SC Licensing Exam key terms

A licence issued under the Capital Markets and Services Act that authorises a firm to carry out one or more regulated activities, such as dealing in securities, dealing in derivatives, fund management, or advising on corporate finance.

A business activity listed in securities law that may only be carried out with a licence, for example dealing in securities, dealing in derivatives, clearing, fund management, investment advice, financial planning, or advising on corporate finance.

A licence granted to an individual permitting them to act as a representative of a licensed firm in carrying out a specified regulated activity under that firm's supervision and responsibility.

The standards used to judge whether a person is suitable to hold a licence or key role, covering honesty, integrity, solvency, competence, past misconduct, and any criminal or regulatory record.

Carrying on business of buying, selling, or subscribing securities, or making offers to do so, whether as principal or agent, including arranging deals for clients and operating a book of such transactions.

Financial instruments such as shares, debentures, bonds, notes, units in unit trusts, and derivatives over these, which are transferable and commonly traded or issued to raise or invest capital.

Carrying on business of entering into, offering to enter into, or arranging contracts whose value derives from an underlying asset, rate, index, or event, including exchange-traded and over-the-counter contracts.

A contract whose value depends on an underlying reference such as a share price, interest rate, currency, commodity, or index, and which typically settles in cash or by delivery at a future date.

The process of confirming, matching, and settling transactions between trading parties, including calculating obligations and managing the risk that a party fails to honour its trades.

An entity that interposes itself between buyers and sellers, becoming counterparty to both sides, so that each party faces the clearing house rather than the original trading party.

The legal substitution of one contract party for another, used by a clearing house to replace the original bilateral contract with two contracts, one facing each side of the trade.

Collateral that a trading or clearing participant must deposit to cover potential losses on open positions, comprising initial margin for new risk and variation margin for daily mark-to-market movements.

A pooled reserve contributed by clearing members and used, after a defaulting member's own margin and contributions are exhausted, to cover losses caused by that member's failure.

Valuing an open position at the current market price rather than its original cost, used to calculate daily profit, loss, and collateral obligations for derivatives and trading books.

Managing a portfolio of securities or other assets on behalf of clients under a mandate or collective investment scheme, including making investment decisions and executing trades for that portfolio.

An arrangement pooling money from several investors to invest in a portfolio, where investors do not control day-to-day decisions and their returns depend on the scheme's performance.

A collective investment scheme constituted by a trust deed in which investors buy units representing a share of a pooled portfolio managed by a manager and held by a trustee.

The total value of a fund's assets minus its liabilities, divided by the number of units or shares outstanding to give the price at which units are created or redeemed.

An institution that safekeeps client or fund assets, settles transactions on the client's behalf, and maintains records separate from those of the investment manager.

A party holding fund assets on trust for investors, overseeing the manager's compliance with the deed and law, and safeguarding investor interests independently of the manager.

The documented authority given by a client to a manager, setting out objectives, permitted investments, risk limits, and any restrictions that govern how the portfolio may be managed.

A voluntary long-term savings arrangement approved under securities law, in which members contribute to approved funds and may receive tax relief, with rules on withdrawals and portability.

An institution approved to establish and operate private retirement scheme funds, including appointing a scheme trustee and administering member accounts and contributions.

The pre-selected retirement fund into which a member's contributions are placed when the member does not choose an investment option, typically set with regard to the member's age.

Giving advice on matters such as takeovers, mergers, fundraising, restructurings, and share issues, including preparing submissions to regulators and advising on compliance with securities rules.

An offer made to shareholders of a company to acquire their shares, often triggering mandatory offer obligations and disclosure requirements once a specified voting threshold is reached.

A disclosure document issued when securities are offered to the public, containing information investors need to make an informed decision, and subject to registration and liability rules.

The investigation and verification a firm performs before advising, underwriting, or recommending a transaction, to confirm facts, identify risks, and ensure disclosures are accurate and complete.

Recommending or giving an opinion on buying, selling, or holding specific securities or derivatives, where the advice is presented as suitable for the person or their circumstances.

Analysing a client's financial position and goals and producing a plan covering savings, investments, insurance, retirement, and estate needs, with recommendations suited to the client.

The process of gathering a client's objectives, financial situation, knowledge, and risk tolerance, and checking that a recommended product or strategy is appropriate for that client.

A summary of an investor's willingness and capacity to bear loss, derived from their goals, time horizon, income, and experience, used to match them with suitable investments.

A written notice explaining the key risks of a product or strategy, including possible loss of capital and leverage or market risks, which the client acknowledges before transacting.

The requirement to give clients clear, accurate information about a product's features, fees, risks, and terms before they invest, so that decisions are informed rather than based on sales claims.

The practice of holding client money and securities separately from the firm's own assets, in designated accounts, so client property can be identified and returned if the firm fails.

The controls a licensed firm must apply to detect and deter money laundering and terrorist financing, including customer due diligence, transaction monitoring, record keeping, and suspicious transaction reporting.

Identifying each client, verifying identity using reliable documents, understanding the nature of the business relationship, and checking beneficial ownership and source of funds where risk requires.

The natural person who ultimately owns or controls a client or the funds involved, or on whose behalf a transaction is carried out, even where another name appears on the account.

The standards governing how licensed firms and representatives behave in the market, including fair dealing with clients, avoiding conflicts of interest, and prohibiting manipulative or misleading trading.

Trading or tipping others to trade in securities while in possession of material non-public information obtained through a connection with an issuer, which is a market misconduct offence.

Conduct that creates a false or misleading appearance of trading activity or price, such as wash trades, fictitious orders, or price ramping, and which is prohibited as market misconduct.

The risk that the other party to a transaction fails to meet its obligations, such as failing to pay or deliver, and which clearing and collateral arrangements are designed to reduce.

The process of determining the fair value of assets or positions using market prices or accepted models, which underpins fund pricing, collateral calculations, and client reporting.

A person holding a stake at or above the level set by law or listing rules, who must notify the issuer or regulator of the holding and of subsequent changes.