As someone wanting to enter the financial services industry, you might have heard of the Financial Industry Regulatory Authority (FINRA) SIE exam.
And in today’s article, we are going to cover the Securities Industry Essentials exam in great depth, highlighting:
There’s a wealth of information here and if you need to know more about the SIE exam, well, you’ve come to the right place.
The SIE Exam Rundown
Before we jump into the critical aspects behind the FINRA SIE exam, let’s take a look at a quick overview of what it’s all about.
For a start, this is an introductory level exam aimed at candidates who want to become security industry professionals.
During this FINRA exam, candidates will learn about and be tested in various key areas of the industry including:
- Financial products and what they entail
- The risks associated with these products
- Understanding trading, markets and how they are structured in the industry
- Regulatory agencies and their purpose
- Unlawful practices as outlined by FINRA including an overview of regulatory framework
But who is eligible?
Well, basically anyone that is 18 or above and wants to show a prospective employer that they have some industry knowledge.
And no, you don’t have to be associated with a company at all to write the exam.
That means that anyone with an interest in a career as a financial advisor can take this FINRA certification.
While the SIE exam is a critical component for someone who wants to become a general securities representative, it doesn’t allow them to register for a FINRA member firm.
Nor will it allow them to operate in the securities business.
For that, they still need to pass a qualification exam linked to their preferred line of work, be it a securities trader, investment banking representative, or whatever they choose.
Why was the SIE was introduced by FINRA?
The SIE exam is relatively new and first appeared in 2018.
But why was it introduced by FINRA?
With their already well-established exams covering various series’ (like FINRA series 22), many questions overlapped and were about the same topics.
So as someone progressed through their career in the securities industry, they would be tested on certain material over and over.
That’s because this material was covered in the additional securities exams they would sit as they take their career forward.
FINRA, therefore, decided to take out this overlapping material from all these exams and include that in the SIE exam specifically.
Of course, this makes complete sense that they did so, as it streamlines their exam series.
But there is another reason as to why the SIE exam exists.
And that’s to help candidates enter the securities industry in a far easier manner.
Before, only candidates that were sponsored by or part of an employing brokerage could sit for these exams.
Now, however, individuals can also undertake the SIE exam before they are employed.
This provides significant help for many to enter the industry, particularly those looking to change their careers.
Also, any individual that wants to obtain their securities license must take the SIE exam first before focusing on a specific area of the finance industry that they might like to specialize in.
What are the advantages of taking the SIE Exam?
No matter what career path in the securities industry you choose, we’ve already seen that passing this exam is compulsory.
But there are other advantages to passing it.
- Giving yourself a career kick start that shows that you are a self-starter
- Puts you in position for sponsorship when looking for a job or internship as employers want SIE qualified individuals
- Helps you to find areas in the industry where your knowledge is lacking
- Makes you far more marketable
That marketability certainly is the biggest benefit of passing this exam.
A prospective employee now only needs to sponsor another FINRA top-off exam to have you qualify in a prospective area of the industry.
They certainly are going to pick someone who has passed the SIE exam over another potential candidate who hasn’t in most cases, right?
And with a four-year validity period following passing the exam, that’s a generous amount of time to help candidates find employment.
That’s enough background for now.
Let’s look at what exactly you can expect from the SIE exam including:
- The exam format
- Passing scores
- Information on SIE exam prep, practice tests, study guides, and more
Format Of The SIE Exam
FINRA has broken down this exam into four distinct parts which they call functions.
- Function 1: Knowledge of capital markets
- Function 2: Understanding financial products and their risks
- Function 3: Understanding trading, customer accounts, and prohibited activities
- Function 4: Overview of regulatory framework
In total, there are 75 exam questions taken from these four functions.
Question allocations within each function
Certain functions within the SIE exam are weighted far more heavily than others.
It’s critical that potential candidates understand this ratio.
