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5 Test-Taking Tips for FINRA’s New SIE Exam: Kaplan

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Taking tests, whether it’s the Series 6 or the Financial Industry Regulatory Authority’s new Securities Industry Essentials (SIE) exam, which started on Sept. 30, 2018, is rarely easy. Kaplan Financial Education says it has worked with thousands of people who have gone on to take the SIE (although Prometric administers the exam). Bruce Walck of Kaplan, who helps people prepare for the exam, outlined major stumbling blocks of the test and gave recommendations on how to prepare for them.

1. Know the lingo.

The SIE is a “comprehension exercise,” so those taking it must learn the language of finance, including acronyms, Walck says. Here are some ways to handle this hurdle:

  1. Study the glossary found in the back of the Licensing Examination Manual. This will help “demystify” some of the language in the exam.
  2. Do the 75-question practice test at

Walck also notes that the test is written by a committee, so be prepared for different question styles; for example, some may include “legal jargon,” while others may be more conversational. The practice test can help prepare for these differentials.

2. One word can have several meanings.

Be prepared for different meanings of the same word, especially with the SIE, Walck says. For example, principal can mean a bond’s face value, a managerial position at a brokerage firm or the capacity of a firm on a given trade.

He points out another word, “covered,” which can mean a protected or hedged position, or specifically used when discussing options trading.

3. The same concept can be referred to in different ways.

As with a similar word having different meanings, so too do terms that use the words. Specifically, Walck says that options writers, options sellers, and going to short an option contract could express the same concept. Again, he warns, the test is written by a committee so each writer may use his or her own terminology that is different than someone else on the committee but means the same thing.

4. This isn’t a math test, but you should know these three formulas.

For those in the securities business who are stronger at math than other areas, this isn’t their test to shine. This test focuses on reading comprehension, Walck says, and there will be few math problems on the exam. That said, three formulas that may pop up on the exam are:

a: % sales charge (load) for a mutual fund purchase = (POP-NAV)/POP

b: Current yield = annual interest payment/bond price

c: Dividend yield = annual dividend/stock price. Remember to multiply the quarterly dividend by four.

5. Know how to apply the concepts.

About 25% of the exam questions will focus on conceptual understanding, going beyond factual knowledge of product of suitability issues, Walck says.

The exam might ask a question regarding influence of Federal Reserve Board policy in which the taker would have to tie three facts together to answer correctly. Let’s say the question is: If the FRB is hawkish, investors should shorten their maturities. Why?

Walck says the test taker must outline the facts and show that they understand the concept. Therefore the answer would include:

The facts are 1) hawkish means rising rates, 2) rising rates translate to lower future bond prices based on the inverse relationship between yield and price, and 3) short-term bonds will be hurt less by rising rates due to their lesser relative price volatility when compared to long-term issues. Remember, maturity magnifies the price move.

Another example of a questions might be a description of a client, including age, job, income and risk tolerance, and the test taker would have to determine the appropriate debt security recommendation. This means a student has to have “a firm grasp of the relative safety profile and tax status of each debt instrument,” Walck notes. For example, high earners might be steered toward municipals dues to tax-free status, while more risk-averse investors might be better off with Treasuries due to default-free status.

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