SIE ReadyPrimary market
Where issuers sell newly issued securities to investors, so the money raised goes to the issuer.
📖 SIE glossary
342 SIE exam terms explained in one plain sentence each, with the lesson that teaches it.
The exam
Securities Industry Essentials (SIE) exam
FINRA's entry-level exam on securities industry basics: 75 scored and 5 unscored questions (80 in all) in 1 hour 45 minutes, with a scaled 70 needed to pass.
Scaled score
A result converted to a 0–100 scale so different versions of the exam compare fairly; 70 passes the SIE.
Pretest items
Five unscored trial questions (ten before October 27, 2025) mixed in with the scored ones and impossible to tell apart, so answer every one seriously.
Qualification exam
A representative-level exam, such as the Series 6 or 7, that together with the SIE and registration by a member firm lets someone do securities business.
SIE content outline
FINRA's list of SIE topics and weights: capital markets 16%, products and risks 44%, trading and accounts 31%, regulatory framework 9%.
Retake waiting period
Wait 30 days after a first or second failed attempt and 180 days after a third or later; from January 19, 2027 the waits become 15, 15 and 60 days.
EXCEPT / NOT question
A question where three options are true statements and the answer is the one that is false or does not belong.
Capital markets
Secondary market
Where investors trade already-issued securities with one another; the issuer receives nothing from these trades.
Third market
Over-the-counter trading of exchange-listed securities, away from the exchange.
Fourth market
Institutions trading securities directly with each other, without a broker-dealer in between, usually through electronic systems.
Exchange
A registered, centralized marketplace such as the NYSE or Nasdaq where listed securities trade under the exchange's rules.
Over-the-counter market (OTC)
A dealer network where securities trade through negotiation between firms rather than on an exchange.
Bid
The highest price a dealer or buyer will pay for a security right now; a customer selling receives the bid.
Ask (offer)
The lowest price at which a dealer or seller will sell a security right now; a customer buying pays the ask.
Bid-ask spread
The difference between the bid and the ask prices for a security.
Market maker
A dealer that stands ready to buy and sell a particular security from its own inventory at the prices it quotes.
Broker (agency capacity)
A firm acting as agent, arranging a trade between its customer and another party for a commission without owning the security.
Dealer (principal capacity)
A firm acting as principal, buying from or selling to customers from its own account and earning a markup or markdown.
Alternative trading system (ATS)
A trading venue that matches buyers and sellers like an exchange but operates under SEC Regulation ATS instead of registering as an exchange.
Dark pool
An ATS that does not display orders publicly before execution, often used by institutions to trade large blocks quietly.
Electronic communications network (ECN)
An electronic system that automatically matches buy and sell orders at specified prices.
Federal Open Market Committee (FOMC)
The Federal Reserve committee that sets the target range for the federal funds rate and directs open market operations.
Open market operations
The Fed buying or selling government securities; buying adds money to the banking system and selling drains it.
Discount rate
The rate the Federal Reserve charges banks that borrow directly from it.
Federal funds rate
The rate banks charge each other for overnight loans of reserve balances; the FOMC sets a target range for it.
Prime rate
The base rate banks charge their most creditworthy business borrowers, which tends to move with the fed funds rate.
Yield curve
A graph of yields across maturities for similar bonds: normal slopes upward, inverted slopes downward, flat shows similar yields.
Inverted yield curve
A curve on which short-term yields are higher than long-term yields, widely watched as a possible warning of slowing growth.
Business cycle
The recurring pattern of expansion, peak, contraction and trough in economic activity.
Recession
A significant, widespread decline in economic activity; the NBER dates US recessions, and two straight quarters of falling GDP is a common rule of thumb.
Defensive industry
A business selling necessities, such as utilities, food or health care, whose earnings hold up relatively well in a downturn.
Gross domestic product (GDP)
The total value of final goods and services produced within a country during a period.
Consumer Price Index (CPI)
A measure of changes in the prices consumers pay for a basket of goods and services, the most watched inflation gauge.
Leading indicator
A statistic that tends to turn before the overall economy does, such as building permits, stock prices or new manufacturing orders.
Stagflation
Slow growth and high unemployment occurring together with rising prices.
Current ratio
Current assets divided by current liabilities, a measure of a company's ability to pay its short-term obligations.
Working capital
Current assets minus current liabilities.
Earnings per share (EPS)
Net income available to common shareholders divided by the number of common shares outstanding.
Registration statement
The disclosure filing an issuer makes with the SEC under the Securities Act of 1933 before offering securities to the public.
Cooling-off period
The time between filing a registration statement and its effective date, generally 20 days, when no sales may be made.
Preliminary prospectus (red herring)
The prospectus used during the cooling-off period; it lacks the final price and states that the securities cannot be sold yet.
Indication of interest
A customer's non-binding statement of interest in a new issue during the cooling-off period.
Firm commitment underwriting
An underwriting in which the underwriters buy the whole issue from the issuer and bear the risk of any shares they cannot sell.
