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Important: this glossary is for guidance purposes only and you should not rely on it when making financial decisions. If you are not sure about any of the terms covered, please get independent professional advice. If we make any changes to this glossary in the future, we will produce a new version which will be posted on this page.

Term Definition
Absolute return This is the return – or measure of the gain or loss – that an asset or investment portfolio achieves over a period of time. It is expressed as a percentage of the capital invested.
Accumulation unit or share A unit or share in an investment that ‘accumulates’. The income from a share or unit (such as dividends) is not paid to you when it arises. Instead, as it arises, it is kept in the investment and can be paid to you at a later date. This increases the unit or share price until the income is taken out.
Active management A fund manager aims to achieve higher returns than the benchmark or the relevant sector by actively choosing stocks they believe will be the best performers.
Advice and dealing service A service which allows you to give instructions on what to buy and sell and where we will provide investment advice if asked.
Adviser charge or charging Payment for advice as defined by the FCA in COBS 6.1 which is: ‘any form of charge payable by or on behalf of a retail client to a firm in relation to the provision of a personal recommendation by the firm in respect of a retail investment product (or any related service provided by the firm) which is agreed between that firm and the retail client in line with the rules on adviser charging and paying advisers’. For more information, please see:
Adviser charging rules The rules set out by the FCA in their Conduct of Business Rules about how adviser charging should be dealt with. They have applied from 31 December 2012.
Advisory management Where you receive advice or an ongoing review of a portfolio (or both) but you need to authorise any changes.
Alternative investments An investment that is not one of the traditional types of asset (stocks, bonds, collectives and cash). They are usually investments in assets with less of a connection to shares or bond markets, such as property, hedge funds, commodities and commodity funds.
Annual management charge For a collective investment scheme (CIS), this is the fee that is paid to the fund management company for managing the underlying investments. The fee is worked out daily when the CIS is valued. The management fee is paid to the fund management company on a regular basis.
Annual Management Fee For Discretionary or Advisory Management, this is the yearly fee charged for managing your account or providing investment advice (or both).
Asset The type of investment held within a portfolio, for example, cash, a share (an equity), fixed-interest securities (a gilt, a bond), a unit trust, and so on.
Asset allocation The process by which an investment manager decides where, and in what proportions, money is to be invested. For example, it could be invested in shares (equities), fixed-interest securities (a gilt or a bond), a unit trust, property, cash or alternative investments.
Asset class The type of asset which a portfolio or fund can invest in. Different asset classes have different characteristics in terms of creating income and capital.
Asset value For stocks, this is the market value of a company’s assets per share.
Authorised unit trust An authorised unit trust is any unit trust that has been authorised by the FCA to be marketed to the public in the UK.
Bank rate The lowest rate at which a bank will charge interest. This is set by the Bank of England’s Monetary Policy Committee (‘MPC’).
Basis point One hundredth of one percent – 0.01%
Bear market A term used when the stock market drops or is expected to drop.
Bearer stock or share A type of equity that is wholly owned by whoever holds the actual stock certificate. The issuing firm neither registers the owner of the stock, nor do they track transfers of ownership. The company shares dividends out among the bearer shares when an actual coupon is presented to the firm.
Benchmark The index or other appropriate measurement against which the performance of a portfolio should be compared.
Best execution The process of achieving the best price for a retail client for a transaction (whether buying or selling) of a particular type and size.
Bid price The price at which an investor can sell a security. This is generally lower than the offer price.
Blue chip A term generally used to describe the highest-quality and lowest-risk shares, usually large, well-established companies with long-term secure earnings
Bond A type of debt security, usually a negotiable certificate, used as evidence of a loan to the issuer. The issuer promises to pay the holder its face value plus (usually) amounts of interest at future dates.
Book cost The cost of a stock, gilt, bond, unit trust and so on, at the time it was bought. This cost might be used to work out whether any capital gains or capital losses are made when a holding is sold.
BRIC An acronym for the emerging markets of Brazil, Russia, India and China.
Bull market A term used when the stock market rises or is expected to rise.
Call option An option that gives the holder (in other words, the person buying the option) the right, but not the obligation, to buy (call) an asset at a given price on or before a given future date.
CGT allowance This is the amount of net gains that a person or trust is allowed to make each year before they have to pay tax (CGT).
