pays periodic interest (the coupon) and returns the face value at maturity; bondholders are creditors, not owners.
- Government and agency debt
- U.S. Treasury securities are backed by the full faith and credit of the government; agency securities carry slightly higher yield and risk.
- Municipal bonds
- Issued by states and localities, their interest is often exempt from federal income tax, making them attractive to higher-bracket investors.
- Ratings
- Rating agencies grade credit quality from investment grade down to speculative (high-yield or junk); lower ratings demand higher yields.
- Inverse relationship
- As interest rates rise, bond prices fall; as rates fall, bond prices rise.
- Premium and discount
- A bond priced above face value trades at a premium; below face value it trades at a discount.
- Yield to maturity
- The total return an investor earns holding a bond to maturity, factoring in coupon, price paid, and time remaining.
- Mutual funds and share classes
- Open-end funds price once daily at net asset value; share classes (A, B, C) differ mainly in how and when sales charges are paid.· Investment Company Act of 1940
- ETFs
- Exchange-traded funds hold a basket of securities but trade throughout the day like a stock, usually with low expenses.
- UITs
- Unit investment trusts hold a fixed portfolio for a set term and do not actively trade their holdings.
- Annuities and REITs
- Annuities are insurance contracts that can provide lifetime income, while REITs pool capital to invest in income-producing real estate.
- Calls and puts
- A call gives the right to buy at the strike price; a put gives the right to sell at the strike price.
- Buyer vs. writer
- The buyer pays a premium for the right, while the writer (seller) receives the premium and takes on the obligation if exercised.
- Hedging vs. speculation
- Options can protect a portfolio against adverse moves or magnify gains and losses through leverage.
- Market and interest-rate risk
- Market risk is the chance that prices fall broadly; interest-rate risk is the danger that rising rates lower the value of existing bonds.
- Credit and liquidity risk
- Credit risk is that an issuer defaults; liquidity risk is being unable to sell an asset quickly without a steep price cut.
- Inflation risk
- Also called purchasing-power risk, it is the danger that rising prices erode the real value of fixed returns.
- Systematic vs. unsystematic
- Systematic risk affects the entire market and cannot be diversified away; unsystematic risk is specific to one company or sector and can be reduced by diversifying.
Trading, Settlement, Customer Accounts, and Prohibited Activities
31% of the exam- Market vs. limit orders serve different goals
- A market order prioritizes speed and certainty of execution but not price; a limit order prioritizes price but may never fill if the market does not reach the specified level.· FINRA Rule 5310 (Best Execution)
- The spread reflects liquidity
- The narrower the bid-ask spread, the more liquid and heavily traded the security; wide spreads signal thin markets and higher trading costs.
- Short selling carries unlimited theoretical risk
- A short seller profits if the price falls but faces potentially unlimited loss if the price rises, because there is no ceiling on how high a security can climb.· Regulation SHO
- Exchanges and OTC differ in structure
- Exchanges centralize orders through an auction with designated market makers or specialists, while the OTC market is a negotiated dealer network where prices are quoted by competing firms.
- Agency means commission; principal means markup
- Acting as agent, a firm earns a disclosed commission; acting as principal, it earns a markup (on a sale) or markdown (on a purchase) embedded in the price.· FINRA Rule 2121 (Fair Prices and Commissions)
- Capacity must be disclosed on the confirmation
- Every trade confirmation must state whether the firm acted as agent or principal so the customer understands how the firm was compensated.· Securities Exchange Act of 1934, Rule 10b-10
- Market makers provide two-sided quotes
- A market maker commits to continuously posting both a bid and an offer, supplying liquidity and profiting from the spread between them.
- Markups must be fair and reasonable
- Regulators expect markups, markdowns, and commissions to be reasonable in light of market conditions; excessive charges violate fair-pricing standards.· FINRA Rule 2121
- Regular-way settlement is T+1
- Most equity, corporate bond, and municipal transactions settle one business day after the trade, so cash and securities exchange on T+1.· Securities Exchange Act of 1934, Rule 15c6-1
- Clearing firms guarantee and net trades
- A central clearing organization steps between counterparties to guarantee settlement and net offsetting positions, reducing risk and the volume of movements.
- The ex-dividend date decides dividend entitlement
- An investor must own the security before the ex-dividend date to receive the declared dividend; buying on or after that date means the seller keeps it.
- Corporate actions can be mandatory or voluntary
- Some events like stock splits and cash dividends happen automatically to all holders, while others such as tender offers require the shareholder to elect to participate.
- JTWROS and TIC differ at death
- In JTWROS the surviving owners inherit the deceased's share; in tenants in common the share passes to the deceased owner's estate rather than to co-owners.
- Custodial accounts have one custodian and one minor
- An UGMA or UTMA account is controlled by a single custodian for a single minor beneficiary, and the assets become the minor's property at the age of majority.