Best efforts underwriting
An underwriting in which the underwriter acts as agent, selling what it can and returning unsold securities to the issuer.
Underwriting syndicate
A group of investment banks that share the work and the risk of distributing a new issue.
Underwriting spread
The difference between the public offering price and the amount the issuer receives, which pays the underwriters.
Stabilization
A syndicate bid, at or below the offering price, placed to support a new issue's price in the market under SEC rules.
Exempt security
A security that does not register under the 1933 Act, such as Treasuries, municipal bonds and commercial paper maturing in 270 days or less.
Regulation D
SEC exemptions for private placements; Rule 506(b) bars general solicitation, while 506(c) allows it if every buyer is a verified accredited investor.
Accredited investor
An investor meeting SEC tests such as $200,000 income ($300,000 with a spouse) or $1 million net worth excluding the primary residence.
Rule 144A
An SEC exemption for reselling restricted securities to qualified institutional buyers (QIBs).
Rule 144
The SEC safe harbor for public resales of restricted and control securities, with holding periods, volume limits and, above set thresholds, a Form 144 filing.
Restricted security
Stock acquired in an unregistered, private transaction that cannot be sold publicly until Rule 144 or another exemption allows it.
Control security
Stock owned by an affiliate, such as an officer, director or large shareholder able to influence the issuer; its sales fall under Rule 144.
Spinning
Allocating hot IPO shares to executives in return for investment banking business, prohibited by FINRA Rule 5131.
Restricted person (IPOs)
Under FINRA Rule 5130, a person such as a broker-dealer employee who generally may not buy new equity issues.
Official statement
The disclosure document for a new municipal issue, the municipal counterpart of a prospectus.
Regulators
Securities and Exchange Commission (SEC)
The federal agency that enforces the securities laws and oversees the markets; it never approves or endorses any security.
Securities Act of 1933
The law requiring registration and full disclosure for new public offerings of securities.
Securities Exchange Act of 1934
The law that created the SEC and regulates secondary trading, exchanges, broker-dealers and margin credit.
Investment Company Act of 1940
The law regulating investment companies such as mutual funds, closed-end funds and unit investment trusts.
Investment Advisers Act of 1940
The law regulating people and firms paid to give advice about securities.
Self-regulatory organization (SRO)
An SEC-overseen organization, such as FINRA or an exchange, that writes and enforces rules for its own members.
FINRA
The SRO for broker-dealers: it writes rules, examines firms, administers qualification exams and disciplines members and their people.
Municipal Securities Rulemaking Board (MSRB)
The body that writes rules for municipal securities dealers and advisors but has no power to enforce them.
Federal Reserve
The US central bank, which runs monetary policy and sets initial margin for securities credit through Regulation T.
State securities administrator
The state official who enforces that state's securities laws, including registering securities and agents sold or working there.
Blue-sky laws
State securities laws, many modeled on the Uniform Securities Act.
FDIC
The agency insuring bank deposits up to $250,000 per depositor, per insured bank, per ownership category; it does not insure securities.
SIPC
The nonprofit that restores customers' missing cash and securities when a member broker-dealer fails, up to $500,000 per customer, including $250,000 cash.
Transfer agent
The firm that keeps an issuer's record of registered owners and records transfers of ownership.
Depository Trust Company (DTC)
The central securities depository that holds securities and moves ownership between firms by book entry.
Clearing firm
A broker-dealer that clears and settles trades and holds customer assets, often for introducing firms.
Introducing firm
A broker-dealer that works with customers but sends their trades and assets to a clearing firm.
Investment adviser
A person or firm paid to advise others about securities, registered with the SEC or the states.
Equity
Common stock
Ownership in a corporation with voting rights and a residual claim on assets, paid after creditors and preferred holders.
Limited liability
A shareholder can lose no more than the amount invested in the stock.
Statutory voting
Voting in which a shareholder may cast at most one vote per share for each open seat.
Cumulative voting
Voting in which a shareholder may pool all votes (shares times seats) on one candidate, helping minority holders win a seat.
Treasury stock
Issued shares the company has bought back; they do not vote, earn no dividends and are not counted as outstanding.
Preferred stock
Equity with a stated dividend paid before common dividends and a claim ahead of common stock in liquidation, usually without voting rights.
Cumulative preferred
Preferred stock whose missed dividends pile up and must be paid before common shareholders receive any dividend.
Convertible preferred
Preferred stock the holder may exchange for a set number of common shares.
Preemptive right
A shareholder's right to buy new shares before the public so their percentage ownership is not diluted.
📚 Learn it: Rights vs Warrants: Short and Cheap, Long and Pricey
Right
A short-term privilege given to existing shareholders to buy new shares, usually below the market price.
📚 Learn it: Rights vs Warrants: Short and Cheap, Long and Pricey
Warrant
A long-term privilege to buy stock at a set price, usually above market when issued, often attached to bonds or preferred as a sweetener.
