SIDC Module 12 key terms

The UK statute that sets out how companies are formed, run and dissolved, covering directors' duties, shareholder rights, meetings, accounts and filings. It underpins most compliance obligations tested in corporate governance questions.

The UK law creating the financial regulatory framework, including the regulator's objectives, the general prohibition on unauthorised regulated activity, and criminal offences for misleading statements or market abuse.

A specified financial activity, such as dealing in investments or managing investments, carried out in relation to a specified investment. Performing it by way of business generally requires authorisation or an exemption.

An individual approved by the regulator to perform a designated senior management or certification function for an authorised firm. Approval depends on fitness, propriety and competence, and lapses if the person changes role.

A regulated role carrying personal accountability for a specified area of a firm's affairs. Holders must be pre-approved by the regulator and are expected to take reasonable steps to prevent regulatory breaches in their area.

The framework placing named, individually approved senior individuals under a duty of responsibility for their business areas. It replaces the earlier approved-persons regime for senior roles and links accountability to specific functions.

A defence available to senior managers who can show they took all steps a person in their position could reasonably be expected to take to avoid a breach occurring or continuing within their area.

The principle that a senior manager is presumed responsible for breaches in their area unless they can show they took reasonable steps to prevent them. It shifts the evidential burden onto the individual.

The regulatory test of whether a person is honest, financially sound, competent and compliant enough to hold an approved role. Assessment considers criminal records, regulatory history, conflicts and business conduct.

The EU-derived rules prohibiting insider dealing, unlawful disclosure of inside information and market manipulation. Firms must detect and report suspicious transactions and maintain insider lists and controls.

Precise, non-public information about an issuer or financial instrument that, if made public, would likely significantly affect its price. Trading or tipping on it is prohibited.

An internal report a firm submits to the regulator when it suspects a transaction may involve market abuse. It must be made without delay and kept confidential from the person concerned.

Situations where a person's or firm's own interests, or duties to another party, could improperly influence decisions made for a client. Firms must identify, manage and disclose them appropriately.

Fees, commissions or non-monetary benefits paid or received by a firm in connection with a service to a client. Rules restrict them to benefits that enhance the service and do not impair the firm's duty to act honestly.

A firm's obligation to take all sufficient steps to obtain the best possible result for clients when executing orders, considering price, cost, speed, likelihood of execution and settlement.

Requirements to hold client funds separately from the firm's own money in designated accounts, with records, reconciliations and protections if the firm fails. They safeguard assets clients entrust to the firm.

The statutory and fiduciary obligations of company directors, including acting within powers, promoting the company's success, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

The body elected by shareholders to oversee the company's strategy, risk and performance, appoint senior executives and account to owners. It acts collectively and delegates specific matters to committees.

A board member without day-to-day executive responsibilities who provides independent challenge and oversight. They typically sit on audit, risk and remuneration committees and help balance executive power.

The freedom of a director from relationships or interests that could materially influence their judgement. Regulators and governance codes set criteria such as tenure, fees and family or business ties.

Sub-groups of the board, such as audit, risk, remuneration and nomination committees, that handle specialised oversight. Their composition, terms of reference and reporting are governed by regulation and governance codes.

A board committee, usually of independent non-executives, that oversees financial reporting, internal controls and the external audit relationship. It meets auditors privately and reviews significant accounting judgements.

A board committee that sets pay and incentives for executive directors and senior managers. It must align rewards with long-term performance and avoid conflicts when appointing advisers.

An independent function that evaluates the effectiveness of risk management, controls and governance. It reports to the audit committee and provides assurance to the board and senior management.

An independent examination of a company's financial statements by a registered auditor, expressing an opinion on whether they are fairly presented. It supports shareholder confidence and regulatory filings.

A governance model where operational management owns risk, a risk and compliance function monitors it, and internal audit provides independent assurance. It clarifies accountability across the organisation.

The amount and type of risk an organisation is willing to accept in pursuit of its objectives. The board sets it, and it guides limits, controls and decision-making throughout the business.

The official company records, such as registers of members, directors and charges, plus minutes and accounting records, that must be kept and made available for inspection as required by law.

A set of principles and provisions on board leadership, effectiveness, accountability and remuneration. Listed companies must report how they apply it or explain any departure, following a comply-or-explain approach.

The signals senior leaders send through their own behaviour, priorities and decisions about what conduct is acceptable. It strongly shapes culture, compliance and the effectiveness of controls.

Leading by demonstrating integrity, fairness and consistency between stated values and actual decisions. It builds trust, reduces misconduct and encourages staff to raise concerns rather than hide problems.

An environment where employees feel safe reporting wrongdoing, risks or errors without fear of retaliation. It depends on visible leadership support, protected channels and timely follow-up on concerns raised.

Disclosing wrongdoing or malpractice, often to an internal function or a regulator, with legal protection for qualifying disclosures. Effective arrangements include independent channels and protection from detriment.

A shared belief that people can ask questions, admit mistakes or challenge decisions without punishment or humiliation. It supports learning, challenge and early escalation of risks.

Being answerable for decisions and their outcomes, with clear ownership and consequences. In leadership it means acknowledging mistakes, explaining actions and accepting scrutiny rather than deflecting blame.

A pattern where a cohesive group suppresses dissent and fails to test alternatives, leading to poor decisions. Diverse membership, devil's advocacy and structured challenge help counteract it.

Identifying and communicating with parties affected by an organisation, such as clients, staff, regulators and communities, to understand expectations and inform decisions. It supports trust and better risk awareness.

The requirement to assess whether a product or service meets a client's objectives, circumstances and risk tolerance before recommending it. Firms must gather sufficient information and keep adequate records.

The process of verifying a client's identity, understanding their business and monitoring activity to prevent financial crime. It underpins anti-money-laundering controls and appropriate product recommendations.

The arrangements a firm uses to design, approve, monitor and review products so they meet identified client needs and do not cause foreseeable harm. It covers target markets, testing and distribution controls.

The defined group of clients for whom a product is designed, based on needs, characteristics and risk profile. Clear definition helps prevent mis-selling and guides distribution and monitoring.

The information firms must give clients about a product's features, costs, risks and terms before they commit. It must be fair, clear and not misleading so clients can make informed decisions.

The degree of loss or uncertainty an investor is willing and able to accept. It is assessed from objectives, time horizon and financial capacity, and must be matched to suitable products.