FINRA Securities Industry Essentials (SIE) Content Outline

Source: http://finraawardsonline.finra.org/sites/default/files/2025-10/SIE_Content_Outline.pdf

Purpose of the exam

The Securities Industry Essentials (SIE) exam assesses a candidate's basic knowledge of the securities industry. The exam focuses on industry terminology, securities products, the structure and function of the markets, regulatory agencies and their functions, and regulated and prohibited practices. For more information about the SIE, see FINRA Rule 1210.03.

Structure of the exam

The exam consists of 75 multiple-choice items, and each item consists of four answer choices. The allocation of test items is as follows:

Section 1: Knowledge of Capital Markets, 16 percent, 12 items

Section 2: Understanding Products and Their Risks, 44 percent, 33 items

Section 3: Understanding Trading, Customer Accounts and Prohibited Activities, 31 percent, 23 items

Section 4: Overview of the Regulatory Framework, 9 percent, 7 items

Total: 100 percent, 75 items

Much of the content on the SIE outline is based on common securities industry knowledge and general concepts. This knowledge is often not based on any one rule or regulation. Examples include basic characteristics of investment products such as the relationship between the price and yield of a bond and the rights of a common stockholder. Alternately, some knowledge is based on specific rules and regulations. Examples include the reporting requirements for a Suspicious Activity Report (SAR) and the Uniform Application for Securities Industry Registration or Transfer (Form U4) filing requirements. The exam will assess candidates on both rule-based and non-rule-based industry knowledge.

Several federal laws and regulations serve as the foundation for some of the knowledge contained in this outline. The content upon which the outline is based includes but is not limited to rules and regulations under the following Acts: The Securities Act of 1933, The Securities Exchange Act of 1934, The Investment Company Act of 1940, The Investment Adviser Act of 1940.

Administration of the exam

The exam is administered via computer. A tutorial on how to take the exam is provided prior to taking the exam. Each candidate's exam includes 5 additional, unidentified pretest items that do not contribute toward the candidate's score. The pretest items are randomly distributed throughout the exam. Therefore, each candidate's exam consists of a total of 80 items (75 scored and 5 unscored). There is no penalty for guessing. Therefore, candidates should attempt to answer all items.

Candidates will be allowed 1 hour and 45 minutes to complete the SIE exam.

All candidate test scores are placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale accounts for the slight variations in difficulty that may exist among the different sets of exam items that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of exam items they received.

Candidates are not permitted to bring reference materials to their testing session. Severe penalties are imposed on candidates who cheat or attempt to cheat on FINRA-administered exams.

Section 1: Knowledge of Capital Markets

1.1 Regulatory Entities, Agencies and Market Participants

1.1.1 The Securities and Exchange Commission (SEC)

The high-level purpose and mission of securities regulation. Definition, jurisdiction and authority of the SEC.

1.1.2 Self-regulatory Organizations (SROs)

Purpose and mission of an SRO. Jurisdiction and authority of SROs (for example: CBOE, FINRA, MSRB).

1.1.3 Other Regulators and Agencies

Department of the Treasury/IRS. State regulators (for example: NASAA). The Federal Reserve. Securities Investor Protection Corporation (SIPC). Federal Deposit Insurance Corporation (FDIC).

1.1.4 Market Participants and their Roles

Investors (for example: accredited, institutional, retail). Broker-Dealers (for example: introducing, clearing, prime brokers). Investment advisers. Municipal advisors. Issuers and underwriters. Traders and market makers. Custodians and trustees. Transfer agents. Depositories and clearing corporations (for example: Depository Trust and Clearing Corporation (DTCC), Options Clearing Corporation (OCC)).

1.2 Market Structure

1.2.1 Types of Markets

The primary market. The secondary market (for example: electronic, over-the-counter (OTC), physical). The third market. The fourth market.

1.3 Economic Factors

1.3.1 The Federal Reserve Board's Impact on Business Activity and Market Stability

Monetary vs fiscal policy. Open market activities and impact on economy. Different rates (for example: interest rate, discount rate, federal funds rate).

1.3.2 Business Economic Factors

Purpose of financial statements (for example: balance sheet, income statement). Business cycle (for example: contraction, trough, expansion, peak). Indicators (for example: leading, lagging, coincident, inflation). Basic effects on bond and equity markets (for example: cyclical, defensive, growth).

Principal economic theories (for example: Keynesian, Monetarist).

