SIE Exam

Issuer

A legal entity that sells securities to finance its operations.

Broker

A firm operating as an agent matching buyers and sellers for a commission.

Dealer

A firm operating as a principal buying or selling from inventory for a markup or markdown.

Market Maker

A broker-dealer providing two-sided quotes standing ready to buy and sell.

Bid Price

The price a market maker will pay to buy a security from a customer.

Ask Price

The price a market maker will accept to sell a security to a customer.

Spread

The difference between the bid price and the ask price.

Investment Adviser

A firm charging fees for providing securities investment advice as a regular business.

Municipal Advisor

An entity providing advice to municipal issuers regarding debt structure and terms.

Institutional Investor

Large entity like a bank or pension fund managing pooled capital.

Retail Investor

An individual investing personal funds for their own account.

Accredited Investor

High net worth or high-income individual deemed sophisticated by the SEC.

Qualified Institutional Buyer

Institution managing at least $100 million in securities.

Clearing Firm

A full-service broker-dealer executing, clearing, and settling trades.

Introducing Firm

A broker-dealer that takes customer orders but outsources clearing to another firm.

Prime Broker

A firm providing centralized clearing, leverage, and custody services to hedge funds.

Transfer Agent

An entity responsible for keeping track of share ownership and certificates.

Registrar

An independent entity ensuring an issuer does not issue more shares than authorized.

SEC

The primary federal regulator of the U.S. securities industry.

FINRA

The largest non-governmental regulator (SRO) for U.S. broker-dealers.

MSRB

SRO responsible for writing rules governing municipal securities firms and banks.

North American Securities Administrators Association (NASAA)

International organization focused on state-level blue-sky investor protection.

SRO

Self-regulatory organization that enforces industry standards on members but lacks criminal power.

Federal Reserve Board

Central bank controlling monetary policy and regulating margin via Reg T.

FDIC

Federal agency insuring bank deposit accounts up to $250,000.

SIPC

Non-profit industry corporation insuring customer brokerage accounts against firm bankruptcy.

SIPC Coverage Limit

Maximum protection of $500,000 per customer, including up to $250,000 in cash.

Securities Act of 1933

Federal law regulating the primary market and requiring prospectus disclosure.

Securities Exchange Act of 1934

Federal law regulating the secondary market and creating the SEC.

Maloney Act of 1938

Amendment enabling the creation of over-the-counter SROs.

Investment Company Act of 1940

Law regulating mutual funds and open or closed-end investment structures.

Investment Advisers Act of 1940

Law requiring ABC-test-meeting advisory firms to register.

Insider Trading Act of 1988

Law establishing civil and criminal penalties for trading on material non-public info.

Treble Damages

Civil penalty allowing inside traders to be sued for three times profits made.

Telephone Consumer Protection Act

Law limiting telemarketing calls to 8

USA PATRIOT Act

Legislation requiring anti-money laundering programs and identity verification.

Common Stock

Standard corporate ownership interest offering growth potential and voting rights.

Authorized Shares

Maximum number of shares a corporation is legally allowed to issue.

Issued Shares

Authorized shares that have been sold to investors by the corporation.

Treasury Stock

Shares issued and later repurchased by the company, lacking voting or dividend rights.

Outstanding Stock

Issued shares remaining in public hands, calculated as Issued minus Treasury.

Statutory Voting

Voting system allowing one vote per share per director slot being filled.

Cumulative Voting

Voting system allowing total votes to be concentrated on one director, helping minority owners.

Preemptive Right

Privilege allowing current owners to buy new stock before the public to prevent dilution.

Stock Warrant

Long-term sweetener giving the option to buy stock at an above-market price initially.

Blue-Chip Stock

High-quality stock of a mature, financially stable industry-leading company.

Growth Stock

Stock of a company expanding faster than average, reinvesting profits instead of paying dividends.

Income Stock

Stock paying consistently high dividends relative to its market price.

Defensive Stock

Recession-resistant stock that maintains steady earnings regardless of the economy.

Cyclical Stock

Stock whose performance tracks and mimics the economic business cycle.

ADR

Dollar-denominated receipt representing ownership of shares in a foreign corporation trading in the U.S.

Preferred Stock

Equity security offering fixed dividends and liquidation priority over common stock.

