SIE cheat sheetSection 3: Trading, Customer Accounts & Prohibited Activities (31%)
Account Types & Registration
Free and printable — use your browser's print function for a clean copy. Content reviewed by Lucky Drucker, a Dartmouth graduate working in investment banking in New York who passed the SIE, Series 63, and Series 79 using Lucky the Banker's own materials. Updated 2026-07-21.
Cash Account
- Must pay in full by settlement date (T+1)
- No borrowing, no margin
- Reg T violation if payment not received = frozen account (90 days)
Margin Account
- Borrow from broker-dealer to buy securities
- Reg T: 50% initial margin requirement (set by Fed)
- Minimum maintenance: 25% (FINRA minimum for long positions)
- Short account maintenance: 30%
- Margin call if equity falls below maintenance requirement
- Margin agreement required: credit agreement, hypothecation agreement, loan consent (optional)
- Day-trading transition (FINRA Notice 26-10): New intraday margin standards replace the legacy day-trade count and $25,000 pattern-day-trader minimum. Effective June 4, 2026; firms may phase in implementation until October 20, 2027.
- At firms still using the legacy framework: 4+ day trades in 5 business days, representing more than 6% of total margin-account trades, triggers pattern-day-trader status and a $25,000 minimum. Do not assume every firm has already switched.
- The new standards address intraday exposure; ordinary margin requirements still apply. [FINRA source](https://www.finra.org/rules-guidance/notices/26-10).
Joint Accounts
- JTWROS (Joint Tenants with Right of Survivorship)
- When one owner dies, assets pass to the survivor(s)
- Most common for spouses
- TIC (Tenants in Common)
- When one owner dies, their share goes to their ESTATE (not the other owner)
- Ownership can be unequal
Custodial Accounts (Minors)
- UGMA (Uniform Gift to Minors Act): Minor owns at age 18
- UTMA (Uniform Transfer to Minors Act): Minor owns at age 18 or 21 (state-dependent)
- Gift is IRREVOCABLE — once given, can't take it back
- Only ONE custodian and ONE minor per account
- No margin trading, no options, no speculative investments
- Custodian has fiduciary duty
Trust Accounts
- Managed by a trustee for beneficiaries
- Must follow terms of the trust document
- Trustee has fiduciary duty
Discretionary Accounts
- Rep can decide what, when, and how much to trade WITHOUT prior client approval per trade
- Requires WRITTEN authorization (power of attorney / trading authorization)
- Principal must approve discretionary accounts
- Each trade must be reviewed by principal promptly
- Time and price do NOT make an account discretionary
- If client says "buy 100 shares of Apple when you think the time is right" = NOT discretionary (only time/price discretion)
Key facts to memorize
- Reg T: 50% initial margin (set by Fed)
- Maintenance: 25% long, 30% short (FINRA minimum)
- FINRA 26-10: intraday margin replaces legacy PDT rules; effective June 4, 2026, phase-in through October 20, 2027
- JTWROS: right of survivorship; TIC: share goes to estate
- UGMA: age 18; UTMA: age 18 or 21 (state dependent)
- Discretionary: choosing WHAT to trade (not just time/price)
- Written authorization required for discretionary accounts
Mnemonics that stick
- "JTWROS = Joint, when one dies the Right goes to the Other Survivor"
- "TIC = share goes To Inheritors (through estate), not the other tenant"
- "UGMA = 18, UTMA = 21 (in most states — U-T-M-A has more letters = more years)"
- "Reg T = 50% — the T looks like a fraction bar, half and half"
- "Legacy PDT only: 4 in 5, over 6%, $25K — check the firm's transition status"
- "Discretionary = Deciding WHAT to buy — time/price alone is NOT discretionary"
Exam traps
- Choosing only TIME and PRICE is NOT discretionary — choosing WHAT security or HOW MANY shares IS discretionary
- UGMA/UTMA accounts: gifts are IRREVOCABLE, no margin, no options
- JTWROS: survivor gets everything; TIC: estate gets deceased's share
- Do not treat the legacy PDT count/$25K minimum as universally current: new intraday standards are effective June 4, 2026, with firm implementation through October 20, 2027
- Margin initial requirement (Reg T) = 50% — set by the FED, not FINRA
- FINRA sets MINIMUM maintenance margin (25% long, 30% short) — firms can set higher
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