Study guide · 31% of the exam
SIE: Trading, Customer Accounts & Prohibited Activities
The second-biggest SIE domain — settlement and accounts you memorize, prohibited activities you have to judge.
Try one before you read on
A broker-dealer intends to share a customer's nonpublic personal information with a nonaffiliated marketing firm. Under Regulation S-P, what method must the broker-dealer use to allow the customer to restrict this sharing?
- Directing the customer to contact the SEC to block sharing
- Providing a reasonable means to opt out of the sharing
- Requiring the customer to proactively opt in to the sharing
- Mandating written consent before any personal data is transferred
Show the answer
Providing a reasonable means to opt out of the sharing
Under Regulation S-P, a broker-dealer must provide customers with a reasonable means to "opt out" of sharing nonpublic personal information with nonaffiliated third parties. The regulation generally uses an opt-out model for permitted disclosures rather than requiring proactive opt-in consent from the customer.
This is the second-heaviest block on the SIE — about 31% of your scored questions, behind only products and their risks. What makes it different is that it tests judgment as much as recall. The settlement and account-type material is real, but it is largely memorization you can grind out. The points that actually move your score live in the prohibited-activities section, where the question is almost never a definition — it is is this allowed, or not? Spend your time learning that line, and treat the rest as supporting cast.
Where this 31% sits
- This domain
- 31% of the exam
- Rank
- #2 by weight
- Top two domains
- 75% of scored Qs
Nearly a third of the exam sits here, and the internal balance matters: the prohibited-activities and account-handling scenarios out-earn the settlement mechanics, question for question. Study this domain from the hub's full blueprint, but weight your hours toward what the exam rewards.
Half of this domain is one question wearing different clothes: is what just happened allowed, or prohibited? Learn the line, not a pile of definitions.
The prioritizer's rule
Trade lifecycle & settlement
You need the shape of a trade from instruction to settlement, not a memorized calendar. The two ideas that repay study are netting — many trades in one security collapse into a single obligation — and the split between the primary and secondary markets.
| Stage | What actually happens |
|---|---|
| Order | The customer's instruction — market, limit, or stop — is routed to the market. |
| Execution | The trade prints and a binding contract now exists between the two firms. |
| Clearing | Trades are compared and netted to a single obligation per security (buy 800, sell 500 → receive 300), not settled one by one. |
| Settlement | Regular-way secondary trades settle on the standard cycle (currently T+1) — cash and securities change hands. |
| New issues | A firm-commitment IPO follows its underwriting agreement, not the regular-way secondary rules — a classic trap. |
Customer accounts & registration
Account questions are rarely 'what is a margin account?' They are 'given this account and this event, what must happen?' Learn each type by the wrinkle it is tested on, not by its dictionary definition.
| Account type | What it is | The tested wrinkle |
|---|---|---|
| Cash | Everything paid in full by settlement. | No borrowing; freeriding (buying then selling before you pay) is prohibited. |
| Margin | The customer borrows against marginable securities. | Regulation T sets initial margin at 50%; a very small first purchase can require 100%. |
| UGMA / UTMA custodial | An adult custodian holds assets for a minor. | Control transfers to the beneficiary outright at the state age of majority — the custodian cannot extend it. |
| Joint | Two or more owners (JTWROS or tenants in common). | What happens on death: survivorship versus a share to the estate. |
| Discretionary | The rep may trade without asking first. | Needs prior written authorization — and every trade still has to be suitable. |
- Cash vs. margin — and that freeriding is prohibited in a cash account
- Regulation T: the 50% initial margin requirement and the small-purchase wrinkle
- Custodial (UGMA/UTMA): control passes to the beneficiary at the age of majority
- Discretionary accounts need prior written authorization — suitability still applies
- CIP / know-your-customer: verify identity before you trade
Prohibited activities — the high-yield core
This is where the domain earns its 31%. Every practice below is tested as a scenario, and the exam wants to see that you can tell a prohibited act from a merely aggressive-but-legal one. Get this table into recall and a large share of the domain answers itself.
| Prohibited practice | What it looks like in a question |
|---|---|
| Insider trading | Trading on material, nonpublic information — or tipping someone who then does. |
| Market manipulation | Spoofing, wash trades, matched orders, or marking the close to fake real activity. |
| Churning | Excessive trading that serves the rep's commissions, not the customer. |
| Front-running | Trading ahead of a customer's known block order. |
| Unauthorized / unsuitable | Trading without authority, or recommending what does not fit the customer. |
AML, SARs & the red flags
Anti-money-laundering shows up as a reflex test: you spot a red flag, what do you do? The two documents get deliberately swapped in the distractors, so keep them straight.
How to drill this domain
Sort prohibited from allowed first
Most points here are judgment calls. Drill scenarios until 'insider trading,' 'manipulation,' 'churning' and 'front-running' jump out of a story instantly.
Learn accounts as a wrinkle table
Don't reread definitions. Memorize the one tested twist per account — age of majority for custodial, Regulation T for margin, written authority for discretionary.
Build the AML reflexes
SAR versus CTR, and the rule that you never tip off the customer. These are free points once the two reports stop blurring together.
Finish on mixed, timed questions
Run blueprint-weighted questions until the wrong answers stop tempting you. Start with the free SIE practice test.
What carries the points
- This domain is about 31% of the SIE — second only to products, and it tests judgment, not just recall.
- Prohibited activities and AML are the high-yield core; settlement mechanics are the memorize-and-move-on tail.
- Learn account types by their tested wrinkle: age of majority for custodial, Regulation T for margin, written authority for discretionary.
- Regular-way secondary trades settle on the standard cycle; new issues follow the underwriting agreement.
- The SIE is a FINRA qualification, not a license — confirm current rules and thresholds at finra.org.
Trading & prohibited-activities questions
How much of the SIE is Trading, Customer Accounts and Prohibited Activities?
About 31% of your scored questions — the second-largest content area after Products and Their Risks. Together those top two domains are roughly three-quarters of the exam, so this one earns real study time. See the full weighting in the SIE study guide.
What prohibited activities show up on the SIE?
Insider trading, market manipulation (spoofing, wash trades, marking the close), churning, front-running, and unauthorized or unsuitable trades. They are almost always tested as short scenarios — is this allowed? — not as flashcard definitions, which is exactly why they carry so many points.
What is a SAR, and when does a firm file one?
A Suspicious Activity Report. When a firm's monitoring flags activity with no clear business purpose, the firm files a SAR with FinCEN — and it never tips off the customer that it is under review. Don't confuse it with a Currency Transaction Report, which covers large cash transactions, not suspicious wire activity. Specific dollar and day thresholds apply; confirm the current figures at finra.org.
Do I need to memorize settlement dates for the SIE?
Know the shape, not a calendar. Regular-way secondary-market trades settle on the standard cycle (currently T+1, one business day after the trade), while new issues follow their underwriting agreement rather than the regular-way rules. The concept is what the scenario questions reward.
Is margin heavily tested in this domain?
Enough to be worth an hour. Know the difference between a cash and a margin account, that Regulation T sets the initial margin at 50%, and the wrinkle that a very small first purchase can require you to deposit the full amount. Confirm current margin figures at finra.org before you rely on them.