IFMP Financial Advisors Certification (FAC), Pakistan flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

SECP

Securities and Exchange Commission of Pakistan: the apex regulator for the capital market, non-bank financial companies, insurers and takaful operators, enforcing the Securities Act 2015 and Companies Act 2017.

NCCPL

National Clearing Company of Pakistan Limited: the clearing house and central counterparty for PSX trades, operating the National Clearing and Settlement System and settling equity trades on a T+2 cycle.

CDC investor account

A book-entry securities account held directly with the Central Depository Company, allowing an individual to hold listed shares and debt securities without going through a broker's sub-account.

Securities Brokers Regulations 2016

SECP regulations licensing and supervising PSX brokers, prescribing minimum paid-up capital, net capital balance, client money segregation, record keeping and conduct requirements.

Free float requirement

A PSX listing rule requiring a minimum proportion of issued shares, generally 25% on the Main Board, to be held by the public so the market has adequate liquidity and price discovery.

Suspicious transaction report

A report filed with the Financial Monitoring Unit through goAML when an institution knows, suspects or has reasonable grounds to suspect that funds are proceeds of crime or linked to terrorism financing.

Politically exposed person

An individual entrusted with prominent public functions, plus family members and close associates; such customers require senior-management approval and enhanced due diligence under Pakistani AML rules.

Tipping-off

Disclosing to the subject of a suspicious transaction report, or to a third party, that a report has been or will be filed; it is an offence under the AML Act 2010.

Customer due diligence

The process of identifying and verifying a customer's identity and beneficial ownership, understanding the purpose of the relationship, and monitoring transactions on an ongoing basis.

goAML

The Financial Monitoring Unit's online reporting portal through which Pakistan's reporting entities file suspicious transaction reports and currency transaction reports and receive regulatory alerts.

Treasury bill

A short-term zero-coupon government security issued through SBP at a discount to face value in 3-, 6- and 12-month tenors, with the discount representing the investor's return.

Pakistan Investment Bond

A long-term government bond paying semi-annual coupons, issued in 3-, 5-, 10-, 20- and 30-year tenors and sold through SBP auctions mainly to banks and institutional investors.

Sukuk

A Shariah-compliant certificate representing ownership in an underlying asset or project, such as Ijara or Musharakah, which pays rentals instead of interest to investors.

Net asset value

The per-unit value of a mutual fund, calculated as total assets minus liabilities divided by units outstanding; subscriptions and redemptions are priced at this value.

Gordon growth model

An equity valuation formula, P0 = D1/(r − g), where D1 is next year's dividend, r the required return and g the sustainable growth rate equal to retention ratio times ROE.

Deliverable futures contract

A PSX-listed derivative obliging buyer and seller to settle at expiry by delivering shares against cash, used for leverage or hedging with margins collected by NCCPL.

Investment policy statement

A written document setting the client's return objective, risk tolerance, time horizon, liquidity, tax and legal constraints, plus permitted asset classes and rebalancing rules.

Sharpe ratio

Excess portfolio return over the risk-free rate divided by the portfolio's standard deviation; it measures total-risk-adjusted performance, with higher values indicating better compensation per unit of risk.

Jensen's alpha

Portfolio return in excess of the CAPM-predicted return: alpha = Rp − [Rf + β(Rm − Rf)]. A positive value indicates outperformance after allowing for systematic risk taken.

Rebalancing

Restoring portfolio weights to the target allocation, either on a calendar schedule or when drift breaches a threshold band, which controls risk drift and enforces disciplined buying and selling.

Real rate of return

Nominal return adjusted for inflation, calculated as (1 + nominal)/(1 + inflation) − 1; it measures the change in purchasing power and is used for long-term goal projections.

Zakat

An annual charge of 2.5% on zakatable wealth held for one lunar year above the nisab threshold, set at 87.48 grams of gold or 612.36 grams of silver.

Value at Risk

A statistical estimate of the maximum loss over a stated horizon at a stated confidence level; parametric one-day VaR equals the z-score times daily volatility times portfolio value.

Modified duration

Macaulay duration divided by (1 + y/m); it approximates the percentage change in a bond's price for a one percentage point change in yield.

Beta

A measure of sensitivity to market movements, calculated as Cov(Ri, Rm)/Var(Rm); a beta of one implies market-equivalent risk and portfolio beta is the weighted average of holdings.

Stress testing

Applying severe but plausible adverse scenarios, such as rate shocks, equity falls, currency moves or defaults, to estimate tail losses beyond those implied by normal VaR models.

Futures hedge ratio

The number of futures contracts needed to hedge an equity portfolio, computed as portfolio beta times portfolio value divided by the value of one futures contract.

Takaful

Cooperative, Shariah-compliant insurance in which participants contribute to a shared fund that pays claims, so risk is shared among participants rather than transferred to a conventional insurer.

Wakala fee

The agency fee charged by a takaful operator for managing the participants' fund, set as a fixed percentage of contributions or of the fund's assets.

Qard-e-hasana

An interest-free loan advanced by the takaful operator to the participants' fund to cover a claim deficit, repayable from future surplus and earning no return.

Insurable interest

A financial or legal relationship in which the policyholder would suffer a measurable loss if the insured event occurred; it is required for a valid insurance contract.

Subrogation

The insurer's right, after indemnifying the insured for a loss, to take over the insured's legal claim against the third party responsible for that loss.