CIRO CFO key terms

The financial cushion a securities dealer must hold, calculated under prescribed rules, so it can absorb losses and still meet obligations to clients and counterparties.

A capital measure that scales required capital to the riskiness of a dealer's assets and activities, so that riskier positions demand more backing than safe ones.

A ratio comparing a dealer's eligible capital to its risk-weighted exposures or minimum requirement, showing how much headroom exists above the regulatory floor.

The amount by which a dealer's regulatory capital exceeds the minimum required level, representing the buffer available before a breach occurs.

A trigger level set above the minimum capital requirement that signals deteriorating financial condition and obliges the dealer to notify or take corrective action.

A shortfall where regulatory capital falls below the prescribed minimum, requiring immediate notification to the regulator and restrictions on business activity.

The holding of sufficiently liquid assets to meet expected cash outflows over a stressed period, ensuring the dealer can pay obligations as they fall due.

The danger that a dealer cannot meet cash or collateral obligations when due without incurring unacceptable losses, often triggered by market stress or funding withdrawal.

The risk that a dealer loses access to, or pays more for, the borrowed money and credit lines that finance its inventory and operations.

Collateral deposited by a client or counterparty to secure obligations, protecting the dealer against loss if the position moves adversely or the party defaults.

Collateral collected when a position is opened, sized to cover a potential future loss over a close-out period under stressed conditions.

The minimum collateral level that must be maintained while a position remains open; falling below it triggers a call for additional funds.

A demand for additional collateral when a client's equity falls below the required level, with consequences such as forced liquidation if unmet.

A percentage reduction applied to the market value of collateral when calculating its lending value, reflecting price volatility and liquidation risk.

A contractual and legal arrangement that converts multiple obligations with a defaulting counterparty into a single net amount payable on termination.

The risk that a trading partner fails to perform on its side of a transaction before final settlement, leaving the dealer exposed to replacement cost.

The risk of loss when one leg of a transaction is delivered but the counterparty fails to deliver the matching leg, typically a short-lived but large exposure.

The risk of loss from movements in prices, interest rates, credit spreads, or volatilities affecting the value of positions held by the dealer.

A statistical estimate of the maximum loss a portfolio could suffer over a defined horizon at a stated confidence level, used to size capital and limits.

Analysis of how a portfolio or the firm would perform under severe but plausible scenarios, complementing statistical measures that assume normal conditions.

A forward-looking exercise that models the impact of specific adverse events, such as a rate shock or market dislocation, on capital and liquidity.

Exposure to loss from reliance on a single counterparty, issuer, product, or market, where one adverse event could cause disproportionate damage.

The risk of loss from failed internal processes, people, systems, or external events, including fraud, errors, and business disruption.

The policies, procedures, and checks a firm uses to safeguard assets, ensure reliable records, and comply with rules and management directives.

Dividing responsibilities so no single person controls all stages of a transaction, reducing the chance of error or fraud going undetected.

A control requiring a second qualified person to review and approve a decision, trade, or payment before it takes effect.

A governance model where business units own risk, a separate compliance or risk function oversees it, and internal audit provides independent assurance.

The unit responsible for monitoring adherence to securities laws, dealer rules, and internal policies, and for advising staff on regulatory obligations.

The obligation to gather information about a client's identity, financial circumstances, and objectives before recommending investments or opening accounts.

The duty to ensure a recommendation or trade is appropriate for the client's objectives, risk tolerance, and circumstances, based on documented information.

Verification of a client's identity and beneficial ownership using reliable documents or data, forming part of anti-money-laundering defences.

A confidential filing made to the financial intelligence authority when a dealer detects activity that may involve money laundering or terrorist financing.

Situations where a firm's or employee's interests could improperly influence advice or dealings, requiring disclosure, avoidance, or management controls.

An information barrier separating teams with material non-public information from those who could misuse it, such as research and investment banking staff.

Trading or tipping others to trade securities while in possession of material non-public information, a serious market abuse offence.

Conduct that distorts the price or supply of securities through deceptive practices such as wash trades or false reporting of orders.

Systematic monitoring of order and trade data to detect manipulative patterns, breaches of limits, and other irregular activity requiring investigation.

The notes and supplementary information accompanying financial statements that explain accounting policies, estimates, and the nature of significant items.

Determining an asset or liability's price in an orderly transaction between market participants at the measurement date, using observable or unobservable inputs.

A reduction in the carrying amount of an asset when its recoverable amount falls below book value, recognized as a loss in the period.

The threshold at which an omission or misstatement could influence decisions of users of financial statements, guiding recognition and disclosure judgements.

A firm admitted to membership of a self-regulatory organization, subject to its rules on capital, conduct, and operations in return for market access.

A body that writes and enforces rules for its member firms under statutory recognition, supplementing government securities regulators.

An account holding client cash and securities that a dealer administers, subject to rules on segregation, recordkeeping, and reporting.

The requirement to hold client assets separately from firm assets, protecting them from the dealer's own creditors in an insolvency.

The risk of loss or misappropriation of client assets held by a dealer, mitigated by segregation, reconciliation, and independent oversight.

The duty to take reasonable steps to obtain the best available outcome for client orders, considering price, speed, cost, and likelihood of execution.

The controlled process of receiving, recording, routing, and allocating client orders fairly, with priority rules that prevent preferential treatment.

The requirement to create and retain accurate records of trades, client instructions, and communications for prescribed periods, available to regulators on request.