FINRA Exam Cheat Sheet – Key Terms and Definitions

Here’s your concise, comprehensive cheat sheet of essential terms and definitions you’ll encounter on FINRA exams:

📌 Broker-Dealer

• A firm engaged in trading securities for clients (broker) or for itself (dealer).

📌 Registered Representative

• An individual licensed to sell securities and provide financial advice on behalf of a broker-dealer.

📌 Securities Industry Essentials (SIE)

• Entry-level FINRA exam covering basic industry knowledge; prerequisite for many other exams.

📌 Series 6 Exam

• Allows selling investment company products (mutual funds, UITs) and variable insurance products.

📌 Series 7 Exam

• General securities representative exam; qualifies individuals to sell a wide range of securities.

📌 Series 63 Exam

• State-specific exam required for securities sales in most U.S. states.

📌 Series 65 Exam

• Qualifies candidates as Investment Adviser Representatives (IARs), allowing fee-based advisory services.

📌 Series 66 Exam

• Combined exam (Series 63 + Series 65) for investment advisory services and securities sales.

📌 FINRA

• Financial Industry Regulatory Authority; self-regulatory organization overseeing brokerage firms and representatives.

📌 NASAA

• North American Securities Administrators Association; sets rules for state securities regulations and exams.

📌 SEC (Securities and Exchange Commission)

• Federal regulator overseeing U.S. securities markets and enforcing federal securities laws.

📌 Suitability (FINRA Rule 2111)

• Requirement ensuring recommended investments match the client’s financial situation, objectives, and risk tolerance.

📌 Know Your Customer (KYC – FINRA Rule 2090)

• Requires gathering comprehensive information about a client’s financial situation and objectives.

📌 Anti-Money Laundering (AML – FINRA Rule 3310)

• Policies aimed at preventing and reporting financial crimes and suspicious activities.

📌 Variable Annuity

• An insurance product offering investment options with variable returns and tax-deferred growth.

📌 Mutual Fund

• Investment company pooling investor money into diversified portfolios of stocks, bonds, or other securities.

📌 Breakpoint

• Discount on sales charges offered when investors buy mutual fund shares above a certain dollar amount.

📌 NAV (Net Asset Value)

• The per-share market value of a mutual fund, calculated daily.

📌 529 Plan

• Tax-advantaged savings plan designed for educational expenses, classified as a municipal fund security.

📌 Fiduciary Duty

• Legal obligation to act solely in a client’s best interest when providing investment advice.

📌 Prospectus

• Disclosure document detailing key information about investments, risks, and fees, required by law for certain securities.

📌 Form U4

• Uniform application used by broker-dealers to register associated persons with FINRA.

📌 Form U5

• Form filed when an individual terminates registration with a broker-dealer; records termination details.

📌 Custodial Account (UGMA/UTMA)

• Accounts set up for minors, managed by a custodian, transferring ownership at legal age.

📌 IRA (Individual Retirement Account)

• Retirement savings accounts offering tax advantages (Traditional IRA, Roth IRA, SEP IRA).

📌 Churning

• Excessive trading by a broker in a client’s account primarily for commission generation, violating FINRA rules.

📌 Front-running

• Illegal practice of trading ahead of client orders based on nonpublic information.

📌 Insider Trading

• Trading securities based on material, non-public information, punishable by severe penalties.

📌 Mark-up/Mark-down

• The amount added (mark-up) or subtracted (mark-down) from the market price of a security by dealers.

📌 Selling Away

• Unauthorized selling of securities outside the scope or knowledge of the employing broker-dealer.

📌 Discretionary Account

• Brokerage account allowing registered representatives to make trades without specific prior approval from clients.

Use this cheat sheet to quickly review key terms as you prepare for your FINRA licensing exam.