Capital This is the amount invested in a portfolio.
Capital gain This refers to the profit made when an investment is sold for a higher price than it was bought at.
Capital gains tax (‘CGT’) This is the tax due on any gains or profits made when an investment is sold. Pensions and NISAs are exempt from capital gains tax. The amount of tax paid is set by HMRC capital gains tax rules. There is a yearly allowance (please see CGT Allowance) and any gains made above this amount may be taxed at the standard or higher rate.
Capital growth This represents the increase in the value of the capital (or the initial amount invested). It does not include income.
Capital loss The loss which is suffered when an asset drops in value. It is also the difference between the purchase price and the sale price (if this is lower). A capital loss will not happen until the asset is sold for a price lower than the purchase price.
Capital risk The risk that you might lose the money you invest, in other words, your capital.
Certificate of deposit A certificate of deposit is a promissory note issued by a bank with an expiry (end) date. It entitles the holder to receive interest at a set rate and can be issued in any currency.
Chargeable gain The amount which capital gains tax is charged on from gains made when selling a chargeable asset. How it is worked out depends on HMRC tax rules.
Chargeable loss The amount which can be used to offset a capital gain. In relation to stocks and shares, the loss will be the difference between the base cost and the proceeds received when the stock or share is sold. How it is worked out depends on HMRC tax rules.
Churning The act of carrying out excessive trading (buying and selling) within a portfolio.
Clean management fee An annual management fee with no transaction (dealing) charges.
Client money The money belonging to a firm’s clients which has been pooled together but kept separate from the firm’s own money and held on trust in a specially designated account. As a result, the money is protected (in line with FCA rules) in case the firm becomes insolvent.
Closed-ended fund An investment trust or a collective investment scheme with a fixed capital that issues a limited number of shares. They are traded in the same way as an equity.
Close out (a position) When two people or organisations have an agreement for a derivative (such as a traded option), and one of them gets rid of their rights or obligations before the fixed date when the agreement is to be acted on (such as the date when a share is to be delivered). For example, the person ‘closing out’ may fulfil their obligations (for example, deliver the share earlier than agreed) or sell the agreement to another person (for example, trade it on an exchange). This is done to try to protect the person ‘closing out’ from changes in the value of the asset the derivative agreement relates to.
Collateral Assets (equities, bonds, cash, fixed interest investments) that are offered as security, usually against a loan.
Collective investment scheme or collective investment (‘CIS’) A fund where investors’ money is pooled together and managed with a shared investment aim.
Commercial paper An unsecured debt instrument which will become due for payment in less than one year from the date it is issued by a corporation to meet, for example, short-term debts.
Commission Transaction charges for buying or selling an asset. It also relates to paying for services that are not covered by the adviser charging rules.
Compensation scheme See Financial Services Compensation Scheme.
Contract note The document that sets out all the relevant details of a trade, in other words, whether it is a sale or a purchase, unit price, total price, trade date, settlement date, dealing costs and so on.
Conventional gilt A conventional gilt is a bond issued by the UK Government which pays the holder a fixed rate of interest (or coupon) every six months until maturity (the point at which the Government buys back the stock). At this point, the holder receives their final coupon payment and the return of the amount invested. They offer a set return of income which is fixed throughout their life.
Convertible debt Debt where the lender has the option to convert the debt into ordinary shares in the company rather than receiving repayment in cash.
Convertible gilt A UK Government bond where the holder has the option to convert the bond into another issue of Government bonds rather than receive repayment in cash.
Convertible loan A corporate bond with an option to convert to ordinary shares on a set date and at a set price.
Corporate bond A type of bond (debt security) issued by a corporation with a fixed maturity date to be cashed in at its issue price on a set date. The holder receives interest payments (yield). They are considered higher risk than Government bonds and, as a result, usually have a higher yield. They are used by corporations to repay their debts and are issued instead of issuing further shares.
Corporate share or share A unit of ownership in a corporation which entitles the holder (shareholder) to a distribution (with other shareholders) to any profits. This is paid as a dividend.
Coupon The rate of interest that is paid on a bond. For example, a bond with a 5% coupon and a nominal value of £100 will pay yearly interest before tax of £5 for every £100 held, no matter what the price at which the bond is trading in the market. It is also the term applied to the detachable part of a bearer stock which gives you an entitlement to interest or other rights.
