RSE Cheat Sheet (CIRO) — Rules, Workflows, Formulas

Use this as your product-fit + suitability rules engine. Pair it with the full RSE guide for coverage and RSE web practice for speed. Subscribers can also use the full Securities Prep web app with the same account credentials, including email and password, Sign in with Apple, or Sign in with Google.

Quick links

• RSE web practice
• Full RSE guide
• Study plan
• Official resources

RSE in 60 seconds (what the exam rewards)

• KYC first: constraints drive the “only defensible answer”.
• Suitability discipline: gather missing facts, KYP, explain tradeoffs, document.
• Product literacy: know what each product does, how it can fail, and when it does not fit.
• Controlled math: clean 1–3 step calculations (returns after fees, basic yields, ratios).
• Integrity reflex: on red flags, the safest answer is usually stop → escalate → document.

    flowchart TD
	  A["Scenario"] --> B["Extract constraints:<br/>KYC facts + horizon + liquidity + risk profile + costs/taxes + authority"]
	  B --> C["Confirm what is missing<br/>and gather it (if required)"]
	  C --> D["KYP + product-fit screening<br/>(features, risks, costs, liquidity)"]
	  D --> E["Recommendation / next step<br/>(best fit + defensible rationale)"]
	  E --> F{"Red flag?<br/>unsuitable instruction / conflict / integrity cue / missing facts"}
	  F -->|Yes| G["Stop, escalate, preserve records,<br/>follow firm policy"]
	  F -->|No| H["Execute appropriately<br/>(order type, best execution mindset)"]
	  G --> I["Document + retain an audit trail"]
	  H --> I
	  I --> J["Monitor + update KYC/suitability on triggers"]

Official topic weights (use for time allocation)

1) KYC and suitability (23%) — the “answer filter”

KYC snapshot (exam-friendly)

• Identity + authority: who can instruct? constraints/limitations?
• Objectives: growth/income/preservation (be specific).
• Time horizon: when is money needed?
• Liquidity needs: known withdrawals, emergencies.
• Risk profile: distinguish risk tolerance vs risk capacity.
• Knowledge/experience: complexity the client can reasonably understand.
• Cost sensitivity: fees + turnover can change outcomes.
• Constraints: tax, concentration limits, ethical constraints (if stated).

Suitability triggers (easy points)

Suitability is not “set and forget”. Re-assess when:

• the client’s circumstances change (job, income, dependants, health, retirement)
• a holding changes materially (risk profile, issuer events, structure, liquidity)
• the portfolio drifts (allocation off target, concentration grows)
• the client gives new instructions that conflict with KYC constraints

Best-answer pattern

If two options both “solve” the problem, the better answer usually:

• fills in missing KYC facts first (when required)
• addresses suitability and product-fit explicitly
• includes disclosure + documentation and escalation when warranted

2) Fixed income (8%) — minimal math + intuition

Yield/price relationship

• When market rates rise, bond prices fall.
• Longer duration generally means higher sensitivity to rate changes.

Test-friendly formulas

Current yield

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

Simple total return

$$ R = \frac{(P_1 - P_0) + I}{P_0} $$

• $P_0$ = starting price, $P_1$ = ending price, $I$ = income (interest).

Common suitability cues

• “Needs cash soon” -> watch interest-rate risk and liquidity.
• “Low risk tolerance” -> avoid mismatch between stated profile and volatility/credit risk.

3) Equities (10%) — what it is + how it can fail

High-yield reminders

• Dividends are not guaranteed.
• Common vs preferred: know the basic tradeoff (growth/volatility vs income/priority).
• Concentration is a frequent hidden constraint.

Dividend yield

$$ \text{Dividend Yield} = \frac{\text{Annual Dividends}}{\text{Price}} $$

4) Securities analysis (11%) — interpret the exhibit

Macro → markets (concept map)

    flowchart LR
	  POLICY["Policy + inflation<br/>(rates, growth, expectations)"] --> YC["Discount rates"]
	  YC --> BONDS["Bond yields/prices"]
	  YC --> EQ["Equity valuation multiples"]
	  POLICY --> FX["FX + capital flows"]
	  FX --> EQ
	  BONDS --> EQ

Basic ratios (know what they imply)

5) Managed products and other investments (13%) — costs + disclosure

Mutual funds vs ETFs (quick)

• Mutual funds: NAV-based purchases/redemptions; costs often dominated by MER.
• ETFs: trade like equities; add bid/ask spread and commissions; watch tracking error.

Cost checklist (easy points)

• MER and other embedded fees (if applicable)
• trading costs (commissions + spreads)
• redemption/early exit constraints
• tax impact (only when the question provides tax inputs)

6) Portfolio construction (11%) — diversification is the mechanism

Expected return (simple)

$$ E(R_p) = \sum_{i=1}^{n} w_i\,E(R_i) $$

CAPM (recognize the idea)

$$ E(R_i) = R_f + \beta_i\left(E(R_m) - R_f\right) $$

High-yield cues

• Diversification is about correlation, not “number of holdings”.
• “Need income soon” + “low tolerance” -> avoid volatility and liquidity mismatch.

7) Investment recommendations (12%) — defend the tradeoff

A recommendation answer is stronger when it includes:

• the dominant client constraint (why this fits)
• the main tradeoff (what you give up)
• what you would document (facts, rationale, disclosures)

8) Execution and market integrity (6%) — order handling + red flags

Order types (recognize the constraint)

Trade lifecycle (mental model)

    sequenceDiagram
	  participant Client as "Client"
	  participant Dealer as "Dealer/Rep"
	  participant Venue as "Marketplace"
	  participant Clear as "Clearing"
	  participant Settle as "Settlement/Custody"
	  Client->>Dealer: "Order / instructions"
	  Dealer->>Venue: "Route order"
	  Venue-->>Dealer: "Execution report"
	  Dealer-->>Client: "Confirmation (fees/commissions)"
	  Dealer->>Clear: "Clear/net obligations"
	  Clear->>Settle: "Settlement processing"
	  Settle-->>Client: "Position/cash updated"

Integrity reflex

If you see an integrity cue (MNPI hints, manipulation patterns, conflicts, instructions that look wrong):

Stop → escalate → preserve records → document.

9) Monitoring and reporting (6%) — triggers drive action

Common triggers to watch

• Client life changes: income, dependants, retirement, liquidity needs
• Portfolio drift: allocation or concentration changes materially
• Product changes: risk profile, structure, liquidity, issuer events
• New instructions that conflict with KYC/suitability constraints

Next: open RSE web practice and convert misses into one-sentence rules while the full RSE guide stays open beside it.