The SIE Exam Glossary: 170 Terms in Plain English

Most SIE glossaries define terms using the same jargon you’re trying to escape. “A debenture is an unsecured debt obligation backed by the general creditworthiness of the issuer” is technically correct and completely useless if you don’t already know what those words mean.

This one doesn’t do that. All 170 terms below are defined in language you’d use talking to a friend, and they’re organised by the four exam sections rather than alphabetically — so this doubles as a map of what the SIE actually covers and where your gaps are.

The short answer

The SIE tests four sections, weighted very unevenly:

Section	Weight
Knowledge of Capital Markets	16%
Understanding Products and Their Risks	44%
Understanding Trading, Customer Accounts and Prohibited Activities	31%
Overview of the Regulatory Framework	9%

Products and Their Risks is nearly half the exam. If you’re short on time, that’s where the hours go — and it’s the longest section in this glossary for exactly that reason.

Use the section headings as a self-check: read the term, cover the definition, say it out loud in your own words. Anything you can’t explain is a study target.

The full answer

Section 1 — Knowledge of Capital Markets (16%)

Primary market — Where securities are sold for the first time. Money goes to the company.

Secondary market — Where investors trade with each other afterward. The company gets nothing.

IPO (initial public offering) — The first time a company sells shares to the public.

Issuer — The company or government raising the money.

Underwriter — The investment bank that helps sell a new issue.

Syndicate — A group of underwriters sharing a deal that’s too big for one firm.

Firm commitment — The underwriter buys the whole issue and resells it. They eat any unsold shares.

Best efforts — The underwriter just tries to sell it. Unsold shares go back to the issuer.

Prospectus — The legal disclosure document a buyer gets with a new issue.

Red herring — The preliminary prospectus, before the price is set. Named for the red warning text on the cover.

Registration statement — The filing a company submits to the SEC before selling securities publicly.

Cooling-off period — The roughly 20-day wait after filing, while the SEC reviews. No sales allowed yet.

Tombstone advertisement — A bare-bones ad announcing a new issue. Facts only, no sales pitch.

Due diligence — The investigation underwriters do to make sure the disclosures are accurate.

Exchange — A central marketplace with listing standards, like the NYSE.

OTC (over-the-counter) — Trading through a dealer network instead of a central exchange.

Broker — Executes trades for someone else and earns a commission. An agent.

Dealer — Trades from its own inventory and earns a markup. A principal.

Market maker — A dealer that continuously quotes both a buy and a sell price for a security.

Bid — What a buyer will pay. What you get when you sell.

Ask (offer) — What a seller wants. What you pay when you buy.

Spread — The gap between bid and ask. The dealer’s compensation.

Federal Reserve — The US central bank. Sets monetary policy.

Monetary policy — Managing the money supply and interest rates. The Fed’s job.

Fiscal policy — Taxing and spending. Congress and the President’s job.

Discount rate — What the Fed charges banks to borrow directly from it.

Federal funds rate — What banks charge each other for overnight loans.

Reserve requirement — The share of deposits a bank must hold rather than lend.

Open market operations — The Fed buying or selling Treasuries to adjust the money supply. Its most-used tool.

Business cycle — The repeating pattern of expansion, peak, contraction, trough. A recession is commonly defined as two consecutive quarters of declining GDP.

Inflation — Rising prices. Your money buys less than it used to.

CPI (Consumer Price Index) — The main measure of inflation.

Yield curve — A graph of interest rates across maturities. Normally upward-sloping; an inverted one is a warning sign.

Section 2 — Understanding Products and Their Risks (44%)

This is the big one. Nearly half the exam.

Equity

Common stock — Ownership in a company. You get voting rights and whatever’s left after everyone else is paid.

Preferred stock — Ownership with a fixed dividend and priority over common stock, but usually no vote.

Cumulative preferred — Missed dividends pile up and must be paid before common shareholders get anything.

Convertible preferred — Can be swapped for a set number of common shares.

Par value — A nominal accounting value on a stock certificate. For bonds it’s the amount repaid at maturity, usually $1,000.

Dividend — A cash or stock payment to shareholders out of company profits.

Declaration date — The day the board announces a dividend.

Ex-dividend date — The first day a buyer does not receive the dividend. Under T+1 settlement, this is the same day as the record date.

Record date — The day you must be on the books as a shareholder to receive the dividend.

Payable date — The day the money actually arrives.

Rights — Short-term privileges letting existing shareholders buy new shares below market price.

Warrants — Long-term privileges to buy shares at a set price, usually issued attached to bonds.

ADR (American Depositary Receipt) — A way to own foreign shares that trade in dollars on US markets.

Debt

Bond — A loan you make to a company or government. They pay you interest and return the principal.

Coupon — The bond’s stated annual interest rate.

Maturity — The date the principal gets repaid.

Premium — A bond priced above par, because its coupon beats current rates.

Discount — A bond priced below par, because its coupon lags current rates.

Current yield — Annual interest divided by the current market price.

Yield to maturity (YTM) — Your total return if you hold to maturity, including any premium or discount.

Callable bond — The issuer can repay it early, usually when rates fall. Bad for you.

