FINRA SIE Exam 2026: Securities, Products, Markets

SIE Exam Purpose

An introductory-level FINRA exam that assesses a candidate's knowledge of basic securities industry information including products; risks; market structure; and prohibited practices. It is a prerequisite for most representative-level qualifications.

SIE Exam Prerequisites

There are no sponsorship requirements. Anyone 18 years or older can take the SIE exam.

SIE Exam Question Count 2026

80 total questions: 75 scored and 5 unscored pretest questions.

SIE Exam Time Limit

1 hour and 45 minutes (105 minutes).

SIE Exam Passing Score

70% which is approximately 53 out of 75 scored questions correct.

SIE Exam Fee 2026

$100 per attempt increased from $80 effective January 1 2026.

SIE Exam Result Validity

Exam results remain valid for 4 years from the date the candidate passes.

SIE Exam Section Weights

Knowledge of Capital Markets 16%; Understanding Products and Their Risks 44%; Understanding Trading Customer Accounts and Prohibited Activities 31%; Overview of the Regulatory Framework 9%.

SEC Securities and Exchange Commission

The primary federal regulator of the securities industry. It enforces securities laws; reviews registration statements; oversees market participants; and protects investors through disclosure requirements.

FINRA Financial Industry Regulatory Authority

The largest self-regulatory organization SRO overseeing broker-dealers. It licenses securities professionals; administers qualification exams; creates and enforces rules; and monitors trading activity.

SIPC Securities Investor Protection Corporation

A non-profit that protects customers when brokerage firms fail. Coverage is up to $500000 per customer including $250000 for cash. It does NOT protect against market losses or bad advice.

MSRB Municipal Securities Rulemaking Board

Creates rules governing municipal securities transactions. Important: MSRB writes rules but does NOT enforce them; enforcement is done by FINRA and the SEC.

SRO Self-Regulatory Organization

A non-governmental organization that creates and enforces industry rules under SEC oversight. Examples: FINRA; MSRB; NYSE.

Federal Reserve Board The Fed

The central banking system governing U.S. monetary policy; regulating money supply; bank stability; and money movement between banks and broker-dealers.

FDIC

An independent federal agency that insures bank deposits up to $250000 per depositor if a member bank fails.

OCC Options Clearing Corp

The clearing agency responsible for clearing; settling; and issuing option contracts.

Issuer

An organization that distributes and sells securities to investors.

Broker Dealer

A person or member firm that trades investment securities for customers as a broker and for its own account as a dealer.

Market Maker

A broker-dealer firm that quotes bid and ask prices and buys and sells shares using its own capital to provide liquidity in the market.

Investment Advisor

A firm that gives financial advice for a fee rather than earning commissions on trades.

Accredited Investor

An investor who meets specific wealth criteria: a net worth of $1000000 excluding primary residence; an individual annual income of $200000; or a joint marital income of $300000.

Primary Market

The market where corporations or governments issue new securities to raise capital; governed by the Securities Act of 1933.

Secondary Market

The market where previously issued securities are traded among investors; governed by the Securities Exchange Act of 1934.

DTCC Depository Trust and Clearing Corporation

A non-profit clearing corporation owned by broker-dealers and banks that ensures trades clear safely and efficiently.

Introducing Broker-Dealer

A smaller broker-dealer that contracts with a clearing broker-dealer to handle back-office clearing; trade settlement; and margin accounts.

Bid-Ask Spread

The difference between the highest price a buyer will pay bid and the lowest price a seller will accept ask for a security.

Common Stock

An equity security representing ownership in a corporation. Features: voting rights typically 1 vote per share; potential dividends not guaranteed; last claim in liquidation; unlimited upside potential.

Preferred Stock

An equity security with priority over common stock for dividends and liquidation. Features: fixed dividend rate; no voting rights typically; paid before common stockholders; less price volatility than common.

Preemptive Rights

Rights allowing existing shareholders to purchase newly issued shares before the public; maintaining their proportional ownership and avoiding dilution.

