SIE Exam Structure and Content Overview

1.2 Exam Structure and Content Overview

Embarking on your journey to pass the Securities Industry Essentials (SIE) Exam requires a solid understanding of its structure and content. This section provides a detailed breakdown of the exam format, content areas, and scoring criteria, equipping you with the knowledge to approach the exam with confidence.

Exam Format

The SIE Exam is designed to assess your foundational understanding of the securities industry. It consists of 85 multiple-choice questions, of which 75 are scored and 10 are unscored. The unscored questions are experimental and are used by FINRA to test new question formats and content. These do not impact your final score but are indistinguishable from scored questions during the exam.

You will have 1 hour and 45 minutes to complete the exam, requiring effective time management skills to ensure that you can thoughtfully address each question. This time allocation translates to approximately 74 seconds per question, making it crucial to pace yourself and avoid spending too much time on any single question.

Content Areas

The exam content is divided into four main sections, each focusing on different aspects of the securities industry. Understanding these areas will help you allocate your study time effectively and ensure comprehensive preparation.

1. Knowledge of Capital Markets (16%)

This section evaluates your understanding of the broader securities markets and the entities that regulate them. Key topics include:

• Regulatory Entities, Agencies, and Market Participants: Familiarize yourself with the roles and responsibilities of the Securities and Exchange Commission (SEC), Self-Regulatory Organizations (SROs) like FINRA, state regulators, and other regulatory bodies.
• Market Structure and Function: Learn about the primary and secondary markets, as well as the third and fourth markets, and the role of electronic trading platforms and exchanges.
• Economic Factors: Understand the impact of monetary and fiscal policies, business cycles, economic indicators, interest rates, inflation, currency exchange rates, and global economic events on the securities markets.

2. Understanding Products and Their Risks (44%)

This is the most heavily weighted section of the exam, covering a wide range of securities products and the risks associated with them. Topics include:

• Equity and Debt Securities: Differentiate between common and preferred stocks, corporate bonds, U.S. government securities, municipal bonds, and other debt instruments.
• Packaged Products: Explore mutual funds, exchange-traded funds (ETFs), closed-end funds, unit investment trusts (UITs), and real estate investment trusts (REITs).
• Options and Annuities: Understand the basics of options contracts, options strategies, fixed and variable annuities, and life insurance products.
• Alternative Investments: Delve into hedge funds, private equity, venture capital, direct participation programs (DPPs), commodities, futures, and cryptocurrencies.
• Risks Associated with Investment Products: Identify and assess market, credit, interest rate, inflation, liquidity, currency, political, legislative, reinvestment, prepayment, extension, and concentration risks.

3. Understanding Trading, Customer Accounts, and Prohibited Activities (31%)

This section covers the practical aspects of trading and account management, as well as ethical considerations. Key topics include:

• Trading Securities: Learn about different types of orders, order execution, trade confirmation, settlement processes, and regulations governing short sales.
• Customer Accounts: Understand the various types of customer accounts, new account documentation, suitability requirements, and the Customer Identification Program (CIP).
• Customer Communications and Disclosures: Familiarize yourself with the rules for communications with the public, advertising, electronic communications, and disclosure requirements.
• Prohibited Activities: Recognize unethical practices such as insider trading, market manipulation, fraudulent activities, unauthorized transactions, and excessive trading.
• Anti-Money Laundering (AML) Compliance: Learn about the Bank Secrecy Act, USA PATRIOT Act provisions, suspicious activity reporting, and currency transaction reporting.
• Privacy and Confidentiality: Understand Regulation S-P, identity theft prevention, and the Red Flags Rule.

4. Overview of the Regulatory Framework (9%)

This section reviews the key regulations and responsibilities within the securities industry. Topics include:

• Securities Acts and Key Legislation: Study the Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1940, Investment Advisers Act of 1940, and other significant legislation.
• Self-Regulatory Organizations (SROs): Learn about FINRA rules, MSRB rules for municipal securities, and the functions of other SROs.
• Registration and Licensing Requirements: Understand the process of associated person registration, Form U4 and U5 procedures, and continuing education requirements.
• Employee Conduct and Reportable Events: Familiarize yourself with statutory disqualification, outside business activities, political contributions, gifts, and complaint handling.
• Customer Protection and Ethical Practices: Learn about Regulation Best Interest (Reg BI), suitability, fiduciary duty, senior investor protections, and best execution.
• Recordkeeping and Reporting Requirements: Understand the importance of maintaining books and records, regulatory filings, business continuity plans, and cybersecurity measures.

Scoring and Passing Criteria

To pass the SIE Exam, you must achieve a score of 70% or higher. This means you need to correctly answer at least 53 out of the 75 scored questions. The unscored questions are not included in this calculation, so focus on performing well across all content areas.

The exam is scored electronically, and you will receive your results immediately upon completion. If you do not pass, you can retake the exam after a 30-day waiting period. However, after three attempts, a 180-day waiting period is required before you can retake the exam.

Glossary

• Multiple-Choice Questions: These questions present several answer options, with only one correct choice. It is important to read each question carefully and consider all options before selecting your answer.
• Content Areas: These are the primary topics and subject matter categories covered in the exam, as outlined in the content areas section above.

References

For more detailed information on the SIE Exam content and structure, refer to FINRA’s official SIE Exam Content Outline. This document provides a comprehensive overview of the topics covered and is an essential resource for your exam preparation.

Additionally, practice questions and sample exams are invaluable tools for familiarizing yourself with the exam format and testing your knowledge. Consider using resources that offer example questions to enhance your study regimen.

SIE Exam Practice Questions: Exam Structure and Content Overview

By mastering the structure and content of the SIE Exam, you are well on your way to successfully passing the exam and advancing your career in the securities industry. Use this guide to focus your study efforts and ensure a comprehensive understanding of the material.