SIE Cheat Sheet — High-Yield Rules, Products & Formulas

Use this as a rapid refresher for the SIE. The best answer is usually the one that identifies the right product/rule bucket first, then chooses the safest compliant next step.

Quick links:

• Guide Home
• FAQ
• Official Resources

Bookmark table: fastest SIE decision sort

1) Market Structure & Offerings

Primary vs. Secondary

• Primary: issuer → investors (capital formation).

  • Methods: IPO, APO/seasoned, private placement (Reg D), shelf registration.

• Secondary: investors trade with each other (liquidity).

  • Venues: exchanges (auction), OTC (dealer/quote-driven), third/fourth markets.

Order Flow (trade lifecycle)

    flowchart LR
	    A["Customer Order"] --> B["Broker/Dealer"]
	    B --> C{Routing}
	    C -->|"Exchange"| D["Execution"]
	    C -->|"ATS/ECN"| D
	    D --> E["Clearing (NSCC)"]
	    E --> F["Settlement (Book-Entry)"]
	    F --> G["Custody • Confirms • Reporting"]

• Best execution: weigh price, volatility, liquidity, order size/type, speed/likelihood of execution and settlement.
• Inside market: national best bid & offer (highest bid / lowest ask across venues).

2) Account Types & Documentation

• Cash vs Margin

  • Reg T initial (long): 50%; Maintenance (FINRA baseline): 25% long, 30% short (house rules may be higher).
  • Retirement accounts (IRAs): generally no margin and no uncovered options.

• Registrations: Individual / Joint (JTWROS vs TIC) / Corporate / Partnership / Trust / Custodial (UGMA/UTMA).

• CIP/AML: name, DOB, address, ID number; verify identity; check OFAC; maintain records.

• Options accounts: Deliver ODD, approval by ROP, customer signs options agreement within 15 days of approval.

Account / document reflex table

Account authority mini-matrix

3) Orders & Execution Instructions

• Market: immediate at best price.
• Limit: price or better (execution not guaranteed).
• Stop (stop-market): becomes market when triggered.
• Stop-Limit: becomes limit when triggered (may not fill if price gaps).
• Time-in-Force: Day, GTC, IOC, FOK, AON.
• Not Held: time/price discretion (good for the day only; no POA).

Trigger logic

• Buy stop (above market): limit loss on short / enter long on breakout.
• Sell stop (below market): limit loss on long / enter short on breakdown.

4) Investment Products & Key Risks

Common Stock: growth, voting, last in liquidation; risks—market/systematic, business. Preferred Stock: fixed dividend; interest-rate sensitive; types—cumulative, participating, convertible, callable.

Bonds (Corporate, Treasury, Agency, Munis)

• Price ↔ Yield inverse; longer maturity & lower coupon → more duration/volatility.
• Key risks: interest-rate, reinvestment (for callable), credit (corp/muni), call (declining rates).
• Accrued interest day-count: corp/muni 30/360; Treasury actual/actual.

Funds/ETFs/UITs

• Mutual funds: NAV once per day; loads/12b-1; cannot be shorted.
• ETFs: intraday pricing; can be margined/shorted like stock.
• UITs: fixed portfolio; redeemable trust units.

Options (equity)

• Long Call BE: $\text{BE} = K + P$
• Long Put BE: $\text{BE} = K - P$ (Short positions share the same breakeven; profit/loss flips.)

Alternatives

• REITs (dividends; no DPP pass-through losses), MLPs (K-1), Hedge funds (illiquidity/strategy risk), DPPs (tax features; illiquid; high risk).

Tax quick hits

• Munis: interest generally federally tax-exempt; capital gains taxable.
• Treasuries: taxable federal; exempt state/local.
• Qualified dividends: favorable rate if holding-period met.

5) Suitability (Principles + Mini-Matrix)

KYC: financial status, tax, objectives, liquidity needs, time horizon, risk tolerance, experience.

Three layers: Reasonable-basis → Customer-specific → Quantitative (no churning).

Quick mapping

• Preservation / income: IG bonds, bond funds, preferreds, laddered CDs.
• Growth (moderate): large-cap equity, broad ETFs.
• Aggressive growth: small/mid-cap, sector/thematic, EM.
• Tax-sensitive: munis/AMT-aware funds (high brackets).
• Inflation hedge: TIPS, equities, real estate.
• Short horizon: avoid long-duration/high-volatility assets.

Uncovered options, leveraged/inverse ETFs, and private placements → only for experienced, high risk-tolerance clients.

6) Options — Payoffs & Formulas

Breakevens

• Calls: $\text{BE} = K + P$
• Puts: $\text{BE} = K - P$

Max outcomes (long)

• Long Call: Max gain = unlimited; Max loss = premium.
• Long Put: Max gain $= K - P$ (if stock → 0); Max loss = premium.

Max outcomes (short)

• Short Call: Max gain = premium; Max loss = unlimited.
• Short Put: Max gain = premium; Max loss $\approx K - P$ (if stock → 0).

Intrinsic vs Time Value $\text{Premium} = \text{Intrinsic} + \text{Time Value}$

Protective vs Covered

• Protective put: long stock + long put (downside insurance).
• Covered call: long stock + short call (income; caps upside).

