Chapter 1: Capital Markets
This chapter covers 16% of the SIE exam (approximately 12 questions) and builds your understanding of how the securities industry is structured, regulated, and operates.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 1 | Regulatory Entities and Market Participants | SEC, FINRA, MSRB, SROs, broker-dealers, investment advisers, market makers |
| 2 | Market Structure | Primary, secondary, third, and fourth markets; exchanges vs. OTC; ECNs and ATSs |
| 3 | Economic Factors | Federal Reserve, monetary and fiscal policy, business cycles, GDP, inflation |
| 4 | Securities Offerings | IPOs, secondary offerings, private placements, Reg D/A/S, underwriting |
Why This Chapter Matters
Before you can understand investment products or trading rules, you need to know who regulates the industry, how markets are organized, and how securities get to market in the first place. This chapter provides that foundation.
The exam tests whether you understand the roles of key regulators (especially the SEC and FINRA), the differences between market types, how economic forces affect securities, and how companies raise capital through offerings.
Exam Strategy
At 16% of the exam, Capital Markets is the second-smallest section. Focus on:
- Distinguishing regulators: Know what the SEC does vs. FINRA vs. MSRB vs. state regulators
- Market types: Primary vs. secondary market is a frequent test topic
- Offering exemptions: Reg D, Reg A, and Reg S exemptions come up regularly
- Federal Reserve tools: Open market operations, discount rate, reserve requirements
-> Start Unit 1: Regulatory Entities and Market Participants