SIDC Module 16 key terms

Trading in securities while in possession of price-sensitive information not yet public, or passing such information to another person who trades on it. It is a criminal offence under securities legislation in most jurisdictions.

A broad category of conduct that undermines market integrity, including insider dealing, market manipulation and false or misleading trading signals. Regulators police it through surveillance, investigation and disciplinary or criminal sanctions.

The obligation to notify a company or regulator when a shareholding crosses specified thresholds, so that the market can see who controls significant voting power. Thresholds and deadlines are set by local company or securities law.

Rules governing when staff may trade for their own account, usually requiring pre-clearance, minimum holding periods and bans around client orders. The aim is to prevent front-running, conflicts and misuse of confidential information.

Internal information barriers that separate teams holding confidential client or deal information from those who could misuse it. They are supported by physical, system and procedural controls rather than by physical walls alone.

Situations where a person's or firm's own interests, or duties to another party, could improperly influence the advice or service given. Firms must identify, manage and, where necessary, disclose them to clients.

Payments or benefits given or received in connection with investment services that could bias behaviour against a client's best interests. Acceptable minor non-monetary benefits are narrowly defined; others must be disclosed or prohibited.

The duty 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. Firms must have and publish an execution policy.

The process of gathering a client's knowledge, experience, financial situation and objectives before recommending a product, so the recommendation is appropriate. It underpins know-your-client and appropriateness requirements.

The identification and verification of a client's identity and circumstances before a relationship begins. It supports anti-money-laundering controls, suitability and ongoing risk monitoring.

The framework of laws, procedures and monitoring designed to detect and prevent the laundering of criminal proceeds through financial services. It includes customer due diligence, transaction monitoring and suspicious activity reporting.

A confidential report filed with the financial intelligence unit when a firm suspects funds are linked to crime. Tipping off the client about the report is itself an offence in many jurisdictions.

Requirements for holding and segregating client assets so they can be returned promptly if the firm fails. Firms must keep accurate records, reconcile regularly and avoid mixing client and house funds.

A regulatory framework assigning explicit responsibilities to named senior individuals and requiring firms to certify the fitness of key staff. It aims to make accountability for regulatory breaches clear and enforceable.

An individual who must be approved by the regulator before performing a specified controlled function. Approval depends on honesty, competence and financial soundness, and can be withdrawn for misconduct.

The assessment of whether a person has the honesty, integrity, competence and financial standing to hold a regulated role. It considers criminal records, regulatory history, qualifications and past business conduct.

The system of rules, structures and processes by which a firm is directed and held to account. It allocates authority among the board, committees and executives and sets reporting lines and controls.

The body elected by shareholders to oversee the company, set strategy and appoint and monitor executives. It owes duties of care and loyalty and must act in the company's best interests.

A board member without day-to-day management responsibility who provides independent challenge and oversight. Independence depends on factors such as prior employment, fees and family or business ties.

A board committee, usually of independent directors, that oversees financial reporting, internal controls and the external audit relationship. It meets auditors without management present and reviews whistleblowing arrangements.

A board committee that sets pay policy for executives and senior staff, aligning rewards with long-term performance and risk. It typically uses deferral, clawback and share-based elements to discourage short-termism.

A governance model in which business units own risk, a risk and compliance function provides oversight, and internal audit gives independent assurance. It clarifies accountability and avoids gaps between control functions.

An independent function that evaluates the effectiveness of risk management, controls and governance and reports to the audit committee. It must be free from management influence to provide credible assurance.

An independent examination of financial statements by an outside firm, which issues an opinion on whether they are fairly presented. It gives shareholders assurance but is not a guarantee against fraud.

The amount and type of risk an organisation is willing to accept in pursuit of its objectives. It is set by the board, expressed in limits and statements, and used to guide decisions and monitoring.

The formal process of granting decision-making power to individuals or committees below board level, usually recorded in a schedule of limits. Clear delegation preserves accountability while enabling timely decisions.

The structured dialogue a company maintains with shareholders, employees, customers, regulators and communities. It informs board decisions and supports transparency and long-term sustainability.

A company's voluntary commitment to act ethically and consider social and environmental impacts alongside profit. It is increasingly expressed through formal sustainability reporting and targets.

The inclusion of environmental, social and governance factors in investment analysis and corporate strategy. It treats these factors as financially material rather than purely ethical considerations.

A style that motivates people through a shared vision, intellectual stimulation and individual consideration, raising performance beyond expectations. It contrasts with transactional leadership based on rewards and supervision.

The idea that effective leaders adapt their style to the competence and commitment of the people and the demands of the task. No single style is best in every context.

The ability to recognise and manage one's own emotions and to perceive and influence the emotions of others. It supports empathy, self-regulation and effective relationship management in leadership.

The skill of addressing disagreements constructively, choosing between avoiding, accommodating, competing, compromising and collaborating approaches. Effective leaders address root causes rather than suppressing tension.

Raising concerns about wrongdoing or risk inside an organisation, ideally through protected channels. Strong cultures protect reporters from retaliation and escalate serious issues to the board or regulator.

A working environment where staff feel safe to raise concerns, challenge decisions and admit mistakes. It depends on visible leadership support, non-retaliation and prompt follow-up on reported issues.

The shared belief that team members can take interpersonal risks, such as admitting errors or asking questions, without humiliation. It is linked to better learning, innovation and risk reporting.

The controls covering a product's design, approval, distribution and review so it meets identified client needs. Manufacturers and distributors share responsibilities, including defining a target market and monitoring outcomes.

The defined group of clients for whom a product is intended, described by characteristics such as risk tolerance, knowledge and investment horizon. It guides distribution and helps prevent mis-selling.

The stages a product passes through from design and launch to growth, maturity and withdrawal. Governance requires review at each stage, including whether the product still meets client needs.

The risk of loss when assets held on behalf of clients are misappropriated, lost or not properly segregated by a custodian. Controls include segregation, reconciliation and independent oversight.