SIDC Module 16 cheat sheet

Regulatory pyramid in securities markets: legislation sets the framework, the regulator (e.g. a securities commission) issues rules and guidance, and self-regulatory organisations apply member rules on top; binding force decreases as you move up.

The regulator's three core objectives are typically investor protection, market fairness/efficiency and financial stability; a rule that serves one objective may trade off against another, so justify decisions against all three.

Disclosure-based regulation assumes investors are responsible for reading filings; conduct-based regulation (suitability, fair dealing) protects investors who cannot or do not read them.

Insider dealing requires inside information, an insider (or tippee) and a prohibited dealing or disclosure; the information must be specific, non-public and price-sensitive.

Market manipulation includes wash trades, marking the close, spoofing and dissemination of false information; intent to create a false or misleading impression is the common element.

Licensing regimes distinguish dealing, advising, managing and arranging; a firm must hold a licence for each regulated activity it performs, and client-money and custody rules attach to holding client assets.

Breach consequences escalate: private warning, public censure, fines, restriction of licence, revocation and referral for criminal prosecution; cooperation and remediation are standard mitigating factors.

Cross-border activity is governed by territorial scope rules and equivalence/passporting arrangements; verify which regime applies before soliciting clients in another jurisdiction.

Situational leadership: match style to follower readiness - directing (low competence, high commitment), coaching, supporting, and delegating (high competence, high commitment).

Transformational leadership rests on four behaviours: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership instead trades reward for performance and manages by exception.

Tuckman's stages: forming, storming, norming, performing, adjourning; conflict peaks in storming, so leaders should surface and resolve it rather than suppress it.

Psychological safety (Edmondson) predicts team learning and error reporting; it is created by leader responses to bad news, not by personality traits of team members.

Goleman's leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching; the authoritative and affiliative styles correlate most positively with climate, the coercive style most negatively in most settings.

Feedback rule: describe observed behaviour and its impact, then ask; avoid trait labels. Specific, timely, behavioural feedback is more likely to change conduct than annual ratings.

Ethical leadership requires tone at the top to match incentives; where stated values conflict with reward structures, employees follow the reward structure.

Delegation requires authority, resources, a clear outcome and an agreed check-in point; delegating accountability without these four elements is abdication.

Board duties are commonly framed as duty of care (informed, diligent decision-making) and duty of loyalty (acting in the company's interest, managing conflicts); the business judgement rule protects informed, disinterested decisions.

Independence tests typically exclude former employees, close family of executives, material suppliers or customers, and advisers with significant fees within a look-back period (often three years).

Committee architecture: audit (financial reporting, external and internal audit), remuneration (executive pay), nomination (board composition and succession) and risk (risk appetite and oversight).

Separation of chair and CEO, and of the board from management, is a structural safeguard; combining roles concentrates power and weakens challenge.

'Comply or explain' governance codes allow departure from a provision provided the reason is disclosed; the disclosure, not the departure, is the obligation.

Related-party transactions require identification, independent review, disclosure and, where material, shareholder approval; abstention of conflicted directors is standard.

Risk governance: the board sets risk appetite, management operates within limits, internal audit provides independent assurance; three lines model separates ownership, oversight and assurance.

Shareholder rights include voting, receiving information, participating in general meetings and, in many regimes, pre-emption on new share issues; one share one vote is a default, not a universal rule.

Board effectiveness reviews (internal annually, external periodically) assess composition, dynamics, information quality and succession planning, not just attendance records.

Product classification drives obligations: securities, derivatives, collective investment schemes, insurance-based products and deposits each trigger different disclosure, suitability and selling rules.

Suitability assessment requires knowledge and experience, financial situation (including ability to bear loss), investment objectives and risk tolerance; the recommendation must be suitable for that client.

Risk-return framing: higher expected return compensates for higher risk; a product marketed as high return with low risk is a red flag for mis-selling or fraud.

Costs compound against the client: total expense ratio, transaction costs and any performance fee reduce net return; compare products on a net, not gross, basis.

Liquidity features to check: dealing frequency, notice periods, lock-ups, gate provisions and suspension rights; a daily-dealt fund may still suspend redemptions in stressed markets.

Product governance requires a target market definition, distribution strategy consistent with it, and post-sale monitoring; misalignment between target market and actual buyers is a governance failure.

Structured products combine a bond floor with derivative exposure; capital protection applies only at maturity, only to the issuer's credit, and only if held to term.

Key Investor/Product disclosure documents must be short, plain-language, comparable and state risks, costs and past performance with the required warning that past performance does not predict future results.

