Introduction to Securities and
Investment
Effective from 1 August 2024
© Chartered Institute for Securities & Investment
Unit 1 – Introduction to Securities and Investment
Objective of the Examination
The objective of the examination is to provide candidates with a basic introduction to
the financial services industry with a focus on investments.
The examination will test candidates’ knowledge and understanding of the following
elements:
• Introduction
• Economic Environment
• Equities
• Bonds
• Other Markets and Investments
• Derivatives
• Investment Funds
• Financial Services Regulation
• Taxation, Investment Wrappers and Trusts
• Other Financial Products
• Financial Advice
Version 24 © Chartered Institute for Securities & Investment 1
Unit 1 – Introduction to Securities and Investment
Syllabus Structure
The unit is divided into elements. These are broken down into a series of learning
objectives.
Each learning objective begins with one of the following prefixes: know,
understand, be able to calculate or be able to apply. These words indicate the
different levels of skill to be tested. Learning objectives prefixed:
• know require the candidate to recall information such as facts, rules and
principles
• understand require the candidate to demonstrate comprehension of an issue,
fact, rule or principle
• be able to calculate require the candidate to be able to use formulae to
perform calculations
• be able to apply require the candidate to be able to apply their knowledge to
a given set of circumstances in order to present a clear and detailed
explanation of a situation, rule or principle
Candidate Update
Candidates are reminded to check the cisi.org/candidateupdate) on a regular basis
for updates that could affect their examination as a result of industry change.
2 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
Examination Specification
Each examination paper is constructed from a specification that determines the
weightings that will be given to each element. The specification is given below.
It is important to note that the numbers quoted may vary slightly from examination to
examination as there is some flexibility to ensure that each examination has a
consistent level of difficulty.
Examination specification
50 multiple choice questions
Element number Element Questions
1 Introduction 3
2 Economic Environment 4
3 Equities 9
4 Bonds 7
5 Other Markets and Investments 4
6 Derivatives 4
7 Investment Funds 6
8 Financial Services Regulation 4
9 Taxation, Investment Wrappers and Trusts 4
10 Other Financial Products 2
11 Financial Advice 3
Total 50
Assessment Structure
A one-hour examination of 50 multiple choice questions.
Candidates sitting the examination by computer based testing may also be asked to
answer up to 10% of additional questions. These are trial questions that will not be
separately identified and do not contribute to the result. Candidates will be given
proportionately more time to complete the test.
Version 24 © Chartered Institute for Securities & Investment 3
Unit 1 – Introduction to Securities and Investment
Summary Syllabus
Element 1 Introduction
1.1 The Financial Services Industry
Element 2 Economic Environment
2.1 Economic Environment
Element 3 Equities
3.1 Equities
Element 4 Bonds
4.1 Characteristics
4.2 Government Bonds
4.3 Corporate Bonds
4.4 Bonds
Element 5 Other Markets and Investments
5.1 Cash Deposits
5.2 The Money Market
5.3 Property
5.4 The Foreign Exchange Market
Element 6 Derivatives
6.1 Derivatives Uses
6.2 Futures
6.3 Options
6.4 Terminology
6.5 Derivatives / Commodity Markets
6.6 Swaps
6.7 Credit Default Swaps
Element 7 Investment Funds
7.1 Introduction
7.2 Unit Trusts
7.3 Open Ended Investment Companies (OEICs)
7.4 Pricing, Dealing and Settling
7.5 Investment Trusts
7.6 Exchange-Traded Funds
7.7 Alternative Investment Funds
4 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
Element 8 Financial Services Regulation
8.1 Financial Services Regulation
8.2 Financial Crime
8.3 Insider Dealing and Market Abuse
8.4 Data Protection
8.5 Complaints and Compensation
Element 9 Taxation, Investment Wrappers and Trusts
9.1 Tax
9.2 Investment Wrappers
9.3 Pensions
9.4 Trusts
Element 10 Other Financial Products
10.1 Loans
10.2 Mortgages
10.3 Life Assurance
Element 11 Financial Advice
11.1 Areas of Financial Advice
11.2 Process for giving financial advice
11.3 Legal concepts relevant in financial advice
Version 24 © Chartered Institute for Securities & Investment 5
Unit 1 – Introduction to Securities and Investment
Element 1 Introduction
1.1 The Financial Services Sector
On completion, the candidate should:
know the role of the following within the financial services sector:
• retail banks
• savings institutions
• investment banks
• pension funds
• insurance companies
• fund managers
• stockbrokers
• custodians
• platforms
• third-party administrators (TPAs)
• industry trade and professional bodies
• peer to peer / crowdfunding
know the function of and differences between retail and
professional business and who the main customers are in each
case
know the role of the following investment distribution channels:
• independent financial advisers
• restricted advice
• execution only
• robo advice
know about the following themes
• Fintech
• Environmental, Social, and Governance (ESG)
6 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
Element 2 Economic Environment
2.1 Economic Environment
On completion, the candidate should:
know the factors which determine the level of economic activity:
• state-controlled economies
• market economies
• mixed economies
• open economies
know the stages of the economic cycle and the role of
government in determining:
• economic policy
• fiscal policy
• monetary policy
know the function of central banks:
• The Bank of England including the Monetary Policy
Committee
• The Federal Reserve
• The European Central Bank
understand the impact of the following economic data:
• Gross Domestic Product (GDP)
• Balance of Payments
• budget deficit / surplus
• level of unemployment
• exchange rates
• inflation/ deflation
Version 24 © Chartered Institute for Securities & Investment 7
Unit 1 – Introduction to Securities and Investment
Element 3 Equities
3.1 Equities
On completion, the candidate should:
know how a company is formed and the differences between
private and public companies
know the features and benefits of ordinary and preference
shares:
• dividend
• capital gain
• share benefits
• right to subscribe for new shares
• right to vote
be able to calculate the share dividend yield
understand the advantages, disadvantages and risks associated
with owning shares:
• price risk
• liquidity risk
• issuer risk
• foreign exchange risk
know the definition of a corporate action and the difference
between mandatory, voluntary and mandatory with options,
including takeovers and mergers
understand the following terms:
• bonus / scrip / capitalisation issues / stock splits / reverse
stock splits
• rights issues
• dividend payments
• buybacks
8 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
be able to calculate:
• theoretical ex rights price
• theoretical ex bonus price
know the purpose and format of annual general meetings
know the function of a stock exchange:
• primary / secondary market
• listing
know the types and uses of the main global stock exchange
indices
know how shares are traded:
• on exchange / over-the-counter
• multilateral trading facilities
• order driven / quote driven
know the method of holding title and related terminology:
registered and bearer; immobilised and dematerialised
understand the role of the central counterparty in clearing and
settlement
understand how settlement takes place:
• participants
• process
• settlement cycles
Version 24 © Chartered Institute for Securities & Investment 9
Unit 1 – Introduction to Securities and Investment
Element 4 Bonds
4.1 Characteristics
On completion, the candidate should:
understand the characteristics and terminology of bonds:
• coupon
• redemption
• nominal value
• yields
4.2 Government Bonds
On completion, the candidate should:
know the definition and features of government bonds:
• types
4.3 Corporate Bonds
On completion, the candidate should:
know the definitions and features of the following types of bond:
• domestic
• foreign
• eurobond
• asset-backed securities including covered bonds
• zero coupon
• hybrids (convertible/preferred)
• floating rate notes
• medium term notes
• permanent interest bearing shares
10 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
4.4 Bonds
On completion, the candidate should:
know the potential advantages and disadvantages of investing in
different types of bonds
be able to calculate the flat yield of a bond
understand the role of credit rating agencies and the differences
between investment and non-investment grades
Element 5 Other Markets and Investments
5.1 Cash Deposits
On completion, the candidate should:
know the characteristics of fixed-term and instant access deposit
accounts
know the advantages and disadvantages of investing in cash
know the differences between crypto currencies and fiat
currencies
5.2 The Money Market
On completion, the candidate should:
know the difference between a capital market instrument and a
money market instrument