Counterparty This is the person or organisation who is the other party in a financial arrangement.
Creation price The lowest price at which units in a collective investment scheme can be bought by a fund manager. This is the cost of ‘creating’ units to meet purchase orders.
Currency risk If investments are held in a different currency, changes in the rate of that currency will affect the value of those investments.
Current yield The expected dividend (on a share) or interest (on a bond or fixed-interest investment) divided by the market price of the asset. This can either be before or after tax.
Custody The safekeeping (and settlement) of securities.
Debenture stock A type of debt instrument (corporate bond) on which the company issuing it guarantees payments on a fixed term or a fixed rate of interest. It is secured against a specific asset or pool of assets.
Debt security or debt instrument A financial instrument which contains a promise by the issuer to pay the holder of the instrument a defined amount on or by a set date (the date when a debt security is said to ‘mature’), usually with interest.
Delegate and delegation The process of passing responsibility for managing a portfolio to an investment manager.
Depositary receipts These are negotiable certificates, like bonds, which represent owning shares of a foreign-based issuer. They are usually issued by a bank or a company to raise money. Each certificate (depositary receipt) will represent a specific number of shares in a company. They are traded on a stock exchange independently of the underlying shares.
Derivative A derivative is a financial instrument, the value of which comes from the price of an asset Rather than trading or exchanging the asset itself, an agreement is entered into to exchange money, assets or some other value at some future date based on the underlying asset. A premium may also be paid to buy the derivative instrument. A derivative usually has a high risk connected with it. The main types of derivatives are futures, options and swaps.
Derivative positions The result of a trade in derivatives.
Developed markets Developed markets are those that, in terms of investing, are considered to have a long economic history of trading on exchanges and so should be less risky.
Discretionary basis If we decide to trade in a security on your behalf.
Designated investment exchange An exchange appearing in the list in the FCA’s Glossary 
Discretionary investment management An arrangement where you give us responsibility to make the decision on your behalf on what investments to buy and sell – and when – in line with your stated investment aims, risk profile and any noted restrictions.
Discretionary Portfolio Service (‘DPS’) At Quilter Cheviot, this is a discretionary investment management service available to clients with £200,000 or more to invest. This is a tailored management service and we manage portfolios in line with your stated investment aim and risk profile. The investments are individually tailored to meet the needs of the client. We give each portfolio to a nominated investment manager we pick who is responsible for making investment decisions and carrying out transactions without referring to you (in other words, under discretion).
Distribution units Units in a collective investment scheme which pay an interest payment or dividend.
Distribution yield The dividend or interest payment divided by the asset price. It can be either before or after tax.
Diversification This is a term used to describe the process of holding a range of different types of investments to spread the risk so that if one investment does badly, others may compensate by doing well.
Dividend This is income that is paid by companies out of their profits and is paid to the shareholders, in other words, those who have bought shares in the company. Dividends are usually paid every year or every six months.
Dividend reinvestment This is where the income is used to buy more shares rather than being paid out, in other words, it is reinvested into shares in the company.
Dividend yield This is the gross dividend per share divided by the share price. It can be either before or after tax.
EEA European Economic Area, defined as the European Union plus Norway, Iceland and Liechtenstein. It was established on 1 January 1994.
EMEA An acronym for Europe, Middle East and Africa.
Emerging markets Emerging markets is the term given to countries which are in the process of rapid growth and industrialisation.
Equity Also known as an ordinary share. It gives the person who holds the share (the shareholder) the right to take advantage of the residual assets of a company and have voting rights. Shareholders will usually receive a dividend. The amount they receive will depend on the profitability of the company. It is another term for a stock or a share.
Ethical investments Ethical – or socially responsible – investments allow you to avoid investing in companies that you would not want to support or to invest in on the basis of their own moral stance. For example, you may not want to invest in tobacco, armaments, defence equipment and so on.
European Central Bank (‘ECB’) The central bank for the euro and responsible for setting the monetary policy of the 17 EU members that make up the eurozone, which is one of the largest currency zones in the world.
European stability mechanism (‘ESM’) The ESM is an international organisation set up in September 2012 in Luxembourg to provide financial help to eurozone member countries in financial difficulties.
