Securities Exam Glossary: SIE & Series 7 Terms
Short, source-cited definitions of the terms that show up on the SIE and the Series 7. Each entry links to the practice questions and study-guide lessons that test it.
All terms
Accredited Investor
An accredited investor is a person or entity the SEC allows to buy certain private placements. A natural person qualifies with income over $200,000 ($300,000 joint) in each of the last two years, or net worth over $1 million excluding the primary residence, or a Series 7, 65, or 82 license in good standing.
SIE · Series 7Bond Duration
Bond duration measures how sensitive a bond's price is to changes in interest rates. As a rule of thumb, a bond with a duration of 5 loses roughly 5% in price when rates rise 1 percentage point. Longer maturities and lower coupons produce higher duration.
SIE · Series 7Current Yield
Current yield equals a bond's annual interest divided by its current market price. A 6% bond with a $1,000 par value trading at $900 pays $60 a year, so its current yield is $60 ÷ $900, or about 6.67%. It ignores gains or losses at maturity.
SIE · Series 7FINRA
FINRA, the Financial Industry Regulatory Authority, is the self-regulatory organization that supervises U.S. broker-dealers and their registered representatives. It writes conduct rules, examines and disciplines firms, and administers the qualification exams such as the SIE and the Series 7.
SIE · Series 7Margin Call
A margin call is a demand from a broker-dealer that a customer deposit cash or securities because the account has fallen below a required equity level. Reg T requires 50% initial margin on equities; FINRA Rule 4210 sets minimum maintenance of 25% on long and 30% on short positions.
SIE · Series 7Net Asset Value (NAV)
Net asset value per share equals a fund's total assets minus its liabilities, divided by the number of shares outstanding. Open-end mutual funds are bought and redeemed at the next NAV calculated after the order arrives, typically at the 4:00 p.m. ET market close.
SIE · Series 7Open-End vs Closed-End Funds
Open-end funds (mutual funds) continuously issue and redeem shares at net asset value and do not trade on exchanges. Closed-end funds issue a fixed number of shares in an offering and then trade on exchanges at market prices that may differ from NAV.
SIE · Series 7Pattern Day Trader (PDT) Rule
A pattern day trader is a customer who executes four or more day trades within five business days in a margin account, where those trades exceed 6% of total trades in that period. Under FINRA Rule 4210, such accounts must maintain at least $25,000 in equity.
SIE · Series 7Put vs Call Options
A call gives the holder the right to buy 100 shares at the strike price; a put gives the right to sell. Calls profit when the stock rises and puts when it falls. The buyer's maximum loss is the premium; the seller's obligation begins when the option is exercised.
Series 7Regulation Best Interest (Reg BI)
Regulation Best Interest requires broker-dealers to act in the best interest of a retail customer when recommending a securities transaction or strategy, without placing the firm's interests ahead of the customer's. It has four obligations: disclosure, care, conflict of interest, and compliance.
SIE · Series 7Regulation T
Regulation T is the Federal Reserve rule that governs credit extended by broker-dealers to customers. It sets 50% initial margin on most equity purchases and requires payment within two business days after the standard settlement date, which is T+3 under T+1 settlement.
Series 7SEC Rule 144
SEC Rule 144 is a safe harbor that lets holders resell restricted and control securities without registration. Restricted stock generally needs a six-month holding period for reporting issuers or one year otherwise, while control-stock sales by affiliates are limited by volume and filed on Form 144.
SIE · Series 7Self-Regulatory Organization (SRO)
A self-regulatory organization (SRO) is a non-governmental body, such as FINRA, the MSRB, or a securities exchange, that writes and enforces rules for its members under SEC oversight. FINRA is the SRO for broker-dealers; rules an SRO proposes generally take effect only after SEC review.
Series 7Tax-Equivalent Yield
Tax-equivalent yield is the pre-tax yield a taxable bond must offer to match a municipal bond's tax-free yield. The formula is tax-free yield divided by one minus the investor's marginal tax rate: a 4% muni for a 32% bracket equals 4% ÷ 0.68, or about 5.88%.
Series 7Wash Sale Rule
Under the IRS wash sale rule, a loss on a security is disallowed if you buy the same or a substantially identical security within 30 days before or after the sale, a 61-day window. The disallowed loss is added to the cost basis of the replacement shares.
Series 7Yield to Worst
Yield to worst is the lowest yield an investor can receive on a callable bond across every possible call date and maturity. For a bond trading at a premium it is usually yield to call; for a bond trading at a discount it is yield to maturity.