CMFAS M2a Exam Free Trial Set Two
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Emma Finch
Customer Success Manager | CMFASexam
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Question 1 of 20
1. Question
Which of the following statements is true regarding the secondary market?
Correct
Trading activity that takes place outside of the initial capital-raising activities (i.e. in the primary market) take place in the secondary market. As such, it can be said that the secondary market allows investors to manage or transfer their risk to other parties. Risk transfer or risk management can also be achieved by trading in futures or derivatives products instead of simply selling the shares or bonds. Some examples of derivatives include Futures, Options, Extended Settlement Contracts, and Issuer Warrants. Singapore Exchange Limited (SGX) provides capital-raising and risk management opportunities to the global market through its product offerings
Incorrect
Trading activity that takes place outside of the initial capital-raising activities (i.e. in the primary market) take place in the secondary market. As such, it can be said that the secondary market allows investors to manage or transfer their risk to other parties. Risk transfer or risk management can also be achieved by trading in futures or derivatives products instead of simply selling the shares or bonds. Some examples of derivatives include Futures, Options, Extended Settlement Contracts, and Issuer Warrants. Singapore Exchange Limited (SGX) provides capital-raising and risk management opportunities to the global market through its product offerings
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Question 2 of 20
2. Question
Which of the following is an example of securities instruments?
Correct
Businesses raise capital through the issuance of various securities instruments such as shares / common stock / equity securities, bonds / fixed income securities and company warrants.
Incorrect
Businesses raise capital through the issuance of various securities instruments such as shares / common stock / equity securities, bonds / fixed income securities and company warrants.
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Question 3 of 20
3. Question
What are the penalties for failure to notify changes to approved traders’ or registered representatives’ circumstances, according to SFA?
I. A further fine not exceeding $15,000 for every day or part thereof during which the offence continues after conviction.
II. Offences are punishable with a fine not exceeding $150,000.
III. The penalty will be dependent on the number of prior violations by the Trading Member
IV. The penalty will be dependent on whether the offender is a Trading Member, Approved Trader or Registered RepresentativeCorrect
I & II.
Failure to notify changes to Approved Traders’ or Registered Representatives’ circumstances
SFA 99D(8), 99E(4), 99F(4)
Offences are punishable with a fine not exceeding $150,000 and, in the case of a continuing offence, to a further fine not exceeding $15,000 for every day or part thereof during which the offence continues after conviction.Incorrect
I & II.
Failure to notify changes to Approved Traders’ or Registered Representatives’ circumstances
SFA 99D(8), 99E(4), 99F(4)
Offences are punishable with a fine not exceeding $150,000 and, in the case of a continuing offence, to a further fine not exceeding $15,000 for every day or part thereof during which the offence continues after conviction. -
Question 4 of 20
4. Question
Which of the following is an example of prominent public functions?
Correct
“Prominent public functions” includes role held by heads of state, heads of government, government ministers, senior civil servants, senior judicial or military officials, senior executives of state owned corporations and senior political party officials.
Incorrect
“Prominent public functions” includes role held by heads of state, heads of government, government ministers, senior civil servants, senior judicial or military officials, senior executives of state owned corporations and senior political party officials.
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Question 5 of 20
5. Question
The Suspicious Transactions Report should be filed within __ days.
Correct
Incorrect
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Question 6 of 20
6. Question
Which of the following is an offence of Laundering Own Criminal Benefits?
Correct
The following is a summary of the money laundering offences under the law:
i. Laundering Own Criminal Benefits
Any person who:
(a) conceals or disguises any property which is or in whole or in part, directly or indirectly, represents his benefits trafficking or criminal conduct; or
(b) converts or transfers that property or removes it from the jurisdiction, shall be guilty of an offenceIncorrect
The following is a summary of the money laundering offences under the law:
i. Laundering Own Criminal Benefits
Any person who:
(a) conceals or disguises any property which is or in whole or in part, directly or indirectly, represents his benefits trafficking or criminal conduct; or
(b) converts or transfers that property or removes it from the jurisdiction, shall be guilty of an offence -
Question 7 of 20
7. Question
To which offence is this statement: “Any person who knowing or having reasonable grounds to believe that any property represents another person’s benefits from drug trafficking or criminal conduct” related?
Correct
ii. Money Laundering by Acquisition
Any person who knowing or having reasonable grounds to believe that any property (in whole or in part, directly or indirectly) represents another person’s benefits from drug trafficking or criminal conduct, acquires that property for no or inadequate consideration shall be guilty of an offence.Incorrect
ii. Money Laundering by Acquisition
Any person who knowing or having reasonable grounds to believe that any property (in whole or in part, directly or indirectly) represents another person’s benefits from drug trafficking or criminal conduct, acquires that property for no or inadequate consideration shall be guilty of an offence. -
Question 8 of 20
8. Question
Which of the following are of the basic guidelines for enhanced due diligence?