Ex-dividend An idea of the trading status of a share. It shows that the seller of the share keeps the right to receive the next dividend payment even though they no longer own that share. Any buyer of the share is not entitled to the next dividend.
Ex-dividend date The date on which a share goes ex-dividend.
Exchange rate mechanism (‘ERM’) The ERM was introduced in 1979 by the then members of the European Union to reduce the ups and downs in exchange rates and variability and to achieve stability in the exchange rate before the euro was introduced, as a single currency across Europe, in January 1999.
Exchange-traded fund (‘ETF’) An investment fund that tracks an index (such as a stock or bond index), a commodity or a basket of assets. ETFs are traded on a stock exchange.
Execution-only The process of carrying out instructions to buy and sell shares and other assets without giving you advice about the investment. We will only take action on your instructions.
Financial adviser Someone who provides financial advice on a range of products (including investments and pensions) who will provide a financial-planning service. They are regulated by the Financial Conduct Authority. They may be independent or restricted.
Financial Conduct Authority (‘FCA’) One of two organisations which replaced the Financial Services Authority. The FCA is a regulatory body which supervises financial services firms and is responsible for making rules and for enforcing and overseeing financial regulation. It was created by the FSMA 2000. The FCA is responsible for regulating how business in retail and wholesale markets is carried out (commonly known as conduct of business). Its aim is to make sure that firms put the wellbeing of their customers at the heart of what they do. For example, they oversee consumer protection and will make sure that financial markets operate with honesty.
Financial Ombudsman Service (‘FOS’) Financial Ombudsman Service (‘FOS’)
The independent body set up under the FSMA 2000 to deal impartially with consumer complaints about financial services firms. There is a charge made on the firm for dealing with a complaint brought against it by a consumer. However, it is a free service to the consumer.
Financial Services and Markets Act 2000 (‘FSMA 2000′) An act of Parliament which led to the creation of the Financial Services Authority (now the FCA and PRA) in 2001. It gave them regulatory powers over supervising regulated activities, controlling financial promotion and the authority to regulate, investigate and discipline the financial services industry. It came into force on 1 December 2001.
Financial Services Compensation Scheme (‘FSCS’) Under the scheme, individuals and small businesses who have lost money as a result of an investment firm not being able to pay everything they owe their clients may qualify for compensation. The compensation limit is £50,000 for each claim for investment business.
Fixed income A term used to describe investments such as bonds, which pay interest at a fixed rate over the term of the investment.
Fixed-income security A security where the income return is set by a coupon.
Fixed interest See fixed income.
Fixed-interest security See fixed-income security.
Forward pricing A system for pricing units in a fund at the next (forward) valuation point (based on the next value of the underlying assets in the fund), so you do not know the exact price at which you are buying or selling your units at the time of placing an order to trade.
Flat-rate fee When it comes to a management fee, this covers charges including safe custody and dealing costs, in other words, no transaction charges are made. See also clean management fee.
Fund of funds A fund that invests in other funds rather than investing directly in assets (such as cash, bonds, shares or property) to meet its investment aim.
Gearing or leverage Some collective investment schemes can borrow money to make further investments in the hope of earning profits greater than the cost of borrowing. As a result they improve the return to investors. However, this can increase the investment risk by increasing rises and falls and exposure to increased capital risk
Gilt or gilt-edged security The name for a bond (fixed-interest security) issued by the UK Government through the Debt Management Office. Originally, the certificates for these bonds were printed with gold (or gilt) edges. The sale of gilts helps the UK Government fund the difference between what it spends and what it receives in taxes, for example. There are two types of gilts – conventional and index-linked. Both types are quoted on the London Stock Exchange.
Gilt yields The gross income from a gilt divided by the price of the gilt.
Government stock A bond sold by the Government to pay for its budget deficit.
Gross redemption yield The total return on a bond, taking into account both the coupon and the capital gain or capital loss if held until it becomes due for payment. This is also known as yield to maturity.
Growth fund A fund whose main aim is to achieve growth of the capital (or the amount) invested.
Hedge fund This is an actively managed collective investment scheme which aims to make the most of market inefficiencies using a variety of sophisticated investment strategies to achieve a positive return in most market conditions. These funds are often unregulated by the UK authorities.
