Regulatory Framework and Market Structure
This domain tests how the licensing regime, trading venues and settlement infrastructure fit together: who may perform which activity, where a product trades, and what happens after execution. Many questions disguise a licensing issue as a product issue.
Licensing follows the activity
Licences attach to regulated activities, not job titles. Dealing, advising on securities and asset management are separate activities, and both the firm and each representative must be licensed for the activity actually performed. Taking a client's order is dealing; adding a personal recommendation to that order is advising, which requires the appropriate licence. The licensed firm remains responsible for supervision, record keeping and notifications.
Venues and participants
In the primary market issuers raise capital through IPOs, placings and rights issues; proceeds go to the issuer or selling shareholder, not to another investor. In the secondary market investors trade with each other on an exchange or over the counter. Exchange trades are novated to a central counterparty and settled on a standard cycle; OTC trades retain counterparty and documentation risk and are not centrally cleared in the same way.
Worked example
A trade executes on Thursday. Settlement is T+2 business days. Thursday is T; Friday is T+1; the weekend is not a business day; Monday is T+2. Settlement falls on Monday. Counting starts the business day after execution and skips non-business days.
Traps that cost marks
Assuming a listed product is low risk; treating primary-market proceeds as payment to a selling investor; assuming one licence covers every activity a colleague performs; confusing the exchange with the clearing house that guarantees settlement.