I. To freeze assets and report suspicion when alerted and to prevent release without approval from the regulator.
II. EDD on local and foreign politically exposed persons.
III. Protect against the use of correspondent banking relationships and front companies to shield illicit activities and be alert generally to the impact of dealing with sanctioned countries.
IV. Do not perform simple CDD if the bank suspects that money laundering or terrorist financing is involved.Correct
II & IV.
When the Risk Score is high, a Member and its Representative must carry out EDD. Some basic guidelines for enhanced due diligence include:
EDD on local and foreign politically exposed persons;
Do not perform simple CDD if the bank suspects that money laundering or terrorist financing is involved;
In instances where financial institutions rely on the intermediaries to perform CDD, the financial institutions would need to immediately obtain the CDD information from the intermediaries. Failing which CMS licence holder should carry out its own due diligence.Incorrect
II & IV.
When the Risk Score is high, a Member and its Representative must carry out EDD. Some basic guidelines for enhanced due diligence include:
EDD on local and foreign politically exposed persons;
Do not perform simple CDD if the bank suspects that money laundering or terrorist financing is involved;
In instances where financial institutions rely on the intermediaries to perform CDD, the financial institutions would need to immediately obtain the CDD information from the intermediaries. Failing which CMS licence holder should carry out its own due diligence. -
Question 9 of 20
9. Question
Which of the following statements is true regarding underlying cash market open?
Correct
Underlying Cash Market Open
When the underlying cash market is open for trading, the reference price shall be the average of the high and low traded prices in the minute before the error trade. If there are no trades in the minute before the error trade, the dynamic futures reference price will be determined by theoretical pricing models using the latest cash index value before the error trade, among other variables.Incorrect
Underlying Cash Market Open
When the underlying cash market is open for trading, the reference price shall be the average of the high and low traded prices in the minute before the error trade. If there are no trades in the minute before the error trade, the dynamic futures reference price will be determined by theoretical pricing models using the latest cash index value before the error trade, among other variables. -
Question 10 of 20
10. Question
Which of the following statements is true regarding External Fraud?
I. An example of an external fraud could result when someone outside of the institution uses a client’s name and account after discovering the details.
II. Taking advantage of the situation and knowing client’s account details, the employee could instruct the sale of investments and payments to be made to a fictitious account operated by him or her.
III. An example of external fraud is an employee who may know his or her client’s behaviour, and be aware that the client could be out of town.
IV. External fraud is possible because very often instructions are given through the telephone.Correct
I & IV.
An example of an external fraud could result when someone outside of the institution uses a client’s name and account after discovering the details (e.g. through hacking a client’s computer system), and then instructs a CMS licence holder to sell the client’s holdings and pay to their own account which is different from the records in the booksof the CMS licence holder.
This is possible because very often instructions are given through the telephone. The CMS licence holder must be able to have controls in place to verify such instructions. If it fails to have such controls, then the fraudster – after receiving the funds into his account – will withdraw it very quickly, disappear and cannot be caught.Incorrect
I & IV.
An example of an external fraud could result when someone outside of the institution uses a client’s name and account after discovering the details (e.g. through hacking a client’s computer system), and then instructs a CMS licence holder to sell the client’s holdings and pay to their own account which is different from the records in the booksof the CMS licence holder.
This is possible because very often instructions are given through the telephone. The CMS licence holder must be able to have controls in place to verify such instructions. If it fails to have such controls, then the fraudster – after receiving the funds into his account – will withdraw it very quickly, disappear and cannot be caught. -
Question 11 of 20
11. Question
Which of the following statements are true regarding Internal Fraud?
I. An example of an external fraud could result when someone outside of the institution uses a client’s name and account after discovering the details
II. An example of internal fraud is an employee who may know his or her client’s behaviour, and be aware that the client could be out of town.
III. Internal fraud is possible because very often instructions are given through the telephone.
IV. In the case of internal fraud, ehen the funds are received they will be withdrawn very quickly and the employee too will disappear.Correct
II & IV.
An employee who may know his or her client’s behaviour, and be aware that the client could be out of town. Taking advantage of the situation and knowing client’s account details, the employee could instruct the sale of investments and payments to be made to a fictitious account operated by him or her.
When the funds are received they will be withdrawn very quickly and the employee too will disappear. Or in some cases, if he or she does not disappear, he or she will cover their tracks through falsifying the client’s instruction records. Therefore operational tests and audits must be robust in CMS licence holder’s organization.Incorrect
II & IV.
An employee who may know his or her client’s behaviour, and be aware that the client could be out of town. Taking advantage of the situation and knowing client’s account details, the employee could instruct the sale of investments and payments to be made to a fictitious account operated by him or her.
When the funds are received they will be withdrawn very quickly and the employee too will disappear. Or in some cases, if he or she does not disappear, he or she will cover their tracks through falsifying the client’s instruction records. Therefore operational tests and audits must be robust in CMS licence holder’s organization. -
Question 12 of 20
12. Question
Which of the following statements is true regarding Price Alerts?
