Bulgarian Investment Consultant Exam key terms

EU framework, transposed into Bulgarian law, governing authorisation, conduct, disclosure and trading rules for investment firms and markets. It sets the baseline for client categorisation, best execution, product governance and record-keeping obligations across the Union.

Bulgaria's integrated regulator for capital markets, insurers and pension funds, headed by a chair and deputies. It licenses investment firms and collective schemes, approves prospectuses, supervises market conduct and may impose sanctions, including fines and licence withdrawal.

EU agency that coordinates national securities regulators, drafts technical standards and issues guidelines. It promotes supervisory convergence, may temporarily restrict products or practices in emergencies, and mediates disputes between national competent authorities.

Formal clearance by the regulator of a public offer or admission document before securities may be marketed to the public. Approval confirms completeness of required disclosures but does not certify the issuer's creditworthiness or the merits of the investment.

Regulatory test of whether shareholders, directors and senior managers of a licensed firm have sufficient integrity, competence, financial soundness and time to perform their roles. Failures can block appointments, force ownership changes or lead to licence conditions.

A multilateral trading system operated by a market operator, authorised and functioning regularly under non-discretionary rules. It admits instruments under transparent listing conditions and provides price discovery and settlement infrastructure, as distinct from bilateral or unregulated venues.

A trading venue where multiple third-party buying and selling interests in financial instruments are brought together under non-discretionary rules. It is lighter in regulation than a regulated market and often admits smaller issuers or less liquid instruments.

An entity that interposes itself between trade counterparties, becoming buyer to every seller and seller to every buyer. It manages counterparty risk through novation, margin requirements and default funds, and is central to clearing of exchange-traded derivatives.

The period between trade execution and final transfer of cash and securities. Standard European cycles run on a T+2 basis, meaning delivery and payment occur two business days after the trade date, subject to market practice and instrument type.

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 set and monitor an execution policy and disclose venues used.

The process of transmitting, routing and completing a client's buy or sell instruction on a venue or against the firm's own book. It includes order handling rules such as prompt transmission, aggregation limits and fair allocation of partially filled orders.

A measure of a bond's price sensitivity to interest-rate changes, expressed in years. Macaulay duration is the weighted average time to cash flows; modified duration approximates the percentage price change for a one percentage point yield shift.

The curvature of the relationship between bond price and yield, capturing how duration changes as yields move. Positive convexity means price gains exceed losses for equal yield moves, so it improves the risk profile of a fixed-income holding.

The single discount rate that equates a bond's future coupons and principal repayment to its current market price, assuming all payments are made and coupons reinvested at that rate. It is a standard comparative measure across fixed-income securities.

The yield differential between a corporate or sovereign bond and a comparable risk-free benchmark, compensating investors for default, liquidity and market risk. Widening spreads signal deteriorating credit conditions or rising risk aversion.

The total value of a fund's assets minus its liabilities, divided by the number of units or shares outstanding. It is typically calculated at a fixed valuation point and used as the price for subscriptions and redemptions.

A harmonised EU fund regime permitting cross-border marketing to retail investors. UCITS must diversify holdings, limit leverage, allow regular redemption and appoint an independent depositary, and are recognised under Bulgarian collective investment rules.

A fund whose units trade intraday on an exchange, usually tracking an index. Authorised participants create and redeem units in kind to keep market price close to net asset value, so investors obtain liquidity with fund-style diversification.

The standard deviation of the difference between a portfolio's returns and those of its benchmark. Low values indicate close replication; high values may reflect sampling, fees, cash drag or derivative use, and should be disclosed to investors.

A short, standardised retail disclosure for packaged investment products, required under EU rules. It states the product's nature, objectives, risk indicator, costs, recommended holding period and performance scenarios in plain language before purchase.

Classification of clients as retail, professional or eligible counterparty, which determines the level of protection, disclosure and reporting owed. Retail clients receive the highest safeguards, and reclassification requires documented consent and warnings.

