Exam-day cram sheet
All 50 exam questions distributed as: Ch 1 · 13Ch 2 · 11Ch 3 · 16Ch 4 · 4Ch 5 · 6. Ch 3 (safekeeping, nominees, custody fees, corporate actions, securities lending) is the heaviest and holds most of the arithmetic. UK tax figures are the workbook's 2025-26 set. Tap a card title to open the full chapter walkthrough.
| Certified sophisticated | Certificate < 3 years old (FCA-approved) |
| Self-certified sophisticated | 2 yrs: £1m director / PE / unlisted deal |
| Certified HNWI | 12 mths: £100k income or £250k assets |
| Broker vs broker-dealer | Agency / agency + proprietary |
| IDB | Between market makers · anonymity |
| Prime brokerage | Mainly hedge funds |
| MiFID clients | Retail most protected · ECP lightest |
Trap: £250,000 HNWI net assets EXCLUDES the primary residence.
| Global custody origin | ERISA, mid-1970s |
| Subcustodian | Eyes and ears locally |
| Local strengths | Tax, culture, lobbying, track record |
| Regional strengths | Tech, standard reporting, discounts, rating |
| Custody agreement | Investor + global custodian |
| SLA | Investor + custodian service standards |
| RFI then RFP | RFP = early screening, not the decision |
| Pension trustees | Direct custodian appointment (ERISA s404, 1995 Act) |
Trap: subcustody agreements are amended to fit LOCAL law and practice.
| UK | CREST (Euroclear UK & Int'l) |
| US | DTC (corporates) · Fed (governments) |
| Germany / Spain | CBF / Iberclear |
| Australia | CHESS · Austraclear (debt) |
| Japan / HK | JASDEC / HKSCC (CMU for debt) |
| Singapore / Korea | CDP / KSD |
| India / Brazil | NSDL + CDSL / B3 |
| CREST quirk | USD excluded from RTGS |
Trap: CREST members are direct "users" or sponsored via a user. Legal register = issuer register + operator register.
| ICSD origin | Eurobond market (1960s) |
| Euroclear Bank channels | SWIFT · EasyWay · EUCLID |
| Clearstream channels | CreationConnect · via SWIFT · CreationOnline |
| Euroclear settlement types | Internal · Bridge · External |
| Bridge | Euroclear Bank ↔ Clearstream |
| Euroclear real-time | 01:30-19:30 CET |
Trap: EasyWay and EUCLID are Euroclear's; the Creation* names are Clearstream's.
| Giovannini (Nov 2001) | 15 barriers: technical, legal, tax |
| T2S | Eurosystem platform · central bank money |
| CSDs on T2S (Mar 2025) | 24 |
| CSDR settlement | Art 5: max T+2 |
| CSDR dematerialisation | New issues 1 Jan 2023 · all 1 Jan 2025 |
| CSDR Art 47 | Issuer may use any EU CSD |
| CSDR banking | Limited-purpose only (1+2 or 2+2) |
| UK | Onshored; no settlement discipline regime |
Trap: UK dropped only the settlement discipline regime, not CSDR as a whole.
| STP | Execution to settlement, no manual intervention |
| FIX | Pre-trade + execution msgs · since 1992 |
| SWIFT operational | May 1977 · Brussels |
| SWIFT payments / securities | ~60% / just over 30% of FIN volume |
| Standards | ISO 15022 (2002) → ISO 20022 |
| Category 5 | Securities markets |
| Trade cycle | Trade · pre-settle/clear · settle · post-settle |
| Novation | CCP = buyer to every seller, seller to every buyer |
| ICM / GCM / NCM | Own only / own + others / uses a GCM |
| Bilateral clearing | Direct credit risk to each counterparty |
| CCP default cover | Defaulter's fund, then mutual guarantee |
| Third-party matching | DTCC CTM · MarketAxess (ICMA, 1989) · OSTTRA (CME + IHS Markit, 2021) |
| Transaction reporting | MiFID II · via ARM · T+1 |
Trap: a CCP spreads and monitors default risk; it does not remove it.
| Most equities/bonds | T+2 |
| US (DTC, Fed) | T+1 |
| India (all) | T+1 |
| UK gilts / JGBs | T+1 |
| Brazil debt · HK debt (CMU) · Korea debt | T+0 |
| UK equities/corp debt | T+2 (CREST) |
| US/Canada/Mexico → T+1 | May 2024 |
Trap: Brazil equities are T+2 but Brazil debt is T+0. UK gilts (T+1) differ from UK equities (T+2).