📚 Learn it: Rights vs Warrants: Short and Cheap, Long and Pricey
American depositary receipt (ADR)
A US-traded receipt for shares of a foreign company held by a depositary bank; holders still carry currency risk.
Qualified dividend
A dividend that meets IRS holding-period and source tests and is taxed at long-term capital gains rates rather than ordinary rates.
Total return
Income received plus the change in price over a period, divided by the starting value.
Debt
Par value
The face amount of a bond, typically $1,000, that the issuer repays at maturity.
Coupon (nominal yield)
A bond's stated annual interest rate, applied to par value.
Accrued interest
Interest earned since the last coupon date that the buyer pays the seller when the trade settles.
Serial maturity
A bond issue structured so portions mature in different years instead of all at once.
Current yield
Annual interest divided by the bond's current market price.
Yield to maturity (YTM)
The total annual return if a bond is held to maturity, counting coupons and the gain or loss back to par.
Yield to call (YTC)
The annual return if a callable bond is redeemed on its call date at the call price.
Discount bond
A bond priced below par, usually because its coupon is lower than current market rates.
Duration
A measure of how sensitive a bond's price is to interest-rate changes; the longer the duration, the bigger the price move.
Basis point
One hundredth of one percentage point (0.01%), the unit for quoting yield changes.
Debenture
An unsecured corporate bond backed only by the issuer's general credit.
Mortgage bond
A corporate bond secured by a lien on the issuer's real property.
Equipment trust certificate
A corporate bond secured by equipment such as aircraft or railcars.
Collateral trust bond
A corporate bond secured by other securities the issuer owns, deposited with a trustee.
Convertible bond
A corporate bond the holder may exchange for a set number of common shares, typically paying a lower coupon in return.
Trust indenture
The contract between a bond issuer and a trustee that sets the issue's terms, required for most public corporate bonds by the Trust Indenture Act of 1939.
Investment grade
A credit rating of BBB (S&P) or Baa (Moody's) or better; lower-rated bonds are called high-yield or junk.
Treasury bill (T-bill)
A Treasury security maturing in one year or less, sold at a discount and repaid at face value.
Treasury note
A Treasury security with a 2- to 10-year maturity that pays interest every six months.
Treasury bond
A Treasury security with a 20- or 30-year maturity that pays interest every six months.
TIPS
Treasury Inflation-Protected Securities: Treasuries whose principal adjusts with the CPI, with interest paid on the adjusted principal.
STRIPS
Treasury interest and principal payments separated and traded as individual zero-coupon securities.
Ginnie Mae (GNMA)
A government agency whose guaranteed mortgage-backed securities carry the full faith and credit of the US government.
Fannie Mae and Freddie Mac
Government-sponsored enterprises whose mortgage-backed securities are not backed by the full faith and credit of the US government.
Collateralized mortgage obligation (CMO)
A mortgage-backed security split into tranches that receive principal in a set order and carry different prepayment risks.
Commercial paper
Short-term unsecured corporate debt; maturities of 270 days or less are exempt from 1933 Act registration.
Banker's acceptance
A short-term time draft guaranteed by a bank, commonly used to finance imports and exports.
Negotiable CD
A large bank certificate of deposit that can be sold to another investor before it matures.
Repurchase agreement (repo)
A sale of securities with an agreement to buy them back later at a higher price, in effect a short-term secured loan.
Call provision
A clause letting the issuer redeem bonds before maturity at a stated price, most likely after interest rates fall.
Call protection
The period after issue during which a callable bond cannot be called.
Put feature
A clause letting the bondholder sell the bond back to the issuer at a stated price before maturity.
Sinking fund
Money an issuer sets aside over time to retire a bond issue.
Municipal securities
General obligation bond (GO)
A municipal bond backed by the issuer's full faith, credit and taxing power, often requiring voter approval.
Revenue bond
A municipal bond repaid only from the income of a specific project, such as tolls or water fees.
Feasibility study
A study done before a revenue bond issue to estimate whether the project will earn enough to repay the debt.
Double-barreled bond
A municipal bond repaid from a project's revenue and also backed by the issuer's taxing power.
Moral obligation bond
A municipal revenue bond that a state legislature may, but is not legally required to, support if revenues fall short.
Tax-equivalent yield
The taxable yield matching a muni's tax-free yield: municipal yield divided by (1 minus the investor's tax rate).
Private activity bond
A municipal bond that mainly benefits a private user; interest on many of them counts toward the alternative minimum tax.
Municipal note
Short-term municipal debt repaid from expected taxes, revenues, grants or a later bond issue: TANs, RANs, TRANs, GANs and BANs.
📚 Learn it: TANs, RANs, BANs: Borrowing Until the Money Arrives
MIG rating
Moody's rating scale for short-term municipal notes, MIG 1 being the highest.
📚 Learn it: TANs, RANs, BANs: Borrowing Until the Money Arrives
529 plan
A state-sponsored education plan whose earnings grow tax-deferred and come out federally tax-free when spent on qualified education expenses.