Hedging The process of taking a position in a security or a derivative to protect against an unexpected or unwelcome price movement in another security or market.
HMRC His Majesty’s Revenue & Customs.
Historic pricing A system for pricing units in a fund at the last valuation point (based on the last value of the underlying assets in the fund), so you know the exact price at which you are buying or selling your units when placing an order to trade.
Illiquid Investments that cannot be easily sold.
Income The return on an investment by way of a dividend on shares or interest on bonds or cash.
Income account The account set up to hold and receive investment income.
Income fund A collective investment scheme with the aim of paying out a higher than average income.
Income statement A statement showing movements within an income account.
Income unit or share A unit or share that pays out income to the unitholder or shareholder.
Independent advice Advice provided to a retail client which is based on a thorough and fair analysis of the relevant market and is restricted advice.
Index An indicative measure of the value of a sector of shares in a market. An example of this is the MSCI UK Index.
Index fund A fund whose structure (in other words, the underlying assets) is designed to copy the performance of a specific stock-market index.
Index-linked gilt A gilt where the coupon payments and capital redemption value are linked to the increase in the Retail Price Index (‘RPI’) over the period the gilt is in issue. The larger the increase in the RPI, the bigger the value of the coupon and the capital value. The income is indexed and paid every six months in arrears. You do not normally pay tax on capital gains.
In specie The distribution of an asset in its present form, rather than selling it and distributing it as cash. This is used where cash is not readily available or where it’s advantageous to distribute the asset in its present form.
Integration In terms of money laundering, this is the process where illegal funds are converted into an apparently legitimate form, for example, cars, property or other assets.
Interest-rate risk Interest rates can rise as well as fall. A risk exists in that the relative value of a security, especially a bond, will get worse due to an increase in the interest rate. This could have a negative effect on other products.
Investment advice Advice provided about investments.
Investment adviser A person or firm who provides investment advice.
Investment company with variable capital (‘ICVC’) This is an open-ended collective investment vehicle, similar to a unit trust, where numerous investors’ money is pooled together and then invested. By pooling funds together, investors get the benefit of diversification and access to professional investment management.
Investment horizon The time period over which an investment, or a portfolio, is to be managed.
Investment management The process of managing your investments (portfolio of assets) and taking investment decisions on your behalf to achieve your stated investment aim.
Investment manager A person or firm who manages a portfolio of assets for a customer.
Investment objective or aim The long-term purpose of making an investment.
Investment performance The return on the investments, usually including income.
Investment risk How much investments can increase and drop in value over time.
Investment strategy An asset allocation chosen to increase the probability of achieving a stated aim or outcome.
Investment trust An investment trust is a public limited company which issues shares to raise funds and then invests the funds in certain securities. It is a type of collective investment scheme but is closed-ended rather than being open-ended, in other words, it has a fixed number of shares. It is quoted and trades on a stock exchange throughout the trading day rather than only once a day as for closed-ended funds.
Junk bond A bond of non-investment grade which often has a higher return than other types of bond but also a higher risk.
Key investor information document (‘KIID’) Key investor information document (‘KIID’)
A standard document providing essential information on a collective investment scheme that must be provided to you at or before the point at which you buy a fund under advice.
Layering In terms of money laundering, this is the process by which illegal funds are separated from their source using a series of financial transactions to disguise where they came from.
Leverage See gearing.
Limit order An order where a limit is placed on the price at which a client is willing to buy (highest price) or sell (lowest price).
Loan note This takes the form of a financial instrument as evidence of a debt between the borrower (the issuer, usually a company) and one or more lenders (noteholders) with the promise by the issuer to repay the debt. Also commonly known as loan stock. A debenture is a common form of loan note.
Loan stock See loan note.
London Interbank Bid Rate (‘LIBID’) The rate used by banks to bid on eurocurrency deposits and therefore the rate at which a bank is willing to borrow from other banks.
London Interbank Offered Rate (‘LIBOR’) The rate used by banks to lend money between themselves.
Managed Portfolio Service (‘MPS’) At Quilter Cheviot, this is a discretionary investment management service available if you have £25,000 or more to invest. Investments are made only in collective investment schemes to provide a greater spread and there is a range of strategies to choose from. We manage all strategies in line with a model.
