Read this on exam eve. Not before.
Every number, every trap, every distinction the IISI Edition 16 exam tests. Cross-check anything you're shaky on against the fuller walkthroughs.
Ch 1 · Financial Services Sector (5 Qs)
| Three core functions | Investment chain · Risk mgmt · Payments |
| NOT a function | Manufacturing / Tax policy / Defence |
| Risk is | Transferred / pooled, not eliminated |
| Primary market | Issuer receives proceeds |
| Secondary market | Issuer does NOT |
| Sell-side | IBs, brokers, market-makers |
| Buy-side | Asset managers, pension funds |
| FX daily turnover (BIS 2022) | ~$7.5tn |
| USD share of FX | ~88% |
"Sell-side" ≠ selling securities. It means SELLING SERVICES to investors (buy-side).
Ch 2 · Economic Environment (4 Qs)
| GDP expenditure formula | C + I + G + (X − M) |
| GDP vs GNP | Borders vs residents |
| Technical recession | 2 consecutive Q's negative GDP |
| Bear market | ≥ 20% drop from peak |
| UK CPI target | 2% |
| Inflation hurts | Fixed-income earners, savers |
| Inflation helps | Fixed-rate borrowers |
| QE | CB buys assets, injects liquidity |
| Monetary policy | Central bank (rates, QE) |
| Fiscal policy | Government (tax + spend) |
Bond prices ↔ interest rates INVERSE. Rates ↑ → bond prices ↓.
Ch 3 · Equities (10 Qs — heaviest)
| Ordinary resolution | > 50% |
| Special resolution | ≥ 75% |
| Ex-div day → price | Falls ~ by dividend |
| Cumulative pref | Arrears accrue |
| Participating pref | Fixed + upside share |
| Rights issue | Raises CASH |
| Bonus issue | No cash raised — re-slice |
| ADR | Non-US co, US market, USD |
| GDR | Non-US co, non-US market (London/Lux) |
| DJIA + Nikkei 225 | PRICE-weighted |
| S&P, FTSE, DAX, CAC, Hang Seng | Cap-weighted |
| Equity settlement (US) | T+1 (May 2024) |
| Equity settlement (UK/EU) | T+2 |
DJIA and Nikkei 225 are PRICE-weighted (unusual). If a Q asks "which is price-weighted", one of these two is the answer.
Ch 4 · Bonds (6 Qs)
| Bond ↔ interest rate | INVERSE |
| IG threshold (S&P/Fitch) | BBB− |
| IG threshold (Moody's) | Baa3 |
| UK gilt "shorts" | ≤ 7 years |
| UK gilt "longs" | > 15 years |
| T-Bill (US) | ≤ 1yr, zero-coupon |
| Callable option holder | ISSUER |
| Putable option holder | BONDHOLDER |
| Debenture (US/int'l) | UNSECURED |
| Eurobond | Currency ≠ country of issue |
| Eurobond depositaries | Euroclear + Clearstream |
| Flat yield | Coupon $ ÷ current price |
| Premium bond | Coupon > Flat > YTM |
| Discount bond | YTM > Flat > Coupon |
| Covered bond recourse | DUAL (issuer + cover pool) |
| ABS recourse | SPV pool only |
"Eurobond" ≠ euro-denominated. Currency doesn't match country of issue (e.g. USD bond in London).
Ch 5 · Other Markets (5 Qs)
| Money market | ≤ 1 year |
| Capital market | > 1 year |
| UK FSCS deposit protection | £85,000 |
| US FDIC | $250,000 |
| EU DGSD | €100,000 |
| 3 functions of money | Exchange · Store · Unit of account |
| Corp T-bill equivalent | Commercial paper |
| Tradable bank deposit | CD |
| Bitcoin supply cap | 21 million |
| Spot FX standard | T+2 (CAD/MXN = T+1) |
| Pip (most) | 0.0001 |
| Pip (JPY) | 0.01 |
| AED / SAR pegs to USD | 3.6725 / 3.75 |
| Higher rate currency (forward) | Trades at DISCOUNT |
Higher interest rate currency trades at a forward DISCOUNT. Counter-intuitive — otherwise arbitrage.
Ch 6 · Derivatives (5 Qs)
| Future | OBLIGATION both sides, no premium |
| Option | RIGHT for buyer, premium paid |
| Call | Right to BUY |
| Put | Right to SELL |
| ITM call | Market > Strike |
| ITM put | Market < Strike |
| American exercise | Any time to expiry |
| European exercise | At expiry only |
| Long option max loss | Premium paid |
| Naked call writer max loss | UNLIMITED |
| Initial margin | Upfront deposit |
| Variation margin | Daily P&L settlement |
| Pay-fixed IRS | Hedges RISING rates |
| CDS buyer benefits if | Reference entity DEFAULTS |
| CCP role | Buyer to seller, seller to buyer |
Naked call writer's max loss is UNLIMITED. Naked put writer's is bounded by the strike.
