High-yield SIE cheat sheet covering market structure, products, account rules, options payoffs, suitability, ethics, settlement, and test-day 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:
| If the question is really about… | Ask first… | Usually strongest answer direction |
|---|---|---|
| market structure or offering | are we in the primary market or secondary market? | identify issuer-vs-investor trading first, then pick the right rule/process |
| account opening or documentation | what account type and authority docs apply? | choose the answer with the right registration, CIP, and authorization step |
| product selection | what is the core risk bucket? | match the product to its main risk before worrying about details |
| suitability or ethics | what customer fact or rule is missing? | gather facts, disclose risk, and avoid the action if it is prohibited |
| options or yield math | what formula actually fits this product? | classify the product and use the correct formula instead of the closest-looking one |
Primary vs. Secondary
Primary: issuer → investors (capital formation).
Secondary: investors trade with each other (liquidity).
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"]
Cash vs Margin
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
| If the account is… | Think first about… | Common trap |
|---|---|---|
| individual cash | CIP + basic account agreement | forgetting CIP/AML still applies even without margin |
| margin | Reg T + maintenance + signed margin agreement | treating margin as just a cash account with more buying power |
| joint JTWROS | survivorship | confusing it with TIC estate treatment |
| joint TIC | fractional ownership without survivorship | assuming the surviving owner automatically gets all assets |
| custodial UTMA/UGMA | minor beneficiary, custodian controls | treating the custodian as the beneficial owner |
| trust | trustee authority from trust document | assuming any trustee can act without checking powers |
| corporate / partnership | entity resolution + authorized signer list | opening from verbal instructions alone |
| options | ODD + approval + signed options agreement | approving the trade before the options paperwork path is complete |
Account authority mini-matrix
| If the question turns on authority… | Usually strongest answer direction |
|---|---|
| trading for someone else | look for POA or other written authority |
| using time/price discretion | day-only discretion is limited and does not create full account discretion |
| exercising broad discretion | look for written discretionary approval and supervision |
| opening on behalf of an entity | verify the authorized person through entity documents |
Trigger logic
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)
Funds/ETFs/UITs
Options (equity)
Alternatives
Tax quick hits
KYC: financial status, tax, objectives, liquidity needs, time horizon, risk tolerance, experience.
Three layers: Reasonable-basis → Customer-specific → Quantitative (no churning).
Quick mapping
Uncovered options, leveraged/inverse ETFs, and private placements → only for experienced, high risk-tolerance clients.
Breakevens
Max outcomes (long)
Max outcomes (short)
Intrinsic vs Time Value \(\text{Premium} = \text{Intrinsic} + \text{Time Value}\)
Protective vs Covered
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
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
Quick percentage examples
Cash dividend timeline
Stock splits / stock dividends: share count ↑, price ↓ proportionally; no immediate tax.
Communications with the public
Communications reflex table
| If the communication is really… | Think… | Strongest exam reflex |
|---|---|---|
| retail communication | broad retail audience | principal pre-approval is the safe default reflex |
| correspondence | smaller retail communication flow | supervise and retain; pre-approval is not the default |
| institutional communication | institutions only | supervision still applies even if pre-approval usually does not |
| performance-heavy pitch | promissory / misleading risk | remove guarantees and balance risk with fair disclosure |
Prohibited / red flags
If you see this red flag…
| Red flag | Safer compliant reflex |
|---|---|
| customer pushes for an unrealistic guaranteed return | explain risk honestly and avoid guarantees |
| rep has MNPI or suspicious information flow | stop, escalate, and do not trade on it |
| fast turnover with no customer benefit | think churning / quantitative suitability problem |
| trading pattern is meant to influence price or appearance of activity | think manipulation, not “creative strategy” |
| unusual movement of funds or identity mismatch | think AML escalation, not rep-side judgment call |
AML
Core duties
Order Type vs Use Case
| Type | Purpose | Risk/Note |
|---|---|---|
| Market | Immediate execution | Price uncertainty |
| Limit | Price control | May not execute |
| Stop (Sell) | Limit loss on long | Becomes market when triggered |
| Stop (Buy) | Limit loss on short / breakout entry | Becomes market when triggered |
| Stop-Limit | Triggered limit order | May not execute if gaps |
Account Maintenance (baseline)
Product → Primary Risks
| Product | Primary Risks |
|---|---|
| Common Stock | Market/systematic, business |
| Preferred Stock | Interest-rate, call |
| IG Bonds | Interest-rate, reinvestment |
| HY Bonds | Credit/default, liquidity |
| Munis | Interest-rate, legislative/tax, call |
| ETFs (broad) | Market risk of index |
| Sector/Leveraged | Concentration, volatility, compounding |
| Options (short) | Potentially large/unlimited losses |
Mermaid
xychart-betaneeds numeric coordinates (noK+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]
Reminder: This is a study aid, not legal or investment advice. Confirm specifics in official rules and your firm’s policies.
Use this free guide for review, then Start SIE Practice on Finance Prep for timed questions, topic drills, and detailed explanations.