know the definition and features of the following:
• Treasury Bill
• Commercial Paper
• Certificate of Deposit
• Money market funds
know the advantages and disadvantages of investing in money
market instruments
Version 24 © Chartered Institute for Securities & Investment 11
Unit 1 – Introduction to Securities and Investment
5.3 Property
On completion, the candidate should:
know the characteristics of property investment:
• commercial / residential property
• direct / indirect investment
know the potential advantages and disadvantages of investing in
property
5.4 The Foreign Exchange Market
On completion, the candidate should:
know the basic structure of the foreign exchange market
including:
• currency quotes
• settlement
• spot / forward
• short-term currency swaps
be able to calculate a forward exchange rate using interest rate
parity formula
Element 6 Derivatives
6.1 Derivatives Uses
On completion, the candidate should:
know the uses and application of derivatives
6.2 Futures
On completion, the candidate should:
know the definition and function of a future
12 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
6.3 Options
On completion, the candidate should:
know the definition and function of an option
understand the following terms:
• calls
• puts
6.4 Terminology
On completion, a candidate should:
understand the following terms:
• long
• short
• open
• close
• holder
• writing
• premium
• covered
• naked
6.5 Derivatives / Commodity Markets
On completion, the candidate should:
know the characteristics of the derivatives and commodity
markets
know the potential advantages and disadvantages of investing in
the derivatives and commodity markets
Version 24 © Chartered Institute for Securities & Investment 13
Unit 1 – Introduction to Securities and Investment
6.6 Swaps
On completion, a candidate should:
know the definition and function of an interest rate swap
6.7 Credit Default Swaps
On completion, a candidate should:
know the definition and function of credit default swaps
Element 7 Investment Funds
7.1 Introduction
On completion, the candidate should:
understand the potential advantages, disadvantages and risks of
collective investment
know the difference between active and passive (eg index)
management
know the purpose and principal features of UCITS / NURS
know the types of funds and how they are classified
7.2 Unit Trusts
On completion, the candidate should:
know the definition and legal structure of a unit trust
know the roles of the manager and the trustee
7.3 Open Ended Investment Companies (OEICs)
On completion, the candidate should:
know the definition and legal structure of an OEIC / ICVC /
SICAV
know the roles of the authorised corporate director and the
depositary
14 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
7.4 Pricing, Dealing and Settling
On completion, the candidate should:
know how unit trust units and OEIC shares are priced, bought
and sold
know how collectives are settled
7.5 Investment Trusts (Closed-Ended Investment Companies)
On completion, the candidate should
know the characteristics of an investment trust:
• share classes
• gearing
• real estate investment trusts (REITs)
know the meaning of the discounts and premiums in relation to
the pricing of investment trusts
know how investment trust shares are traded
7.6 Exchange-Traded Funds
On completion, the candidate should:
know the main characteristics of exchange-traded funds:
• trading
• replication methods
• synthetic/non-synthetic
7.7 Alternative Investment Funds
On completion, the candidate should:
know the basic characteristics of hedge funds:
Version 24 © Chartered Institute for Securities & Investment 15
Unit 1 – Introduction to Securities and Investment
• risks
• cost and liquidity
• investment strategies
know the basic characteristics of private equity:
• raising finance
• realising capital gain
Element 8 Financial Services Regulation
8.1 Financial Services Regulation
On completion, the candidate should:
know the UK regulatory environment and role of the:
• government
• regulatory authorities
• changing regulatory environment post Brexit
understand the need for regulation and authorisation of firms
know the CISI’s Code of Conduct
understand Consumer Duty and the key principles of
professional integrity and ethical behaviour in financial services
8.2 Financial Crime
On completion, the candidate should:
know what money laundering is, the stages involved and the
related criminal offences
know how firms / individuals can be exploited as vehicles for
financial crime:
• fraud
• cybercrime
16 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
• terrorist financing
