SIE Exam | Securities Industry Essentials Study Guide & Practice Test
Securities and Exchange Commission (SEC) - (answer)The securities industry's primary regulatory body.
Broker-Dealers that transact securities business with customer or with other broker-dealers must apply
and be approved for registration.
SEC regulates all exchanges and trading markets.
Self-regulatory organizations - (answer)SROs - function UNDER the SEC's oversight. Each SRO is
accountable to the Commission for enforcing federal securities laws, as well as supervising securities
practices within an assigned jurisdiction.
Largest SRO? - (answer)FINRA (Financial Industry Regulatory Authority)
regulates all matters related to investment banking, trading in the OTC market, trading in NYSE-listed
securities, and the conduct of FINRA member firms and associated persons.
SROS:
Chicago Board Options Exchange (CBOE) - (answer)regulates all matters related to trading in
standardized options and related contracts listed on that exchange
SROS:
Municipal Securities Rulemaking Board (MSRB) - (answer)regulates all matters related to the
underwriting and trading of state and municipal securities.
Regulates but does NOT have enforcement powers--it depends on other SROS (finra) to enforce its rules.
Federal and State regulatory agencies:
Department of the Treasury/IRS - (answer)is an executive department and and the treasury of the US
federal government.
Collection of taxes = IRS
The Federal Reserve Board (FRB) - (answer)consists of 12 regional federal reserve banks and hundreds of
national and state banks that belong to the system.
The FRB determines monetary policy and takes actions to implement its policies
,SIE Exam | Securities Industry Essentials Study Guide & Practice Test
The Securities Investor Protection Corporation (SIPC) was created under the Securities Investor
Protection Act of 1970: - (answer)The corporation is a nonprofit membership organization. SIPC
members pay assessments into a general insurance fund that is used to meet customer claims in the
event of a broker-dealer bankruptcy
All broker/dealers registered with the SEC must be SIPC memebrs except? - (answer)-banks that deal
exclusively in municipal securities
-firms that deal exclusively in U.S. government securities
-firms that deal exclusively in redeemable investment company securities
Basic coverage under SIPC? - (answer)no more than $500,000 per separate customer
NOT per separate account
(of that 500K, SIPC covers no more than 250,000 in cash.
SIPC does not cover what? - (answer)commodities or commodities futures contracts, because they are
not considered securities
Federal Deposit Insurance Corporation (FDIC) - (answer)Created during the great depression in response
to bank failures.
an independent agency of the US federal government that preserves public confidence in the banking
system by insuring deposits.
The FDIC guarantees what - (answer)$250,000 for each deposit ownership category in each insured
bank.
Investors - (answer)someone who provides money or resources for an enterprise, such as a corp, with
the expectation of financial or other gain.
Investors:
Retail investors- - (answer)an individual who makes investments such as the purchase of securities for
his or her own personal account rather than for an organization
, SIE Exam | Securities Industry Essentials Study Guide & Practice Test
Investors:
Institutional investor- - (answer)an entity that pools money to purchase securities and other investment
assets. (banks, insurance companies, pensions, hedge funds, and mutual funds)
Investors:
Accredited Investor- - (answer)defined as:
a net worth of 1 million or more
has an annual income of 200K or more in each of the two most recent years
Broker-Dealer - (answer)each member firm broker-dealer operates under an individualized membership
agreement with FINRA or other SRO. The membership agreement explains with lines of business the
broker-dealer undertakes.
Full service BDs - (answer)offer all types of investment products: stocks, bonds, mutual funds, options
and many others
Carrying Firm - (answer)carries customer accounts and accepts funds and securities from customers;
carrying and clearing firms typically rank among the larger broker-dealers.
A fully disclosed firm (introducing BD) - (answer)one that introduces its customers to a clearing firm
Prime Brokers - (answer)Prime account allows a customer to select one member firm (prime broker) to
provide custody and other services, while other firms -called executing brokers- handle all trades placed
by the customer.
