CISI Global Financial Compliance key terms

Behaviour that undermines market integrity, chiefly insider dealing, unlawful disclosure of inside information, and market manipulation, whether by trading, orders, or misleading signals. Firms must detect and report it.

Precise, non-public information about a financial instrument or its issuer that, if made public, would likely significantly affect the instrument's price. It is the trigger for insider dealing restrictions and disclosure duties.

Trading, or encouraging or facilitating trading, in financial instruments on the basis of inside information, in breach of a duty of confidence or market rules. It is a criminal offence in most major jurisdictions.

Communicating inside information to another person outside the normal exercise of one's employment, profession or duties. It sits alongside insider dealing and manipulation as a core form of market abuse.

Conduct that gives false or misleading signals about supply, demand or price, or that fixes an abnormal price, such as wash trades, spoofing, layering, or disseminating false information. Intent to mislead is often key.

Entering orders with no intention to execute, to create a misleading impression of demand or supply, then cancelling them. Layering involves multiple such orders at different prices to reinforce the false picture.

Deliberately submitting or influencing benchmark input data, such as interest rate or FX fixings, to benefit a trading position rather than reflecting genuine market rates. It is treated as serious market abuse.

A report a firm submits to its regulator when it has reasonable suspicion that a transaction or order may constitute market abuse. It must be made promptly and without informing the client.

The process of disguising the origin of criminal proceeds so they appear legitimate, typically through placement, layering and integration. Firms must have controls to detect and deter it.

Providing or collecting funds, from legitimate or criminal sources, with the intention or knowledge they will be used for terrorist acts. Controls focus on fund flows and screening rather than only criminal origin.

A report to the national financial intelligence unit about activity suspected of involving criminal proceeds or terrorist financing. In the UK the firm must obtain internal consent before proceeding with the transaction.

Disclosing to a person that a suspicious activity or market abuse report has been made, or that an investigation is underway, where this could prejudice the investigation. It is a criminal offence.

Identifying a customer, verifying identity using reliable sources, and understanding the purpose and intended nature of the relationship. It is the foundation of anti-money-laundering controls and must be refreshed for higher risk.

Additional, more intrusive checks applied to higher-risk customers and situations, such as politically exposed persons or high-risk jurisdictions, including source of funds and source of wealth evidence and senior sign-off.

The natural person who ultimately owns or controls a customer or the funds involved, often identified by an ownership threshold such as 25%. Firms must identify them and understand the ownership chain.

A person entrusted with a prominent public function, or a close associate or family member, who presents higher corruption risk. Relationships require enhanced due diligence and senior management approval.

Checking customers, counterparties and payments against designated lists of prohibited persons, entities and countries, and freezing or blocking matches. Screening must be risk-based, documented and kept current.

Offering, promising, giving, requesting or accepting an improper advantage to influence conduct. Firms address it through gifts and hospitality policies, third-party risk controls and, in the UK, the failure-to-prevent offence.

A log recording gifts, entertainment and hospitality received or given, with thresholds triggering approval. It supports anti-bribery controls and helps evidence that inducements are not influencing client outcomes.

Authorities that license, supervise and enforce rules for financial firms, such as conduct and prudential regulators and central banks. Their powers typically include authorisation, rule-making, supervision and sanction.

High-level, outcome-based duties that sit above detailed rules, such as integrity, skill and care, managing conflicts, dealing with regulators openly and treating customers fairly. Breaching them can be sanctioned on its own.

The permission a firm or individual needs from a regulator to carry out specified regulated activities. Acting without permission is a criminal offence and may make related contracts unenforceable.

Regimes that require named individuals in key roles to be pre-approved by the regulator, and require other staff to be assessed as fit and proper by the firm before performing their role.

An assessment of honesty, integrity, reputation, competence, financial soundness and any relevant criminal or regulatory history, applied to individuals and sometimes to firms seeking or holding authorisation.

The allocation of specific regulatory duties to named senior individuals, so accountability is clear and cannot be diffused across a committee. It supports enforcement against individuals as well as firms.

The boundary of activities that require authorisation. Advising on, arranging, managing or dealing in investments typically falls inside it, while genuine introductions or general information may not.