EPS Earnings Per Share

A measure of company profitability. Formula: Net Income divided by Shares Outstanding. Used to compare profitability across companies of different sizes.

P/E Ratio Price-to-Earnings Ratio

Stock valuation metric. Formula: Market Price per Share divided by EPS. High P/E 20+ suggests growth expectations; Low P/E under 15 may indicate undervaluation or limited growth.

ADR American Depositary Receipt

Certificates issued by U.S. banks representing shares of foreign companies. They allow U.S. investors to easily invest in foreign companies through U.S. exchanges.

Rights

Short-term weeks instruments that give holders the right to purchase common stock at a specified price.

Warrants

Long-term years instruments that give holders the right to purchase common stock at a specified price.

Corporate Bond

A debt security where a corporation borrows money from investors. The issuer promises to pay periodic interest coupon and return principal at maturity. Bondholders are creditors not owners.

Par Value Face Value

The principal amount typically $1000 per bond that will be repaid at maturity.

Coupon Rate Nominal Yield

The annual interest rate paid on the bond's par value.

Bond Price Interest Rate Relationship

Inverse relationship: When interest rates rise bond prices fall. When interest rates fall bond prices rise.

General Obligation GO Bond

A municipal bond backed by the full faith credit and taxing power of the issuing government. Considered safer than revenue bonds because the issuer can raise taxes to pay.

Revenue Bond

A municipal bond backed only by the revenue generated by a specific project such as a toll road or airport.

Debenture

An unsecured corporate bond backed only by the issuer's full faith and credit not by pledged assets.

Current Yield

Formula: Annual Interest divided by Market Price. This is the most commonly tested SIE bond formula.

Yield to Maturity YTM

The total return anticipated on a bond if it is held until it matures.

Municipal Bond Interest Tax Status

Municipal bond interest is always federal-tax-exempt; state tax is exempt only if you live in the issuing state.

Option

A contract between two parties that gives the buyer the right but not the obligation to buy or sell an underlying asset at a specific price before a specific date.

Call Option

Gives the buyer the right to purchase the underlying security at a specified price the strike price before expiration. Bullish strategy.

Put Option

Gives the buyer the right to sell the underlying security at the strike price before expiration. Bearish strategy.

Premium

The price paid by the buyer to the seller for the option contract.

Strike Price

The price at which the stock will be bought or sold if the contract is exercised.

Option Contract Size

Each standard equity option contract represents 100 shares of the underlying stock.

Call Breakeven

Call breakeven equals strike price plus premium.

Put Breakeven

Put breakeven equals strike price minus premium.

In-the-Money Call

A call is in the money when the market price is greater than the strike price.

In-the-Money Put

A put is in the money when the market price is less than the strike price.

Mutual Fund

A pooled investment vehicle that issues and redeems shares at net asset value NAV calculated once per business day. Orders are filled at the next NAV forward pricing.

Net Asset Value NAV

The per-share value of a fund calculated by dividing total assets minus liabilities by shares outstanding. Mutual funds calculate NAV once daily at 4:00 PM ET.

Public Offering Price POP

For load funds POP equals NAV plus the sales charge.

ETF Exchange-Traded Fund

A pooled investment vehicle that trades on an exchange like a stock. It provides diversified exposure to an index or strategy with intraday liquidity.

401k Plan

An employer-sponsored retirement plan allowing employees to make pre-tax or Roth after-tax salary deferrals often with employer matching contributions.

Traditional IRA

A tax-deferred retirement account where contributions may be tax-deductible; taxes are paid on withdrawals.

Roth IRA

A retirement account funded with after-tax dollars. Qualified withdrawals are tax-free.

Indirect 60-Day Rollover

The deadline to complete a rollover from a 401k to an IRA is 60 days from receipt of the distribution.

Market Order

An instruction to buy or sell promptly at the best price currently available. It emphasizes speed and certainty of execution rather than a specific price.

Limit Order

An order to buy or sell a security at a specified price or better.

Margin Account

An account that allows customers to borrow money from the broker-dealer to purchase securities using the securities themselves as collateral.

