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REGULATORY FRAMEWORK OVERVIEW – SIE CHEAT SHEET > Exam weight (sourced from FINRA 2025 outline): Section 4 = 9% of scored items = 7 out of 75 questions.
> Smallest section by weight — but each question here is regulation-heavy and highly examinable.
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KEY REGULATORS & THEIR AUTHORITY Body Role Regulates Authority Type SEC Federal watchdog; created by Securities Exchange Act of 1934 Broker-dealers, investment advisers, exchanges, SROs Primary federal authority FINRA Largest SRO; operates under SEC oversight Broker-dealers & registered reps Enforcement & rulemaking MSRB Municipal bond rulemaker Muni dealers & muni advisors Rulemaking ONLY — enforcement by FINRA (for B-Ds) and banking regulators (for banks)SIPC Customer asset protection Registered broker-dealers (membership required) Covers failed firms only ($500k/customer; $250k cash max) — authority: SIPA 1970 Federal Reserve Monetary policy & margin rules Margin requirements via Regulation T Sets borrowing limits (currently 50% minimum initial margin) NASAA State regulators (North American Securities Administrators Association) State-registered IAs and representatives State blue-sky laws ---
REGISTRATION & CONTINUING EDUCATION (Section 4.1 of SIE outline) FINRA Rule 1210.03 governs the SIE exam.
Registration pathway (per SIE outline Section 4.1.1):
Must associate with a FINRA member firm to take top-off exams SIE can be taken without firm sponsorship (open to any candidate 18+) After passing SIE, must pass an associated top-off exam (e.g., Series 7 per FINRA Rule 1220(b)(2) ) Firm Element CE: firm-administered training Regulatory Element CE: FINRA-administered; required for registered persons (governed by FINRA Rule 1240 ) Fingerprinting required for associated persons (cited in SIE outline; authority: SEC Rule 17f-2 ) Statutory disqualification defined in Exchange Act Section 3(a)(39) Form U4 / Form U5 (Section 4.2.1):
Form U4: Uniform Application for Securities Industry Registration or Transfer — filed to register; must be updated promptly for reportable eventsForm U5: Uniform Termination Notice — filed when representative leaves a firmFiling misleading information violates FINRA Rule 1122 ---
REPORTABLE EVENTS (Section 4.2.2 of SIE outline) All of the following must be reported via Form U4 update:
Outside business activities — governed by FINRA Rule 3270 Private securities transactions — governed by FINRA Rule 3280 Political contributions exceeding dollar thresholds — MSRB Rule G-37 Gifts and gratuities limits — FINRA Rules 2310(c), 2320(g)(4), 2341(l)(5), 5110(h); MSRB Rule G-20 Felony convictions, financial-related misdemeanors, liens, bankruptcy ---
HIGH-YIELD TRAPS & RULES What SEC Review Does NOT Mean SEC did not approve the investment SEC only verified required disclosures were made (Securities Act of 1933, Sections 7–8) SIPC Coverage Limits Covers: Missing securities/cash when broker-dealer failsDoes NOT cover: Market losses, bad advice, fraud, commodity futuresPer customer: $500k total ($250k cash max)Authority: Securities Investor Protection Act of 1970 (SIPA)MSRB = Rulemaking, NOT Enforcement Writes rules for municipal securities Operates EMMA (Electronic Municipal Market Access — free public muni data) Does not enforce — FINRA enforces for B-Ds; banking regulators enforce for banksMSRB Rule G-32 governs disclosures in primary muni offeringsMSRB Rule G-37 governs political contributions and pay-to-play prohibitionsRegulation T Requirement Investors must deposit minimum 50% of purchase price when buying on margin Set by Federal Reserve Board under Regulation T (Credit by Brokers and Dealers) FINRA Rule 4210 sets maintenance margin minimums---
BROKER-DEALER VS. INVESTMENT ADVISER Aspect Broker-Dealer Investment Adviser Regulated by SEC & FINRA SEC ($110M+ AUM) or state (<$100M AUM) Standard of Care Best Interest (Reg BI — Exchange Act Rule 15l-1)Fiduciary duty (higher; Investment Advisers Act of 1940)Compensation Commission (broker) or markup/markdown (dealer) Advisory fees Ongoing duty? No — Reg BI applies at time of recommendation Yes — continuous fiduciary obligation ---
MARKET STRUCTURE ROLES Participant Function Key Duty Registered Representative Licensed individual; solicits orders & recommends Must pass SIE (Rule 1210.03) + top-off exam + register with FINRA Market Maker Continuously quotes bid/ask; provides liquidity Profit from bid-ask spread Transfer Agent Records & maintains security ownership; processes transfers Works for issuer , not investor Custodian Holds & safeguards investor securities Distinct from transfer agent DTCC Clears & settles trades Standard: T+1 settlement (SEC Rule 15c6-1)
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CAPACITY DISCLOSURE RULE When acting as broker (agent):
Must disclose: "Acting as broker" When acting as dealer (principal):
Must disclose: "Acting as principal" & the spread/profit amount ---
EXAM QUICK HITS ✓ FINRA Rule 1210.03 governs the SIE; Rule 1240 governs CE
✓ FINRA = enforcement arm for broker-dealers
✓ MSRB = rulemaker for munis (FINRA enforces)
✓ SIPC = firm fails only → covers customer losses (not fraud/advice); authority: SIPA 1970
✓ SEC = approves disclosures, not investments (Securities Act of 1933)
✓ Fiduciary duty (Advisers Act) > Best Interest (Reg BI / Rule 15l-1) > Suitability (Rule 2111)
✓ Reg T = 50% minimum deposit for margin purchases
✓ T+1 = standard equity settlement (SEC Rule 15c6-1)
✓ Form U4 = registration; Form U5 = termination
✓ FINRA Rule 3270 = outside business activities; Rule 3280 = private securities transactions
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Sources All rule citations in this lesson are grounded in primary sources (verified 2026-06-29):
[FINRA SIE Content Outline 2025](https://www.finra.org/sites/default/files/2025-10/SIE_Content_Outline.pdf) — Section 4 (9% / 7 questions); FINRA Rules 1122, 1240, 2060, 2263, 2267, 3110(e), 3220, 3270, 3280, 4330, 4530, 5110(h), 8312 (pages 14–15); MSRB Rules G-2, G-3, G-7, G-10, G-20, G-37; SEC Rule 17f-2; Exchange Act Section 3(a)(39) (Statutory Disqualification)