Introduction
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: Part of 33 questions (44% of exam), Products & Risks chapter
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
- SEC Rule 144 and the rules for selling control and restricted securities
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 Rule 144 holding periods.
Let's start with the most fundamental equity security: common stock.