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The Financial Crimes Enforcement Network (FinCEN) enforces AML rules under the Bank Secrecy Act and USA PATRIOT Act. Broker-dealers must implement AML programs, report suspicious activity, and comply with Customer Identification Program (CIP) rules. The SEC and FINRA oversee securities, while the Fed manages monetary policy. The SIE exam requires understanding of AML enforcement responsibilities.

Mortgage-backed securities (MBS) expose investors to prepayment risk (homeowners refinance when rates fall) and extension risk (mortgages last longer when rates rise). Corporate, municipal, and Treasury bonds do not carry these risks to the same extent. The SIE exam requires candidates to understand risks unique to structured products like MBS.

The SEC regulates securities exchanges, including options exchanges like the Chicago Board Options Exchange (CBOE). The Options Clearing Corporation (OCC) clears and guarantees option trades but does not regulate exchanges. FINRA oversees broker-dealers. MSRB governs municipal securities. The SIE exam highlights regulatory jurisdictions: SEC oversees securities markets broadly, including options markets.

FINRA requires broker-dealers to send account information updates to customers at least once every 36 months. Additionally, firms must provide customers with account record copies at account opening and after significant changes. Annually, firms must provide customers with privacy notices under Regulation S-P. While customers can update at any time, the firm’s obligation is periodic confirmation. The SIE exam expects candidates to understand periodic disclosure, account recordkeeping, and privacy requirements under SEC and FINRA rules.

A margin account requires principal approval before being opened because it involves borrowing and additional risk. Cash accounts, joint accounts, and custodial accounts do not require principal approval to open, though they require proper documentation. The SIE exam highlights account approval requirements, especially for margin and options accounts.