Margin A payment made by people buying and selling exchange-traded futures contracts and writers of exchange-traded options as evidence of their ability to cover possible losses on their position.
Market capitalisation Market capitalisation is worked out by multiplying a company’s shares by the current market price of one share. The investment community uses this figure to decide on a company’s size, as opposed to sales or total asset figures.
Market risk The risk that the price or value of an investment will fluctuate (move) due to factors such as market supply and demand, the viewpoint of investors and the prices of any underlying or linked investments.
Mid price and mid-market price The price midway between the bid price and the offer price of a share or unit. It is usually the basis on which investments are valued.
Markets in Financial Instruments Directive (‘MiFID’) A directive (European law) that aims to integrate the European Union’s financial markets and to increase the amount of cross-border investment.
Model A group of investments which we choose to reflect a recommended investment strategy to meet an outcome or aim in current market conditions (for example, an income model might include a range of shares which pay regular dividends).
Model performance The return the model manages to provide.
Monetary Policy Committee (‘MPC’) The committee at the Bank of England which is responsible for setting interest rates.
Money laundering The process by which illegally obtained funds are disguised. This usually involves the illegal funds being introduced into the financial system and converted into legitimate funds. There are three clear phases – placement, layering and integration.
Money market fund A collective investment scheme that holds cash or near cash investments and has a daily build up of income.
Multilateral trading facility A trading system operated by an investment firm or a market operator, which brings together multiple third-party buyers and sellers of financial instruments in accordance with that MTF’s rules, protocols or operating procedures.
Mutual fund The American term for a collective investment scheme.
Net asset value (‘NAV’) The total value of a company or fund, measured by taking the total value of its assets, less its liabilities.
Nil paid rights The right to buy additional shares in a company at a known price.
New individual savings account (‘NISA’) A personal tax-efficient wrapper for investments and savings. Capital gains are tax-free and income does not need to be reported on a tax return.
Nominal value The principal or face value of a bond.
Note A debt instrument. The instrument is usually a certificate which shows the terms of the debt. The issuer of the certificate promises to pay the person who holds it a fixed amount (its face (par) value) on a certain date (maturity), plus (usually) regular interest on the fixed amount until maturity. The time until the note matures varies, but is often longer than a bill but shorter than a bond. Notes are often traded, and may be sold at, above or below face value.
Nominee A company set up for the purpose of holding various assets on behalf of the underlying beneficial owner. The nominee is the legal owner of the assets and their name will appear on the share register.
Non-attributable fractional entitlements This is where an entitlement cannot be exactly allocated between accounts within a nominee, because the amounts cannot be divided exactly between each holder.
Offer price The price at which you can buy a security.
Offshore bond An investment bond issued by a service provider outside the UK.
Onshore bond An investment bond issued by a service provider inside the UK.
Open-ended fund A fund that creates new shares (units) whenever money is invested to meet demand and cancels shares (units) when sale orders (redemptions) are made.
Open-ended investment companies (‘OEICs’) A structure for an open-ended collective investment scheme. It takes the legal form of a company rather than a trust. The manager has to create shares when money is invested and has to cash in shares when money is taken out. See open-ended fund.
Option A contract which gives the holder the right to buy or sell a certain asset at an agreed price on or before an agreed date in the future.
Option contract An option contract is one that is sold by the writer of an option.
Ordinary shares Ordinary shares are issued by limited liability companies as the main way of raising risk capital. Ordinary shares usually carry a right to vote at general meetings of the company which issued them. There is no guaranteed return on an investment in ordinary shares. If the issuer goes into liquidation, ordinary shareholders are among the last with a right to get their capital back or to or any surplus funds of the issuer (or both).
Organised Trading Facility A trading system which is not a regulated market or an MTF and in which multiple third-party buyers and sellers of non-equity financial instruments are able to interact in a way that results in a contract. Unlike regulated markets and MTFs, operators of an OTF have some influence over the execution of trades.
Packaged product Investments formed from a collection of other investments. For example, a unit trust is created by combining a range of shares and other assets. Packaged products also include life policies, stakeholder pensions and investment trust savings schemes.
Partly paid share A share where the shareholder is still legally responsible for paying an extra amount to the issuer, in other words, the company in which that individual owns the shares, when the outstanding amount is called for. There can be a loss in value if the shareholder does not pay the extra amount.