| Creation | Shares deposited with depository bank → DRs issued |
| ADR | US$ · T+1 · vote yes, rights issue no |
| GDR | Two or more markets · often Euroclear/Clearstream |
| DI | Foreign share in CREST · SDRT-exempt |
| Pre-release | Shares due ~3 months · fully collateralised |
| DR issue tax (UK/Irish) | 1.5% (vs 0.5% UK share purchase) |
| CHIPS | US$ · netting · pre-funded · settles via Fedwire |
| Fedwire | US$ · gross RTGS · Federal Reserve |
| CHAPS | Sterling RTGS · 06:00-18:00 |
| TARGET2 | Euro RTGS · Nov 2007 · 07:00-18:00 CET |
| CLS | FX PvP · removes Herstatt risk |
| CLS members | Settlement member (account) · user member (sponsored) |
Trap: Herstatt = one leg paid, other never arrives (1974).
| DvP | Securities final if and only if cash final |
| Ways to DvP | RTGS · netting · CSD books · guaranteed cheque |
| CREST DvP | Model 1 · central bank money |
| Bearer | No name on register · fungible · holder bears loss |
| Registered certificated | Transfer form + reregistration |
| ASDA | Cash moves on ACTUAL settlement; seller loses on delay |
| CSDA | Cash moves on contract date; custodian risk |
Trap: CSDA = provisional credit = custodian credit risk.
| Buy-in | SELLER fails · buyer buys elsewhere |
| Sell-out | BUYER fails · seller sells elsewhere |
| EUI matching fine | £4 at close T+1, +£2/day, max 30 days |
| EUI settlement targets | 85 · 90 · 95 · 98 · 99% |
| CSDR discipline | Cash penalties · mandatory buy-ins · in force Feb 2022 |
| Mandatory buy-in | Deferred to Nov 2025 |
| US fails claim floor | US$500 |
| Method | Sign each leg, add shares and cash separately |
| Example | Buy 7,000 (£28,000), sell 4,200 (£17,220) + 2,000 (£7,600) |
| Result | +800 shares · pay £3,180 |
| Trade date netting | That day's trades only |
| CNS | Re-presents fails · oldest first · kept in bigger position |
Trap: check both columns. Shares can net to a receive while cash nets to a payment.
| Formula | Net × rate/100 × days/(360 or 365) |
| Rate | SELLER's overdraft rate |
| GBP day basis | 365/366 |
| Example | £219,000 × 4% × 5/365 = £120 |
| Dispute / pay | 15 days / 30 days |
| Written off | Under US$500 or 30 days after actual settlement |
Trap: calendar days, seller's rate, currency's day basis.
| Reconciliation (not physically held) | At least every 25 business days |
| Physical count | Every 6 months |
| Record retention | 3 years |
| DvP exemption | Due within 1 business day |
| Same-group custodian | Tell the client in writing |
| Non-compliance | Tell regulator in writing, without delay |
Trap: 25 days = held by others; 6 months = physical count in-house.
| Initial thresholds | UK 3% · HK/US 5% · Taiwan/Sri Lanka 10% |
| s793 CA 2006 | 3 year look-back |
| Legal title | Nominee (on register) |
| Beneficial ownership | Client |
| Pooled / designated / sole | Omnibus / unique ID / dedicated name |
| Omnibus voting | Only the nominee votes |
| Bare trustee | Only when + as instructed |
| Ad valorem | Basis points on assets |
| Transaction fee | Per settlement |
| Formula | Value × bp ÷ 10,000 |
| US$500m @ 1bp | US$50,000 |
| US$2m @ 20bp | US$4,000 |
| Emerging markets | Higher fees (risk, cost, less scale) |
| Mandatory | Cash dividend · bonus · split · consolidation · nil-paid rights issued |
| Voluntary | Rights subscription · warrants · conversion · put |
| Custodian cut-off | Before = liable · after = best efforts |
| Floating-rate coupon | Not known in advance |
| Capital repayment | Same shares · lower nominal value |
| Unconverted convertible | Redeemed for cash |
Trap: rights: ISSUE is mandatory, SUBSCRIBING is voluntary.
| Bonus | Value ÷ (old + bonus shares) |
| 3,000 @ £1.00, 1:3 | 4,000 @ £0.75 |
| Split 1-for-4 | 4× shares, ÷4 price |
| Consolidation 4-for-1 | ÷4 shares, 4× price |
| TERP | (old×old px + new×issue px) ÷ total shares |
| 3,000 @ £2, 2:3 at £1.50 | TERP £1.80 |
| Nil-paid right | TERP − issue price (£0.30) |
Trap: 1:4 adds 25%; it does not quadruple. TERP lies between old and issue price.
