What should I study the night before the SIE exam?

Focus on high-yield topics: bond yields and pricing, options breakevens, margin requirements, order types, systematic vs. non-systematic risk, regulatory bodies (SEC, FINRA, MSRB), customer account types, SIPC coverage, and retirement accounts. These topics make up the bulk of exam questions.

What is a dump sheet for the SIE exam?

A dump sheet is a list of formulas and key facts you memorize before the exam and write down on your scratch paper immediately when the test begins. Key items include: Current Yield formula, options breakevens, Tax-Equivalent Yield, Reg T margin (50%), maintenance margins (25% long, 30% short), and SIPC limits ($500K/$250K).

What formulas do I need to know for the SIE exam?

Essential SIE formulas: Current Yield = Annual Interest ÷ Market Price, Call Breakeven = Strike + Premium, Put Breakeven = Strike - Premium, Tax-Equivalent Yield = Municipal Yield ÷ (1 - Tax Bracket), Reg T Initial Margin = 50%, Long Maintenance = 25%, Short Maintenance = 30%.

What topics are most likely to appear on the SIE exam?

The most tested topics include: bond yields and pricing, options basics, types of risk, mutual funds vs ETFs, order types (market, limit, stop), margin accounts, customer account documentation, SIPC coverage, regulatory bodies, prohibited practices, retirement accounts, and variable annuities.

What is the difference between SIPC and FDIC?

SIPC protects brokerage accounts against broker-dealer failure ($500K total, $250K cash max). FDIC protects bank deposits against bank failure ($250K per depositor). Neither protects against market losses or bad investment decisions.

What are the most common SIE exam traps?

Common traps: confusing current yield with YTM, mixing up buyer vs writer rights in options, forgetting municipal bonds are only state tax-exempt in your home state, confusing SEC vs FINRA jurisdiction, thinking SIPC covers market losses, forgetting short positions have 30% maintenance (not 25%), and missing "EXCEPT" or "NOT" in questions.

What is the difference between systematic and unsystematic risk?

Systematic risk (market risk) affects the entire market and cannot be diversified away - includes interest rate, inflation, and market risk, measured by beta. Unsystematic risk is company-specific and CAN be diversified away - includes business, financial, and regulatory risk.

What margin requirements do I need to know for the SIE?

Key margin requirements: Reg T initial margin is 50% (set by Federal Reserve). Maintenance margin is 25% for long positions and 30% for short positions (set by FINRA). When equity falls below maintenance, a margin call is issued.

SIE Exam Last-Minute Review: Complete Topics, Formulas & Dump Sheet (2026)

SIE Exam Last-Minute Review

This guide covers the highest-yield content for the SIE exam - the topics and formulas most likely to appear. The SIE is 75 scored questions in 105 minutes, requiring 70% (53 correct) to pass.

Dump Sheet Formulas

Write these down on your dry-erase board immediately when the exam begins.

Bond Yields

$\text{Current Yield} = \frac{\text{Annual Interest}}{\text{Market Price}}$

$\text{Nominal Yield} = \frac{\text{Annual Interest}}{\text{Par Value}} \quad \text{(stated rate)}$

Yield Relationship (discount bond): Coupon Rate < Current Yield < YTM < YTC

Yield Relationship (premium bond): Coupon Rate > Current Yield > YTM > YTC

Options Breakevens

$\text{Call Breakeven} = \text{Strike Price} + \text{Premium}$

$\text{Put Breakeven} = \text{Strike Price} - \text{Premium}$

Tax-Equivalent Yield

$\text{TEY} = \frac{\text{Municipal Yield}}{1 - \text{Tax Bracket}}$

Margin Formulas

$\text{Reg T Initial Requirement} = 50\% \text{ of purchase price}$

$\text{Minimum Maintenance (Long)} = 25\% \text{ of market value}$

$\text{Minimum Maintenance (Short)} = 30\% \text{ of market value}$

Key Numbers to Memorize

Concept	Value
Rule 144 Holding Period	6 months
Reg T Margin Requirement	50%
Long Maintenance Margin	25%
Short Maintenance Margin	30%
Reg D Accredited Income	$200K individual / $300K joint
Reg D Accredited Net Worth	$1 million (excl. home)
SIPC Coverage	$500K total / $250K cash
Options Contract	100 shares
Corporate Bond Par	$1,000
Municipal Bond Par	$5,000

