Bulgarian Financial Instruments Broker Exam key terms

The EU framework, transposed into Bulgarian law, that governs investment firms, trading venues, client protection and transparency. It sets authorisation conditions, conduct rules and organisational requirements for firms providing investment services.

Bulgaria's independent regulator for capital markets, insurance and pension funds. It licenses investment firms, approves prospectuses, supervises trading venues and may impose sanctions for breaches of financial markets legislation.

Bulgaria's central bank, responsible for monetary policy, payment systems oversight and banking supervision. It also plays a role in anti-money-laundering supervision and in safeguarding settlement and payment infrastructure.

A legal entity authorised to provide investment services such as reception and transmission of orders, execution, portfolio management or underwriting. It must meet capital, governance and conduct-of-business requirements on an ongoing basis.

Any contract or asset within the regulatory list, including transferable securities, money-market instruments, derivatives, units in collective investment schemes and emission allowances. Classification determines which conduct, reporting and transparency rules apply.

A negotiable instrument that can be traded on capital markets, such as shares, depositary receipts, bonds and other debt securities. It excludes instruments of payment and units in open-ended collective schemes treated separately.

An equity security representing ownership in a company, carrying voting and dividend rights. Its value depends on earnings, growth expectations and market sentiment, and shareholders rank behind creditors on insolvency.

A debt security by which an issuer borrows capital and promises periodic coupons and repayment of principal at maturity. Price moves inversely to yield and reflects credit risk, interest rates and time to maturity.

A contract whose value derives from an underlying asset, rate, index or event. Common forms are futures, options, swaps and forwards, used for hedging or speculation and typically settled in cash or by delivery.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying at a set strike price before or at expiry. The buyer pays a premium; the seller bears contingent obligations.

A standardised exchange-traded contract to buy or sell an underlying at a fixed price on a future date. Positions are marked to market daily and secured by margin, with clearing reducing counterparty risk.

A short-term debt instrument, typically maturing within one year, used to manage liquidity. Examples include treasury bills and commercial paper; they usually carry low credit and interest-rate risk.

A pooled vehicle that raises capital from many investors and invests it according to a defined policy. Investors receive units whose value tracks the fund's net asset value, and the fund is managed by a licensed manager.

An EU-harmonised open-ended fund that may be marketed across member states under a passport. It must follow diversification, liquidity and eligible-asset rules and appoint a depositary to safeguard assets.

The value of a fund's assets minus its liabilities, usually expressed per unit or share. It is calculated at each valuation point and forms the basis for subscriptions and redemptions in open-ended funds.

A multilateral trading system operated by a market operator that admits instruments under defined rules and is authorised by the regulator. It provides transparent price discovery and is subject to admission and ongoing disclosure requirements.

A trading venue, operated by an investment firm or market operator, that brings together multiple buying and selling interests on a non-discretionary basis. It is lighter in regulation than a regulated market but still subject to transparency rules.

A multilateral venue for non-equity instruments where the operator may exercise discretion in matching orders. It cannot execute client orders against its own proprietary capital and is subject to specific conduct and transparency obligations.

An investment firm that, on an organised and frequent basis, executes client orders against its own book outside a trading venue. It must publish firm quotes and meet best-execution and transparency obligations.

Trading conducted bilaterally or off-venue rather than on an organised exchange. Prices are negotiated privately, transparency is lower, and counterparty and liquidity risk are typically higher than on regulated venues.

An instruction from a client to buy or sell a financial instrument on specified terms, including quantity, price limit and validity. How it is recorded, transmitted and executed is governed by conduct and record-keeping rules.

An order to buy or sell only at a specified price or better. It gives price control but may remain unfilled if the market does not reach the limit, and it can be partially executed.

An instruction to execute immediately at the best available price. It prioritises speed of execution over price certainty and may fill at a worse price than quoted if liquidity is thin.

Regulated activities provided to third parties, including order reception and transmission, execution, dealing on own account, portfolio management, investment advice and underwriting. Each requires authorisation and triggers conduct obligations.

A personal recommendation to a client regarding a transaction in a specific financial instrument. It must be suitable, based on the client's knowledge, experience, objectives and financial situation, and clearly distinguished from generic information.

Discretionary management of client assets under a mandate, where the firm decides which instruments to buy and sell. It requires a suitability assessment, periodic reporting and policies to manage conflicts of interest.

