IFMP Financial Advisors Certification (FAC), Pakistan key terms

Pakistan's statutory regulator for companies, capital markets, insurance, and non-bank financial institutions. It licenses market intermediaries, approves mutual funds and takaful operators, and enforces securities and insurance law.

Pakistan's main stock exchange, formed by merging the Karachi, Lahore, and Islamabad exchanges. It lists equity, debt, and derivative securities and operates trading platforms supervised by the SECP.

The central counterparty and clearing house for Pakistan's securities market. It clears and settles trades, manages settlement risk, collects margins, and operates the National Clearing and Settlement System.

Pakistan's central depository, holding securities in electronic book-entry form for investors and intermediaries. It provides custody, settlement, and trustee services and reduces risks associated with physical share certificates.

A settlement convention under which a securities trade is paid for and delivered two business days after execution. Pakistan's equity market uses this cycle, with NCCPL managing the clearing process.

A market-capitalisation-weighted index of 100 companies listed on the Pakistan Stock Exchange. It is widely used as the benchmark for Pakistani equity performance and for comparing mutual fund returns.

A Pakistan Stock Exchange index of 30 Shariah-compliant companies selected using Islamic screening rules. It serves as a benchmark for Islamic equity funds and Shariah-conscious investors.

A company licensed by the SECP to manage collective investment schemes and discretionary portfolios. It makes investment decisions, markets funds, and must act within the fund's stated mandate.

The value of a fund's assets minus its liabilities, divided by the number of outstanding units. It is the price used for buying or redeeming open-end fund units.

Trading securities while in possession of material non-public information obtained through a position of trust or confidence. Pakistan's securities law prohibits it because it undermines market fairness and investor confidence.

Pakistan's primary anti-money laundering statute. It criminalises money laundering, requires reporting entities to conduct customer due diligence, and establishes the Financial Monitoring Unit.

Pakistan's financial intelligence unit, established under the Anti-Money Laundering Act. It receives suspicious transaction reports, analyses them, and shares intelligence with law enforcement and regulators.

A report filed by a regulated entity with the Financial Monitoring Unit when it suspects funds are linked to crime or terrorism. Filing in good faith is protected by law.

The process of identifying a customer, verifying identity, understanding the business relationship, and monitoring transactions. It is a core obligation under Pakistan's AML/CFT framework.

An individual entrusted with prominent public functions, or a close associate or family member. Banks and brokers must apply enhanced due diligence before accepting such customers.

The natural person who ultimately owns or controls a customer or the funds involved in a transaction. Identifying them is essential to prevent concealment through companies or trusts.

A legal obligation to act in another party's best interests, with loyalty, care, and disclosure of conflicts. Advisers and fund managers owe this duty to clients and investors.

A situation where a person's private or institutional interest could improperly influence professional judgement. Firms must identify, disclose, and manage such conflicts to protect clients.

An internal information barrier preventing staff in one department from sharing sensitive information with another. It is used to control conflicts between advisory, trading, and research functions.

Islamic investment certificates representing ownership in a tangible asset, usufruct, or project. Holders receive returns from underlying cash flows rather than interest, and the structure must avoid riba and gharar.

A cost-plus sale contract in which the seller discloses the cost and adds an agreed profit. Payment is often deferred, and the structure is used for Islamic financing without charging interest.

A lease contract in which the owner of an asset transfers its usufruct to another party for an agreed rent. The lessor retains ownership and related risks, making it a common Islamic finance structure.

A joint partnership in which partners contribute capital and share profits according to an agreed ratio and losses according to capital. It is used in Islamic business and project finance.

Interest or an unjustified increase charged on a loan, which Islamic law prohibits. Avoiding riba is a defining requirement of Sukuk, Islamic funds, and takaful arrangements.

Excessive uncertainty in a contract's subject matter, price, or delivery terms. Islamic law prohibits it because it can lead to disputes, and takaful and Sukuk structures are designed to reduce it.

The process of assessing an investor's willingness and ability to bear risk through questionnaires, financial data, and discussion. It guides suitable asset allocation and product recommendations.

Dividing a portfolio among asset classes such as equities, bonds, cash, and Islamic alternatives. The mix is chosen to balance expected return against the investor's risk tolerance and time horizon.

Spreading investments across assets, sectors, and issuers so that one loss does not dominate the portfolio. It reduces unsystematic risk but cannot eliminate market-wide risk.

A written document setting out an investor's objectives, risk tolerance, constraints, and permissible investments. It guides portfolio construction and provides a benchmark for reviewing performance.

A measure of how much a security or portfolio tends to move relative to the market. A beta above one suggests greater volatility than the market; below one suggests lower volatility.

A statistical measure of the dispersion of returns around their average. In finance it is used as a measure of total volatility and investment risk.

A risk-adjusted performance measure calculated as excess return over the risk-free rate divided by standard deviation. A higher ratio indicates better return per unit of total risk.

A measure of a bond's price sensitivity to interest rate changes, expressed in years. Higher duration means greater price volatility when yields move.

A cooperative Islamic insurance arrangement in which participants contribute to a pooled fund used to pay claims. It is based on mutual assistance and avoids riba, gharar, and conventional insurance practices.

A takaful plan providing protection and savings for individuals and families, often including death and disability benefits. Contributions are split between a risk pool and an investment account.

An agency contract in which one party acts on behalf of another for a fee or agreed remuneration. Takaful operators often use wakala to manage participants' funds.

Insurance purchased by an insurer to transfer part of its risk to another insurer. It protects the insurer's solvency and capacity to pay large or unexpected claims.

A financial or legal interest in the subject matter of insurance such that a loss would harm the insured. Its presence distinguishes insurance from gambling.

The principle that insurance should restore the insured to the financial position held before a loss, no better and no worse. It applies to property and liability covers, not strictly to life insurance.

The insurer's right, after paying a claim, to take over the insured's legal rights against a third party responsible for the loss. It prevents the insured from recovering twice.