Bond Yields and Pricing

The Seesaw Relationship

When interest rates GO UP:

Bond prices go DOWN
Current yield goes UP
This is interest rate risk

When interest rates GO DOWN:

Bond prices go UP
Current yield goes DOWN

Types of Bond Yields

Yield Type	Formula	What It Measures
Nominal/Coupon Yield	Annual Interest ÷ Par Value	Stated interest rate
Current Yield	Annual Interest ÷ Market Price	Income return only
Yield to Maturity	Includes interest + capital gain/loss	Total return if held to maturity
Yield to Call	Same as YTM but to call date	Total return if called early

Bond Price vs. Par Value

Trading At	Price vs. Par	Yield Relationship
Premium	Above $1,000	Coupon > Current > YTM > YTC
Par	At $1,000	All yields equal
Discount	Below $1,000	Coupon < Current < YTM < YTC

Bond Characteristics by Type

Bond Type	Par Value	Interest Payment	Tax Treatment
Corporate	$1,000	Semi-annual	Fully taxable
Municipal	$5,000	Semi-annual	Federal tax-exempt
Treasury	$1,000	Semi-annual (notes/bonds)	State tax-exempt
T-Bills	$1,000	Discount (no coupon)	State tax-exempt

Municipal Bond Tax Treatment

Federal tax: Always exempt
State tax: Exempt only if you live in issuing state
AMT: Private activity bonds may trigger AMT
Capital gains: Still taxable (only interest is exempt)

Options Basics

The Four Basic Positions

Position	Right/Obligation	Outlook	Max Gain	Max Loss
Long Call	Right to BUY	Bullish	Unlimited	Premium
Short Call	Obligation to SELL	Bearish	Premium	Unlimited
Long Put	Right to SELL	Bearish	Strike - Premium	Premium
Short Put	Obligation to BUY	Bullish	Premium	Strike - Premium

Key Options Concepts

"Call Up, Put Down"

Call buyers profit when stock goes UP
Put buyers profit when stock goes DOWN

Buyers vs. Writers

Buyers pay premium → have RIGHTS
Writers receive premium → have OBLIGATIONS

Options Terminology

Term	Definition
In the money (ITM)	Option has intrinsic value
At the money (ATM)	Strike = market price
Out of the money (OTM)	Option has no intrinsic value
Intrinsic value	Real value if exercised now
Time value	Premium - Intrinsic value
Exercise	Using the option right
Assignment	Writer must fulfill obligation

When Options Are In/Out of the Money

Option	In the Money When	Out of the Money When
Call	Market > Strike	Market < Strike
Put	Market < Strike	Market > Strike

Types of Risk

Systematic Risk (Market Risk)

Cannot be diversified away - affects entire market. Measured by beta.

Risk Type	Definition	Example
Interest Rate Risk	Bond prices fall when rates rise	Fed raises rates
Inflation/Purchasing Power Risk	Returns don't keep pace with inflation	3% return, 4% inflation
Market Risk	Overall market decline	Market crash
Currency/Exchange Rate Risk	Foreign exchange fluctuations	Dollar weakens
Reinvestment Risk	Must reinvest at lower rates	Rates fall when bond matures

Non-Systematic Risk (Unsystematic Risk)

Can be diversified away - affects specific companies/sectors.