ABLE account
A state-sponsored, tax-advantaged savings account for qualified disability expenses of an eligible individual, sold as a municipal fund security.
Local government investment pool (LGIP)
A state-run pool where local governments invest cash, classed as a municipal fund security.
EMMA
The MSRB's free website showing municipal disclosure documents and trade prices.
Options
Call option
A contract giving its buyer the right to buy the underlying, usually 100 shares, at the strike price until expiration.
Put option
A contract giving its buyer the right to sell the underlying, usually 100 shares, at the strike price until expiration.
Holder (long)
The option buyer, who pays the premium and owns the right to exercise.
Writer (short)
The option seller, who receives the premium and must perform if assigned.
Strike price
The price at which an option holder may buy (call) or sell (put) the underlying.
Intrinsic value
The amount by which an option is in the money; never less than zero.
In the money
A call whose stock price is above the strike, or a put whose stock price is below the strike.
Time value
The part of an option's premium above its intrinsic value, which shrinks to zero by expiration.
Breakeven (options)
The stock price where a position neither gains nor loses: strike plus premium for calls, strike minus premium for puts.
Covered call
Writing a call on stock already owned to collect premium income, giving up gains above the strike.
Protective put
Buying a put on stock already owned to put a floor under its value.
American-style option
An option that may be exercised any time up to expiration; a European-style option may be exercised only at expiration.
Options Clearing Corporation (OCC)
The clearing organization that issues and guarantees listed options, standing between every buyer and writer.
Options disclosure document (ODD)
The booklet 'Characteristics and Risks of Standardized Options', which must reach a customer at or before options account approval.
📚 Learn it: Opening an Options Account: ODD, Approval, Agreement
Packaged products
Open-end fund (mutual fund)
An investment company that continuously issues new shares and redeems them at prices based on net asset value.
Closed-end fund
A fund with a fixed number of shares that trade on an exchange at market prices, often above or below net asset value.
Unit investment trust (UIT)
An investment company with a fixed, largely unmanaged portfolio sold in redeemable units that ends on a set date.
Public offering price (POP)
Net asset value plus any front-end sales charge: the price a buyer pays for a load fund.
Sales charge (load)
A commission on fund purchases or redemptions; FINRA caps a mutual fund's sales charges at 8.5% of the offering price.
Forward pricing
Mutual fund orders are filled at the next net asset value calculated after the order is received.
12b-1 fee
An annual fee taken from fund assets to pay for distribution and shareholder services, named for an SEC rule.
Breakpoint
A purchase amount at which a fund's front-end sales charge is reduced.
Letter of intent (LOI)
A promise to invest a stated amount in a fund family within 13 months in exchange for the reduced sales charge now.
Rights of accumulation
A feature counting existing fund-family holdings toward breakpoints on new purchases.
Expense ratio
A fund's annual operating expenses as a percentage of its average net assets.
Statement of additional information (SAI)
A fuller fund disclosure document, beyond the prospectus, available free on request.
Money market fund
A fund holding short-term, high-quality debt that aims for stability but is not FDIC insured or guaranteed.
Exchange-traded fund (ETF)
A fund whose shares trade on an exchange throughout the day at market prices, usually tracking an index.
Leveraged or inverse ETF
An ETF seeking a multiple or the opposite of an index's daily return; daily resetting makes longer-term results drift from that multiple.
Exchange-traded note (ETN)
An unsecured debt note that tracks an index and trades on an exchange, exposing the holder to the issuer's credit risk.
Variable annuity
An insurance contract whose value rides on separate account investments, offering tax-deferred growth and lifetime income options.
Separate account
The insurer's account, kept apart from its general assets, that holds a variable annuity's investments.
Accumulation unit
The measure of an owner's share of a variable annuity's separate account before payments begin.
Assumed interest rate (AIR)
The benchmark return a variable annuity's payments are measured against: beat it and payments rise, fall short and they drop.
Fixed annuity
An insurance contract paying a rate guaranteed by the insurer, regulated as insurance rather than as a security.
Alternatives
Direct participation program (DPP)
A business, usually a limited partnership, that passes its income and losses through to investors' own tax returns.
General partner
The partner who manages a limited partnership and has unlimited liability.
Limited partner
A passive partnership investor whose liability is limited to the amount invested.
Real estate investment trust (REIT)
A company that owns or finances real estate and must distribute at least 90% of its taxable income to keep its tax treatment.
Non-traded REIT
A REIT not listed on an exchange, which can make shares hard to sell.
Hedge fund
A private pooled fund, generally limited to accredited investors, using flexible strategies, with limited liquidity.
Lockup period
A period during which investors in a private fund may not withdraw their money.
Structured note
A debt note whose return follows an underlying asset or index by a formula, carrying the issuer's credit risk and added complexity.
Investment risk
Systematic risk
Risk that affects the whole market and cannot be removed by diversification.