- Discretion requires prior written authorization
- A representative may exercise discretion over which security, quantity, or action to take only after the customer has signed a written discretionary authorization and the firm has approved the account.· FINRA Rule 3260 (Discretionary Accounts)
- Retirement accounts trade tax benefits for rules
- IRAs and qualified plans offer tax-deferred or tax-free growth in exchange for annual contribution limits and penalties for early or missed distributions.· Internal Revenue Code
- Insider trading breaches a duty of trust
- Trading on material nonpublic information, or tipping it to others, violates the law when it breaches a fiduciary or similar duty owed to the source of the information.· Securities Exchange Act of 1934, Rule 10b-5
- Manipulation creates false market signals
- Wash trades, matched orders, and pump-and-dump schemes are prohibited because they deceive other investors about genuine supply, demand, or price.· Securities Exchange Act of 1934, Section 9
- Churning puts commissions ahead of the customer
- Excessive trading that serves the representative's compensation rather than the customer's objectives violates suitability and fair-dealing standards.· FINRA Rule 2111 (Suitability)
- Selling away must be pre-approved
- A representative may not engage in private securities transactions outside the firm without giving prior written notice and, for compensated deals, obtaining the firm's written approval.· FINRA Rule 3280 (Private Securities Transactions)
- Every firm needs a written AML program
- The BSA requires a documented AML program with a compliance officer, employee training, and independent testing to detect and report suspicious activity.· Bank Secrecy Act
- CIP verifies identity at account opening
- Firms must collect and verify a customer's name, date of birth, physical address, and taxpayer identification number before or shortly after opening an account.· USA PATRIOT Act, Section 326
- SARs are filed confidentially
- A firm files a Suspicious Activity Report when it identifies potentially illicit activity, and it may not disclose the filing to the customer involved.· Bank Secrecy Act
- Large cash movements trigger a CTR
- Cash transactions above a defined daily threshold require a Currency Transaction Report, and structuring transactions to stay under that threshold is itself illegal.· Bank Secrecy Act
The Regulatory Framework: Overseers, Registration, and Conduct
9% of the exam- The SEC is the top federal securities regulator
- Created by federal law, the SEC protects investors and oversees the entire securities industry, including approving the rules that SROs adopt.· Securities Exchange Act of 1934
- FINRA regulates broker-dealers
- As the principal SRO for the brokerage industry, FINRA licenses representatives, administers qualification exams, and disciplines members that break the rules.· Securities Exchange Act of 1934
- The MSRB writes municipal securities rules
- The MSRB sets standards for firms and professionals in the municipal market, but it does not conduct its own examinations or enforcement; other regulators enforce its rules.· Securities Exchange Act of 1934
- SROs operate under SEC oversight
- Self-regulatory organizations must submit their rules to the SEC for approval, creating a layered structure where the SEC supervises the SROs.
- Form BD registers the firm
- A broker-dealer applies for registration and SRO membership by filing Form BD, which describes the firm's business, ownership, and control persons.· Securities Exchange Act of 1934
- Form U4 registers the individual; U5 reports departure
- A person registers by filing Form U4 through the sponsoring firm, and the firm files Form U5 within a set period after the person's employment ends.· FINRA By-Laws
- Fingerprinting supports a background check
- Applicants must be fingerprinted so regulators can review criminal history as part of determining fitness to work in the industry.· Securities Exchange Act of 1934, Rule 17f-2
- Statutory disqualification bars association
- Certain felonies, regulatory bars, or misconduct trigger a statutory disqualification, preventing association with a member firm unless the regulator grants specific relief.· Securities Exchange Act of 1934
- The SIE tests fundamentals and is open to all
- Anyone may sit for the SIE, even without firm sponsorship, because it covers general industry knowledge rather than the duties of a specific role.
- A top-off exam completes the qualification
- The SIE must be combined with a representative-level exam covering a specific function before a person is fully qualified to conduct that securities business.
- Top-off exams require firm sponsorship
- Unlike the SIE, representative-level exams can be taken only after a member firm sponsors the candidate by filing the registration application.
- A passed SIE has a limited shelf life
- A passing SIE result stays valid for a set number of years, giving the candidate time to associate with a firm and complete a top-off exam.
- Regulatory Element is industrywide training
- The Regulatory Element delivers standardized training on compliance and ethics that registered persons must complete on a recurring schedule.· FINRA Rule 1240 (Continuing Education)
- Firm Element is tailored by each firm
- Each member firm designs its own Firm Element training based on a needs analysis covering the products, services, and risks specific to its business.· FINRA Rule 1240
- Both components are mandatory to stay active
- Registered persons must satisfy both the Regulatory and Firm Elements; failing the Regulatory Element can make a registration inactive until it is completed.· FINRA Rule 1240
- Outside business activities must be disclosed in advance
- A representative must give the firm prior written notice of outside employment or compensation so the firm can evaluate potential conflicts.· FINRA Rule 3270 (Outside Business Activities)
- Private securities transactions need notice and approval
- A representative must notify the firm in writing before participating in a securities transaction outside the firm, and compensated transactions require firm approval and supervision.· FINRA Rule 3280 (Private Securities Transactions)
- Business gifts are capped at one hundred dollars
- Gifts given in connection with the business to another person in the industry may not exceed one hundred dollars per recipient per year.· FINRA Rule 3220 (Influencing or Rewarding Employees of Others)
- Entertainment is treated separately from gifts
- Ordinary and reasonable business entertainment, where the host attends, is evaluated under separate standards rather than counted against the gift limit.
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