Convertible bond — Can be exchanged for the issuer’s common stock.

Debenture — An unsecured corporate bond. Backed only by the company’s promise and reputation.

Secured bond — Backed by specific collateral you can claim if the issuer defaults.

Treasury bill (T-bill) — Short-term government debt, one year or less. Sold at a discount, no coupon.

Treasury note — Government debt maturing in 2 to 10 years.

Treasury bond — Government debt maturing in more than 10 years.

TIPS — Treasury bonds whose principal adjusts with inflation.

Municipal bond — Debt issued by a state or local government. Interest is usually federally tax-exempt.

General obligation (GO) bond — A muni backed by the issuer’s taxing power.

Revenue bond — A muni backed only by income from a specific project, like a toll road.

Zero-coupon bond — Pays no interest. Sold cheap, matures at full face value.

Money market instruments — Very short-term debt: commercial paper, negotiable CDs, banker’s acceptances, repos.

Commercial paper — Short-term unsecured corporate IOUs, maturing in 270 days or less.

Repurchase agreement (repo) — A short-term loan collateralised by securities, with an agreement to buy them back.

Packaged products

Mutual fund — A pooled investment run by a manager. You buy shares in the pool.

Open-end fund — A mutual fund that issues unlimited shares and redeems them at NAV.

Closed-end fund — Issues a fixed number of shares that then trade on an exchange, sometimes above or below NAV.

NAV (net asset value) — Total assets minus liabilities, divided by shares outstanding. What one share is worth.

Front-end load — A sales charge paid when you buy.

Back-end load — A sales charge paid when you sell, usually shrinking over time.

Breakpoint — A discount on sales charges once your investment crosses a threshold.

Expense ratio — The annual percentage a fund charges to run itself.

UIT (unit investment trust) — A fixed portfolio with a set end date. No active manager.

ETF (exchange-traded fund) — A fund that trades on an exchange like a stock, all day at market prices.

REIT — A company owning income-producing real estate. Must distribute most of its income to shareholders.

DPP (direct participation program) — An investment passing income and losses straight to investors. Usually illiquid.

Hedge fund — A lightly regulated private fund for accredited investors, using aggressive strategies.

Variable annuity — An insurance contract whose value moves with the investments you choose. Contains securities.

Fixed annuity — An insurance contract paying a guaranteed rate. Not a security.

529 plan — A tax-advantaged account for education costs. A municipal fund security.

Options

Call option — The right to buy a stock at a set price. You want the stock to rise.

Put option — The right to sell a stock at a set price. You want the stock to fall.

Strike price — The price at which the option lets you buy or sell.

Option premium — What you pay to buy the option.

In the money — The option is worth exercising right now.

Out of the money — It isn’t.

Covered call — Selling a call on stock you already own. Income now, capped upside later.

Risks

Systematic risk — Risk affecting the whole market. Diversification doesn’t help.

Unsystematic risk — Risk specific to one company or industry. Diversification does help.

Market risk — The chance prices fall broadly. The main systematic risk.

Interest rate risk — When rates rise, existing bond prices fall.

Credit (default) risk — The issuer might not pay you back.

Inflation (purchasing power) risk — Your returns don’t keep up with rising prices.

Liquidity risk — You can’t sell quickly without accepting a worse price.

Reinvestment risk — You get your money back and can only reinvest it at lower rates.

Call risk — The issuer repays early, right when you’d rather keep the income.

Currency risk — Exchange rate moves erode returns on foreign holdings.

Political risk — Government action in a country damages your investment.

Business risk — This specific company performs badly.

Diversification — Spreading money across investments so one failure doesn’t sink you.

Section 3 — Trading, Customer Accounts and Prohibited Activities (31%)

Order types and settlement

Market order — Execute immediately at whatever the current price is. Speed over price.

Limit order — Only execute at my price or better. Price over speed. May never fill.

Stop order — Sits dormant until a trigger price is hit, then becomes a market order.

Stop-limit order — Same trigger, but becomes a limit order instead.

Day order — Expires at the end of the trading day if unfilled.

GTC (good till cancelled) — Stays alive until filled or cancelled.

Fill or kill (FOK) — Fill the whole thing immediately or cancel it.

All or none (AON) — Fill the whole thing or nothing, but it can wait.

Trade date — The day the transaction happens.

Settlement date — The day securities and money actually change hands.

T+1 — Regular-way settlement: one business day after the trade. Effective May 2024, replacing T+2.

Accounts

Cash account — You pay in full. No borrowing.

Margin account — You borrow from the broker to buy securities.

Regulation T — The Fed rule setting initial margin at 50% of the purchase.

Initial margin — The deposit required to open a margin position.

Maintenance margin — The minimum equity you must keep. FINRA’s floor is 25% for long positions.

Margin call — A demand for more money when your equity falls below maintenance.

Long — You own it and profit if it rises.

Short — You borrowed and sold it, and profit if it falls.

Short selling — Selling borrowed shares hoping to buy them back cheaper. Losses are theoretically unlimited.

Joint account — Two or more owners.

JTWROS (joint tenants with right of survivorship) — When one owner dies, the survivor takes the whole account.