Regulatory pyramid in securities markets: legislation sets the framework, the regulator (e.g. a securities commission) issues rules and guidance, and self-regulatory organisations apply member rules on top; binding force decreases as you move up.

The regulator's three core objectives are typically investor protection, market fairness/efficiency and financial stability; a rule that serves one objective may trade off against another, so justify decisions against all three.

Disclosure-based regulation assumes investors are responsible for reading filings; conduct-based regulation (suitability, fair dealing) protects investors who cannot or do not read them.

Insider dealing requires inside information, an insider (or tippee) and a prohibited dealing or disclosure; the information must be specific, non-public and price-sensitive.

Market manipulation includes wash trades, marking the close, spoofing and dissemination of false information; intent to create a false or misleading impression is the common element.

Licensing regimes distinguish dealing, advising, managing and arranging; a firm must hold a licence for each regulated activity it performs, and client-money and custody rules attach to holding client assets.

Breach consequences escalate: private warning, public censure, fines, restriction of licence, revocation and referral for criminal prosecution; cooperation and remediation are standard mitigating factors.

Cross-border activity is governed by territorial scope rules and equivalence/passporting arrangements; verify which regime applies before soliciting clients in another jurisdiction.

Situational leadership: match style to follower readiness - directing (low competence, high commitment), coaching, supporting, and delegating (high competence, high commitment).

Transformational leadership rests on four behaviours: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership instead trades reward for performance and manages by exception.

Tuckman's stages: forming, storming, norming, performing, adjourning; conflict peaks in storming, so leaders should surface and resolve it rather than suppress it.

Psychological safety (Edmondson) predicts team learning and error reporting; it is created by leader responses to bad news, not by personality traits of team members.

Goleman's leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching; the authoritative and affiliative styles correlate most positively with climate, the coercive style most negatively in most settings.

Feedback rule: describe observed behaviour and its impact, then ask; avoid trait labels. Specific, timely, behavioural feedback is more likely to change conduct than annual ratings.

Ethical leadership requires tone at the top to match incentives; where stated values conflict with reward structures, employees follow the reward structure.

Delegation requires authority, resources, a clear outcome and an agreed check-in point; delegating accountability without these four elements is abdication.

Board duties are commonly framed as duty of care (informed, diligent decision-making) and duty of loyalty (acting in the company's interest, managing conflicts); the business judgement rule protects informed, disinterested decisions.

Independence tests typically exclude former employees, close family of executives, material suppliers or customers, and advisers with significant fees within a look-back period (often three years).

Committee architecture: audit (financial reporting, external and internal audit), remuneration (executive pay), nomination (board composition and succession) and risk (risk appetite and oversight).

Separation of chair and CEO, and of the board from management, is a structural safeguard; combining roles concentrates power and weakens challenge.

'Comply or explain' governance codes allow departure from a provision provided the reason is disclosed; the disclosure, not the departure, is the obligation.

Related-party transactions require identification, independent review, disclosure and, where material, shareholder approval; abstention of conflicted directors is standard.

Risk governance: the board sets risk appetite, management operates within limits, internal audit provides independent assurance; three lines model separates ownership, oversight and assurance.

Shareholder rights include voting, receiving information, participating in general meetings and, in many regimes, pre-emption on new share issues; one share one vote is a default, not a universal rule.

Board effectiveness reviews (internal annually, external periodically) assess composition, dynamics, information quality and succession planning, not just attendance records.

Product classification drives obligations: securities, derivatives, collective investment schemes, insurance-based products and deposits each trigger different disclosure, suitability and selling rules.

Suitability assessment requires knowledge and experience, financial situation (including ability to bear loss), investment objectives and risk tolerance; the recommendation must be suitable for that client.

Risk-return framing: higher expected return compensates for higher risk; a product marketed as high return with low risk is a red flag for mis-selling or fraud.

Costs compound against the client: total expense ratio, transaction costs and any performance fee reduce net return; compare products on a net, not gross, basis.

Liquidity features to check: dealing frequency, notice periods, lock-ups, gate provisions and suspension rights; a daily-dealt fund may still suspend redemptions in stressed markets.

Product governance requires a target market definition, distribution strategy consistent with it, and post-sale monitoring; misalignment between target market and actual buyers is a governance failure.

Structured products combine a bond floor with derivative exposure; capital protection applies only at maturity, only to the issuer's credit, and only if held to term.

Key Investor/Product disclosure documents must be short, plain-language, comparable and state risks, costs and past performance with the required warning that past performance does not predict future results.