📚 Learn it: The Risk You Can Diversify and the Risk You Can't
Unsystematic risk
Risk specific to one company or industry, which diversification can reduce.
📚 Learn it: The Risk You Can Diversify and the Risk You Can't
Beta
A measure of a stock's volatility compared with the market; a beta of 1.0 moves in line with the market.
📚 Learn it: The Risk You Can Diversify and the Risk You Can't
Interest rate risk
The risk that rising rates push down prices of existing bonds, greatest for long maturities and low coupons.
📚 Learn it: Rates Up, Prices Down: Rate, Inflation and Reinvestment Risk
Inflation risk
The risk that rising prices erode what an investment's returns can buy, worst for fixed payments.
📚 Learn it: Rates Up, Prices Down: Rate, Inflation and Reinvestment Risk
Reinvestment risk
The risk that interest or returned principal must be reinvested at lower rates.
📚 Learn it: Rates Up, Prices Down: Rate, Inflation and Reinvestment Risk
Credit risk
The risk that an issuer fails to pay interest or principal on time.
Liquidity risk
The risk of being unable to sell quickly at a fair price.
Call risk
The risk that an issuer redeems a bond early, usually after rates fall, leaving the investor to reinvest at lower yields.
Prepayment risk
The risk that homeowners repay mortgages faster when rates fall, returning principal to mortgage-backed investors early.
Currency risk
The risk that exchange-rate moves reduce the dollar value of foreign investments.
Political risk
The risk that government action or instability in a country hurts investments there.
Diversification
Spreading money across many securities so one holding's problems hurt less; it reduces unsystematic risk only.
📚 Learn it: Managing Risk: Allocate, Diversify, Rebalance, Hedge
Asset allocation
Dividing a portfolio among asset classes such as stocks, bonds and cash to match goals and risk tolerance.
📚 Learn it: Managing Risk: Allocate, Diversify, Rebalance, Hedge
Rebalancing
Buying and selling to bring a portfolio back to its target allocation after market moves.
📚 Learn it: Managing Risk: Allocate, Diversify, Rebalance, Hedge
Trading
Market order
An order to buy or sell immediately at the best available price, which guarantees execution but not price.
Limit order
An order to buy at or below, or sell at or above, a set price; it guarantees price but not execution.
Stop order
An order that becomes a market order once the stock trades at or through the stop price.
Stop-limit order
An order that becomes a limit order once the stop price is reached.
Good-till-canceled (GTC)
An order that stays open until filled or canceled, unlike a day order, which expires at the close.
Short sale
Selling borrowed stock in hopes of buying it back cheaper later; potential loss is unlimited.
📚 Learn it: Going Long, Selling Short and Who Is on the Other Side
Locate requirement
Under Regulation SHO, a firm must have reasonable grounds to believe stock can be borrowed before accepting a short sale.
📚 Learn it: Going Long, Selling Short and Who Is on the Other Side
Markup / markdown
A dealer's charge above (markup) or below (markdown) the prevailing market price; FINRA's 5% policy is a guideline for fairness, not a fixed limit.
📚 Learn it: Going Long, Selling Short and Who Is on the Other Side
Regular-way settlement
Standard settlement one business day after trade date (T+1) for stocks, corporate and municipal bonds, effective since May 28, 2024.
Cash settlement
Settlement on the trade date itself.
When-issued trade
A trade in a security that has been authorized but not yet issued, settling once it is.
Free-riding
Buying and selling in a cash account without paying for the purchase, which leads Regulation T to freeze the account for 90 days.
Regulation T
The Federal Reserve rule on broker-dealer credit, setting initial margin for stock purchases at 50%.
Maintenance margin
The minimum equity a margin account must keep; FINRA Rule 4210 requires at least 25% of market value for long stock.
Margin call
A demand that a customer deposit cash or securities because account equity has fallen below the required level.
Hypothecation
Pledging customer securities as collateral for the margin loan, agreed to in the margin agreement.
Intraday margin standards
FINRA Rule 4210 standards effective June 4, 2026 that replaced the pattern day trader rules and $25,000 minimum; firms may phase in until October 20, 2027.
Trade confirmation
The written notice of a trade's details that a firm must send at or before completion of the transaction.
📚 Learn it: After the Trade: Reports, Confirms and Statements
Account statement
A report of positions and activity that firms must send customers at least once each calendar quarter.
📚 Learn it: After the Trade: Reports, Confirms and Statements
Ex-dividend date
The first day a stock trades without its upcoming dividend; under T+1 settlement it is the same business day as the record date.
Record date
The date the issuer checks its records to see who receives a dividend or distribution.
Stock split
Dividing each share into more shares at a proportionally lower price, leaving total value unchanged.
📚 Learn it: More Slices, Same Pizza: Splits and Stock Dividends
Reverse split
Combining shares into fewer shares at a proportionally higher price, leaving total value unchanged.
📚 Learn it: More Slices, Same Pizza: Splits and Stock Dividends
Tender offer
A public offer to buy shareholders' stock, usually at a premium, for a limited time.