Tenants in common (TIC) — Each owner’s share passes to their estate, not the co-owner.

Custodial account (UGMA/UTMA) — An adult manages it for a minor. The assets belong to the child irrevocably.

Discretionary account — The rep can trade without asking first. Requires written authorisation.

Power of attorney — Written authority for someone else to act on the account.

Traditional IRA — Retirement account with a possible tax deduction now and taxable withdrawals later.

Roth IRA — No deduction now, but qualified withdrawals are tax-free.

401(k) — An employer-sponsored retirement plan.

Prohibited activities

Insider trading — Trading on material non-public information, or passing it on.

Material information — Information a reasonable investor would want before deciding.

Front running — Trading ahead of a customer’s large order to profit from the price move.

Churning — Excessive trading in an account to generate commissions.

Painting the tape — Fake trades creating the illusion of activity.

Matched orders — Coordinated buying and selling to manufacture false volume.

Market manipulation — Any deliberate interference with fair pricing.

Breakpoint sale — Selling just under a breakpoint so the customer misses a discount and you keep the commission.

Selling dividends — Pushing a fund purchase using an upcoming dividend as bait. Misleading, because the NAV drops by the same amount.

Commingling — Mixing customer assets with firm assets.

Free-riding — Buying and selling without ever paying for the purchase.

Section 4 — Overview of the Regulatory Framework (9%)

SEC — The federal government agency overseeing US securities markets. The top regulator.

FINRA — The self-regulatory organisation for broker-dealers. Writes rules, runs exams, disciplines firms.

SRO (self-regulatory organisation) — An industry body that regulates its own members under SEC oversight.

MSRB — Writes the rules for municipal securities. Doesn’t enforce them itself.

SIPC — Insurance for brokerage failure, not investment losses. Up to $500,000 per customer, including $250,000 for cash.

FDIC — Bank deposit insurance, up to $250,000. Does not cover securities.

Securities Act of 1933 — The “paper act.” Governs new issues and disclosure. Think primary market.

Securities Exchange Act of 1934 — The “people act.” Created the SEC and regulates trading and industry participants. Think secondary market.

Investment Company Act of 1940 — Classifies and regulates mutual funds, closed-end funds, and UITs.

Form U4 — The application to register an individual with a firm.

Form U5 — The filing when someone leaves. Starts the clock on qualification validity.

CRD (Central Registration Depository) — The database holding registration and disciplinary records.

BrokerCheck — The free public tool for looking up a broker’s background.

AML (anti-money laundering) — Rules preventing criminals from washing money through the financial system.

CIP (customer identification program) — Verifying who a customer actually is before opening an account.

SAR (suspicious activity report) — A filing when a transaction looks like possible criminal activity.

CTR (currency transaction report) — A filing for cash transactions over $10,000 in a single day.

Structuring — Splitting cash transactions to dodge the CTR threshold. Illegal on its own.

KYC (know your customer) — FINRA Rule 2090. Know the essential facts about every customer.

Suitability — FINRA Rule 2111. A recommendation must fit the customer’s profile.

Regulation Best Interest (Reg BI) — The SEC standard requiring firms to act in the retail customer’s best interest.

FINRA Rule 3220 — The gift limit. $300 per person per year, effective March 30, 2026.

Outside business activity (OBA) — Work outside your firm. Must be disclosed in writing.

Private securities transaction — Selling securities away from your firm. Requires notice and often approval.

Continuing education (CE) — Ongoing required training. Skip it and your registration goes CE inactive.

Statutory disqualification — A history that bars someone from the industry.

How to use this

A glossary is a checking tool, not a study method. Reading it start to finish will feel productive and teach you very little.

What works:

Cover and recall. Read the term, cover the definition, say it out loud in your own words. If you can’t, that’s a gap — not a term to reread, but a topic to go study properly.

Work the 44% first. Section 2 is nearly half the exam and about half this glossary. If your recall there is shaky, nothing else you do matters as much.

Watch the pairs. The SIE loves testing terms that sound similar: broker vs dealer, primary vs secondary, systematic vs unsystematic, GO vs revenue, JTWROS vs tenants in common, 1933 Act vs 1934 Act. If you can only define one of a pair, you’ll miss the question that contrasts them.

Check the dated ones. Several of these changed recently. T+1 replaced T+2 in May 2024, and the Rule 3220 gift limit moved to $300 in March 2026. Older study material still carries the old figures, and the exam tests the current ones.

Related resources

• What is the SIE exam in plain English — the overview, if the terms above are new
• SIE exam explained: format, scoring, subjects — how the four sections are weighted and scored
• T+1 settlement explained — one of the recently changed facts above
• How to read SIE exam questions — spotting the paired-term questions this glossary prepares you for
• How long should you study for the SIE? — building a plan around your weak sections
• Every number and formula on the SIE — a current one-page reference, with the figures that changed since 2024
• Systematic vs unsystematic risk — the one test that classifies any risk type
• Suitability, KYC and Reg BI — which standard governs a recommendation, and to whom each applies
• Free SIE practice exam — a domain-scored diagnostic to find which section needs the hours