How to Pass the CISI IAD Securities Exam

Securities is the instruments unit of the CISI Level 4 Investment Advice Diploma, and the one that decides whether you can talk properly about what you are recommending. It is not the Level 3 Capital Markets Programme paper of the same name, which is a different qualification with a different syllabus lineage and a different workbook, and which catches a steady stream of candidates out before they have opened a book. Unlike the regulation units, this paper is almost entirely technical: 80 questions on cash, bonds, shares, funds, settlement, analysis and portfolios, and two of those eight areas take half of them.

The exam is 80 multiple-choice questions in two hours, with a 70% pass mark, which means 56 correct answers. It is computer based and there is no negative marking, so answer every question, including the ones you are guessing. The current workbook is Edition 16, written against syllabus version 16.1, which covers exams sat up to 30 December 2026. There is no separate syllabus document for this unit: the learning map and the exam specification are printed inside the workbook, which is worth knowing before you spend an evening looking for a PDF that does not exist.

Candidates are usually trainee or newly qualified advisers, paraplanners moving into advice, private client and wealth staff, and people coming across from operations or banking who need a Level 4 technical unit on record. Passkey covers the other Investment Advice Diploma units too: UK Regulation and Professional Integrity, Investment Risk and Taxation and Financial Planning and Advice.

Know the weightings before you revise

Eighty questions across eight elements, and it is the concentration at the top that matters. Two elements are 20 marks each, and the other six share the remaining 40 between them.

Fixed-Income Securities and Equities are 20 marks each, half the paper between them. Collective Investments, Securities Analysis and Portfolio Construction follow at eight apiece, then Settlement, Safe Custody and Prime Brokerage at seven. At the other end, Cash, Money Markets and the Foreign Exchange Market is five and Investment Selection and Administration is four. That tail is nine marks, more than a tenth of the paper, and it is the cheapest nine marks on the syllabus.

What each element tests

Cash, Money Markets and the Foreign Exchange Market (5 questions)

Cash as an asset class and what inflation does to it in real terms, then the money market instruments: treasury bills, certificates of deposit, commercial paper and repurchase agreements, with their maturities and the fact that several are issued at a discount rather than paying a coupon. The foreign exchange half covers spot and forward quotes, which side of a quoted pair a client actually gets, and the currency risk an overseas holding carries whether or not the underlying investment performs.

Fixed-Income Securities (20 questions)

The largest element and the one with the most arithmetic in it. Government and corporate issuance, gilts including index-linked, floating rate notes, eurobonds, convertibles and asset-backed paper, with their coupon and redemption structures. Then the analysis: clean price against dirty price and accrued interest, running yield against gross redemption yield, the inverse relationship between price and yield, duration and modified duration as measures of interest rate sensitivity, and the shape of the yield curve with the explanations offered for it. Credit ratings and the credit, inflation, liquidity and reinvestment risks sit alongside all of it.

Equities (20 questions)

Equal in weight to fixed income and much easier to under-prepare, because it feels familiar. Ordinary and preference shares and the rights attaching to each, primary issuance from a full listing to a placing, and secondary trading on order-driven and quote-driven markets. Corporate actions are the reliable source of marks here: rights issues, bonus and scrip issues, dividends, the cum-dividend and ex-dividend dates, and what each does to the share price. Depositary receipts, indices, warrants and the basic valuation ratios round it out.

Collective Investments (8 questions)

Unit trusts, open-ended investment companies, investment trusts and exchange traded funds, and the distinctions that actually get examined: open-ended against closed-ended, pricing against net asset value, discounts and premiums, gearing inside an investment trust, and the charges each structure carries. UCITS and non-UCITS status, offshore funds, and the more specialist vehicles from property to private equity.

Settlement, Safe Custody and Prime Brokerage (7 questions)

The operational element, and the one advisers have least contact with. The trade lifecycle from execution through clearing to settlement, the role of a central counterparty, delivery versus payment and settlement cycles. Then custody: nominee accounts, safe custody agreements, the difference between legal and beneficial ownership of a client holding, stock lending, and the bundle of services a prime broker provides to a hedge fund.

