NISM Series III-C key terms

The process by which an intermediary identifies each client, verifies identity using reliable documents, understands the client's business and risk profile, and keeps that information current throughout the relationship.

The broader obligation to establish who a client is, what they do, and whether their activity fits their profile, so that suspicious or unsuitable transactions can be detected before harm occurs.

Additional scrutiny applied to higher-risk clients, such as politically exposed persons or those from higher-risk jurisdictions, involving deeper source-of-funds checks and more frequent review of the relationship.

The natural person who ultimately owns or controls a client entity, or on whose behalf a transaction is carried out, identified by tracing ownership and control layers rather than accepting the registered name at face value.

A person entrusted with prominent public functions, along with close family members and associates, who presents higher corruption risk and therefore attracts enhanced scrutiny and senior management approval before onboarding.

Evidence showing where the money used in a transaction came from, such as salary, sale proceeds, or savings, used to test whether a client's activity is consistent with their known financial profile.

An explanation of how a client's total accumulated wealth was generated over time, distinct from the specific money used in one transaction, and typically required for high-risk or high-value relationships.

A confidential report filed with the financial intelligence unit when an intermediary suspects that funds are proceeds of crime or relate to terrorist financing, filed promptly without tipping off the client.

Disclosing to a client or any third party that a suspicious transaction report has been or may be made, which is itself an offence because it can frustrate investigation and alert wrongdoers.

The national agency that receives suspicious transaction reports and other prescribed disclosures, analyses them, and shares intelligence with enforcement and regulatory authorities.

An entity with no genuine operations, employees, or physical presence, often used to hold assets or move money while concealing the real controlling persons behind it.

The principle that the intensity of monitoring and due diligence should be proportionate to assessed risk, so low-risk clients receive simpler treatment and high-risk clients receive deeper scrutiny.

Trading in securities while in possession of unpublished price-sensitive information obtained through a connected person or other unlawful means, which is prohibited and attracts severe penalties.

Material information about a company that is not yet public and that, if disclosed, would likely affect the price of its securities, such as financial results, dividends, or major contracts.

An internal information barrier separating teams that hold confidential price-sensitive information from those who trade or advise clients, preventing misuse and managing conflicts of interest.

A situation where an intermediary's own interest, or that of a connected party, could improperly influence the advice or service given to a client, requiring disclosure, avoidance, or managed separation.

The legal obligation to act in the client's best interest, placing the client's interest ahead of the intermediary's own and exercising care, honesty, and good faith in handling client assets and instructions.

The practice of holding client funds and securities separately from the intermediary's own assets, often in designated accounts, so that client property is protected if the firm fails.

An entity that safekeeps client securities, settles trades, processes corporate actions, and maintains records of holdings on behalf of clients, subject to specific registration and compliance obligations.

An intermediary registered with a depository that opens and maintains demat accounts for clients, effects transfers of securities, and handles pledge and corporate action credits electronically.

An electronic account holding securities in dematerialised form, through which ownership is transferred by book entry rather than physical certificates, reducing risks such as forgery and loss.

Any person registered with the securities regulator to carry on a regulated activity, such as a broker, merchant banker, portfolio manager, or depository participant, and bound by its code of conduct.

The formal authorisation issued by the regulator permitting an intermediary to conduct specified securities activities, subject to stated conditions and continuing compliance with eligibility norms.

The standards of integrity, reputation, financial soundness, and competence that applicants and registered intermediaries, including their key personnel, must satisfy on a continuing basis.

Senior officers such as the chief executive, compliance officer, and heads of key functions whose conduct and qualifications are scrutinised for regulatory fitness and accountability.

The designated officer responsible for monitoring regulatory compliance, advising staff on obligations, reporting breaches to the board and regulator, and acting as the contact point for inspections.

The prescribed set of behavioural standards in the regulations that an intermediary must follow, covering honesty, fair dealing, confidentiality, and proper handling of client instructions and grievances.

The formal process for receiving, investigating, and resolving client complaints within stated timeframes, with escalation to the regulator or an ombudsman where the client remains dissatisfied.

An independent review function that tests whether the intermediary's systems, controls, and records comply with regulations and internal policies, reporting findings to senior management and the board.

The obligation to maintain accurate books, client agreements, transaction records, and communications for prescribed periods so that regulators can reconstruct and verify activity during inspections.

The combination of written policy, client due diligence, transaction monitoring, staff training, and record retention that an intermediary maintains to prevent and detect money laundering.

The ongoing review of client activity against expected patterns, thresholds, and red flags, aimed at identifying unusual or suspicious transactions that require further enquiry or reporting.

A registered intermediary that manages a client's securities portfolio under a discretionary mandate, making investment decisions on the client's behalf within agreed objectives and constraints.

A written authority allowing a portfolio manager to buy and sell securities without seeking the client's prior consent for each trade, governed by agreed investment objectives.

A registered intermediary that advises on and manages capital raising, takeovers, and other corporate transactions, and must observe specific conduct rules when acting for issuers.

Arranging for a third party to perform a regulated or operational function, permitted only where the intermediary retains responsibility, manages risk, and ensures regulatory access to records.

A formal examination in which the regulator reviews an intermediary's records, systems, and conduct to verify compliance and may issue observations or enforcement action following findings.