SC Licensing Exam flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Dealing in securities licence

A licence under the CMSA that authorises the holder to carry on the business of dealing in securities, including subscribing for or underwriting securities, subject to SC conditions.

Best execution obligation

A dealer must execute client orders on the best available terms, considering price, speed, and likelihood of execution, and must disclose its execution policy to clients.

Client money segregation

Client money must be held in a trust account separate from the dealer's own funds, reconciled daily, and not used for the dealer's benefit.

Short selling restriction

Short selling is permitted only for designated securities under the SC's securities borrowing and lending framework; naked short selling is prohibited.

Market manipulation prohibition

Creating a false or misleading appearance of active trading, including wash sales and matched orders, is prohibited under the CMSA.

Dealing in derivatives licence

A licence under the CMSA that authorises the holder to deal in derivatives, including executing client orders and trading on its own account, subject to SC conditions.

Derivatives suitability assessment

A derivatives dealer must assess a client's investment experience and financial capacity before opening an account, and must document the assessment.

Risk disclosure statement

A document that explains the risks of derivatives trading, which a dealer must provide to a client before the client's first derivatives transaction, obtaining acknowledgement.

Derivatives margin segregation

Client margin for derivatives must be segregated from the dealer's own funds and maintained in accordance with exchange or clearing house rules.

Position limits

Caps imposed by an exchange or the SC on the number of derivatives contracts a person may hold, to prevent excessive concentration and market risk.

Clearing licence

A licence under the CMSA that authorises the holder to operate a clearing house for securities or derivatives transactions, including settlement and counterparty risk management.

Default fund

A pool of resources maintained by a clearing house to cover losses arising from the default of a clearing member, supplementing margin and collateral.

Clearing member capital

A clearing member must meet minimum capital requirements set by the clearing house and must post collateral to support its obligations.

Portability of client positions

A clearing house must have rules allowing client positions to be transferred to another clearing member if the original member defaults, protecting clients.

Fund management licence

A licence under the CMSA that authorises the holder to manage a portfolio of securities or derivatives on behalf of clients, including collective investment schemes.

Investment mandate

A written agreement between a fund manager and a client that sets out investment objectives, restrictions, and fees, and must be agreed by the client.

Independent valuation

Fund assets must be valued at least monthly by a function independent of the portfolio manager, using a documented and consistently applied valuation policy.

Fund manager reporting

A fund manager must report to clients at least quarterly on performance, holdings, and fees, and provide an annual report audited by an independent auditor.

Private retirement scheme licence

A licence or approval under the CMSA that authorises a provider to deal in private retirement scheme products, subject to SC guidelines and member protection rules.

PRS withdrawal conditions

PRS funds may be withdrawn only upon retirement age, death, permanent incapacity, or other permitted grounds; early withdrawal may incur penalties or tax consequences.

PRS default investment option

A PRS provider must offer a default investment option for members who do not choose an investment option, alongside a range of risk-profiled options.

PRS fee disclosure

A PRS provider must disclose all fees, charges, and investment risks to members clearly and prominently before they join the scheme.

Corporate finance adviser licence

A licence under the CMSA that authorises the holder to advise on corporate finance matters, including takeovers, mergers, acquisitions, and fund-raising exercises.

Take-over adviser appointment

Under the SC's take-over guidelines, a corporate finance adviser must be appointed for certain transactions and must submit required documents to the SC for approval.

Independence in corporate finance

A corporate finance adviser must act independently, disclose conflicts of interest, and avoid dealing in client or target securities while possessing inside information.

Fairness opinion

An independent opinion on the fairness of a transaction, which the SC may require a corporate finance adviser to provide, especially for related-party transactions.

Investment advice licence

A licence under the CMSA that authorises the holder to advise on securities and derivatives, including making recommendations on buying, selling, or holding investments.

Reasonable basis for advice

An investment adviser must base recommendations on research and analysis, ensure suitability for the client, and document the basis for the advice.

Conflict of interest disclosure

An investment adviser must disclose any actual or potential conflict, including commissions or benefits from product issuers, before giving advice.

Financial planning licence

A licence under the CMSA that authorises the holder to provide financial planning services, including analysing a client's financial situation and recommending a plan.

Client fact-find

A thorough assessment of a client's financial position, objectives, risk tolerance, and time horizon, which a financial planner must conduct before making recommendations.

Fit and proper test

The SC's assessment of honesty, integrity, competence, financial soundness, and reputation applied to licence applicants and holders under the CMSA.

Capital Markets Compensation Fund

An investor protection fund that may compensate eligible investors for losses caused by the failure of a licensed capital market intermediary, subject to claim limits.