Risk Type	Definition	Example
Business/Operating Risk	Company operational issues	Product recall
Financial/Credit Risk	Company debt problems	Default risk
Regulatory Risk	Government policy changes	New regulations
Political Risk	Foreign government actions	Nationalization
Liquidity Risk	Can't sell quickly at fair price	Thinly traded stock

Risk Measurements

Metric	Measures	Key Point
Beta	Systematic risk	Beta = 1 means moves with market
Alpha	Performance vs. benchmark	Positive alpha = outperformance
Standard Deviation	Total volatility	Higher = more volatile

Order Types and Trade Execution

Basic Order Types

Order Type	Definition	When to Use
Market Order	Execute immediately at best available price	Want guaranteed execution
Limit Order	Execute at specified price or better	Want price control
Stop Order	Becomes market order when stop price reached	Limit losses or protect gains
Stop-Limit Order	Becomes limit order when stop price reached	Control price but may not execute

Buy vs. Sell Orders

Order	Limit	Stop
Buy	At or below limit price	Above current price (breakout)
Sell	At or above limit price	Below current price (stop loss)

Time in Force

Designation	Meaning
Day Order	Expires at end of trading day
GTC (Good Till Canceled)	Remains until executed or canceled
IOC (Immediate or Cancel)	Execute immediately or cancel
AON (All or None)	Execute entire order or nothing
FOK (Fill or Kill)	Execute entire order immediately or cancel

Trade Settlement

Security Type	Settlement
Stocks, Corporate Bonds, Munis	T+1 (trade date + 1 business day)
Government Securities	T+1
Options	T+1

Customer Accounts

Account Types

Account Type	Characteristics
Cash Account	Pay in full, no borrowing
Margin Account	Borrow from broker, pay interest
Discretionary	Broker can make trades without prior approval
Non-Discretionary	Customer approves each trade

Margin Account Requirements

Requirement	Amount	Purpose
Reg T (Initial)	50%	Minimum to open position
Maintenance (Long)	25%	Minimum equity to maintain
Maintenance (Short)	30%	Higher due to unlimited risk

Margin Call Example

Buy $10,000 stock on margin
Initial requirement: $5,000 (50%)
Borrowed: $5,000
If stock drops to $6,000:
- Equity = $6,000 - $5,000 = $1,000
- Required = $6,000 × 25% = $1,500
- Margin call for $500

Account Documentation Requirements

Document	Purpose
New Account Form	Customer info, investment objectives
Customer Agreement	Terms and conditions
Margin Agreement	If using margin (hypothecation, loan consent)
Options Agreement	Required before trading options

Suitability and Know Your Customer (KYC)

Suitability factors:

Investment objectives (growth, income, speculation, preservation)
Risk tolerance
Time horizon
Liquidity needs
Tax status
Financial situation
Investment experience

SIPC Protection

What SIPC Covers

Coverage	Amount
Total	$500,000 per customer
Cash	$250,000 maximum
Securities	Included in $500K total

What SIPC Does NOT Cover

Losses from market decline
Commodity futures
Foreign exchange
Investment contracts (annuities, limited partnerships) not registered with SEC
Bad investment advice

SIPC vs. FDIC

	SIPC	FDIC
Protects	Brokerage accounts	Bank deposits
Against	Broker-dealer failure	Bank failure
Coverage	$500K / $250K cash	$250K per depositor
NOT	Market losses	Market losses

Investment Products

Investment Company Types

Type	Shares	NAV	Trading
Open-End (Mutual Fund)	Unlimited, redeemable	Priced at NAV	Once daily (4 PM ET)
Closed-End Fund	Fixed, not redeemable	Trade at premium/discount	Exchange-traded
ETF	Creation units	Trade at/near NAV	Exchange-traded
UIT	Fixed, redeemable	NAV-based	Not managed, self-liquidating

Mutual Fund Share Classes

Class	Sales Charge	12b-1 Fee	Best For
A Shares	Front-end load	Lower	Long-term, large investments
B Shares	Back-end (CDSC)	Higher	Declining charge over time
C Shares	Level load	Highest	Short-term (1-3 years)
No-Load	None	None or low	Cost-conscious investors