1.3.3 International Economic Factors

U.S. balance of payments. Gross domestic product (GDP), gross national product (GNP). Exchange rates.

1.4 Offerings

Roles of participants (for example: investment bankers, underwriting syndicate, municipal advisors).

Types of offerings:

Public vs private securities offering.

Initial public offering (IPO), secondary offering and follow-on offering.

Methods of distribution (for example: best efforts, firm commitment).

Shelf registrations and distributions (for example: definition, purpose).

Types and purpose of offering documents and delivery requirements (for example: official statement, program disclosure document, prospectus).

Regulatory filing requirements and exemptions (for example: SEC, blue-sky laws).

Rules for Section 1:

FINRA Rules: 2266 (SIPC Information), 2269 (Disclosure of Participation or Interest in Primary or Secondary Distribution), 5250 (Payments for Market Making).

MSRB Rules: G-11 (Primary Offering Practices), G-32 (Disclosures in Connection with Primary Offerings), G-34 (CUSIP Numbers, New Issue and Market Information Requirements).

SEC Rules and Regulations: Securities Act of 1933 Section 7 (Information Required in a Registration Statement), Section 8 (Taking Effect of Registration Statements and Amendments Thereto), Section 10 (Information Required in Prospectus), Section 23 (Unlawful Representations), 215 (Accredited Investor), 431 (Summary Prospectuses), Schedule A (Schedule of Information Required in Registration Statement), Schedule B (Schedule of Information Required in Registration Statement); Securities Exchange Act of 1934 Section 3(a) (Definitions and Application of Title), Section 12 (Registration Requirements for Securities), Section 15 (Registration and Regulation of Brokers and Dealers), Section 15A (Registered Securities Associations); Regulation D (Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933); 144 (Persons Deemed Not to Be Engaged in a Distribution and Therefore Not Underwriters), 144A (Private Resales of Securities to Institutions), 145 (Reclassification of Securities, Mergers, Consolidations and Acquisitions of Assets), 147 ("Part of an Issue," "Person Resident," and "Doing Business Within" for Purposes of Section 3(a)(11)), 164 (Post-filing Free Writing Prospectuses in Connection with Certain Registered Offerings).

Securities Investor Protection Act of 1970 (SIPA).

Section 2: Understanding Products and Their Risks

2.1 Products

2.1.1 Equity Securities

Types of equities: Common stock, Preferred stock, Rights, Warrants, American Depositary Receipts (ADRs).

Knowledge of: Ownership (for example: order of liquidation, limited liability), Voting rights, Convertible, Control and restrictions (for example: SEC Rule 144).

2.1.2 Debt Instruments

Treasury securities (for example: bills, notes, receipts, bonds). Agency (for example: asset-backed and mortgage-backed securities). Corporate bonds. Municipal securities: General obligation (GO) bonds, Revenue bonds, Others (for example: special type bonds, taxable municipal securities, short-term obligations). Others (for example: money market instruments, certificate of deposit (CD), bankers' acceptance, commercial paper).

Knowledge of: Varying maturities, Generate income (for example: interest), Coupon value, Par value, Yield, Ratings and rating agencies, Callable and convertible features, Short-term vs long-term characteristics, Relationship between price and interest rate, Negotiated vs competitive offerings via underwriters and syndicates, Auction.

2.1.3 Options

Types of options: Puts and calls, Equity vs index.

Knowledge of: Hedging or speculation, Expiration date, Strike price, Premium, Underlying or cash settlement, In-the-money, out-of-the money, Covered vs uncovered, American vs European, Exercise and assignment, Varying strategies (for example: long, short), Special disclosures (for example: Options Disclosure Document (ODD)), Options Clearing Corporation (OCC) for listed options.

2.1.4 Packaged Products

Investment companies. Types of investment companies: Closed-end funds, Open-end funds, Unit investment trusts (UITs), Variable contracts/annuities.

Knowledge of: Loads, Share classes, Net asset value (NAV), Disclosures, Costs and fees, Breakpoints, Right of accumulation (ROA), Letter of intent (LOI), Net transactions, Surrender charges, Sales charges.

2.1.5 Municipal Fund Securities

529 Plans: Prepaid tuition, Savings plans. Local government investment pools (LGIPs). ABLE accounts.

Knowledge of: Municipal fund securities, Owner vs beneficiary, Restricted use of plan assets, Tax advantages, Direct or adviser sold.

2.1.6 Direct Participation Programs (DPPs)

Types of DPPs: Limited partnerships, Tenants in common (TIC).