Securities Analysis (8 questions)

Fundamental analysis against technical analysis, and what each claims to do. Reading a set of financial statements, then the ratios: earnings per share, price/earnings, dividend yield and dividend cover, gearing, interest cover and return on equity. Valuation by discounted cash flow and by dividend models, plus the macroeconomic backdrop that moves whole sectors regardless of what an individual company does.

Portfolio Construction (8 questions)

Client objectives and constraints first, then the theory: risk and return, why correlation rather than the sheer number of holdings is what makes diversification work, the efficient frontier, the capital asset pricing model, beta and alpha. Strategic against tactical asset allocation, active against passive management, and how a portfolio is measured against a benchmark once it is running.

Investment Selection and Administration (4 questions)

Four marks on turning everything above into a holding a client actually owns: choosing between comparable investments, the wrappers and platforms the holding sits in, the administration and reporting that follow, performance measurement, and the periodic review. Small, practical, quick to learn, and the last element in the workbook, which is where it usually gets skipped.

Where people slip

The first and largest problem is treating fixed income as one chapter among eight rather than as a quarter of the paper. Twenty marks is more than most candidates budget for, the arithmetic is unlike anything else in the syllabus, and gross redemption yield in particular does not survive a single reading.

The second is assuming equities are the easy 20. They are the familiar 20, which is not the same thing. Rights issues against bonus issues, and cum-dividend against ex-dividend, are quick to learn and easy to answer the wrong way round when the clock is running.

The third is the settlement element. Seven marks on the trade lifecycle, custody and prime brokerage is more than the whole cash and foreign exchange element, and it is the part of the syllabus an adviser is least likely to absorb at work.

The fourth is duration. Candidates learn the definition, then meet a question asking which of four bonds is most sensitive to a change in interest rates. Longer maturity raises duration and a lower coupon raises it too, and questions are built by varying one while holding the other still.

The fifth is revising from the wrong workbook entirely. Both the Level 4 Investment Advice Diploma and the Level 3 Capital Markets Programme have a unit called Securities. Before you read a page, check the cover says Investment Advice Diploma and Edition 16.

How long it takes to prepare

There is no standalone syllabus document to look the recommended hours up in, because for this unit the learning map and the exam specification live inside the workbook. That makes the useful question not how many hours you put in but where they go, and the weightings answer it unusually clearly.

Half your hours belong to fixed income and equities, and fixed income should take the larger share of the two, because arithmetic needs repetition in a way that description does not. Give Collective Investments, Securities Analysis and Portfolio Construction a tenth each, settlement slightly less, and an evening apiece to cash and foreign exchange and to investment selection and administration. That leaves room for two full timed mocks at the end, which is where the format rehearsal happens rather than the learning.

How to revise it

Start with fixed income, while you are fresh, and come back to it last as well. A quarter of the paper justifies two passes, and the yield and duration material is the only part of this syllabus that behaves like maths rather than memory.

Work the numbers with a pen. Clean price and dirty price, accrued interest, running yield, gross redemption yield: do each of them enough times that the method is automatic, because 90 seconds a question does not leave room to reconstruct it from scratch.

Build a one-page table of the corporate actions and another of the fund structures. Most of the equity and collective investment marks turn on keeping similar things apart, and a table you have drilled beats a chapter you have read.

Then revise by being tested rather than by rereading. The gap between recognising a term and knowing it cold shows up only under a clock, so finish with timed 80-question mocks weighted like the real paper, and use repeated results alongside your timetable and remaining weak areas when deciding whether to book. No mock score can predict an individual result. If you are not sure where to start, the Introduction diagnostic will tell you which elements are costing you most.

Hunting for past papers? Read IAD Securities past papers: what actually exists. Passkey is an independent study tool and is not affiliated with, endorsed by, or accredited by the Chartered Institute for Securities & Investment.