SIE Study Guide

This study guide has been adapted from material provided by siepracticeexam.com, and enhanced with the use of AI.

Securities and Exchange Commission (SEC)

Government oversight agency responsible for securities regulations in the U.S.

Securities Act of 1933

Federal legislation requiring issuers to disclose material company information to protect investors from fraud.

Securities Exchange Act of 1934

Federal legislation that regulates securities trading on the secondary market and requires certain issuers to file periodic reports with the SEC.

Investment Advisors Act of 1940

Federal legislation that sets forth regulations for investment advisors. It requires registration with the SEC and adherence to certain standards of conduct and fiduciary duties.

Investment Company Act of 1940

Federal legislation that regulates investment companies, such as mutual funds, and requires disclosure of financial condition and investment policies.

New York Stock Exchange (NYSE)

Largest stock exchange in the world with rigorous listing requirements for companies.

Chicago Board Options Exchange (CBOE)

Largest options exchange in the world, facilitating trading in put and call options.

Financial Industry Regulatory Authority (FINRA)

Not-for-profit organization overseeing broker-dealers in the United States, protecting investors and ensuring market transparency.

Municipal Securities Regulatory Board (MSRB)

Writes and enforces rules and procedures for firms and banks selling municipal bonds and other municipal securities.

United States Treasury

Executive department overseeing government revenue, including the Internal Revenue Service and the Financial Crimes Enforcement Network.

Internal Revenue Service (IRS)

Bureau of the United States Treasury responsible for collecting taxes and administering tax laws.

Federal Reserve (The Fed)

Central bank of the United States, responsible for monetary policy and regulating banks.

State Regulators

These are responsible for licensing securities firms, registering securities offerings, and enforcing state securities laws in each state.

Federal Deposit Insurance Corporation (FDIC)

Independent U.S. government agency providing deposit insurance to U.S. bank depositors.

Securities Investor Protection Corporation (SIPC)

Created to restore trust in the U.S. securities industry and insures eligible investors for up to $250,000 in cash in their brokerage accounts.

Foreign Country Regulators

Government regulatory agencies in other countries similar to the SEC.

Retail Investors

Individual investors who buy and sell securities for personal goals.

Accredited Investors

Individuals or entities meeting certain requirements to trade in private securities not registered with the SEC.

Institutional Investors

Legal entities such as banks, insurance companies, and mutual funds that trade in securities on behalf of clients or shareholders.

Broker-Dealers

Entities that trade in securities on behalf of clients or on behalf of themselves.

Introducing Brokers

Brokers that receive orders for securities but contract with a clearing firm to process them.

Clearing Firms

Firms that hold customer accounts and are responsible for clearing trades and ensuring settlement.

Prime Brokers

Brokers that provide services to large financial institutions, such as trade clearing and settlement.

Investment Advisors

Individuals or companies paid to provide advice about securities investments and manage investment portfolios.

Municipal Advisors

Firms that provide advice on municipal financial products and the issuance of municipal securities.

Issuers

Legal entities that fund their operations by selling securities to investors.

Underwriters

Individuals who facilitate the sale and distribution of an issuer's securities by pricing and purchasing the securities from the issuer.

Market Makers

Brokerage firms that provide availability for public investors to buy or sell stocks and bonds. They typically buy and sell securities of specific companies to provide liquidity in the market.

Custodians

Entities that hold and safeguard assets for safekeeping.

Trustees

Individuals or organizations responsible for governing a trust and managing assets on behalf of the beneficiary.

Transfer Agents

Intermediaries between securities issuers and holders, responsible for maintaining security holder records and distributing dividends.

Depository Trust & Clearing Corporation (DTCC)

Manages clearing and settlement processes for most securities transactions in the United States.

Primary Market

Market for newly created debt and equity securities, where investors purchase securities directly from issuers.

Secondary Market

Market where publicly traded securities are bought and sold between investors, facilitated by stock exchanges and brokerage firms.

Third Market

Over-the-counter trading of exchange-listed securities between institutional investors and broker-dealers.

Fourth Market

Market for the trading of large blocks of securities between institutional investors, processed through an Electronic Communications Network (ECN).

Foreign Markets

Markets that provide access to international securities, such as American Depositary Receipts (ADRs) and Regulation S Offerings.

Monetary Policy

Actions taken by the Federal Reserve to maintain the health of the U.S. economy, such as adjusting interest rates.

Fiscal Policy

Actions taken by Congress and the President to set tax rates and policies to influence the economy.

Leading Economic Indicators

Indicators that provide insight into the future direction of the economy, such as stock market returns and building permits.

Lagging Economic Indicators

Indicators that reveal trends in the economy after major events have occurred, such as unemployment rate and corporate profits.

Coincident Economic Indicators

Indicators that provide information about the current state of the economy, such as gross domestic product and retail sales.

Inflation

A decrease in the purchasing power of money due to an increase in the prices of goods and services.

Cyclical Industries

Industries that follow the standard business cycle, performing well in good economies and poorly in down economies.

Defensive Industries

Industries that provide goods we use in our daily lives and are not significantly impacted by the state of the economy.

Growth Industries

Industries expected to grow faster than the overall economy, such as technology and healthcare.

Keynesian Economic Theory

Theory that government expenditures and tax changes can prevent or repair economic recessions.