Knowledge of: Pass-through tax treatment, Unlisted, Generally illiquid.

2.1.7 Real Estate Investment Trusts (REITs)

Types of REITs: Private, Registered non-listed, Listed.

Knowledge of: Real estate equity or debt, Tax-advantaged income without double taxation.

2.1.8 Hedge Funds

Knowledge of: Minimum investment, Partnership structure, Private equity, Generally illiquid.

2.1.9 Exchange-traded Products (ETPs)

Types of ETPs: Exchange-traded funds (ETFs), Exchange-traded notes (ETNs).

Knowledge of: Alternative investments to mutual funds, Fee considerations, Active vs passive.

2.2 Investment Risks

Definition and Identification of Risk Types: Capital, Credit, Currency, Inflationary/purchasing power, Interest rate/reinvestment, Liquidity, Market/systematic, Non-systematic, Political, Prepayment.

Strategies for Mitigation of Risk: Diversification, Portfolio rebalancing, Hedging.

Rules for Section 2:

FINRA Rules: 2261 (Disclosure of Financial Condition), 2262 (Disclosure of Financial Relationship with Issuer), 2310 (Direct Participation Programs), 2330 (Members' Responsibilities Regarding Deferred Variable Annuities), 2342 ("Breakpoint" Sales), 2360 (Options).

MSRB Rules: D-12 (Definition of Municipal Fund Securities), G-17 (Conduct of Municipal Securities and Municipal Advisory Activities), G-30 (Pricing and Commissions), G-45 (Reporting of Information on Municipal Fund Securities).

CBOE Rule: Rule 1.1 (Definitions).

SEC Rules and Regulations: Securities Exchange Act of 1934 3a11-1 (Definition of the Term "Equity Security"), 10b-18 (Purchases of Certain Equity Securities by the Issuer and Others); Investment Company Act of 1940 Section 3(a) (Definitions - "Investment Company"), Section 4 (Classification of Investment Companies), Section 5 (Subclassification of Management Companies), 12b-1 (Distribution of Shares by Registered Open-end Management Investment Company).

Section 3: Understanding Trading, Customer Accounts and Prohibited Activities

3.1 Trading, Settlement and Corporate Actions

3.1.1 Orders and Strategies

Types of orders (for example: market, stop, limit, good-til-canceled (GTC), discretionary vs non-discretionary, solicited vs unsolicited). Buy and sell, bid-ask. Trade capacity (for example: principal, agency). Long and short, naked and covered. Bearish and bullish.

3.1.2 Investment Returns

Components of return (for example: interest, dividends, realized/unrealized gains, return on capital). Different types of dividends (for example: cash, stock). Dividend payment dates (for example: record date, ex-dividend date, payable date). Concepts of measurement (for example: yield, yield to maturity (YTM), yield to call (YTC), total return, basis points). Cost basis requirements. Benchmarks and indices.

3.1.3 Trade Settlement

Settlement time frames for various products (for example: T, T plus 1). Physical vs book entry (for example: delivery and settlement).

3.1.4 Corporate Actions

Types of corporate actions (for example: splits, reverse splits, buybacks, tender offers, exchange offers, rights offerings, mergers and acquisitions (M and A)). Impact of stock splits and reverse stock splits on market price and cost basis. Adjustments to securities subject to corporate actions. Delivery of notices and corporate action deadlines. Proxies and proxy voting.

3.2 Customer Accounts and Compliance Considerations

3.2.1 Account Types and Characteristics

Cash. Margin. Options. Discretionary vs non-discretionary. Fee-based vs commission. Educational accounts.

3.2.2 Customer Account Registrations

Individual. Joint. Corporate/institutional. Trust (for example: revocable, irrevocable). Custodial (for example: UTMA). Partnerships. Retirement (for example: individual retirement account (IRA), qualified plans). Types and characteristics. Required minimum distributions. Contributions.

3.2.3 Anti-money Laundering (AML)

Definition of money laundering. Stages of money laundering (for example: structuring, layering, placement). AML compliance program. Suspicious Activity Report (SAR). Currency Transaction Report (CTR). FinCEN. Office of Foreign Asset Control (OFAC) and the Specially Designated Nationals and Blocked Persons (SDNs) List.

3.2.4 Books and Records and Privacy Requirements

Books and records retention requirements. Confirmations and account statements. Holding of customer mail. Business continuity plans (BCP). Customer protection and custody of assets. Privacy requirements (for example: Regulation S-P). Nonpublic personal information. Confidentiality of information. Privacy notifications. Safeguard requirements.