• bribery
8.3 Insider Dealing and Market Abuse
On completion, the candidate should:
know the offences that constitute insider dealing and market
abuse and the instruments covered
8.4 Data Protection
On completion, the candidate should:
know the impact of the Data Protection Act 2018 on firms’
activities
8.5 Complaints and Compensation
On completion, the candidate should:
know the requirements for handling customer complaints
including the role of the Financial Ombudsman Service
know the circumstances under which the Financial Services
Compensation Scheme pays compensation and the
compensation payable for investment and deposit claims
Element 9 Taxation, Investment Wrappers and Trusts
9.1 Tax
On completion, the candidate should:
know the direct and indirect taxes affecting individuals:
• income tax
• capital gains tax
• inheritance tax
Version 24 © Chartered Institute for Securities & Investment 17
Unit 1 – Introduction to Securities and Investment
• stamp duty
• corporation tax
• state benefits / HMRC tax credits
• national insurance
• residency / domicile
know the main exemptions in respect of the main personal taxes
9.2 Investment Wrappers
On completion, the candidate should:
know the definition of and tax incentives provided by ISAs
know the main types of ISA available:
• cash ISA
• stocks & shares ISA
• innovative ISA
• lifetime ISA
• junior ISA
9.3 Pensions
On completion, the candidate should:
know the benefits provided by pensions
know the basic characteristics of the following:
• State Pension Scheme
• Occupational Pension Schemes
• Personal Pensions including Self Invested Personal
Pensions (SIPPs)
18 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
9.4 Trusts
On completion, the candidate should:
know the features of the main trusts:
• discretionary
• interest in possession
• bare
know the definition of the following terms:
• trustee
• settlor
• beneficiary
know the main reasons for creating trusts
Element 10 Other Financial Products
10.1 Loans
On completion, the candidate should:
know the differences between bank loans, overdrafts and credit
card borrowing
know the difference between the quoted interest rate on
borrowing and the effective annual rate of borrowing
be able to calculate the effective annual rate of borrowing, given
the quoted interest rate and frequency of payment
know the difference between secured and unsecured borrowing
10.2 Mortgages
On completion, the candidate should:
understand the characteristics of the mortgage market:
• interest rates
Version 24 © Chartered Institute for Securities & Investment 19
Unit 1 – Introduction to Securities and Investment
• loan to value
know the definition of and types of mortgage:
• repayment
• interest only
• offset
10.3 Life Assurance
On completion, the candidate should:
know the basic principles of life assurance and the definition of
the following types of life policy:
• term assurance
• whole-of-life
Element 11 Financial Advice
11.1 Areas of Financial Advice
On completion, the candidate should:
understand the main areas of financial advice:
• budgeting
• protection
• borrowing
• investment and saving
• later life planning
• estate planning
• tax planning and offshore considerations
20 © Chartered Institute for Securities & Investment Version 24
Unit 1 – Introduction to Securities and Investment
11.2 Process for giving financial advice
On completion, the candidate should:
understand the key factors in the financial advice process:
• the client relationship
• affordability, suitability, attitude to risk
• matching solutions with needs
• use of communication skills in giving advice
• the limitations of forecasting future performance and scenario
planning
• monitoring and reviewing clients’ circumstances
• information given to clients
• essential documentation
• total costs and charges
• consumer rights and remedies, including awareness of their
limitations
understand the fundamentals of managing a portfolio:
• diversification
• rebalancing portfolios to reflect a change in circumstances
11.3 Legal concepts relevant in financial advice
On completion, the candidate should:
understand the key legal concepts relating to:
• legal persons (wills / intestacy / personal representatives /
trustees / companies / limited liabilities / partnerships
• contract, capacity to contract
• agency
• real estate, personal property and joint ownership
Version 24 © Chartered Institute for Securities & Investment 21
Unit 1 – Introduction to Securities and Investment
• powers of attorney
• insolvency and bankruptcy
• identifying, reporting scams
22 © Chartered Institute for Securities & Investment Version 24