📚 Learn it: Offers You Can Take or Leave: Rights, Tenders and Mergers
Proxy
A written authorization letting someone else cast a shareholder's votes at a meeting.
Street name
Registration of securities in the broker-dealer's name while the customer remains the beneficial owner.
Customer accounts
Customer identification program (CIP)
Required verification of a new customer's name, date of birth, address and identification number when an account is opened.
Know your customer (KYC)
FINRA Rule 2090: use reasonable diligence to know the essential facts about every customer, starting at account opening.
Trusted contact person
Someone a firm may contact about a customer's account, for example over suspected exploitation; firms must make reasonable efforts to obtain one.
Suitability (Rule 2111)
FINRA's rule that recommendations be suitable, with reasonable-basis, customer-specific and quantitative obligations.
Regulation Best Interest
The SEC rule requiring broker-dealers to act in a retail customer's best interest when recommending, without putting their own interests first.
Form CRS
A short SEC-required relationship summary for retail investors covering services, fees, conflicts and disciplinary history.
Joint tenants with right of survivorship
A joint account in which a deceased owner's share passes to the surviving owners, not to the estate.
📚 Learn it: Individual and Joint Accounts: Who Gets It When Someone Dies
Tenants in common
A joint account in which each owner holds a set share that goes to that owner's estate on death.
📚 Learn it: Individual and Joint Accounts: Who Gets It When Someone Dies
Transfer on death (TOD)
An individual account that passes directly to named beneficiaries at death, avoiding probate.
📚 Learn it: Individual and Joint Accounts: Who Gets It When Someone Dies
UTMA / UGMA account
A custodial account for one minor with one custodian; gifts into it are irrevocable and belong to the minor.
Discretionary account
An account where the rep may choose the security, amount or action without asking first; it needs the customer's prior written authorization and firm acceptance.
Time and price discretion
Customer chooses the security, amount and action, leaving only timing or price to the rep; not discretion, and good for that day unless authorized in writing.
Traditional IRA
An individual retirement account whose contributions may be deductible depending on income and plan coverage; withdrawals are taxed as ordinary income.
Roth IRA
An IRA funded with after-tax money whose qualified withdrawals, earnings included, are tax-free; eligibility to contribute phases out at higher incomes.
60-day rollover
Moving retirement money by taking it out and redepositing it in another plan or IRA within 60 days.
Required minimum distribution (RMD)
Yearly withdrawals required from traditional IRAs and most employer plans, currently starting at age 73; original Roth IRA owners have none.
401(k) plan
An employer-sponsored defined contribution plan funded by employee salary deferrals, often with employer matching.
📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE
403(b) plan
A retirement savings plan for employees of public schools and certain tax-exempt organizations.
📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE
SEP IRA
A retirement plan for small businesses and the self-employed, funded by employer contributions to employees' IRAs.
📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE
ERISA
The federal law setting standards for most private employer retirement plans; it does not cover government plans.
📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE
Defined benefit plan
A pension that promises a set retirement payment, with the employer bearing the investment risk.
📚 Learn it: Employer Plans: 401(k), 403(b), 457, SEP and SIMPLE
Coverdell ESA
An education savings account limited to $2,000 of contributions per beneficiary per year, with tax-free qualified withdrawals.
ACATS
The Automated Customer Account Transfer Service that moves customer accounts between firms.
Temporary hold (Rule 2165)
A firm may briefly hold a disbursement from a specified adult's account when it reasonably believes financial exploitation is occurring.
Anti-money laundering
Money laundering
Disguising illegally obtained money so it appears to come from a legitimate source.
Placement
The first laundering stage: getting illegal cash into the financial system.
Layering
The second laundering stage: moving money through many transactions to hide where it came from.
Integration
The final laundering stage: bringing the money back into the economy so it looks legitimate.
Bank Secrecy Act (BSA)
The federal law requiring financial institutions, broker-dealers included, to keep records and file reports that help detect money laundering.
Currency Transaction Report (CTR)
A report filed with FinCEN for cash transactions over $10,000 by or for one person in one business day.
Suspicious Activity Report (SAR)
A confidential FinCEN report a broker-dealer files on suspicious transactions of $5,000 or more; the customer must never be told.
Structuring
Breaking cash transactions into smaller amounts to avoid a currency transaction report, a crime even if the money is clean.
OFAC and the SDN list
The Treasury office that publishes the Specially Designated Nationals list of sanctioned parties firms must not do business with.
AML compliance program
The written program every broker-dealer must have under FINRA Rule 3310, with policies, a designated officer, training and independent testing.
USA PATRIOT Act
The 2001 law that strengthened anti-money-laundering duties, including customer identification programs and information sharing.
Compliance
Rules 17a-3 and 17a-4
SEC rules on which records firms must make and how long to keep them, for example three years, six years or the firm's lifetime.
