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Municipal revenue bonds are backed by the revenues of a specific project (such as tolls, lease payments, or fees). If the project underperforms, investors face credit risk—the possibility that revenues will not be sufficient to meet debt service obligations. Interest-rate risk is present in all bonds but is not unique to revenue bonds. Prepayment risk is more relevant to mortgage-backed securities. Inflation risk affects all fixed-income securities by eroding purchasing power. For the SIE exam, it’s important to contrast general obligation (GO) bonds, backed by taxing authority, with revenue bonds, which carry higher credit risk tied to project performance.

Mortgage bonds are secured by real estate or physical property owned by the issuer. A debenture is unsecured corporate debt. Subordinated bonds rank lower in priority during liquidation. General obligation bonds are municipal securities backed by taxing power. The SIE exam requires candidates to distinguish secured vs. unsecured bonds.

The Bank Secrecy Act requires financial institutions, including broker-dealers, to file SARs when they detect suspicious or potentially fraudulent activity. These reports are submitted to FinCEN. The 1934 Act regulates secondary trading, the 1940 Act governs investment companies, and the Trust Indenture Act applies to corporate debt issues. The SIE exam requires candidates to know AML reporting requirements.

TIPS adjust their principal based on changes in the Consumer Price Index (CPI), ensuring that both principal and interest payments rise with inflation. Zero-coupon bonds and preferred stock do not provide inflation protection, and high-yield bonds offer higher income but greater credit risk. The SIE exam tests inflation risk and products that mitigate it.

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits (checking, savings, CDs) up to $250,000 per depositor per bank. SIPC protects securities accounts at broker-dealers (up to $500,000). FINRA is a self-regulatory organization, not an insurer. OCC clears options trades, not deposits. The SIE exam stresses the distinction between FDIC (banks) and SIPC (broker-dealers).