NISM Series III-A (Compliance) key terms

A designated person within a securities intermediary who monitors adherence to securities laws, exchange rules, and internal policies, and reports compliance status to senior management and the board.

A director nominated by a securities intermediary to ensure compliance with the Prevention of Money Laundering Act and its rules, and to oversee the anti-money laundering framework of the entity.

An officer appointed under anti-money laundering rules to act as the central point for reporting suspicious transactions and to ensure the entity's AML programme is implemented effectively.

The process of identifying a client, verifying identity and address through documents, understanding the client's financial profile, and periodically updating records before and during the relationship.

Ongoing measures including identification, verification, risk categorisation, and monitoring of a client relationship, applied at onboarding and refreshed on triggers such as changed profile or unusual activity.

Heightened scrutiny applied to higher-risk clients such as politically exposed persons or those in high-risk jurisdictions, involving additional documentation, senior approval, and more frequent monitoring.

An individual entrusted with prominent public functions, or a close relative or associate of such a person, who is treated as higher risk and requires enhanced scrutiny and senior management approval.

The natural person who ultimately owns or controls a client account or the shares of a corporate client, identified through ownership thresholds and control tests rather than merely the registered name.

A confidential report filed with the financial intelligence unit when a transaction appears unusual, inconsistent with the client's profile, or indicative of money laundering or terrorist financing.

A report submitted to the financial intelligence unit for cash transactions above the prescribed threshold, capturing client identity, amount, and nature of the transaction.

The obligation to maintain client identification records, transaction documents, and correspondence for the prescribed period so that regulators and investigating agencies can verify compliance.

The policies, procedures, and checks an intermediary builds to ensure compliance with laws and rules, including segregation of duties, authorisation limits, and periodic review by compliance.

An independent, periodic examination of an intermediary's operations and controls, performed by a function separate from the business, to identify gaps and recommend corrective action.

A control that separates functions such as dealing, settlement, and record keeping so that no single person can initiate, approve, and conceal a transaction or error.

An information barrier within a firm that prevents confidential or price-sensitive information held by one department from reaching other departments whose decisions could be affected by it.

Dealing in securities while in possession of unpublished price-sensitive information, or communicating such information to others who trade on it, both of which are prohibited.

Information about a company or its securities that is not generally available and which, if published, would likely materially affect the price of the securities.

A written set of standards governing behaviour of an intermediary and its employees, covering areas such as fair dealing, confidentiality, conflicts of interest, and personal trading.

A situation where an intermediary's or employee's personal or business interest could improperly influence decisions taken for a client, requiring disclosure, avoidance, or management.

The duty to execute client orders on the terms most favourable to the client under prevailing market conditions, considering price, speed, and likelihood of settlement.

An instruction received from a client to buy or sell securities, which must be recorded, time-stamped, executed on the exchange, and settled in accordance with the client's mandate.

A document issued by a trading member to the client after a trade, stating the securities, quantity, price, brokerage, taxes, and settlement details of the transaction.

The prescribed timeline within which securities and funds are exchanged after a trade, with obligations on the intermediary to ensure pay-in and pay-out occur on schedule.

Money belonging to clients that an intermediary holds for trading or settlement, which must be kept separate from the intermediary's own funds and used only for the client's purposes.

Securities held by an intermediary on behalf of clients, which must be segregated from the intermediary's own holdings and reconciled periodically against client records.

A facility allowing clients to buy securities by paying part of the value and funding the rest through the intermediary, subject to eligibility, limits, and disclosure requirements.

A document given to clients explaining the risks of trading in securities, including market risk, leverage, and settlement risk, before the client begins dealing.

The formal process by which an intermediary receives, records, investigates, and resolves client complaints within prescribed timelines, with escalation to the designated officer.

A fund maintained by the exchange to compensate investors up to specified limits in cases of default or fraud by a trading member, funded by member contributions.

Failure by a trading member to meet settlement obligations, pay dues, or comply with exchange requirements, triggering action such as suspension and invocation of the protection fund.

A minimum capital adequacy standard that an intermediary must continuously meet, calculated as assets minus liabilities, to demonstrate financial soundness and absorb losses.

The maintenance of sufficient capital relative to the risks an intermediary carries, ensuring it can meet obligations to clients and the exchange without becoming insolvent.

The authorisation granted by the regulator to an intermediary to carry on specified securities business, subject to conditions and valid for the stated period.

Standards assessing the honesty, integrity, reputation, competence, and financial soundness of an intermediary, its promoters, directors, and key personnel.

Delegation of an activity to a third-party service provider while the intermediary retains full responsibility for regulatory compliance and for managing the associated risks.

A documented plan enabling an intermediary to continue critical operations or recover them within a defined time after a disruption such as system failure or disaster.

Mandated controls and incident-reporting procedures an intermediary adopts to protect client data, trading systems, and records from unauthorised access and cyber attacks.

The duty of an intermediary to submit periodic and event-based reports, such as financial returns and compliance certificates, to the regulator and the exchange within prescribed timelines.

An on-site or off-site examination by the regulator or exchange to assess whether an intermediary's records, conduct, and controls comply with applicable requirements.