FINRA SIE (Securities Industry Essentials) Glossary
25 essential terms and definitions for FINRA SIE (Securities Industry Essentials). Each definition is written for exam preparation, covering the concepts as they are tested on the 2026 syllabus.
B
- Bid-Ask Spread
- The bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask) for a security. Tighter spreads typically reflect more liquid markets and lower implicit trading costs.
- Bond
- A bond is a debt security in which the issuer promises to pay periodic interest (coupons) and return the face value at maturity. Bonds differ by issuer, coupon structure, embedded options, and seniority in the issuer's capital structure.
C
- Capital Markets
- Capital markets are the markets where long-term debt and equity securities are issued and traded. They are distinguished from money markets, which trade short-term debt instruments with original maturities of one year or less.
- Common Stock
- Common stock is an equity ownership interest in a corporation. Holders typically receive voting rights and a residual claim on assets and earnings, subordinate to all debt and preferred stock claims.
D
- Debt Security
- A debt security is an instrument representing a loan from the holder to the issuer. The category includes corporate bonds, government securities, agency securities, and money-market instruments.
- Derivative
- A derivative is a financial instrument whose value depends on an underlying asset, index, or rate. Common categories include futures, forwards, options, and swaps, used for hedging, speculation, or arbitrage.
- Dividend
- A dividend is a distribution of corporate earnings to shareholders, typically in cash or additional shares. Key dates are declaration (board action), record (holders entitled to the dividend), ex-dividend (settlement-driven cut-off), and payment.
E
- Equity Security
- An equity security represents ownership in a corporation. The category includes common stock with voting rights and residual claims, and preferred stock with fixed dividends and a priority claim ahead of common.
- Exchange-Traded Fund (ETF)
- An ETF is a pooled investment vehicle that trades on an exchange like a stock. It provides diversified exposure to an index or strategy with intraday liquidity, typically lower expense ratios than mutual funds, and a creation-redemption mechanism that helps the market price track NAV.
F
- FINRA
- The Financial Industry Regulatory Authority is the self-regulatory organization that oversees broker-dealers in the United States. It writes and enforces rules, examines firms, and runs the dispute-resolution forum for industry arbitration.
I
- Initial Public Offering (IPO)
- An IPO is the first sale of a company's stock to the public. It is typically conducted through underwriters, accompanied by a prospectus, and often features a quiet period before and a lock-up period after.
M
- Money Market Instrument
- Money-market instruments are short-term debt instruments with original maturities of one year or less. The category includes Treasury bills, commercial paper, certificates of deposit, banker's acceptances, and repurchase agreements.
- Municipal Bond
- A municipal bond is a debt obligation issued by a state or local government. Interest is typically exempt from federal income tax and often from state and local tax for in-state residents, which lowers the pre-tax yield required to compete with taxable bonds.
- Mutual Fund
- A mutual fund is a pooled investment vehicle that issues and redeems shares at net asset value calculated once per business day. Orders are filled at the next NAV (forward pricing) rather than at a current market price.
O
- Option
- An option is a contract giving the holder the right (not the obligation) to buy (call) or sell (put) an underlying asset at a specified strike price by a specified expiration. The writer earns the premium and bears the matching obligation.
P
- Preferred Stock
- Preferred stock is an equity security with fixed dividend payments and priority over common stock in dividends and liquidation. It typically lacks voting rights and trades more like a long-duration bond than common stock.
- Prospectus
- A prospectus is the legal document filed with the SEC that discloses information about a securities offering, including business description, risk factors, financial statements, use of proceeds, and management. It must be delivered to investors at or before sale.
S
- SEC
- The Securities and Exchange Commission is the primary US federal regulator of securities markets, brokers, investment advisers, exchanges, and public-company disclosure. It administers the federal securities laws starting with the 1933 and 1934 Acts.
- Securities Act of 1933
- The Securities Act of 1933 governs the public offering of securities. It requires registration of public offerings (subject to exemptions) and prohibits fraud in the offer and sale of securities; the so-called 'truth in securities' act.
- Securities Exchange Act of 1934
- The Exchange Act created the SEC and regulates secondary trading, broker-dealers, exchanges, and ongoing reporting by public companies. It also includes the antifraud provisions central to insider-trading enforcement under Rule 10b-5.
- Settlement
- Settlement is the process of transferring securities and cash between counterparties to complete a trade. Standard US equity settlement is T+1 (one business day after trade); options settle T+1 and most US Treasuries settle T+1 as well.
- Suitability
- Suitability is the requirement that recommendations align with the customer's financial situation, objectives, and risk tolerance. FINRA Rule 2111 sets the general framework; Regulation Best Interest (Reg BI) raises the standard to a best-interest obligation for retail recommendations.
T
- Treasury Security
- Treasury securities are debt obligations of the US federal government, backed by full faith and credit. Maturities range from T-bills (up to 1 year, sold at discount), to T-notes (2-10 years), to T-bonds (over 10 years), plus TIPS (inflation-indexed).
U
- Underwriter
- An underwriter is the investment bank that purchases securities from an issuer and resells them to the public. The commitment may be firm (the underwriter bears the risk of unsold shares) or best-efforts (the issuer bears that risk).
Y
- Yield to Maturity (YTM)
- Yield to maturity is the total return anticipated on a bond held to maturity, assuming all coupons can be reinvested at the YTM. It is the discount rate that equates the present value of future cash flows to the bond's market price.