Welcome to Equity Securities, the foundation of ownership in the securities markets and one of the most frequently tested areas on the SIE exam.
Exam Weight: This unit is part of Understanding Products and Their Risks. The full section accounts for 33 scored questions (44% of the exam). The official outline does not assign a separate question count to this unit.
What You'll Learn
- Common stock ownership rights, voting, dividends, and what it means to be a residual owner
- How preferred stock behaves as a hybrid of equity and debt
- How rights protect existing shareholders from dilution during new share issuances
- How warrants work as long-term options attached to other securities
- How American Depositary Receipts let U.S. investors access foreign stocks
- Who gets paid first when a company goes bankrupt and how ownership priority works
- How preferred stock and bonds can be exchanged for common shares
- The restricted-stock resale rule and how control and restricted securities can be sold
Why This Matters
Equity securities are the building blocks of the entire securities industry. Every securities professional needs to understand the differences between common and preferred stock, how rights and warrants work, and the strict rules governing who can sell what and when. The SIE exam tests these concepts frequently, especially liquidation priority, cumulative preferred dividends, and restricted-stock holding periods.
Let's start with the most fundamental equity security: common stock.