7) Pricing, Yields & NAV

Current Yield (bond)

$$ \text{CY} = \frac{\text{Annual Coupon}}{\text{Market Price}} $$

Approximate YTM (test-friendly)

$$ \text{YTM} \approx \frac{\text{Annual Coupon} + \frac{\text{Par} - \text{Price}}{\text{Years}}}{\frac{\text{Par} + \text{Price}}{2}} $$

NAV (mutual fund)

$$ \text{NAV} = \frac{\text{Assets} - \text{Liabilities}}{\text{Shares Outstanding}} $$

Public Offering Price (front-end load)

$$ \text{POP} = \frac{\text{NAV}}{1 - c},\qquad c = \frac{\text{Sales Charge}}{100} $$

Yield relationships

• At discount: $\text{YTM} > \text{CY} > \text{Nominal}$
• At premium: $\text{Nominal} > \text{CY} > \text{YTM}$

Worked example (annualized simple yield) $\displaystyle \text{Yield} = \left(\frac{50}{9950}\right) \times \frac{365}{90} \approx 2.04%$

Real return & margin

$$ \text{Real Return} = \text{Nominal Return} - \text{Inflation Rate} $$

$$ \text{Margin Requirement} = \text{Notional Value} \times \text{Margin Rate} $$

Symbol key

• $PV$ = Present Value of the bond
• $C$ = Coupon payment
• $r$ = Market interest rate (discount rate)
• $t$ = Time period
• $F$ = Face value of the bond
• $n$ = Number of periods until maturity

Quick percentage examples

• 2022 Total Assets: $\left(\frac{1,200 - 1,000}{1,000}\right) \times 100 = 20%$
• 2023 Total Assets: $\left(\frac{1,500 - 1,000}{1,000}\right) \times 100 = 50%$

8) Settlement, Corporate Actions & Dividends

• Lifecycle: execution → clearing → settlement (book-entry).
• Accrued interest: buyer pays seller from last interest date to (but not including) settlement.

Cash dividend timeline

• Declaration → Ex-Dividend (first day stock trades without dividend) → Record → Payable
• Buy before ex-date to receive dividend.

Stock splits / stock dividends: share count ↑, price ↓ proportionally; no immediate tax.

9) Communications, Conflicts & Ethics

Communications with the public

• Retail: >25 retail investors in 30 days → principal pre-approval typically required.
• Correspondence: ≤25 retail investors in 30 days → post-use review.
• Institutional: institutions only; supervision but no pre-approval.

Communications reflex table

Prohibited / red flags

• Front-running, insider trading (MNPI), free-riding, churning, painting the tape, marking the close, backing away, pump-and-dump.

If you see this red flag…

AML

• Structuring, rapid fund movement, unusual wires, activity inconsistent with profile → escalate; file SAR when appropriate.

Core duties

• Disclose material conflicts, fair pricing/markups, suitability, best execution, and no performance guarantees.

10) Quick Reference Tables

Order Type vs Use Case

Account Maintenance (baseline)

• Long stock: 25%
• Short stock: 30%
• FINRA min equity: $2,000

Product → Primary Risks

11) Five things to remember under pressure

1. SIE questions often test category recognition before math.
2. If a product sounds attractive, identify its main risk before recommending it mentally.
3. Primary vs secondary, cash vs margin, and long vs short are common trap pairs.
4. On ethics/compliance questions, the safer answer usually discloses, escalates, or refuses.
5. For formulas, classification comes first and calculation comes second.

12) Options Payoff Sketches (Mermaid — working numeric examples)

Mermaid xychart-beta needs numeric coordinates (no K+P). The examples below use K = 100 and P = 10. Adjust by recomputing break-evens and end points.

Long Call (K=100, P=10) Breakeven = 110; Max loss = -10; slope +1 after K.

    xychart-beta
	    title "Long Call Payoff"
	    x-axis "Stock Price" [0, 100, 110, 200]
	    y-axis "P/L"
	    line [0,-10, 100,-10, 110,0, 200,90]

Long Put (K=100, P=10) Breakeven = 90; Max gain = 90 (if S→0); Max loss = -10.

    xychart-beta
	    title "Long Put Payoff"
	    x-axis "Stock Price" [0, 90, 100, 200]
	    y-axis "P/L"
	    line [0,90, 90,0, 100,-10, 200,-10]

Short Call (K=100, P=10) Breakeven = 110; Max gain = +10; loss grows above K.

    xychart-beta
	    title "Short Call Payoff"
	    x-axis "Stock Price" [0, 100, 110, 200]
	    y-axis "P/L"
	    line [0,10, 100,10, 110,0, 200,-90]

Short Put (K=100, P=10) Breakeven = 90; Max gain = +10; Max loss = -90 (if S→0).

    xychart-beta
	    title "Short Put Payoff"
	    x-axis "Stock Price" [0, 90, 100, 200]
	    y-axis "P/L"
	    line [0,-90, 90,0, 100,10, 200,10]

13) Test-Day Tactics

• Read the last sentence first (“Which is true?” / “Except?”).
• Eliminate obviously wrong answers to improve odds.
• For math, estimate first; directionally right beats slow precision.
• Mark & move; return after first pass.
• Watch for suitability traps (time horizon, liquidity, risk tolerance).

Mini-Glossary (super high-yield)

• Spread: ask − bid.
• Liquidity: ability to trade size quickly with minimal impact.
• Duration: bond price sensitivity to rate moves.
• Indication of Interest (IOI): non-binding interest pre-offering.
• Stabilization: permitted bids by underwriter to support a new issue (within rules).
• Blue-Sky: state securities registration/notice filing/exemption.
• Prospectus: disclosure for new issues; no highlighting/marking.

Reminder: This is a study aid, not legal or investment advice. Confirm specifics in official rules and your firm’s policies.