Performance See investment performance.
Performance report A statement showing performance return, sometimes with an explanation of how the return was achieved and how it compares with a benchmark.
Perimiter Guidance Manual(‘PERG’) This is the Perimeter Guidance Manual provided by the FCA.
Periodic statement Under FCA rules, we must send you a valuation of your investments at least every six months. If your portfolio contains an uncovered derivative, this must be monthly.
PIIGS An acronym for Portugal, Ireland, Italy, Greece and Spain.
Placement In terms of money laundering, this is the process of placing illegally gained funds into the financial system or retail economy.
Portfolio A term used to describe the holdings and different types of instruments which make up your investment, for example shares, unit trusts, bonds, cash and so on.
Portfolio valuation A report listing all the holdings and different types of instruments which make up a collection of investments showing the value of these investments.
PRA See Prudential Regulation Authority.
Preference shares These give shareholders the right to a fixed dividend and so tend to be a less risky form of investment than ordinary shares. Preference shares do not usually give you the right to vote at general meetings of the issuer but you will rank higher than ordinary shareholders if the issuer goes bankrupt.
Principal (acting as) When we are acting for our own account when buying and selling rather than acting for our clients.
Private equity funds Usually, these are closed-ended funds which generally take or have a controlling stake in shares in a business (or several businesses) that is either private or becomes private once the funds have been bought. Private equity funds can generate returns significantly higher than share markets but they also carry a higher risk.
Professional client Someone not classified as a retail client or financial institution.
Prudential Regulation Authority One of two organisations which replaced the FSA from the end of 2012. Their main aim is prudential supervision, in other words, to promote and maintain the stability of the UK financial system. They regulate banks, insurance companies and a small number of very large investment firms.
PTM levy This is a charge of £1 which is automatically imposed on investors when they buy or sell shares with a total value of more than £10,000. It is collected by the broker who dealt the trade and is used to help in paying for the Panel on Takeovers and Mergers.
Put option An option that gives the holder (in other words, the buyer of the option) the right, but not the obligation, to sell (put) an asset at a given price on or before a given date.
Qualifying investments In relation to a NISA, these are the investments which can be bought and held within the NISA, as set out in the HMRC ISA Regulations.
Quantitative easing (‘QE’) A policy used by central banks to stimulate the economy by increasing the amount of money in the economy and using it to buy financial assets such as gilts.
Real estate investment trust (‘REIT’) A closed-ended fund that invests in real estate and meets specific HMRC rules for REITs.
Redemption yield The theoretical return on a bond if it is held until it is due for payment (maturity). The yield is mathematically calculated to reflect the interest payments a bondholder will receive over the life of the bond if there is any gain or loss made when it matures.
Registrar The institution which keeps a register of shareholders for a company or a number of companies and is responsible for issuing certificates, dividend payments and company notices.
Restricted advice This is advice that is provided to a retail client which is not independent advice. It is advice related to investments from a restricted number of product providers about a restricted number of investment products.
Retail client A client that is not a professional client or an institution.
Retail Distribution Review (‘RDR’) A review of financial services rules which aimed to make sure there is better protection for retail clients from financial services providers. Rules which came from RDR cover the advised sales of retail investment products including pensions, annuities, onshore and offshore bonds and collective investments. It also led to rules on how advisers can be charged for the financial advice they provide and says that those people providing financial and investment advice need to be appropriately qualified at a higher level.
Retail investment product or products (‘RIP’) This is the term given to a range of investment products.
Retail Price Index (‘RPI’) This is the measure of the rate of inflation in the UK. It uses a list of prices of a range of typical goods to show how much the cost of living changes from month to month. It works out the cost of buying these goods and expresses this as a percentage of the base year index.
Risk appetite See risk profile.
Riskless principal When a business which has received your order immediately makes an identical order in its own name and on its own behalf (rather than as your agent), to satisfy your order.
Security and securities A document or electronic record that gives the holder (shareholder) the entitlement to part own a company or shows you are owed part of a debt issue. A security is tradeable. It is a general term which covers shares (equities), bonds and certain other investments which can be bought or sold.