Of course, knowledge of all these functions is necessary but with more questions taken from certain areas, candidates will have an idea of which of these functions requires more focus.
Here’s a breakdown of how each function is weighted in terms of questions.
Function 1: Knowledge of capital markets
Of the 75 exam questions, 12 of them will be based on this function.
This equates to 16% of the test in total making this the second smallest contributor to the exam overall.
Questions in this section of the exam will come from the following areas of Function 1:
- Regulatory entities, agencies, and market participants
- Market structure
- Economic factors
Function 2: Understanding financial products and their risks
Function 2 is the main contributor to the exam when it comes to questions taken from a specific section of the course work.
In fact, the contribution, at 44% is close to half of the 75 exam questions.
In total, there are 33 questions taken from this function alone.
Questions in this section of the exam will come from the following areas of Function 2:
- Understanding products
- Investment risks
Function 3: Understanding trading, customer accounts, and prohibited activities
The second biggest contributor of questions, Function 3 provides just under a third of the total questions found on the SIE exam.
That means that of the 75 questions, 23 of them, or 31% in total come from this function.
Much like Function 2, this is an area that must be focussed on while preparing for the exam.
Questions in this section of the exam will come from the following areas of Function 3:
- Trading, settlement, and corporate actions
- Customer accounts and compliance considerations
- Prohibited activities
Function 4: Overview of regulatory framework
This function is the smallest contributor to the exam overall.
In fact, only seven questions out of the total of 75 or just 9% of the exam in total will come from here.
Questions in this section of the exam will come from the following areas of Function 4:
- SRO regulatory requirements for associated persons
- Employee conduct and reportable events
While Function 2 and 3 contribute three-quarters (75%) of the SIE exam questions, the other two shouldn’t be discounted at all, that’s for sure.
SIE exam questions format
Like many tests these days, the SIE exam comes in only one format.
There are no long-form questions to be found here.
Instead, all candidates will be presented with multiple-choice questions only.
While 75 of the questions contribute to the final scoring for each candidate, there are actually 85 in total.
These 10 extra questions are randomly distributed and form part of a pre-test without adding to the overall score.
With a multiple-choice format and no written answers, the SIE exam doesn’t need an extended period of time to complete.
In fact, you have one hour and forty-five minutes (01h45) to finish all 85 questions.
Bear in mind that while the extra 10 questions do not count towards your final pass mark, they must be completed.
So if we break this down, you are looking at 85 questions in 105 minutes, a little over a minute and 20 seconds per question.
And that’s more than enough time to get the job done, especially if you’ve prepared properly, including taking practice tests, etc.
Exam cost and pass rate
At present, all candidates who want to take the SIE exam will have to pay $60 to do so.
This is payable to FINRA once a candidate enrolls for the exam.
To pass, you need to score 70% or above.
That means getting 53 out of the 75 multiple-choice questions correct overall.
FINRA says that around 74% of all first-time candidates pass the exam.
SIE Exam Registration
To enroll for the exam, candidates will first need to register on FINRA.org.
Part of this includes paying your $60 exam fee as well as creating a Test Enrollment Services System (TESS) account.
This account is used when you go to a Prometric Test Center to write your exam.
If you don’t have a Prometric Test Centre near your location, you can use other testing centers associated with FINRA.
If you’d prefer to take the exam online, you can.
The SIE exam, along with many others, for example, the Series 7 exam, is available as an online test.
All you need to do is to indicate that you’d prefer to take the exam online than at a testing center.
Note, however, that online testing will require candidates to download the ProProctor online testing system from Prometric.
This means that you would need your own laptop or use a company computer if you are an intern to take the online test.
You cannot log into a website from an internet cafe to complete it, for example.
There are other important prerequisites too.
The computer that you write the online exam on should include either a webcam or movable camera.
This is so invigilators can check that a candidate doesn’t have any notes with them.
If you only have a webcam, bring a small mirror to help with the checking process.