Cumulative Preferred

Preferred stock requiring all unpaid skipped dividends to be satisfied before common payouts.

Convertible Preferred

Preferred stock that can be exchanged for a set number of common shares.

Bond

A debt security representing a loan from an investor to an issuer.

Par Value

The face value of a bond, typically $1,000, repaid at maturity.

Coupon Rate

The fixed annual interest rate printed on a bond, paid as a percentage of par.

Maturity Date

The future date when the principal loan amount must be repaid to the bondholder.

Discount Bond

A bond trading in the secondary market at a price below its par value.

Premium Bond

A bond trading in the secondary market at a price above its par value.

Nominal Yield

The stated interest rate of a bond, identical to its coupon rate.

Current Yield

Annual interest payment divided by the bond's current market price.

Yield to Maturity

The total return expected on a bond if held until its final maturity date.

Yield to Call

The expected return on a callable bond assuming it is redeemed early by the issuer.

Inverse Relationship

The fundamental rule that bond prices move opposite to prevailing interest rates.

Call Provision

Issuer right to redeem a bond prior to maturity, usually when interest rates fall.

Call Protection

A specified multi-year period during which an issuer cannot call a bond.

Put Provision

Investor right to force the issuer to buy back the bond early, typically if rates rise.

Interest Rate Risk

Risk that rising interest rates will cause bond prices to fall.

Credit Risk

Risk that an issuer will default on interest or principal payments.

Inflation Risk

Risk that purchasing power will decline faster than a fixed bond's investment returns.

Reinvestment Risk

Risk that periodic coupon income cannot be reinvested at the original high yield.

Secured Bond

Corporate debt backed by specific physical collateral like real estate or equipment.

Mortgage Bond

A corporate bond secured by a lien on real estate property owned by the firm.

Equipment Trust Certificate

Debt secured by rolling stock like airplanes or railroad cars.

Debenture

An unsecured corporate bond backed only by the full faith and credit of the issuer.

Subordinated Debenture

Unsecured debt ranking behind junior debentures in liquidation priority.

Convertible Bond

Corporate bond that can be converted into a fixed number of common shares.

Arbitrage

Profit strategy involving simultaneous buying and selling of related assets across markets.

Treasury Bills

Short-term U.S. government debt issued at a discount with maturities up to 52 weeks.

Treasury Notes

Medium-term U.S. government debt paying semi-annual interest with 2 to 10 year maturities.

Treasury Bonds

Long-term U.S. government debt paying semi-annual interest with 10 to 30 year maturities.

TIPS

Treasury securities whose principal adjusts semi-annually based on CPI inflation changes.

STRIPS

Zero-coupon securities backed by the U.S. government, created by separating coupons from principal.

Ginnie Mae

Government agency whose mortgage-backed securities carry the direct full faith guarantee of the U.S.

Fannie Mae

Government-sponsored enterprise issuing mortgage securities backed by its own credit.

Prepayment Risk

Risk that homeowners refinance mortgages early when rates drop, shortening MBS lifespan.

Extension Risk

Risk that mortgage refinancing slows down as rates rise, lengthening MBS lifespan.

Asset-Backed Security

Debt pool backed by non-mortgage loans like credit cards or auto loans.

Commercial Paper

Unsecured corporate short-term debt issued up to 270 days max maturity.

Municipal Bond

Debt issued by states, cities, or counties to finance public projects.

General Obligation Bond

Municipal bond backed by full faith, credit, and taxing authority of the issuer.

Revenue Bond

Municipal bond backed solely by user fees or revenues generated from a specific project.

Feasibility Study

An independent study assessing whether a proposed revenue bond project can self-finance.

Industrial Development Bond

Municipal revenue bond issued on behalf of a private corporation.

Tax-Exempt Status

Feature where municipal bond interest is free from federal income taxes.

In-State Tax Rule

Feature where municipal interest is also exempt from state and local taxes if bought by residents.

Taxable Equivalent Yield

Formula calculating what a taxable bond must pay to equal a tax-free bond.

Municipal Note

Short-term municipal debt used for temporary interim financing.

Section 529 Plan

State-sponsored, tax-advantaged savings plan used to fund qualified education expenses.