| Comply or explain | Combined Code (as named) |
| Myners (Feb 2004) | Lost votes · publish policy · automate · designated nominees |
| Before ex-date | Cum: buyer entitled |
| On/after ex-date | Ex: seller entitled |
| Ex-date-driven market | Buyer may need to claim |
| Special-ex / special-cum | Agreed against the period's norm |
| Assurance on voting | AAF 01/20 or SSAE 18 |
| Forecasting | Short: 1 day-2 wks · medium: to 1-2 yrs |
| Sweep | Idle cash to interest overnight |
| Pooling | Combine balances for interest |
| Single-currency | One-currency accounting · many FX trades |
| Multi-currency | DvP in foreign currency · complex recs |
| Legal title on loan | Passes to borrower |
| Lender's votes | Lost unless recalled |
| Manufactured dividend | Borrower pays lender |
| Haircut | Collateral > loan value |
| Daily | Mark to market · margin calls |
| SFTR | Report SFTs to a trade repository |
| Repo | Sell for cash, repurchase later |
| Tri-party repo | Agent manages collateral |
Trap: in a repo the party SELLING securities is the cash BORROWER.
| Dividend allowance | £500 |
| Dividend rates | 8.75% · 33.75% · 39.35% |
| Personal allowance | £12,570 |
| CGT exempt amount | £3,000 |
| CGT rates | 18% / 24% · trustees 24% · BADR 14% |
| SDRT | 0.5% (none on gilts / UK corp bonds) |
Trap: these are year-specific workbook figures. Use the ones in the exam question if given.
| Gilts / QCBs | CGT-exempt (individuals) |
| QCB | Sterling + non-convertible |
| Gilt strips | Income tax annually · deemed sale |
| FOTRA | Free of tax to residents abroad |
| Gain | 500 × (1.40−1.00) − £30 = £170 |
| Matching order | Same day → 30 days after (FIFO) → S104 pool |
| S104 part-sale | Pool cost × sold ÷ pool shares |
| De minimis | 100 − 0.25 × years to maturity |
Trap: gilts exempt, gilt STRIPS taxed as income.
| WHT | At source · reclaimed via DTT, usually by custodian |
| DTTs | 1,300+ · UK 100+ countries |
| QI | IRS 2001 · report + withhold |
| FATCA | 2010 · 30% WHT if non-compliant |
| CRS | OECD/G20 · automatic exchange · from 2017 |
| BIS three | Credit · market · operational |
| Credit risk elements | Issuer · counterparty · settlement |
| Op risk subcategories | Transaction-processing · legal · reputational |
| Systematic | Whole market / segment |
| Systemic | Whole financial system collapse |
| Basel II pillars | Min capital · supervisory review · disclosure |
| Basel III | 2013-2019 · risk-weighted assets |
Trap: systematic vs systemic are not interchangeable.
| Network management | First line of risk management |
| No indemnity | Systemic shocks to CSD / payments |
| AIFMD / UCITS V | Depositary restitution |
| SEC 17f-5 | Custodians: books, recovery, currency, expropriation |
| SEC 17f-7 | Depositories · 2001 |
| AGC | 120+ Q questionnaire, annual |
| AAF 01/20 | ICAEW · replaced 01/06 (Jul 2020) |
| SSAE 18 / ISAE 3402 | Type 1 point-in-time · Type 2 6+ months |
Trap: countermeasures: CCP = failing counterparty · four-eyes = wrong instructions · collateralised CSDA = DvP unavailable.
Exam-day metadata
| Format | 50 questions · 60 minutes |
| Chapter weights | Ch 3: 16 · Ch 1: 13 · Ch 2: 11 · Ch 5: 6 · Ch 4: 4 |
| Heavy chapters | Ch 3 + Ch 1 + Ch 2 = 40 of 50 questions (80%) |
| Calculation sweep | Netting · interest claim · custody fee · bonus/split/consolidation · rights (TERP) · capital gain · S104 · de minimis |
| "NOT" / "EXCEPT" questions | Read carefully · pick the odd one out |
Strategy: spend your best revision time on
Ch 3 (32% of the paper, most of the arithmetic), then Ch 1 (recall of who runs what) and Ch 2. Ch 4 and Ch 5 are small but cheap marks: learn the numbers on the cards above.