Mutual Fund Fees

Fee	Description
Sales Load	Commission (front or back)
12b-1 Fee	Marketing/distribution (max 0.75%)
Management Fee	Portfolio manager compensation
Expense Ratio	Total annual operating costs

Common Stock vs. Preferred Stock

Feature	Common Stock	Preferred Stock
Voting Rights	Yes	Usually no
Dividend	Variable, not guaranteed	Fixed, priority
Growth Potential	Higher	Lower
Price Volatility	Higher	Lower (like bonds)
Bankruptcy Priority	Last	After bonds, before common

Equity Securities Features

Security	Key Characteristics
ADRs	Foreign stocks trading in US, dollar-denominated
Rights	Short-term, below market price, existing shareholders
Warrants	Long-term, above market price, often with bonds
REITs	Must distribute 90% of income, real estate exposure

Money Market Securities

Security	Issuer	Maturity	Key Feature
T-Bills	US Treasury	4, 13, 26, 52 weeks	Safest, discount securities
Commercial Paper	Corporations	Max 270 days	Short-term corporate borrowing
Banker's Acceptances	Banks	1-180 days	International trade financing
Negotiable CDs	Banks	Various	FDIC insured up to $250K
Repos	Dealers	Overnight to weeks	Collateralized by securities

Annuities

Fixed vs. Variable Annuities

Feature	Fixed Annuity	Variable Annuity
Returns	Guaranteed rate	Market-based
Risk	Insurance company	Contract owner
Investment	General account	Separate account
Regulator	State insurance	SEC and state
Inflation Protection	No	Potential

Annuity Phases

Phase	What Happens
Accumulation	Money grows tax-deferred
Annuitization	Convert to income stream
Payout/Distribution	Receive payments

Annuity Payout Options

Option	Payments	Death Benefit
Life Only	Highest payment	None - payments stop at death
Life with Period Certain	Lower payment	Beneficiary receives remaining period
Joint and Survivor	Lower payment	Continues to surviving spouse

Variable Annuity Fees

Fee	Description
Mortality & Expense (M&E)	Insurance guarantee costs
Administrative Fees	Recordkeeping
Surrender Charges	Early withdrawal penalty
Subaccount Expenses	Like mutual fund expenses

Retirement Accounts

Traditional IRA vs. Roth IRA

Feature	Traditional IRA	Roth IRA
Contributions	Pre-tax (deductible)	After-tax
Growth	Tax-deferred	Tax-free
Withdrawals	Taxed as income	Tax-free (if qualified)
RMDs	Required at 73	None during owner's lifetime
Early Withdrawal	10% penalty + taxes	Contributions anytime; earnings penalized
Income Limits	Deduction phases out	Contribution phases out

Employer-Sponsored Plans

Plan	Type	Key Features
401(k)	Defined contribution	Employee deferrals, employer match possible
403(b)	Defined contribution	Nonprofits, schools, hospitals
457	Deferred compensation	Government and nonprofits
Pension	Defined benefit	Employer promises specific retirement benefit
Profit Sharing	Defined contribution	Employer contributes based on profits

Qualified Plan Characteristics

Tax-deductible contributions
Tax-deferred growth
Must follow ERISA rules
Vesting schedules for employer contributions
10% penalty for early withdrawal (before 59½)
RMDs at age 73

Regulatory Bodies

Who Regulates What

Regulator	Jurisdiction
SEC	Securities markets, public companies, investment advisers (>$100M AUM)
FINRA	Broker-dealers and registered representatives
MSRB	Municipal securities (rules only - no enforcement)
State Regulators	Investment advisers (<$100M AUM), agents, state securities
Federal Reserve	Margin requirements (Reg T)
OCC	Options clearing

Key Securities Laws

Law	Year	Purpose
Securities Act	1933	New issue registration, prospectus requirement
Securities Exchange Act	1934	Secondary market regulation, created SEC
Investment Company Act	1940	Mutual fund regulation
Investment Advisers Act	1940	Investment adviser regulation

