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SIE Exam Study Guide with Verified Solutions
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SIE Exam Study Guide with Verified Solutions purpose of securities industry - Answer️️ -matching investors with money to issuers that need that money to finance issuer - Answer️️ -legal entity that sells securities in order to finance its operations (business, governments) ie. us treas...

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  • September 25, 2024
  • 259
  • 2024/2025
  • Exam (elaborations)
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TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024

SIE Exam Study Guide with Verified
Solutions

purpose of securities industry - Answer✔️✔️-matching investors with money to issuers

that need that money to finance


issuer - Answer✔️✔️-legal entity that sells securities in order to finance its operations

(business, governments) ie. us treasury, us gov agencies, foreign governments, state

and local governments, corps, banks

methods issuers use to raise capital - Answer✔️✔️-1) issue debt securities (bonds) and

2) issues equity securities (stocks)

debt securities - Answer✔️✔️-publically traded loans = bonds, notes, or debt instruments.

The person loaning money/buying a bond is considered a creditor to the issuer and the

amount they paid for is the principal that the issuer owes them and also makes interest

payments throughout the duration of the loan

-can be issued by banks, corps, etc

equity securities (common vs preferred) - Answer✔️✔️-raise capital by issuing stock

(equity), this time when you buy this, you have ownership in the company and if the

company is profitable then you may be entitled to a portion of the profits (this is received

through dividend distribution). differs from bonds bc 1) typically no maturity date and 2)

dividend payments are optional


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,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024



-only banks/corporations sell these and can do so publically or privately to specific

group of investors



preferred=paid a predetermined dividend (usually received first and higher than those of

common holders, but don't get a vote in company matters)

common=paid a dividend based on company fortunes

broker dealer = brokerage firm (2 capacities) - Answer✔️✔️-2 capacities



1) broker= (ABC - agency, broker, commission)engages in agency transactions in

security accounts of others. they match up buys and sells and earn a commission for

their work (like a real estate broker, acting on behalf of customers to make commission).

no risk to firm, they find party willing to take other side of trade

2) dealer= (PDM - principal, dealer, markup/markdown) firms buying and selling

securities for its own accounts. buy securities from clients and hold them in inventory

and allow clients to buy from them. like a car dealer... buys for its inventory and sells

from its inventory and can mark up and down accordingly. acts as principal and can

take other side of the trade, MARK UP OR MARK DOWN

-risk & Inventory

broker-dealer departments/structure of firms (5) - Answer✔️✔️-1) investment banking

2) research


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,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
3) sales/private client

4) trading

5) operations

broker dealer - Investment banking - Answer✔️✔️-referred to as underwriters of

securities... they provide advise to issuers in who are looking to issue stocks, bonds, or

a combo (structure/arrange security offerings)

also can assist with M&A or restructuring for bankruptcy

broker dealer - research - Answer✔️✔️-analysts!! study market and issuers to make

reccomendations (buy, sell, hold)

broker dealer - sales (stock or bond brokers aka registered representatives RR or

investment advisor representatives IAR) - Answer✔️✔️-financial professionals who

market bonds, stocks, but also packaged products such as mutual funds to people and

institutions

broker dealer - trading - Answer✔️✔️-execute trades for the firm and the firm's clients and

occur in electronic market places NASDAQ or hybrid ones such as NYSE

broker dealer - operations - Answer✔️✔️-make sure things are up to standard

(paperwork, trades, etc) also generate statements, etc

info barriers - Answer✔️✔️-barrier where info shouldn't be shared with other side/other

departments (investment banking on one side and research, sales/private client,

trading, ops on the other)

market maker - Answer✔️✔️-**applies to equity not bonds**
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, TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
when broker dealer decides to display quotes on a trading system indicating they want

to buy and sell at specific prices... required to do so on a REGULAR basis. stands ready

to buy and sell at any given time

-maintain inventory

-these market makers are two sided... indicating a price they are willing to sell at

(ASK/OFFER) and buy at (BID)

-usually a min of 100 shares at those prices=ROUND LOT

odd lot=anything but groups of 100 shares

spread (ask, bid, etc) - Answer✔️✔️-spread=difference between ask and bid

price=profitability of market maker, larger the spread=more MM makes

bid=what firm will buy at/what client sells at

ask=what firm will sell at/what client buys at

-more actively traded securities tend to have more narrow spreads

**markup (sell price/ask)/markdown (buy price/bid) is in addition to the spread

comp for broker dealer, investment advisor, - Answer✔️✔️-1) broker dealer receives $ bc

of transaction based compensation (broker receives commission)

2) investment advisor charges fees for managing portfolio, usually based on assets

under management

traders --> proprietary trading - Answer✔️✔️-trade for the firm without setting price

markers like a market maker = no quotes entered. simply execute trades on the quotes

made from a market maker


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