Reg T Initial Margin Requirement

50% for most securities.

FINRA Maintenance Margin Long

25% for long positions.

FINRA Maintenance Margin Short

30% for short positions.

Trade Settlement T+1

Since May 28 2024 US stocks corporate bonds and municipal bonds settle on trade date plus one business day.

Churning

A prohibited practice involving excessive in-and-out trading inconsistent with the customer's objectives.

Front Running

A prohibited activity of trading ahead of a known customer block order.

Wash Trading

A prohibited activity of effecting trades between commonly controlled accounts with no change in beneficial ownership.

Systematic Risk Market Risk

The risk of a security declining due to negative market conditions. It cannot be diversified away.

Non-Systematic Risk Business Risk

The risk of a corporation failing to perform up to expectations. It can be reduced through diversification.

Credit Risk Default Risk

The risk that the principal and interest on a debt security are not paid on time.

Liquidity Risk

The risk that an investor might not be able to sell an investment quickly and at a fair market price.

Inflation Risk Purchasing Power Risk

The risk that the purchasing power of investment returns will be eroded by inflation.

Suitability Standard

The obligation to ensure investment recommendations match a customer's financial situation and investment objectives. Components include reasonable-basis suitability; customer-specific suitability; and quantitative suitability.

KYC Know Your Customer

The process of verifying a customer's identity; understanding their financial goals; and ensuring that recommended financial products align with their risk tolerance and investment objectives.

What type of security represents ownership in a corporation?

Common stock. Stockholders are part-owners of the company and have voting rights. Bonds are debt instruments where the holder is a creditor not an owner.

Which shareholders have priority in receiving dividends?

Preferred stockholders have priority over common stockholders for dividend payments. However bondholders creditors must be paid interest before any dividends are distributed to shareholders.

Common stockholders typically have which rights?

Voting rights typically one vote per share on major corporate matters such as electing the board of directors and approving mergers.

Which type of preferred stock allows unpaid dividends to accumulate?

Cumulative preferred stock accumulates any unpaid dividends dividends in arrears. These must be paid before any dividends can be paid to common stockholders.

An American Depositary Receipt ADR represents:

Ownership in a foreign company traded in U.S. markets. ADRs are certificates issued by U.S. banks representing shares of foreign companies.

Rights and warrants are similar in that both:

Give the holder the right to buy stock at a set price. Rights are short-term weeks while warrants are long-term years.

How many questions are presented on the current SIE examination?

80 questions total. 75 scored and 5 unscored.

A client receives a distribution from their 401k and wants to roll it over to an IRA. What is the deadline to complete an indirect 60-day rollover?

60 days from receipt of the distribution.

All of the following accurately describe a market order EXCEPT:

Setting a maximum purchase price or minimum sale price describes a limit order not a market order. A market order is an instruction to buy or sell promptly at the best price currently available.

All of the following are prohibited practices under FINRA rules EXCEPT:

Performing a reasonable-basis and customer-specific suitability review before recommending a security is the required permitted process under FINRA's suitability and Regulation Best Interest standards—not a prohibited practice.

A registered representative engages in the following activities. Each of them constitutes a prohibited practice EXCEPT:

Advising a customer against an unsuitable transaction is consistent with the representative's best-interest and suitability obligations and is permitted.

Current Yield Formula

Annual Interest divided by Market Price. The most commonly tested SIE bond formula.

EPS Formula

Net Income divided by Shares Outstanding. Measures company profitability.

P/E Ratio Formula

Market Price per Share divided by EPS. Stock valuation metric.

Call Breakeven Formula

Strike Price plus Premium. The point at which a call option buyer neither gains nor loses.

Put Breakeven Formula

Strike Price minus Premium. The point at which a put option buyer neither gains nor loses.

NAV Formula

Total Assets minus Total Liabilities divided by Shares Outstanding. Net Asset Value per share for a mutual fund.

POP Formula

NAV plus Sales Charge. Public Offering Price for a load mutual fund.