3.2.5 Communications with the Public and General Best Interest Obligations and Suitability Requirements

Communications with the public and telemarketing. Classifications and general requirements. Do-not-call list.

Best interest obligations and suitability requirements. Know-your-customer (KYC). General requirements (for example: what constitutes a recommendation).

3.3 Prohibited Activities

3.3.1 Market Manipulation

Definition of market manipulation. Types of market manipulation (for example: market rumors, pump and dump, front running, excessive trading, marking the close, marking the open, backing away, freeriding).

3.3.2 Insider Trading

Definition of insider trading. Definition of material nonpublic information. Identifying involved parties. Penalties (for example: fines, expulsion, incarceration).

3.3.3 Other Prohibited Activities

Restrictions preventing associated persons from purchasing initial public offerings (IPOs). Use of manipulative, deceptive or other fraudulent devices. Improper use of customers' securities or funds. Borrowing from customers. Sharing in customer accounts.

Financial exploitation of seniors. Activities of unregistered persons. Prohibition against paying commissions to unregistered persons. Prohibition against solicitation of customers and taking orders. Falsifying or withholding documents. Signatures of convenience. Responding to regulatory requests. Prohibited activities related to maintenance of books and records (for example: falsifying records and improper maintenance/retention of records).

Rules for Section 3:

FINRA Rules: 2010 (Standards of Commercial Honor and Principles of Trade), 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices), 2040 (Payments to Unregistered Persons), 2090 (Know Your Customer), 2111 (Suitability), 2120 (Commissions, Mark Ups and Charges), 2150 (Improper Use of Customers' Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts), 2165 (Financial Exploitation of Specified Adults), 2210 (Communications with the Public), 2231 (Customer Account Statements), 2251 (Forwarding of Proxy and Other Issuer-related Materials), 2264 (Margin Disclosure Statement), 2232 (Customer Confirmations), 3150 (Holding of Customer Mail), 3210 (Accounts at Other Broker-Dealers and Financial Institutions), 3230 (Telemarketing), 3240 (Borrowing from or Lending to Customers), 3250 (Designation of Accounts), 3260 (Discretionary Accounts), 3310 (Anti-money Laundering Compliance Program), 4210 (Margin Requirements), 4370 (Business Continuity Plans and Emergency Contact Information), 4511 (General Requirements), 4512 (Customer Account Information), 4514 (Authorization Records for Negotiable Instruments Drawn From a Customer's Account), 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), 5210 (Publication of Transactions and Quotations), 5220 (Offers at Stated Prices), 5230 (Payments Involving Publications that Influence the Market Price of a Security), 5240 (Anti-intimidation/Coordination), 5270 (Front Running of Block Transactions), 5280 (Trading Ahead of Research Reports), 5290 (Order Entry and Execution Practices), 5310 (Best Execution and Interpositioning), 5320 (Prohibition Against Trading Ahead of Customer Orders), 6438 (Displaying Priced Quotations in Multiple Quotation Mediums).

MSRB Rules: G-8 (Books and Records to be Made by Brokers, Dealers, Municipal Securities Dealers, and Municipal Advisors), G-9 (Preservation of Records), G-13 (Quotations), G-14 (Reports of Sales or Purchases), G-15 (Confirmation, Clearance, Settlement and Other Uniform Practice Requirements with Respect to Transactions with Customers), G-18 (Best Execution), G-21 (Advertising), G-25 (Improper Use of Assets), G-39 (Telemarketing), G-41 (Anti-money Laundering Compliance Program), G-47 (Time of Trade Disclosure).

