SEC Certified Investment Solicitor (CIS) key terms

The process of matching a recommended investment to a client's stated objectives, risk tolerance, financial situation, investment horizon and knowledge, and documenting the basis for that recommendation before it is made.

The mandatory collection and verification of a client's identity, financial position, investment experience and objectives at onboarding and on a periodic refresh cycle thereafter.

A documented summary of how much volatility and potential loss a client can financially absorb and psychologically accept, used to constrain which products may be recommended.

The framework of laws, procedures and monitoring controls designed to detect and report the laundering of criminal proceeds through client accounts and transactions.

A confidential filing made to the financial intelligence unit when a firm detects activity that may involve criminal proceeds, without tipping off the client involved.

Evidence explaining where the money for a specific transaction came from, such as salary, sale of property or an inheritance, distinct from evidence of a client's overall wealth.

A legal obligation to act in the client's best interest ahead of one's own, encompassing loyalty, avoidance or disclosure of conflicts, and care in giving advice.

Situations where a firm's or adviser's own interests, or those of another client, could improperly influence the advice or service given to a client.

A fee, commission or non-monetary benefit paid by a third party to an adviser in connection with a recommendation, which must be disclosed and, in many regimes, is restricted.

The duty to take all reasonable steps to obtain the best possible result for client orders, considering price, cost, speed, likelihood of execution and settlement.

The rules governing prompt, fair and expeditious execution of client orders, including aggregation, allocation and priority of client orders over proprietary trades.

Trading ahead of a known client order to profit from the price impact it will cause, which is a form of market abuse and a breach of client priority.

Conduct that gives false or misleading signals about the supply, demand or price of a security, such as wash trades, spoofing or dissemination of false information.

Trading or tipping others to trade on price-sensitive information about an issuer that has not yet been made public, in breach of a duty of confidence.

Precise, non-public information about an issuer or security that, if disclosed, would likely significantly affect the price of the security.

The requirement for listed issuers to publish inside information promptly, and for advisers to ensure clients receive fair, clear and not misleading information.

A regulated disclosure document published for a public offer of securities, containing the information an investor needs to make an informed assessment of the offer.

The system under which firms and individuals must be authorised or registered by the regulator before carrying out regulated activities such as dealing or advising.

A specified business activity, such as dealing in securities, advising on investments or managing portfolios, that may only be carried on with authorisation.

The regulator's assessment of an applicant's honesty, competence, financial soundness and reputation before granting or renewing a licence or approval.

The requirement to hold client money and securities separately from the firm's own assets, typically in designated accounts, so they can be returned if the firm fails.

An institution that safekeeps client securities, processes corporate actions and settlements, and maintains records of beneficial ownership on the client's behalf.

The standard period between trade execution and final exchange of cash and securities, commonly two business days (T+2) in many major markets.

The first sale of shares by a private company to public investors, usually accompanied by a prospectus and listing on an exchange.

The process of gathering investor indications of demand and price during an offering, used to set the final offer price and allocate shares.

An over-allotment option letting underwriters sell up to a set percentage of extra shares to stabilise the price after listing.

The total market value of a company's outstanding shares, calculated as share price multiplied by the number of shares in issue.

The proportion of a company's shares available for public trading, excluding holdings by founders, governments or other locked-up strategic owners.

A valuation multiple equal to share price divided by earnings per share, showing how much investors pay for each unit of current profit.

A company's profit attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the period.

The reduction in existing shareholders' percentage ownership and earnings per share caused by issuing new shares or converting convertible instruments.

Annual dividend per share divided by the share price, expressing the income return an investor receives from holding the stock.

The date from which a buyer of shares no longer has the right to receive the next declared dividend, typically set one business day before the record date.

A measure of a bond's price sensitivity to interest rate changes, expressed in years, combining the timing and size of its cash flows.

The curvature of the relationship between a bond's price and yield, describing how duration itself changes as yields move.

The single discount rate that equates a bond's future coupons and principal repayment to its current market price if held to maturity.

The extra yield a bond offers over a comparable risk-free benchmark, compensating investors for default and liquidity risk.

An agency's opinion, expressed on a letter scale, of an issuer's or instrument's ability and willingness to meet its debt obligations.

The risk that the other party to a trade or contract fails to meet its obligations, causing loss to the non-defaulting side.

A system where an exchange-affiliated entity interposes itself between trade counterparties, guaranteeing performance and managing margin and default funds.

A demand for additional collateral when the value of a leveraged or derivative position moves against the holder beyond agreed limits.

The use of borrowed money or derivatives to increase exposure beyond the capital committed, magnifying both gains and losses.

The change in an option's price for a one-unit change in the underlying asset price, also used as a hedge ratio.

The volatility level that, when entered into an option pricing model, produces the option's observed market price, reflecting market expectations of future movement.

The price a buyer pays, and a seller receives, for an option contract, made up of intrinsic value and time value.

A bond that pays interest but can be converted into a fixed number of the issuer's shares, combining debt protection with equity upside.

A fund whose units trade on an exchange like shares, typically tracking an index and disclosing holdings daily, with creation and redemption by authorised participants.

A fund's total assets minus liabilities, divided by units outstanding, giving the per-unit value used for subscriptions and redemptions.

The standard deviation of the difference between a portfolio's returns and those of its benchmark, measuring how closely it replicates the index.

The rule determining how much of an index each constituent represents, such as by market capitalisation, equal weighting or factor-based scoring.

The division of a portfolio among asset classes such as equities, bonds and cash, which is the dominant driver of long-term return and volatility.

Spreading investments across assets, sectors and regions whose returns are not perfectly correlated, reducing portfolio risk without necessarily lowering expected return.

A statistic between -1 and +1 describing how closely two return series move together, used to judge the risk-reduction benefit of combining assets.

A measure of how much a security or portfolio's returns move relative to the market, where 1 means it moves in line with the market.

The portion of a portfolio's return not explained by exposure to the market, often treated as the value added by active management.

Excess return over the risk-free rate divided by the standard deviation of returns, measuring return earned per unit of total risk taken.

The largest peak-to-trough decline in a portfolio's value over a given period, a practical gauge of the worst loss an investor would have suffered.

Periodically buying and selling to restore a portfolio to its target asset weights after market movements have shifted them.

The ongoing education hours a licensed representative must complete each year to maintain competence and renew registration.