Monetarist Economic Theory

Theory that controlling the money supply and letting the market work itself out is essential for a healthy economy.

Balance of Payments

Net transactions between one country's government bodies, companies, and individuals and those of outside countries.

Gross Domestic Product (GDP)

Total value of all goods and services produced within a country by its nationals and foreigners alike.

Gross National Product (GNP)

Total value of all goods and services produced by the citizens of a country, regardless of where they live.

Exchange Rates

Rates at which one currency can be converted to another.

Public Offerings

Offerings of securities to the general investing public, including initial public offerings (IPOs) and follow-on offerings.

Private Offerings

Offerings of securities to a narrowly defined group of investors who meet strict wealth and sophistication requirements.

Shelf Registrations

Registration of securities offerings on a delayed or continuous basis, allowing issuers to sell securities quickly when market conditions are favorable.

Offering Documents

Documents provided to investors in securities offerings, such as prospectuses, private placement memoranda, and official statements.

Exempt Securities

Regulatory Filing Requirements - Securities not required to be registered with the SEC.

Common Stock

Provides fundamental ownership position in a corporation

Common Stock Equivalents

Securities that can be converted into common stock

Preferred Stock

Stock with certain advantages, including fixed cumulative dividends and priority liquidation

Pre-emptive Rights

Rights of existing shareholders to maintain their share ratio

Warrants

Certificates that give the holder the right to buy common shares at a fixed price on a set date.

Stock Options

Can provide rights to buy common shares at a set price

Repurchase Agreement (Repo)

Agreement to purchase and repurchase securities

American Depository Receipts (ADRs)

Certificates representing shares of a foreign company's stock

Voting

Right of common shareholders to have a say when choosing the Board of Directors

Restricted Stock

Stock acquired in private, unregistered sales by an issuer or an affiliate of the issuer.

Control Stock

Equity shares owned by major shareholders of a publicly traded company.

Interest Rate Risk

Risk of bond value decreasing due to fluctuations in interest rates

Inflation Risk

Investment risk involving the declining purchasing power of money

Credit Risk

Risk of issuer defaulting on loan payments

Liquidity Risk

Risk of difficulty selling a security quickly

Political Risk

Risk of default or debt downgrade due to political challenges

Callable Bonds

Bonds that can be paid off by the issuer before maturity

Puttable Bonds

Bonds that can be sold back to the issuer before maturity

Zero-Coupon Bonds

Bonds that do not pay interest, but are sold at a discount

Variable Life Insurance

Permanent life insurance policy with cash value invested in securities

Separate Accounts of Variable Annuities

Accounts where variable annuity investments are held

529 College Savings Plans

Municipal securities used to save for qualified post-secondary educational expenses. Account earnings grow federally tax-free, with potential state tax deductions.

Municipal Fund Securities

Savings plans sponsored by states to save for qualified educational or disability expenses.

Advisor-Sold Plans

Plans offered through registered broker-dealers or RIAs. Offer better portfolio flexibility but higher fees

Direct-Sold Plans

Plans offered directly by the state. Include fixed portfolios with lower fees.

Achieving a Better Life Experience (ABLE) Accounts

Municipal fund securities that allow Americans with disabilities to save for disability-related expenses. To be eligible, individuals must receive Supplemental Security Income (SSI) and/or Social Security Disability Insurance (SSDI) or have a documented diagnosis of blindness or other disability prior to the age of 26.

Local Government Investment Pools (LGIPs)

Investment vehicles established by state governments to pool resources of local governmental entities.

Direct Participation Programs (DPPs)

Limited liability corporations, real estate investment trusts (REITs), or limited partnerships that act as limited partnerships all fall in this program category.

Investor

DPP profits are taxed only once at the ________ level.

Tenants in Common (TIC)

Fractional ownership interests in real estate through co-ownership investments.

Real Estate Investment Trusts (REITs)

Companies that either pool money from investors and invest in income-producing real estate assets, or lend money to real estate buyers.

Types of REITs

Publicly Traded REITs, Public Non-listed REITs, and Private REITs are all ______ __ ______.

Equity REITs

Trusts that acquire and manage commercial real estate properties.

Mortgage (Debt) REITs

Trusts that lend money to real estate buyers.

Hedge Funds

Investment funds that pool money from sophisticated investors and aim to generate large returns.

Hedge Funds

These funds are structured as limited partnerships, with managers acting as general partners and investors acting as limited partners.

Leverage

Hedge funds often use borrowed money, referred to as ________ to increase investment returns.

Private Equity Funds

Invest directly into companies by purchasing private companies or acquiring controlling interests in publicly traded companies.

Exchange-traded Products (ETPs)

Bought and sold like individual stocks on an exchange, tracking underlying securities or indices. Can be passively or actively managed.

Exchange-traded Funds (ETFs)

Packaged portfolios with real-time pricing and lower investment minimums and brokerage commissions.

Mutual Funds

Stock ETFs are more tax-efficient than __________.

Exchange-traded Notes (ETNs)

Senior, unsecured debt obligations that track a benchmark index and do not hold a portfolio of assets or securities.

Investment Risks

Market Risk, Business Risk, Inflationary/Purchasing Power Risk, Interest Rate/Reinvestment Risk, Credit Risk, Foreign Currency Risk, Liquidity Risk, Prepayment Risk, and Political Risk are all _________ _______.