Security classification, in securities data management, is the assignment of each financial instrument to defined categories that describe what it is: an ordinary share, a preference share, a government bond, a convertible, a fund unit, a listed option and so on. The classification is stored as part of instrument reference data in the security master file, and other systems read it to decide how the instrument should be priced, settled, taxed, risk-weighted and reported.
Several schemes are used side by side. The ISO 10962 standard defines the Classification of Financial Instruments (CFI) code, a six-letter code allocated alongside the ISIN. Regulators, index providers and data vendors add their own categories for industry sector, country of risk and regulatory treatment, and firms map these to an internal asset class classification. A wrong classification can misstate exposure, breach an investment restriction or cause a regulatory report to be rejected, so changes are controlled under reference data governance.