Evaluation of whether a recommended transaction fits a client's investment objectives, financial situation, knowledge and experience. Firms must obtain necessary information, warn when data is insufficient and keep records of the assessment and resulting advice.

Assessment applied to non-advised sales of complex products, checking whether the client understands the risks involved. If the product appears unsuitable, the firm must warn the client, and the client may proceed at their own risk.

Framework requiring manufacturers and distributors to define a target market, test products for that market, and review outcomes. It aims to prevent mis-selling, align charges with benefits and ensure distribution channels match product complexity and client needs.

Power of regulators to prohibit or restrict a financial product or practice to protect investors, for example limits on binary options or leverage in contracts for difference. Intervention may be national or EU-wide and can be temporary or permanent.

Documented arrangements to identify, prevent or manage situations where the firm's or staff's interests may harm clients, such as inducements, proprietary trading or affiliated research. Measures include disclosure, information barriers and declining or returning inducements.

Fees, commissions or non-monetary benefits paid to or by third parties in connection with investment services. Under EU conduct rules they are generally permitted only if they enhance service quality, do not impair the duty to act in the client's best interest, and are disclosed.

Internal information barriers separating departments such as corporate finance and research to stop confidential price-sensitive information from reaching trading desks. Their adequacy is a supervisory expectation and a defence against market abuse allegations.

Trading or tipping others to trade on inside information about an issuer or instrument that is not public. It is a market abuse offence under Bulgarian and EU law, punishable by administrative fines and criminal sanctions, and firms must report suspicious orders.

Conduct that gives false or misleading signals about supply, demand or price, such as wash trades, spoofing or disseminating false news. It distorts market integrity and triggers surveillance, reporting and disciplinary obligations for investment firms.

A confidential filing to the national financial intelligence unit when a firm suspects money laundering or terrorist financing. It must be made promptly, without tipping off the client, and is supported by customer due diligence records.

Ongoing process of identifying clients, verifying their identity and understanding the purpose of the business relationship. It includes beneficial ownership checks, risk rating, periodic review and enhanced measures for higher-risk cases.

A person entrusted with prominent public functions, plus close family members and associates, whose accounts present higher corruption risk. Firms must apply enhanced due diligence, obtain senior approval and monitor the relationship more closely.

Tax on profit from disposing of investments, generally the difference between sale proceeds and the acquisition cost. Bulgarian rules exempt gains on shares and units traded on regulated markets, while other capital gains are taxed at a flat rate.

Tax deducted at source from dividend distributions before payment to the investor. The rate depends on the payer's jurisdiction and any applicable double tax treaty, and foreign tax paid may be credited against domestic liability.

The acquisition cost used to compute taxable gain on disposal, adjusted for commissions and corporate actions such as splits. Accurate record-keeping is essential because missing documentation can lead to tax assessed on gross proceeds.

A statistical estimate of the maximum loss a portfolio may suffer over a defined horizon at a given confidence level. It is widely used for limit-setting but ignores losses beyond the threshold and can understate tail risk.

The average loss conditional on losses exceeding the Value at Risk threshold, also called conditional VaR. It captures tail severity better than VaR and is favoured in modern capital rules for market risk.

Analysis of portfolio or firm resilience under severe but plausible scenarios, such as rate shocks, credit deterioration or liquidity freezes. Results inform capital planning, limit calibration and contingency arrangements beyond statistical models.

A measure of an asset's sensitivity to movements in the market portfolio. A beta above one implies amplified market moves, below one dampened moves, and the metric underpins the capital asset pricing model and systematic risk analysis.

A model stating that expected return equals the risk-free rate plus beta times the market risk premium. It separates systematic from diversifiable risk and is used to estimate required returns and cost of equity.

Spreading exposure across assets, sectors and regions so that idiosyncratic risks offset rather than concentrate. It reduces portfolio volatility without necessarily lowering expected return, but cannot remove systematic market risk.