Regulation S-P
The SEC privacy rule requiring firms to give privacy notices, let customers opt out of certain sharing with nonaffiliates, and safeguard customer information.
Regulation S-ID
The SEC rule requiring firms to run a program that detects and responds to red flags of identity theft.
Retail communication
Any written communication sent or made available to more than 25 retail investors within a 30-day period.
Correspondence
Any written communication sent or made available to 25 or fewer retail investors within a 30-day period.
Institutional communication
Written communication sent or made available only to institutional investors, not to any retail investor.
Do-not-call list
The national registry and each firm's own list of people who must not receive telemarketing calls.
Telemarketing calling hours
Cold calls may be made only between 8 a.m. and 9 p.m. in the called person's local time.
Conduct and registration
Churning
Excessive trading in a customer's account, mainly to generate commissions.
Unauthorized trading
Placing a trade in a customer's account without the customer's permission or written discretionary authority.
Front running
Trading ahead of a customer's large order, or a research report, to profit from the expected price move.
Wash trade
Buying and selling the same security with no real change in ownership to create false activity.
Matched orders
Coordinated buy and sell orders entered by colluding parties to create misleading activity or prices.
Pump and dump
Hyping a stock with false or misleading claims to raise its price, then selling into the rise.
Spoofing
Entering orders with no intent to execute them, to trick others about supply or demand, then canceling them.
Marking the close
Trading near the close to push a security's closing price up or down.
Insider trading
Trading, or tipping others to trade, on material nonpublic information in breach of a duty; civil penalties can reach three times the profit gained or loss avoided.
Material nonpublic information
Information not yet public that a reasonable investor would consider important in deciding to buy or sell.
Information barrier
Firm policies that keep material nonpublic information from passing between departments, such as banking and trading.
Guarantee against loss
Promising a customer they will not lose money, prohibited by FINRA rules.
Sharing in accounts
A rep sharing in a customer's gains or losses, allowed only with firm and customer written approval and generally in proportion to the rep's investment.
Borrowing from customers
FINRA Rule 3240 bars reps from borrowing from or lending to customers unless the firm allows it and the relationship falls in an allowed category.
Commingling
Mixing customer funds or securities with the firm's or the rep's own, which is prohibited.
Selling away
Taking part in securities transactions outside the firm without giving it the required written notice.
Breakpoint sale
Recommending a fund purchase just below a breakpoint so the customer pays a higher sales charge, prohibited by FINRA.
Late trading
Accepting mutual fund orders after the fund's pricing time but giving them that day's NAV, which is illegal.
Rule 2010
FINRA's rule requiring high standards of commercial honor and just and equitable principles of trade.
Rule 10b-5
The SEC antifraud rule against misstatements, omissions of material facts and deceptive practices in buying or selling securities.
Associated person
Anyone working for or controlled by a member firm, including employees, partners, officers and directors.
Principal
A registered person who manages or supervises a member firm's securities business.
Central Registration Depository (CRD)
FINRA's registration and licensing database for the securities industry.
Form U4
The registration form a firm files for a new associated person, disclosing history; it must be kept current as events occur.
Form U5
The form a firm files within 30 days after a registered person leaves, stating the reason.
BrokerCheck
FINRA's free public tool showing the registration and disciplinary history of firms and registered people.
Regulatory Element (CE)
Continuing education every registered person must complete each year, by December 31.
📚 Learn it: Continuing Education and Keeping Your Exams Alive
Firm Element (CE)
Annual continuing education each firm designs for its own registered people.
📚 Learn it: Continuing Education and Keeping Your Exams Alive
Maintaining Qualifications Program (MQP)
A FINRA program letting people who leave the industry keep their qualifications for up to five years by completing yearly continuing education.
📚 Learn it: Continuing Education and Keeping Your Exams Alive
Statutory disqualification
A status, triggered by events such as a felony conviction within the past 10 years, that bars association with a member firm unless FINRA grants relief.
📚 Learn it: Disqualified: Felonies, 8210 and FINRA Discipline
Rule 8210
FINRA's power to demand information, documents and testimony from members and associated persons.
📚 Learn it: Disqualified: Felonies, 8210 and FINRA Discipline
Letter of acceptance, waiver and consent (AWC)
A settlement in which a respondent accepts FINRA's findings and sanctions without admitting or denying them and waives a hearing.
📚 Learn it: Disqualified: Felonies, 8210 and FINRA Discipline
Arbitration
A binding dispute process run by FINRA, used for most disputes between customers, firms and reps.
📚 Learn it: Disqualified: Felonies, 8210 and FINRA Discipline
Outside business activity
Paid or business work outside the firm that a registered person must notify the firm about in writing beforehand (Rule 3270; Rule 3290 replaces it October 25, 2027).
Private securities transaction
A securities sale outside the firm; it requires prior written notice, and approval and supervision when compensated.
Gift limit (Rule 3220)
FINRA's limit on gifts to someone at another firm, related to business: $300 per person per year since March 30, 2026.