Self-invested personal pension (‘SIPP’) The name given to a type of HMRC-approved personal pension scheme that allows members to have a choice on the investment aims and timing of taking benefits. A member can pass management of their SIPP to a discretionary investment manager.
SETS Stock Exchange Electronic Trading Service of the London Stock Exchange. This is known as the order book and is how most shares which are easily converted to cash in the UK are traded.
Share Also known as an equity. It relates to any of the equal parts into which a company’s capital is divided and entitles the holders (shareholders) to a proportionate share of the company’s profits.
Single pricing The term used to describe the obligations of an OEIC manager to provide one single price for both buying and selling the OEIC’s shares.
SIPP See self-invested personal pension.
Small self-administered schemes (‘SSAS’) A company pension scheme with 12 or fewer members. It is set up by a trust deed and controlled by the trustees.
Stamp duty, stamp duty reserve tax and stamp duty land tax Stamp duty is a transaction tax which is charged on paper share transfers where the purchase needs to be recorded on a stock transfer form. Stamp duty reserve tax is a tax charged on the electronic transfer of chargeable securities without using a stock transfer form. Stamp duty land tax is a tax charged on the transfer of property.
Stock Another term for a share, equity or bond.
Stock-specific risk The risk associated with having a large percentage of your money invested in one or few stocks.
Stock transfer form The form used to transfer ownership of a share or security to someone else.
Investment strategy An investment policy we use to deliver your long-term investment aims.
Structural separation A method of managing conflicts of interest within a company or group structure. Measures taken can range from putting in place barriers between business units to actually splitting the business into separate parts which operate independently of each other.
Suitability The duty we owe in managing your investments or providing advisory services to you to make sure you make investments and receive advice that is appropriate and relevant to your needs and which is suitable for you.
Systematic Internaliser An investment firm which, on an organised, frequent, systematic and substantial basis, deals on own account by executing client orders outside a regulated market, an MTF or an OTF without operating a multilateral system (i.e. one in which multiple buyers and sellers interact).
Timely execution Under FCA rules, transactions have to be carried out in a timely way, in other words, as soon as reasonably possible after the order to buy or sell has been given or the decision to buy or sell has been made.
Total expense ratio (‘TER’) The running costs of a collective investment scheme including any annual management charge and administration fees, expressed as a percentage.
Total return Both the capital and income return on an investment or portfolio.
Trail commission Trail commission is paid by investment management or fund management firms to financial advisers and represents a percentage of the value invested.
Transaction schedule List of purchases, sales and corporate actions which have taken place on an account.
Treating customers fairly (‘TCF’) An FCA principle that aims to raise standards in the way financial firms treat customers to make sure they do so in a way that is fair. It also aims to help you fully understand the features, benefits, costs and risks of any financial product you buy and to reduce the number of unsuitable products sold to you by encouraging best practice at all stages of the process.
Unbiased (advice) Advice from an assessment of the whole market of suitable retail investment products.
Undertakings for collective investment in transferable securities (‘UCITS’) A type of collective investment or fund that, once authorised in one member state, can be marketed freely across the European Union.
Unit trust A type of collective investment scheme organised as a trust and in which money is pooled together and invested according to specific investment guidelines.
Unlisted A term used for a security which is not listed on a stock exchange. It is possible to deal in an unlisted security in the UK through AIM (alternative investment market) for example.
Unrestricted (advice) Advice that considers the full range of suitable retail investment products.
Valuation The process by which the value of a portfolio, unit or share is set.
Valuation point The time of day (or point at which) the underlying assets of a fund are valued, resulting in a price at which orders are dealt.
Volatility The movement in the price of a security.
Warrant A tradeable, time-limited right to subscribe for shares, debentures, loan stock or government securities and which can be exercised against whoever issued the warrant at a fixed price.
Weighting This represents the percentage allocated to each sector, region or investment type in a portfolio or index.
WMA Wealth Management Association. A trade association that represents investment managers and stockbrokers.
XD date See ex-dividend.
Yield The income divided by the price.
Yield curve A graph of redemption yields over redemption periods, plotted by expressing the yield on bonds by referring to their expected maturity date.
Yield to maturity See gross redemption yield.
Zero-coupon bond A loan which does not pay interest. They are usually issued at a discount.


The value of your investments and the income from them can fall and you may not recover what you invested.