Also, candidates must ensure that they have a stable internet connection.
For example, if they are testing at home, make sure other household members aren’t streaming movies or playing online games while you take the test.
Scheduling your exam and cancellation policy
Once a candidate has registered, paid for, and decided where they will take their exam, it’s time to schedule it.
Of critical importance here is that you have a 120-day window in which to do so from your registration date.
That’s effectively three months and should be enough time for any candidate to find a suitable date to take the test.
Of course, life always throws curveballs our way so what happens if a candidate cannot take the exam and has to cancel or reschedule?
Well, there is a 10-day leeway in place.
If you cancel or reschedule more than 10 days before the exam is set to take place, you won’t be charged.
However, if you do so within that 10-day period, you will incur a fee of $30.
Note, this moves up to $60 if you cancel or reschedule three days before the exam.
For more on the FINRA cancellation policy for all their exams, click here.
The Day Of The Exam
The day of the exam operates in a manner depending on your chosen method of taking the exam, either at a testing center or online.
In this section, we are going to look at a brief description of what both entail.
Writing at a testing center
Here are the most critical things to remember when writing at a testing center:
- You must arrive 30 minutes before the scheduled exam start time
- If you arrive 30 minutes later than your scheduled starting time will not write the exam and the test will be rescheduled with additional costs
- Bring your email address and email confirmation for the exam date and time with them as well as valid identification
- You need to show that you don’t have additional information on your person to help pass the exam.
- You will be supplied with a pen at the testing center
- You will also receive a four-function calculator, extra paper and noise-canceling headphones (on request).
- All other belongings are stored in a locker
- Once the exam starts, the timer cannot be paused
- If you arrive early and are set up before you scheduled exam time, you are allowed to start when ready
Once the exam is finished, candidates will only receive their scores if they pass.
Those that fail, however, will get additional information.
This includes their performance in each section of the exam which can help isolate where their knowledge is lacking with a retest in mind.
I’ve already touched on the fact that you will need to download testing software should you wish to write the SIE exam online.
This includes a systems check to see that your laptop is capable of hosting the exam.
These checks should be done well before the test date.
- A 360-degree check will be made of your surrounding before you start and tests can only take place indoors
- You will need to have a valid identification with you which will be captured through the webcam
- You need to show you don’t have additional information in youpockets or up your sleeves via the webcam
- You may not leave your station and move outside of the camera view unless they have received authorization to
- You may return to prior questions should you want to change your answers
Several other rules apply to online testing and you can find them by clicking here.
Candidates should note that results are not available straight away.
They will only receive them by email within three business days of having taken the test.
Rewriting the exam
Should a candidate fail the exam, they are free to apply for a rewrite.
This will cost an additional $60 but certain rules apply.
For example, should it be a candidate’s first failure, they have to wait a period of 30 days before they can try the exam for the second time.
However, if they have failed for the second and third time and would like to write again, the waiting period is far longer.
Candidates must wait six months between their third and any other attempt after that.
Practice exams as preparation
Exam preparation should always include practice exams or tests.
Of course, you won’t come across the same questions you will find in the exam, but by doing a practice example, a candidate can quickly identify areas where their knowledge is lacking.
Luckily, you will find SIE exam practice opportunities all over the internet, including on our site.
You can also test your knowledge by trying the FINRA SIE practice exam.
Click here to try it out.
In summing up, it’s easy to see that the FINRA SIE exam has changed much in the financial services industry since its introduction in 2018.
Perhaps the most critical thing that it has done is allowed college students and other candidates the opportunity to enter the industry far easier.
That’s because unlike before, candidates who want to write this exam no longer have to be sponsored by a company.
And that allows anyone the opportunity to get their foot in the door.
Remember, once a candidate has passed, their results are valid for a period of four years.
By passing this exam, candidates will have an advantage while looking for employment or an internship with a finance company.
And that can put you on the path to obtaining that CRD number as a registered representative in the securities industry.