Regulatory pyramid in securities markets: legislation sets the framework, the regulator (e.g. a securities commission) issues rules and guidance, and self-regulatory organisations apply member rules on top; binding force decreases as you move up.

The regulator's three core objectives are typically investor protection, market fairness/efficiency and financial stability; a rule that serves one objective may trade off against another, so justify decisions against all three.

Disclosure-based regulation assumes investors are responsible for reading filings; conduct-based regulation (suitability, fair dealing) protects investors who cannot or do not read them.

Insider dealing requires inside information, an insider (or tippee) and a prohibited dealing or disclosure; the information must be specific, non-public and price-sensitive.

Market manipulation includes wash trades, marking the close, spoofing and dissemination of false information; intent to create a false or misleading impression is the common element.

Licensing regimes distinguish dealing, advising, managing and arranging; a firm must hold a licence for each regulated activity it performs, and client-money and custody rules attach to holding client assets.

Breach consequences escalate: private warning, public censure, fines, restriction of licence, revocation and referral for criminal prosecution; cooperation and remediation are standard mitigating factors.

Cross-border activity is governed by territorial scope rules and equivalence/passporting arrangements; verify which regime applies before soliciting clients in another jurisdiction.

Situational leadership: match style to follower readiness - directing (low competence, high commitment), coaching, supporting, and delegating (high competence, high commitment).

Transformational leadership rests on four behaviours: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership instead trades reward for performance and manages by exception.

Tuckman's stages: forming, storming, norming, performing, adjourning; conflict peaks in storming, so leaders should surface and resolve it rather than suppress it.

Psychological safety (Edmondson) predicts team learning and error reporting; it is created by leader responses to bad news, not by personality traits of team members.

Goleman's leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching; the authoritative and affiliative styles correlate most positively with climate, the coercive style most negatively in most settings.

Feedback rule: describe observed behaviour and its impact, then ask; avoid trait labels. Specific, timely, behavioural feedback is more likely to change conduct than annual ratings.

Ethical leadership requires tone at the top to match incentives; where stated values conflict with reward structures, employees follow the reward structure.

Delegation requires authority, resources, a clear outcome and an agreed check-in point; delegating accountability without these four elements is abdication.

Board duties are commonly framed as duty of care (informed, diligent decision-making) and duty of loyalty (acting in the company's interest, managing conflicts); the business judgement rule protects informed, disinterested decisions.

Independence tests typically exclude former employees, close family of executives, material suppliers or customers, and advisers with significant fees within a look-back period (often three years).

Committee architecture: audit (financial reporting, external and internal audit), remuneration (executive pay), nomination (board composition and succession) and risk (risk appetite and oversight).

Separation of chair and CEO, and of the board from management, is a structural safeguard; combining roles concentrates power and weakens challenge.

'Comply or explain' governance codes allow departure from a provision provided the reason is disclosed; the disclosure, not the departure, is the obligation.

Related-party transactions require identification, independent review, disclosure and, where material, shareholder approval; abstention of conflicted directors is standard.

Risk governance: the board sets risk appetite, management operates within limits, internal audit provides independent assurance; three lines model separates ownership, oversight and assurance.

Shareholder rights include voting, receiving information, participating in general meetings and, in many regimes, pre-emption on new share issues; one share one vote is a default, not a universal rule.

Board effectiveness reviews (internal annually, external periodically) assess composition, dynamics, information quality and succession planning, not just attendance records.

Product classification drives obligations: securities, derivatives, collective investment schemes, insurance-based products and deposits each trigger different disclosure, suitability and selling rules.

Suitability assessment requires knowledge and experience, financial situation (including ability to bear loss), investment objectives and risk tolerance; the recommendation must be suitable for that client.

Risk-return framing: higher expected return compensates for higher risk; a product marketed as high return with low risk is a red flag for mis-selling or fraud.

Costs compound against the client: total expense ratio, transaction costs and any performance fee reduce net return; compare products on a net, not gross, basis.

Liquidity features to check: dealing frequency, notice periods, lock-ups, gate provisions and suspension rights; a daily-dealt fund may still suspend redemptions in stressed markets.

Product governance requires a target market definition, distribution strategy consistent with it, and post-sale monitoring; misalignment between target market and actual buyers is a governance failure.

Structured products combine a bond floor with derivative exposure; capital protection applies only at maturity, only to the issuer's credit, and only if held to term.

Key Investor/Product disclosure documents must be short, plain-language, comparable and state risks, costs and past performance with the required warning that past performance does not predict future results.