Key Advantage: trading with multiple brokerage houses while still maintaining a centralized master
account
Securities and Exchange Commission (SEC) - (answer)The securities industry's primary regulatory body.
Broker-Dealers that transact securities business with customer or with other broker-dealers must apply
and be approved for registration.
SEC regulates all exchanges and trading markets.
Self-regulatory organizations - (answer)SROs - function UNDER the SEC's oversight. Each SRO is
accountable to the Commission for enforcing federal securities laws, as well as supervising securities
practices within an assigned jurisdiction.
Largest SRO? - (answer)FINRA (Financial Industry Regulatory Authority)
regulates all matters related to investment banking, trading in the OTC market, trading in NYSE-listed
securities, and the conduct of FINRA member firms and associated persons.
SROS:
Chicago Board Options Exchange (CBOE) - (answer)regulates all matters related to trading in
standardized options and related contracts listed on that exchange
SROS:
Municipal Securities Rulemaking Board (MSRB) - (answer)regulates all matters related to the
underwriting and trading of state and municipal securities.
Regulates but does NOT have enforcement powers--it depends on other SROS (finra) to enforce its rules.
Federal and State regulatory agencies:
Department of the Treasury/IRS - (answer)is an executive department and and the treasury of the US
federal government.
Collection of taxes = IRS
The Federal Reserve Board (FRB) - (answer)consists of 12 regional federal reserve banks and hundreds of
national and state banks that belong to the system.
The FRB determines monetary policy and takes actions to implement its policies
,SIE Exam | Securities Industry Essentials Study Guide & Practice Test
The Securities Investor Protection Corporation (SIPC) was created under the Securities Investor
Protection Act of 1970: - (answer)The corporation is a nonprofit membership organization. SIPC
members pay assessments into a general insurance fund that is used to meet customer claims in the
event of a broker-dealer bankruptcy
All broker/dealers registered with the SEC must be SIPC memebrs except? - (answer)-banks that deal
exclusively in municipal securities
-firms that deal exclusively in U.S. government securities
-firms that deal exclusively in redeemable investment company securities
Basic coverage under SIPC? - (answer)no more than $500,000 per separate customer
NOT per separate account
(of that 500K, SIPC covers no more than 250,000 in cash.
SIPC does not cover what? - (answer)commodities or commodities futures contracts, because they are
not considered securities
Federal Deposit Insurance Corporation (FDIC) - (answer)Created during the great depression in response
to bank failures.
an independent agency of the US federal government that preserves public confidence in the banking
system by insuring deposits.
The FDIC guarantees what - (answer)$250,000 for each deposit ownership category in each insured
bank.
Investors - (answer)someone who provides money or resources for an enterprise, such as a corp, with
the expectation of financial or other gain.
Investors:
Retail investors- - (answer)an individual who makes investments such as the purchase of securities for
his or her own personal account rather than for an organization
, SIE Exam | Securities Industry Essentials Study Guide & Practice Test
Investors:
Institutional investor- - (answer)an entity that pools money to purchase securities and other investment
assets. (banks, insurance companies, pensions, hedge funds, and mutual funds)
Investors:
Accredited Investor- - (answer)defined as:
a net worth of 1 million or more
has an annual income of 200K or more in each of the two most recent years
Broker-Dealer - (answer)each member firm broker-dealer operates under an individualized membership
agreement with FINRA or other SRO. The membership agreement explains with lines of business the
broker-dealer undertakes.
Full service BDs - (answer)offer all types of investment products: stocks, bonds, mutual funds, options
and many others
Carrying Firm - (answer)carries customer accounts and accepts funds and securities from customers;
carrying and clearing firms typically rank among the larger broker-dealers.
A fully disclosed firm (introducing BD) - (answer)one that introduces its customers to a clearing firm
Prime Brokers - (answer)Prime account allows a customer to select one member firm (prime broker) to
provide custody and other services, while other firms -called executing brokers- handle all trades placed
by the customer.
Key Advantage: trading with multiple brokerage houses while still maintaining a centralized master
account
