Securities Industry Essentials (SIE) Exam

Securities and Exchange Commission (SEC)

A U.S. government oversight agency responsible for ensuring that securities laws and regulations are complied with.

Securities Act of 1933

The first federal legislation aimed at the securities regulation industry requiring issuers to disclose all material company information.

Investment Advisers Act of 1940

An act that limits advertising by investment advisers to prevent fraudulent, deceptive, and manipulative practices.

Accredited Investor

An individual or couple with a net worth exceeding $1 million or with particular income levels over a specified period.

Investment Company Act of 1940

Regulates the organization of investment companies like mutual funds and mandates disclosure of their financial details.

Self-Regulatory Organizations (SROs)

Organizations like FINRA that oversee broker-dealers and enforce compliance within the securities industry.

New York Stock Exchange (NYSE)

The largest stock exchange in the world that requires companies to meet rigorous financial requirements to be listed.

FINRA

A not-for-profit organization supervising broker-dealers and enforcing industry rules to protect investors.

Municipal Securities Regulatory Board (MSRB)

Writes and enforces rules for investment firms and banks selling municipal bonds.

Market Participants

Groups involved in the trading of securities, including retail investors, accredited investors, and institutional investors.

Broker-Dealers

Entities that trade in securities on behalf of clients (brokers) and for their own accounts (dealers).

Payment Date

The date when dividends are actually distributed to shareholders.

T+2

The standard settlement timeframe for most securities transactions, requiring completion within two business days.

Call Option

A contract giving the holder the right to purchase an underlying asset at a specified price before or on a certain date.

Put Option

A contract giving the holder the right to sell an underlying asset at a specified price before or on a certain date.

Cyclical Stocks

Stocks in sectors that follow the business cycle, performing well during economic growth and poorly during downturns.

Market Manipulation

The illegal act of artificially influencing the market price of a security for personal gain.

Insider Trading

The act of trading shares based on non-public, material information about a company.

Registered Investment Adviser

An individual or firm that is paid to provide clients with advice about securities investments or to manage investment portfolios.

Equity Securities

Ownership instruments in a company, such as common and preferred stocks.

Debt Securities

Instruments indicating a loan made by an investor to a borrower, typically a corporate or governmental entity.

Dividend

A portion of a company's earnings distributed to shareholders, typically in the form of cash or additional stock.

Net Asset Value (NAV)

The value of a fund's total assets minus its liabilities, crucial for pricing mutual fund shares.

Money Market Instruments

Short-term debt securities typically maturing in up to one year, such as Treasury bills and commercial paper.

Liquidity Risk

The risk that an asset cannot be bought or sold quickly enough in the market to prevent a loss.

Fiduciary Duty

An obligation to act in the best interest of another party, typically seen in the relationship between investment advisers and their clients.

FINRA Rule 2111

Mandates that recommendations made by brokers be suitable for customers based on their individual characteristics.

Section 529 Plans

Tax-advantaged savings plans intended to encourage saving for future education costs.

Exchange-Traded Funds (ETFs)

Investment funds that are traded on stock exchanges, similar to stocks, and track an index or sector.

Closed-End Fund

A type of investment company with a fixed number of shares that are traded on an exchange like stock.

Repurchase Agreement (Repo)

A short-term borrowing mechanism where securities are sold with an agreement to repurchase them at a higher price.

Risk Tolerance

The degree of variability in investment returns that an investor is willing to withstand.

Hedge Fund

A pooled investment fund that employs various strategies to earn active returns for investors.

Private Placement

A capital raising method where securities are sold directly to a select group of investors.

Regulation D (Reg D)

A SEC regulation that permits companies to offer securities to investors without requiring SEC registration.

Anti-Money Laundering (AML)

Efforts and regulations designed to detect and prevent money laundering activities.

Commodity Trading Advisor (CTA)

A person or firm that provides personalized advice regarding the trading of commodity futures or options.

Tax Advantage

A financial benefit that reduces the amount of tax owed, often applied to investment vehicles.

Exchange Act Rule 15c3-3

Requires firms to protect customer assets and segregate customer securities from their own.

Asset-Backed Securities (ABS)

Financial securities backed by a pool of assets, typically loans or receivables.

Fiscal Policy

Government policy regarding taxation and spending, aimed at influencing economic conditions.

Monetary Policy

Central bank actions, such as interest rate adjustments, to influence the availability and cost of money.

Collaterals

Assets pledged as security for repayment of a loan.

Market Capitalization

The total market value of a company's outstanding shares of stock.

Volatility

A statistical measure of the dispersion of returns for a given security or market index.

Total Return

The overall return on an investment, including dividends, interest, and capital gains.

Efficient Market Hypothesis (EMH)

The theory that asset prices fully reflect all available information.

Buy-and-Hold Strategy

An investment approach where investors buy stocks and hold them for a long period regardless of fluctuations.

Investment Strategy

A set of principles that guide an investor's decisions regarding their asset allocation and investment selection.

Diversification

A risk management technique that mixes a wide variety of investments within a portfolio.

Behavioral Finance

A field of study that examines how psychological influences and cognitive biases affect the financial behaviors of investors.