Regulatory pyramid in securities markets: legislation sets the framework, the regulator (e.g. a securities commission) issues rules and guidance, and self-regulatory organisations apply member rules on top; binding force decreases as you move up.

The regulator's three core objectives are typically investor protection, market fairness/efficiency and financial stability; a rule that serves one objective may trade off against another, so justify decisions against all three.

Disclosure-based regulation assumes investors are responsible for reading filings; conduct-based regulation (suitability, fair dealing) protects investors who cannot or do not read them.

Insider dealing requires inside information, an insider (or tippee) and a prohibited dealing or disclosure; the information must be specific, non-public and price-sensitive.

Market manipulation includes wash trades, marking the close, spoofing and dissemination of false information; intent to create a false or misleading impression is the common element.

Licensing regimes distinguish dealing, advising, managing and arranging; a firm must hold a licence for each regulated activity it performs, and client-money and custody rules attach to holding client assets.

Breach consequences escalate: private warning, public censure, fines, restriction of licence, revocation and referral for criminal prosecution; cooperation and remediation are standard mitigating factors.

Cross-border activity is governed by territorial scope rules and equivalence/passporting arrangements; verify which regime applies before soliciting clients in another jurisdiction.

Situational leadership: match style to follower readiness - directing (low competence, high commitment), coaching, supporting, and delegating (high competence, high commitment).

Transformational leadership rests on four behaviours: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership instead trades reward for performance and manages by exception.

Tuckman's stages: forming, storming, norming, performing, adjourning; conflict peaks in storming, so leaders should surface and resolve it rather than suppress it.

Psychological safety (Edmondson) predicts team learning and error reporting; it is created by leader responses to bad news, not by personality traits of team members.

Goleman's leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching; the authoritative and affiliative styles correlate most positively with climate, the coercive style most negatively in most settings.

Feedback rule: describe observed behaviour and its impact, then ask; avoid trait labels. Specific, timely, behavioural feedback is more likely to change conduct than annual ratings.

Ethical leadership requires tone at the top to match incentives; where stated values conflict with reward structures, employees follow the reward structure.

Delegation requires authority, resources, a clear outcome and an agreed check-in point; delegating accountability without these four elements is abdication.

Board duties are commonly framed as duty of care (informed, diligent decision-making) and duty of loyalty (acting in the company's interest, managing conflicts); the business judgement rule protects informed, disinterested decisions.

Independence tests typically exclude former employees, close family of executives, material suppliers or customers, and advisers with significant fees within a look-back period (often three years).

Committee architecture: audit (financial reporting, external and internal audit), remuneration (executive pay), nomination (board composition and succession) and risk (risk appetite and oversight).

Separation of chair and CEO, and of the board from management, is a structural safeguard; combining roles concentrates power and weakens challenge.

'Comply or explain' governance codes allow departure from a provision provided the reason is disclosed; the disclosure, not the departure, is the obligation.

Related-party transactions require identification, independent review, disclosure and, where material, shareholder approval; abstention of conflicted directors is standard.

Risk governance: the board sets risk appetite, management operates within limits, internal audit provides independent assurance; three lines model separates ownership, oversight and assurance.

Shareholder rights include voting, receiving information, participating in general meetings and, in many regimes, pre-emption on new share issues; one share one vote is a default, not a universal rule.

Board effectiveness reviews (internal annually, external periodically) assess composition, dynamics, information quality and succession planning, not just attendance records.

Product classification drives obligations: securities, derivatives, collective investment schemes, insurance-based products and deposits each trigger different disclosure, suitability and selling rules.

Suitability assessment requires knowledge and experience, financial situation (including ability to bear loss), investment objectives and risk tolerance; the recommendation must be suitable for that client.

Risk-return framing: higher expected return compensates for higher risk; a product marketed as high return with low risk is a red flag for mis-selling or fraud.

Costs compound against the client: total expense ratio, transaction costs and any performance fee reduce net return; compare products on a net, not gross, basis.

Liquidity features to check: dealing frequency, notice periods, lock-ups, gate provisions and suspension rights; a daily-dealt fund may still suspend redemptions in stressed markets.

Product governance requires a target market definition, distribution strategy consistent with it, and post-sale monitoring; misalignment between target market and actual buyers is a governance failure.

Structured products combine a bond floor with derivative exposure; capital protection applies only at maturity, only to the issuer's credit, and only if held to term.

Key Investor/Product disclosure documents must be short, plain-language, comparable and state risks, costs and past performance with the required warning that past performance does not predict future results.