Ch 7 · Investment Funds (6 Qs)
| Open-ended pricing | NAV, once daily |
| Closed-ended pricing | Market price = NAV ± disc/prem |
| US open-ended | Mutual fund |
| UK modern open-ended | OEIC |
| UK closed-ended | Investment trust (PLC) |
| EU corporate OE | SICAV |
| EU co-ownership OE | FCP |
| EU retail-fund standard | UCITS |
| REIT distribution reqmt | ~90% |
| Synthetic ETF risk | Counterparty (swap) |
| ETF price kept ≈ NAV by | APs (creation/redemption) |
| Active vs S&P 10yr | ~80–95% underperform |
| Hedge fund fees | "2 and 20" |
| PE fund life | ~10 years |
| PE carry | 20% above 8% hurdle |
| PE target | 2–3× MOIC, 20%+ IRR |
Open-ended units always trade at NAV. Closed-ended shares can trade at persistent DISCOUNT or PREMIUM to NAV.
Ch 8 · Regulation & Ethics (4 Qs)
| Universal regulator aims | Consumer · Integrity · Stability |
| UK Twin Peaks | PRA + FCA |
| US securities regulator | SEC (1934) |
| Global securities standard | IOSCO |
| Global AML standard | FATF (40 Recommendations) |
| 3 stages of ML | Placement → Layering → Integration |
| SAR goes to | National FIU (UK: NCA) |
| Tipping-off | CRIMINAL offence |
| PEP | Prominent public function + close family/associates |
| UK Bribery Act | 2010 |
| Inside info — tests | Precise · Non-public · Relates · Price-material |
| Market abuse — 3 categories | Insider dealing · Unlawful disclosure · Manipulation |
| Spoofing | Orders placed intending to cancel |
| CISI Code principles | 8 |
| Consumer Duty year | 2023 |
| CISI CPD (annual) | ~35 hours |
Tipping-off (telling a customer about a SAR or investigation) is a CRIMINAL offence.
Ch 9 · Other Financial Products (3 Qs)
| DB — who bears risk? | Employer |
| DC — who bears risk? | Member |
| UK auto-enrolment total | 8% (3% + 5%) |
| Pension tax pattern (EET) | Exempt in · Exempt growth · Taxed out |
| UK tax-free lump sum | 25% |
| Traditional IRA | Deduct now, tax later |
| Roth IRA | Tax now, withdraw tax-free |
| APR | Effective annual cost + fees |
| LTV | Loan ÷ Value |
| Repayment mortgage | Principal + interest each month |
| Interest-only | Principal repaid as lump sum |
| Islamic riba | Interest — PROHIBITED |
| Ijara | Islamic lease |
| Murabaha | Cost-plus sale |
| Sukuk | Islamic bond (asset-backed) |
| Term assurance | Pays only on death within term |
| Whole-of-life | Pays on death regardless of when |
Biggest DB/DC trap: employer bears the risk in DB; member bears the risk in DC.
Ch 10 · Financial Advice (2 Qs)
| Emergency fund rule | 3–6 months' expenses in savings first |
| Tax planning ≠ evasion | Planning legal · Evasion illegal |
| Intestate | Died without valid will |
| Executor | Named in will |
| Administrator | Court-appointed (no will) |
| Attorney (LPA) | Appointed IN ADVANCE by individual |
| Deputy | Court-appointed AFTER capacity lost |
| Joint tenancy | Survivorship — outside will |
| Tenancy in common | Defined shares — passes by will |
| Risk tolerance | Willingness (emotional) |
| Capacity for loss | Ability (financial) |
| Suitability uses | The LOWER of the two |
| UK cooling-off (most) | 14 days |
| UK life insurance cooling-off | 30 days |
| Independent advice | Whole-market |
| Restricted advice | Limited range |
| UK RDR year | 2013 — commission ban |
Risk tolerance = emotional willingness. Capacity for loss = financial ability. Not the same thing. Use the LOWER of the two to set risk.
🎯 Exam-day strategy
| Total questions | 50 |
| Time | 75 minutes |
| Time per Q | ~90 seconds |
| Pass mark | 70% (35 of 50) |
| Heaviest chapters | Ch 3 (10) · Ch 4 (6) · Ch 7 (6) |
| Combined weight of top 3 | 22 Qs = 44% of exam |
Do a full sweep first — mark harder Qs and return. Don't get stuck on any single Q for more than 2 minutes.
💥 Top 10 traps (memorise these)
| 1. Bond ↔ interest rate | INVERSE |
| 2. Future vs Option | Obligation vs Right + premium |
| 3. DB vs DC risk | Employer vs Member |
| 4. Callable vs Putable | Issuer vs Holder |
| 5. Cum-div → Ex-div | Price falls by ~ dividend |
| 6. Ordinary vs Special resolution | 50% vs 75% |
| 7. Money vs Capital market | ≤1yr vs >1yr |
| 8. Investment grade boundary | BBB− / Baa3 |
| 9. Eurobond | Currency ≠ country of issue |
| 10. Risk tolerance vs Capacity | Willingness vs Ability |
If you're short on time — cold-recall these 10 distinctions and you'll pick up 8+ points across the paper.
CISI IISI Edition 16 (Syllabus v16.0) · icwim.com/app?course=iisi · Good luck.