The duty to take all sufficient steps to obtain the best possible result for clients when executing orders, considering price, cost, speed, likelihood of execution and settlement. Firms must have and disclose an execution policy.

The process of classifying clients as retail, professional or eligible counterparty, which determines the level of protection and disclosure they receive. Clients may request reclassification, subject to safeguards and written consent.

A client who is not professional or an eligible counterparty and therefore receives the highest level of protection. Firms must provide risk warnings, suitability and appropriateness assessments, and detailed disclosures.

A client meeting criteria on size, legal form or expertise, or who elects to be treated as such. Professional clients receive reduced protections, including fewer disclosures, but suitability obligations still apply.

An entity such as a credit institution, investment firm or large undertaking that receives the lowest level of conduct protection. Firms may treat such clients as eligible only where the applicable rules permit.

The evaluation of whether a recommendation or portfolio decision fits a client's investment objectives, financial situation, knowledge and experience. It is required for investment advice and discretionary management and must be documented.

An assessment of whether a client has the knowledge and experience to understand the risks of a product when advice is not provided. If the product is deemed inappropriate, the firm must warn the client.

Unlawful conduct on financial markets, including insider dealing, unlawful disclosure of inside information and market manipulation. It undermines integrity and price formation and carries administrative and criminal sanctions.

Precise, non-public information relating to an issuer or instrument that, if disclosed, would likely significantly affect its price. Trading or tipping on it is prohibited, and issuers must disclose it promptly under transparency rules.

Conduct that gives false or misleading signals about supply, demand or price, or that secures an abnormal price. Examples include wash trades, spoofing and dissemination of false information, and it is prohibited regardless of intent to profit.

A situation where the firm's or an employee's interests may impair the duty to act in the client's best interest. Firms must identify, prevent or manage such conflicts and disclose them where management is insufficient.

A fee, commission or non-monetary benefit paid or received in connection with an investment service. It must be disclosed, must not impair the duty to act in the client's best interest, and must enhance the service provided.

The set of legal and organisational measures to prevent criminals from disguising the proceeds of crime as legitimate funds. It includes customer due diligence, ongoing monitoring, record-keeping and reporting of suspicious activity.

The process of identifying and verifying a client's identity, understanding the business relationship and assessing risk before providing services. It is ongoing and must be repeated when risk changes or doubts arise.

The natural person who ultimately owns or controls a client or the transaction, or on whose behalf it is carried out. Firms must identify beneficial owners and verify their identity as part of due diligence.

A person entrusted with prominent public functions, or a close associate or family member of such a person. The relationship carries higher risk and requires enhanced due diligence and senior-management approval.

Additional checks applied to higher-risk relationships, such as those involving PEPs, high-risk jurisdictions or complex ownership structures. It may include source-of-funds verification, senior approval and more frequent monitoring.

A report filed with the national financial intelligence unit when a firm suspects money laundering or terrorist financing. It must be submitted promptly, and tipping off the client about the report is prohibited.

Minimum own-funds rules that an investment firm must meet to absorb losses and remain solvent. The amount depends on the services provided and may be calculated under fixed-overhead, initial-capital or risk-based approaches.

Rules requiring client money and financial instruments to be segregated from the firm's own assets and held in designated accounts. They prevent commingling and support prompt return of assets if the firm fails.

The separation of client funds and securities from the firm's proprietary assets and from those of other clients. It protects clients in insolvency and requires accurate reconciliation and record-keeping.

The framework of policies, limits and controls by which a firm identifies, measures, monitors and mitigates risks. It includes credit, market, liquidity and operational risk and requires independent oversight and escalation procedures.

The risk that a firm or fund cannot meet obligations as they fall due, or cannot sell assets quickly without a significant price concession. It is managed through buffers, funding diversification and maturity matching.

The risk of loss from inadequate or failed internal processes, people, systems or external events. It covers fraud, IT failure, outsourcing and human error and is managed through controls, testing and business continuity planning.

The obligation to report details of executed transactions in financial instruments to the competent authority promptly and accurately. Reports identify the client, the instrument, price, quantity and the executing or transmitting firm.

The requirement to retain records of orders, communications, transactions and client agreements for defined periods. Records must be complete, accurate, readily retrievable and available to the regulator on request.

The duty to publish details of executed transactions, such as price, volume and time, after execution. It supports price discovery and market integrity and applies to trading venues and, in certain cases, to investment firms.