Regulatory pyramid in securities markets: legislation sets the framework, the regulator (e.g. a securities commission) issues rules and guidance, and self-regulatory organisations apply member rules on top; binding force decreases as you move up.

The regulator's three core objectives are typically investor protection, market fairness/efficiency and financial stability; a rule that serves one objective may trade off against another, so justify decisions against all three.

Disclosure-based regulation assumes investors are responsible for reading filings; conduct-based regulation (suitability, fair dealing) protects investors who cannot or do not read them.

Insider dealing requires inside information, an insider (or tippee) and a prohibited dealing or disclosure; the information must be specific, non-public and price-sensitive.

Market manipulation includes wash trades, marking the close, spoofing and dissemination of false information; intent to create a false or misleading impression is the common element.

Licensing regimes distinguish dealing, advising, managing and arranging; a firm must hold a licence for each regulated activity it performs, and client-money and custody rules attach to holding client assets.

Breach consequences escalate: private warning, public censure, fines, restriction of licence, revocation and referral for criminal prosecution; cooperation and remediation are standard mitigating factors.

Cross-border activity is governed by territorial scope rules and equivalence/passporting arrangements; verify which regime applies before soliciting clients in another jurisdiction.

Situational leadership: match style to follower readiness - directing (low competence, high commitment), coaching, supporting, and delegating (high competence, high commitment).

Transformational leadership rests on four behaviours: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership instead trades reward for performance and manages by exception.

Tuckman's stages: forming, storming, norming, performing, adjourning; conflict peaks in storming, so leaders should surface and resolve it rather than suppress it.

Psychological safety (Edmondson) predicts team learning and error reporting; it is created by leader responses to bad news, not by personality traits of team members.

Goleman's leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching; the authoritative and affiliative styles correlate most positively with climate, the coercive style most negatively in most settings.

Feedback rule: describe observed behaviour and its impact, then ask; avoid trait labels. Specific, timely, behavioural feedback is more likely to change conduct than annual ratings.

Ethical leadership requires tone at the top to match incentives; where stated values conflict with reward structures, employees follow the reward structure.

Delegation requires authority, resources, a clear outcome and an agreed check-in point; delegating accountability without these four elements is abdication.

Board duties are commonly framed as duty of care (informed, diligent decision-making) and duty of loyalty (acting in the company's interest, managing conflicts); the business judgement rule protects informed, disinterested decisions.

Independence tests typically exclude former employees, close family of executives, material suppliers or customers, and advisers with significant fees within a look-back period (often three years).

Committee architecture: audit (financial reporting, external and internal audit), remuneration (executive pay), nomination (board composition and succession) and risk (risk appetite and oversight).

Separation of chair and CEO, and of the board from management, is a structural safeguard; combining roles concentrates power and weakens challenge.

'Comply or explain' governance codes allow departure from a provision provided the reason is disclosed; the disclosure, not the departure, is the obligation.

Related-party transactions require identification, independent review, disclosure and, where material, shareholder approval; abstention of conflicted directors is standard.

Risk governance: the board sets risk appetite, management operates within limits, internal audit provides independent assurance; three lines model separates ownership, oversight and assurance.

Shareholder rights include voting, receiving information, participating in general meetings and, in many regimes, pre-emption on new share issues; one share one vote is a default, not a universal rule.

Board effectiveness reviews (internal annually, external periodically) assess composition, dynamics, information quality and succession planning, not just attendance records.

Product classification drives obligations: securities, derivatives, collective investment schemes, insurance-based products and deposits each trigger different disclosure, suitability and selling rules.

Suitability assessment requires knowledge and experience, financial situation (including ability to bear loss), investment objectives and risk tolerance; the recommendation must be suitable for that client.

Risk-return framing: higher expected return compensates for higher risk; a product marketed as high return with low risk is a red flag for mis-selling or fraud.

Costs compound against the client: total expense ratio, transaction costs and any performance fee reduce net return; compare products on a net, not gross, basis.

Liquidity features to check: dealing frequency, notice periods, lock-ups, gate provisions and suspension rights; a daily-dealt fund may still suspend redemptions in stressed markets.

Product governance requires a target market definition, distribution strategy consistent with it, and post-sale monitoring; misalignment between target market and actual buyers is a governance failure.

Structured products combine a bond floor with derivative exposure; capital protection applies only at maturity, only to the issuer's credit, and only if held to term.

Key Investor/Product disclosure documents must be short, plain-language, comparable and state risks, costs and past performance with the required warning that past performance does not predict future results.