FINRA Rules

Not a government agency - Self-Regulatory Organization (SRO)
Registers and tests broker-dealer representatives
Enforces rules on broker-dealers
Operates BrokerCheck for public

SEC vs. FINRA Jurisdiction

Issue	Regulator
Registered representative conduct	FINRA
Public company disclosure	SEC
Broker-dealer registration	Both
Investment adviser (large)	SEC
Market manipulation	SEC

Prohibited Practices

Insider Trading

Trading on material, non-public information
Illegal for insiders AND tippees
"Material" = would affect investment decision
Must disclose or abstain

Front Running

Trading ahead of customer's large order
Using knowledge of pending orders for personal gain

Market Manipulation

Practice	Description
Churning	Excessive trading to generate commissions
Painting the Tape	Creating false appearance of activity
Matched Orders/Wash Sales	Pre-arranged trades to fake volume
Marking the Close	Trades to artificially affect closing price
Pump and Dump	Inflate price with false info, then sell

Other Violations

Practice	Description
Selling Away	Selling unapproved securities (private securities transactions)
Borrowing from Customers	Prohibited without firm approval
Sharing in Accounts	Only with approval and proportionate
Guaranteeing Against Loss	Never permitted
Unauthorized Trading	Trading without customer consent

Primary and Secondary Markets

Primary Market (New Issues)

Term	Definition
IPO	First public offering of shares
Underwriter	Investment bank bringing issue to market
Syndicate	Group of underwriters sharing risk
Selling Group	Brokers who sell but don't underwrite
Prospectus	Required disclosure document

Underwriting Types

Type	Risk Bearer	Unsold Shares
Firm Commitment	Underwriter	Underwriter keeps
Best Efforts	Issuer	Returned to issuer
All or None	Issuer	Deal canceled if not all sold
Mini-Max	Issuer	Minimum must sell or canceled

Secondary Market

Trading of already-issued securities
Proceeds go to selling shareholders (not issuer)
Exchanges (NYSE, NASDAQ) and OTC markets

Securities Registration

Exempt Securities (Don't Need SEC Registration)

US Government securities (Treasury)
Municipal bonds
Bank securities
Commercial paper (< 270 days)
Insurance policies and annuities

Exempt Transactions

Regulation	Description
Reg D	Private placements to accredited investors
Reg A	Small offerings (Tier 1: $20M, Tier 2: $75M)
Rule 144	Resale of restricted/control stock
Rule 144A	Resale to qualified institutional buyers

Rule 144 Requirements

Type	Holding Period	Volume Limits	Filing
Restricted Stock	6 months	Yes	Form 144 if > 5,000 shares or $50,000
Control Stock	None	Yes	Form 144 required

Common Exam Traps

Trap #1: "EXCEPT" and "NOT" Questions

Read the full question - one word changes everything.

Trap #2: Current Yield vs. YTM

Current Yield = Annual Interest ÷ Market Price (income only)
YTM = Total return including capital gain/loss

Trap #3: Buyer vs. Writer Rights

Buyers have RIGHTS (pay premium)
Writers have OBLIGATIONS (receive premium)

Trap #4: Municipal Bond Taxation

Federal tax: Always exempt
State tax: Exempt only if you live in issuing state
Capital gains: Still taxable

Trap #5: SEC vs. FINRA

Registered representative issues → FINRA
Public company disclosure → SEC

Trap #6: SIPC Coverage

Protects against broker failure, NOT market losses
$500K total, $250K cash limit

Trap #7: Systematic vs. Unsystematic Risk

Systematic: Cannot diversify away (interest rate, inflation, market)
Unsystematic: Can diversify away (business, financial)

Trap #8: Margin Maintenance

Long positions: 25% maintenance
Short positions: 30% maintenance (higher risk)

✓Key Facts

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