MSRB Rule G-37
The MSRB pay-to-play rule: a contribution to an issuer official triggers a two-year business ban unless the giver can vote for the official and gives at most $250 per election.
Rule 4530
FINRA's rule requiring firms to report events such as certain complaints, charges and violations, generally within 30 calendar days.
Rule 3210
An associated person needs the employing firm's prior written consent to open an account at another firm, and must tell the other firm in writing.
Written supervisory procedures (WSPs)
A firm's written rules describing how it supervises its business and people to comply with securities laws.
Mnemonics
THE SEESAW (bond prices and rates)
Rates on one end, bond prices on the other: when rates go up, prices go down, and the reverse.
LONG AND LOW SWING MOST
Long maturities and Low coupons make bond prices swing the most when rates move.
📚 Learn it: Rates Up, Prices Down: Rate, Inflation and Reinvestment Risk
N-C-M-C ladder (premium vs discount yields)
List Nominal, Current, Maturity, Call yields: a premium bond's yields fall along that order, a discount bond's rise along it.
DERP (dividend dates)
Declaration, Ex-date, Record, Payable: the order of dividend dates; under T+1 the ex-date and record date fall on the same day.
CALL UP, PUT DOWN
Calls win when the stock goes up and break even at strike plus premium; puts win going down and break even at strike minus premium.
BUY CALL, SELL PUT = BULL
Buying a call or selling a put is bullish; buying a put or selling a call is bearish.
CALL UP, PUT DOWN (in the money)
A call is in the money when the stock is up above the strike; a put is in the money when the stock is down below it.
REG T = HALF DOWN
Regulation T: the customer puts half down (50%) on a margin stock purchase and the firm lends the rest.
LUCKY 13 (letter of intent)
A letter of intent gives 13 months to invest the promised amount and keep the reduced sales charge.
S FOR SECURITIES, D FOR DEPOSITS
SIPC protects Securities customers when a brokerage fails; FDIC protects Deposits when a bank fails; neither covers market losses.
500 / 250 (SIPC limits)
SIPC: $500 thousand per customer in total, of which at most $250 thousand may be cash.
P-L-I (money laundering stages)
Placement, Layering, Integration: put dirty money in, move it around to hide it, bring it back looking clean.
CTR 10, SAR 5
Currency Transaction Report for cash over $10,000; a broker-dealer's Suspicious Activity Report threshold is $5,000.
BLiSS (order placement)
Buy Limits and Sell Stops sit below the market; sell limits and buy stops sit above it.
BAC / DPM (broker vs dealer)
Broker = Agent = Commission; Dealer = Principal = Markup or markdown.
PRIMARY PAYS THE ISSUER
Primary market proceeds go to the issuer; in the secondary market, money moves only between investors.
E-P-C-T (business cycle)
Expansion, Peak, Contraction, Trough: the four phases of the business cycle, in order.
FED BUYS = BUCKS IN
When the Fed buys securities it pays banks, adding money (easier money); when it sells, it pulls money out (tighter money).
STRONG DOLLAR, SHOP ABROAD
A stronger dollar makes imports cheaper and helps importers, while US exporters' goods get pricier abroad.
GO = TAXES, REVENUE = USERS
General obligation bonds are repaid from taxes; revenue bonds are repaid by users of the project, such as tolls or fees.
EACH LEVEL SPARES THE OTHER (interest taxes)
Treasury interest is federally taxed but state-tax free; municipal bond interest is generally federal-tax free and may be state taxed.
GINNIE IS THE GOVERNMENT'S
Of the mortgage agencies, only Ginnie Mae carries the full faith and credit of the US government.
RIGHTS SHORT, WARRANTS LONG
Rights last weeks and are usually priced below market; warrants last years and are usually priced above market when issued.
📚 Learn it: Rights vs Warrants: Short and Cheap, Long and Pricey
CUMULATIVE ACCUMULATES
Missed dividends on cumulative preferred accumulate and must be paid before any common dividend.
SURVIVOR TAKES ALL, COMMON GOES HOME
JTWROS: the survivor takes the whole account. Tenants in common: each share goes home to the owner's estate.
📚 Learn it: Individual and Joint Accounts: Who Gets It When Someone Dies
U4 IN, U5 OUT
Form U4 registers a person joining a firm; Form U5 is filed when that person leaves.
BREAKFAST TO BEDTIME (8 to 9)
Cold calls only from 8 a.m. to 9 p.m., in the called person's local time.
TRIPLE TROUBLE (insider trading)
Insider trading civil penalties can reach three times the profit made or loss avoided.
SYSTEMATIC = THE WHOLE SYSTEM
Systematic risk hits the whole system, so diversification cannot remove it; unsystematic risk is one company's, so diversification can.
📚 Learn it: The Risk You Can Diversify and the Risk You Can't
SIE + SERIES + SPONSOR
To become a registered rep you need all three: the SIE, a representative qualification exam, and registration through a member firm.
Every term as a flashcard, free. No sign-up needed.