The independent second-line team that advises the business, monitors conduct and controls, and reports on regulatory risk. It must have authority, resources and access to the board to be effective.

A governance model where the business owns and manages risk, compliance and risk functions oversee it independently, and internal audit provides assurance. It clarifies accountability for regulatory risk.

The shared values, behaviour and incentives that determine whether staff do the right thing rather than merely follow rules. Tone from the top, accountability and speaking up are central indicators.

A process allowing staff to raise concerns about wrongdoing or breaches confidentially and without retaliation. Effective arrangements include protected channels, investigation and feedback to the reporter.

A risk-based schedule of reviews testing whether controls and conduct meet regulatory requirements, with defined scope, frequency, sampling and reporting of findings to senior management and governance bodies.

An outcome-based expectation that firms deliver fair treatment across the product lifecycle, from design and promotion through advice, servicing and complaints, rather than only avoiding mis-selling.

A standard requiring firms to act to deliver good outcomes for retail customers in products, price and value, consumer understanding and support, supported by evidence of outcomes rather than process alone.

The requirement to ensure a recommendation or discretionary decision is appropriate for the client's objectives, risk tolerance, financial situation and knowledge. Suitability must be assessed and evidenced before acting.

An assessment of whether a client has the knowledge and experience to understand the risks of a product or service, required for certain non-advised sales. It is narrower than full suitability.

Collecting and maintaining information about a client's circumstances, objectives, risk appetite and identity so that advice, suitability and financial crime controls can operate effectively.

A structured method of assessing a client's willingness and ability to bear loss, producing a risk score matched to suitable products. Poorly designed tools are a common cause of unsuitable advice.

Clients whose circumstances, such as health, bereavement, low literacy or financial difficulty, reduce their ability to make informed decisions. Firms must adapt communications, processes and support to avoid harm.

Marketing communications inviting or inducing investment activity. They must be fair, clear and not misleading, and in many jurisdictions must be approved by an authorised person before issue.

Payments or benefits given or received in connection with investment services that may conflict with duties to clients. Rules generally require them to enhance service, be disclosed, or be prohibited.

Situations where a firm's or employee's interests may damage a client's or another party's interests. Firms must identify, prevent or manage them through policies, disclosure and, where needed, declining business.

Information barriers separating teams, such as corporate finance and sales, to prevent the flow of confidential or inside information. They must be supported by physical, system and behavioural controls.

Controls over the design, approval, target market definition and ongoing review of products, ensuring they meet identified client needs and do not cause foreseeable harm.

Allocating compliance resources and controls in proportion to the likelihood and impact of harm, so higher-risk customers, products and markets receive more scrutiny than lower-risk ones.

A structured evaluation of how regulatory obligations could be breached, the likelihood and impact of each risk, and the adequacy of existing controls, used to prioritise monitoring and remediation.

A living record of identified risks, their owners, ratings and mitigations, reviewed by governance bodies. It evidences that compliance risk is understood and actively managed.

The process for identifying, recording, investigating, remediating and, where required, notifying regulators of rule breaches, including root-cause analysis and tracking of remedial actions to completion.

Telling the regulator promptly about significant breaches or suspected breaches where required, with facts, impact, client harm and remediation. Late or incomplete notification can aggravate the consequences.

A documented process for receiving, investigating and resolving client complaints fairly and within set time limits, with root-cause analysis feeding back into product and process improvement.

Ongoing oversight by a regulator of a firm's compliance, governance and risk, through data requests, meetings, inspections and thematic reviews, leading to findings, requirements or enforcement.

Formal measures a regulator takes against firms or individuals, such as fines, public censure, restrictions on business, or prohibition. It may follow breach findings and can be published.

Submitting accurate, complete and timely information to regulators and exchanges, such as transaction reports, prudential returns and periodic attestations. Errors can themselves be breaches.

Reporting details of executed transactions, such as instrument, price, quantity, counterparty and identifier, to a designated authority so markets can be monitored for abuse.

The application of one country's rules to conduct or firms outside its borders, for example where a foreign firm deals with its residents or uses its currency. It drives cross-border compliance mapping.

The duty of an issuer to publish inside information as soon as possible, subject to limited delay where confidentiality can be maintained, so markets trade on equal information.