What is the SIE Exam?


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By: Kaplan Financial Education
April 9, 2019

The Securities Industry Essentials (SIE) exam is a new qualifications exam administered by FINRA, and it has changed the way individuals earn many of the most popular securities licenses available. The exam tests basic information including products, risks, the structure and function of the securities industry and its regulatory agencies, and knowledge of regulated and prohibited practices.

Why FINRA Introduced the SIE Exam

FINRA developed the SIE exam for two primary reasons. First of all, the organization recognized that across many of their series-specific exams, there were questions covering the same introductory topics. As a result, candidates who sat for multiple securities exams throughout their career were being tested on the same material multiple times. These topics have been pulled out of those series-specific exams, and will now be tested in the SIE exam. We’ve detailed which exams will be changing and how in our SIE FAQ article

The second reason FINRA created the SIE exam was to remove a significant barrier to entry into the industry. Previously, in order to sit for any of FIRNA’s series-specific exams, an individual would need to be sponsored by an employing brokerage. While this is still the case, individuals can sit for the SIE exam before securing employment. This significantly opens the industry up to career changers and university students.

Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for more valuable information about the test contents and the securities licensing process.

SIE Exam Format

The SIE exam is a 75-question, multiple-choice exam. It consists of four parts FINRA calls Functions that each carry a different weight in a candidate's score. The Functions and their respective exam weight are: 

Function 1: Knowledge of Capital Markets12 of 75 questions16% of the test
Function 2: Understanding Financial Products and their Risks33 of 75 questions44% of the test
Function 3: Understanding Trading, Customer Accounts, and Prohibited Activities23 of 75 questions31% of the test
Function 4: Overview of Regulatory Framework7 of 75 questions9% of the test

 

All candidate test scores are placed on a common scale using a statistical adjustment process known as “equating”. Equating accounts for the slight variations in difficulty that may exist among the different sets of exam items (questions) that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard, regardless of which set of questions they received.

History of the SIE Exam

At the 2015 ARM educational conference, FINRA first introduced a proposal to amend how candidates qualify to be registered at the representative level in the securities industry. Since that initial announcement, FINRA has routinely provided updates introducing additional details about the SIE exam. In October 2017, FINRA announced October 1, 2018, as the effective date for the SIE exam.

If you already hold a securities license, you are exempt from taking the SIE exam. But any individual seeking to earn their first securities license, whose testing window opens after October 1, 2018, will be required to pass the SIE exam prior to earning a representative-level qualification exam for a specific series.

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Free Download:A Candidate's Complete Guide to the SIE Exam

After identifying nine series exams with common content (6, 7, 22, 57, 79, 82, 86/87, 99), FINRA decided to restructure their licensing process. The common content is now tested in the new Securities Industry Essentials (SIE) exam. Download this free guide to learn more about how the new securities licensing process works, the rationale for the change, SIE tested exam content, and how it could change hiring and recruiting practices.