SEC Rules and Regulations: Regulation M, Regulation S-P (Privacy of Consumer Financial Information and Safeguarding Personal Information); Securities Exchange Act of 1934 Section 10 (Regulation of the Use of Manipulative and Deceptive Devices), Section 11(d) (Trading by Members of Exchanges, Brokers and Dealers - "Prohibition on Extension of Credit by Broker-Dealer"), Section 14 (Proxies), Section 15 (Rules Relating to Over-the-Counter Markets), Section 20A (Liability to Contemporaneous Traders for Insider Trading), Section 21A (Civil Penalties for Insider Trading); 10b-1 (Prohibition of Use of Manipulative or Deceptive Devices or Contrivances with Respect to Certain Securities Exempted from Registration), 10b-3 (Employment of Manipulative and Deceptive Devices by Brokers or Dealers), 10b-5 (Employment of Manipulative and Deceptive Devices), 10b5-1 (Trading on Material Nonpublic Information in Insider Trading Cases), 10b5-2 (Duties of Trust or Confidence in Misappropriation Insider Trading Cases), 10b-10 (Confirmation of Transactions), 15c1-2 (Fraud and Misrepresentation), 15c1-3 (Misrepresentation by Brokers, Dealers and Municipal Securities Dealers as to Registration), 15c2-12 (Municipal Securities Disclosure), 15l-1 (Regulation Best Interest), 17a-3 (Records to be Made by Certain Exchange Members, Brokers and Dealers), 17a-4 (Records to be Preserved by Certain Exchange Members, Brokers and Dealers), 17a-14 (Form CRS, for Preparation, Filing and Delivery of Form CRS); Investment Company Act of 1940 17a-6 (Exemption for Transactions with Portfolio Affiliates), 17a-7 (Exemption of Certain Purchase or Sale Transactions Between an Investment Company and Certain Affiliated Persons Thereof).

Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA).

Federal Reserve Board Regulation T.

Federal Trade Commission Telemarketing Sales Rule.

USA PATRIOT Act: Section 314 (Cooperative Efforts to Deter Money Laundering), Section 326 (Verification of Identification), Section 352 (Anti-Money Laundering Programs).

Section 4: Overview of the Regulatory Framework

4.1 SRO Regulatory Requirements for Associated Persons

4.1.1 Registration and Continuing Education

SRO qualification and registration requirements. Definition of registered vs non-registered person. Permitted activities of registered and non-registered persons. Ineligibility for membership or association. Background checks. Fingerprinting. Statutory disqualification. Failing to register an associated person. State registration requirements (for example: blue-sky laws). Continuing Education (CE) requirement. Firm Element. Regulatory Element.

4.2 Employee Conduct and Reportable Events

4.2.1 Employee Conduct

Form U4 and Form U5 (for example: purpose, when to update forms). Consequences of filing misleading information or omitting information. Customer complaints. Potential red flags.

4.2.2 Reportable Events

Outside business activities. Private securities transactions. Reporting of political contributions and consequences for exceeding dollar contribution thresholds. Dollar and value limits for gifts and gratuities and non-cash compensation. Business entertainment. Felony, financial-related misdemeanors, liens, bankruptcy.

Rules for Section 4:

FINRA By-Laws: Article I (Definitions), Article III (Qualifications of Members and Associated Persons), Article IV (Membership), Article V (Registered Representatives and Associated Persons), Article VI (Dues, Assessments, and Other Charges), Article XII (Disciplinary Proceedings), Article XV (Limitations of Power).

FINRA Rules: 0100 Series (General Standards), 1000 Series (Member Application and Associated Person Registration), 1122 (Filing of Misleading Information as to Membership or Registration), 1240 (Continuing Education), 2060 (Use of Information Obtained in Fiduciary Capacity), 2263 (Arbitration Disclosure to Associated Persons Signing or Acknowledging Form U4), 2267 (Investor Education and Protection), 2310(c) (Non-cash Compensation), 2320(g)(4) (Non-cash Compensation), 2341(l)(5) (Non-cash Compensation), 3110(e) (Responsibility of Member to Investigate Applicants for Registration), 3220 (Influencing or Rewarding the Employees of Others), 3270 (Outside Business Activities of Registered Persons), 3280 (Private Securities Transactions of an Associated Person), 4513 (Written Customer Complaints), 4330 (Customer Protection - Permissible Use of Customers' Securities), 4530 (Reporting Requirements), 5110(h) (Non-cash Compensation), 8312 (FINRA's BrokerCheck Disclosure).

CBOE Rule 7.10 (Fingerprint-based Background Checks of Exchange Directors, Officers, Employees and Others).

MSRB Rules: G-2 (Standards of Professional Qualifications), G-3 (Professional Qualification Requirements), G-7 (Information Concerning Associated Persons), G-10 (Delivery of Investment Brochure), G-20 (Gifts, Gratuities and Non-cash Compensations), G-37 (Political Contributions and Prohibitions on Municipal Securities Business).

SEC Rules and Regulations: Securities Exchange Act of 1934 Section 3(a)(39) (Definitions and Application of Statutory Disqualification), 17f-2 (Fingerprinting of Securities Industry Personnel).