Comprehensive SIE Practice Exam Vocabulary

A collection of vocabulary terms and definitions derived from the SIE practice exam notes, covering market regulations, security types, and investment concepts.

Syndicate desk

A desk whose primary purpose in the context of an equity offering is to build an order book and allocate the stock.

Index funds

Funds that offer an advantage of lower management fees due to the passive management of the fund.

Primary distribution

A sale of newly issued shares by the issuer.

Secondary distribution

The sale of already issued and outstanding shares.

30/360

The calendar basis normally used for the computation of dollar prices and accrued interest on municipal and corporate bonds.

Direct participation programs (DPPs)

Investments that provide exposure to non-correlated assets, often exhibiting flow-through of tax consequences.

Call protection

A feature most valuable to a bond owner when bond prices are generally rising.

Stock split

A corporate action that results in a decrease in the price per share of common stock.

Anti-money laundering (AML) program

A program required of broker-dealers that includes the designation of an AML compliance officer.

Selling away

A violation of FINRA rules involving engaging in private securities transactions without the written prior consent of the employing broker-dealer.

Roth 401(k) / Roth IRA

Retirement plans where qualified distributions are excluded from federal income tax.

Premium bond

A bond selling at a price above its par value, such as a bond quoted at $102$.

Letter of intent (LOI)

A written indication provided by an investor to purchase a set number of mutual fund shares in the future, valid for a maximum period of $13$ months.

Rights

Products issued by a corporation to offer shareholders a privilege to obtain its shares at a fixed price, allowing them to maintain proportionate ownership.

Recession

A decline in the gross domestic product (GDP) lasting for at least $2$ quarters.

Tenants in common

A customer account where the ownership of a decedent's assets is governed by their will or state law, passing to their estate.

Treasury stock

Issued stock that has been subsequently reacquired by the corporation.

Transfer agent

The party required to maintain a record of the shareholders eligible to receive additional shares in the event of a stock split.

Money market instruments

Debt securities that mature in $1$ year or less at the time of issue.

Closing purchase

A transaction in which an option writer covers a position by purchasing an option.

Secured debt holders

Stakeholders who have first claim priority in a Chapter $11$ proceeding.

Nonsystematic risk

A category of risk, such as business or single-sector risk, that can be mitigated through diversification.

FDIC

The entity that guarantees savings accounts at a bank.

Net Asset Value (NAV)

The value used to determine the redemption value of an open-end investment company's shares, computed after the order is received.

Market maker

A member of a stock exchange responsible for providing liquidity by being willing to buy and sell at all times at quoted bid and ask prices.

Spread

The difference between the bid and asked (offer) prices.

Spot exchange rate

The primary factor used to determine how much of a counter currency a customer will receive when selling a base currency.

No-load mutual funds

Mutual funds that carry no sales charge and do not charge a $12b-1$ fee greater than $25$ basis points ($0.25\%$).

Currency Transaction Report (CTR)

A report filed when a firm receives cash in excess of $\$10,000$ from one customer in one business day.

Bank Secrecy Act

The legislation enforced by FinCEN to safeguard the financial system from financial crime, including terrorist financing and money laundering.

Warrants

Securities that normally have the longest period to expiration at the time of issuance.

Exchange-traded notes (ETNs)

Products that are adversely impacted if the issuer's credit rating is downgraded.

Statutory disqualification

A status resulting from reportable events like a felony conviction for driving under the influence (DUI).

Regulation S-P

SEC regulation regarding consumer privacy that requires firms to include policies to protect nonpublic information in their notices.

Accredited investor

A category including a married couple who earned income exceeding $\$300,000$ in each of the prior two years and expects the same for the current year.

Wilshire 5000

Considered the broadest market index.

Securities Exchange Act of 1934

The piece of legislation that deals with the secondary market.

Quantitative easing

An open market activity defined as a central bank purchasing bonds and securities in the open market.

Shelf registration

A method of registering securities with the SEC that is valid for up to $3$ years.

Stop order

An order that becomes a market order once it is triggered.

Duration

A measure of the sensitivity of a debt portfolio to changes in interest rates.

Commercial paper

A frequently issued money market instrument with a maximum maturity of $270$ days.

SIPC insurance

Insurance providing maximum coverage of $\$500,000$ for securities and cash combined per separate customer.

Prime broker

A single broker-dealer that handles the back-office clearing and processing for institutional managers who trade at several clearing firms.

Backing away

A violation occurring when a market maker fails to honor its quote for at least one round lot.

Front-running

The prohibited practice of trading ahead of a customer's block order.

Free-riding

A violation of Regulation T where an investor liquidates a position and uses the proceeds to cover the cost of the initial purchase without having paid for it.

Layering

A stage of money laundering involving a series of international wire transfers and transactions with shell companies.

Integration

A stage of money laundering characterized by activities such as buying a business with illicit funds.

Churning

Market manipulation involving an excessive number of trades for a client to increase trade commissions.

Wash sale

A violation involving selling a stock at a loss and buying it right back to generate a tax-deductible capital loss.

Wash trading

Market manipulation where an investment manager makes large rapid trades of a company over a short period to create perceived volume.

Reasonable-basis obligation

A suitability requirement where an advisor offers advice based on the industry's stability and predicted appeal.

Coverdell ESA

An education savings account with income eligibility restrictions; assets must be used by the beneficiary's $30th$ birthday.

The primary purpose of a syndicate desk in the context of an equity offering is to:

build an order book and allocate the stock

3 multiple choice options

The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis?

30/360

3 multiple choice options

Direct participation programs (DPPs) provide:

exposure to non-correlated assets

3 multiple choice options

Call protection is most valuable to a bond owner when bond prices are generally:

rising

3 multiple choice options

Which of the following represents the effect of a stock split?

The price per share of common stock decreases

3 multiple choice options

Stability in the value of a debt portfolio is greatest when:

maturities of the debt securities are short.

3 multiple choice options

Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program?

Designating an AML compliance officer

3 multiple choice options

Which of the following actions violates FINRA rules regarding selling away?

Engaging in private securities transactions without written prior consent of the employing BD

3 multiple choice options

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