Correct
Price Alerts – When the price of the order differs from a reference price by more than a stipulated number of ticks or percentage. The reference price would be the last traded price, or the previous day’s settlement price if there has been no trade during the day.
Incorrect
Price Alerts – When the price of the order differs from a reference price by more than a stipulated number of ticks or percentage. The reference price would be the last traded price, or the previous day’s settlement price if there has been no trade during the day.
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Question 13 of 20
13. Question
Which of the following statements is true regarding real-time termination of DMA?
Correct
A Member must have the ability to immediately suspend or terminate a customer’s DMA when necessary15. This is to ensure that the Member can comply with instructions from SGX to suspend or terminate a customer’s DMA as described in Section 4.1.1.3 (Suspension and Termination of DMA).
Incorrect
A Member must have the ability to immediately suspend or terminate a customer’s DMA when necessary15. This is to ensure that the Member can comply with instructions from SGX to suspend or terminate a customer’s DMA as described in Section 4.1.1.3 (Suspension and Termination of DMA).
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Question 14 of 20
14. Question
What rights does SGX have to protect the financial integrity, reputation or interests of the markets established or operated by SGX?
I. Amend the Error Trade Price Range and Methodology.
II. Refer to trades executed in SGX-DT listed strategies, such as Calendar, Butterfly or Condor Spreads.
III. Compute the error trade price range for non-designated option contracts.
IV. Cancel or adjust the price of an Error Trade.Correct
I & IV.
To protect the financial integrity, reputation or interests of the markets established or operated by SGX, SGX retains the right to:
1. Amend the Error Trade Price Range and Methodology SGX has the right to consider other relevant market information to determine the error trade price range or the reference price, and determine error trade price ranges using any other methodology. SGX may periodically adjust the error trade price range to reflect prevailing market conditions. DMC will broadcast such changes to Members.
2. Cancel or adjust the price of an Error Trade
SGX retains the power to cancel an error trade partially or fully, or adjust the price of an error trade. SGX’s discretion to adjust the trade price or cancel a trade, either partially or fully, may be exercised even where the trade is within the error trade price range.Incorrect
I & IV.
To protect the financial integrity, reputation or interests of the markets established or operated by SGX, SGX retains the right to:
1. Amend the Error Trade Price Range and Methodology SGX has the right to consider other relevant market information to determine the error trade price range or the reference price, and determine error trade price ranges using any other methodology. SGX may periodically adjust the error trade price range to reflect prevailing market conditions. DMC will broadcast such changes to Members.
2. Cancel or adjust the price of an Error Trade
SGX retains the power to cancel an error trade partially or fully, or adjust the price of an error trade. SGX’s discretion to adjust the trade price or cancel a trade, either partially or fully, may be exercised even where the trade is within the error trade price range. -
Question 15 of 20
15. Question
Which of the following statements is true regarding hunting for stops?
Correct
Hunting for stops: this occurs when a trader deliberately places subsequently higher (or lower) bids (or offers) into the market, effectively pushing the market up (or down). This is done in the hope that eventually the market price will be moved to a point where Stop Loss orders are triggered. The trader will either already be Long and take profit as the buying momentum from the triggered Stop Loss orders kicks in, or will go Short after the buying momentum kicks in, expecting the market to fall back off thereafter.
Incorrect
Hunting for stops: this occurs when a trader deliberately places subsequently higher (or lower) bids (or offers) into the market, effectively pushing the market up (or down). This is done in the hope that eventually the market price will be moved to a point where Stop Loss orders are triggered. The trader will either already be Long and take profit as the buying momentum from the triggered Stop Loss orders kicks in, or will go Short after the buying momentum kicks in, expecting the market to fall back off thereafter.
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Question 16 of 20
16. Question
Of which are OMS’s required to have error prevention alerts that notify users?
I. Maximum Quantity Per Order.
II. “Doer-checker” measures.
III. Price Alerts.
IV. User access control measures.Correct
I & III.
OMS’s are required to have error prevention alerts that notify users of:
Maximum Quantity Per Order – This should be configurable for the individual trader. For example, where the Trader typically trades in sizes no larger than 10 lots, an alert should be triggered if the order’s quantity exceeded 10 lots
Price Alerts – When the price of the order differs from a reference price by more than a stipulated number of ticks or percentage. The reference price would be the last traded price, or the previous day’s settlement price if there has been no trade during the day. Alerts on additional data fields are good practice but not mandatory.Incorrect
I & III.
OMS’s are required to have error prevention alerts that notify users of:
Maximum Quantity Per Order – This should be configurable for the individual trader. For example, where the Trader typically trades in sizes no larger than 10 lots, an alert should be triggered if the order’s quantity exceeded 10 lots
Price Alerts – When the price of the order differs from a reference price by more than a stipulated number of ticks or percentage. The reference price would be the last traded price, or the previous day’s settlement price if there has been no trade during the day. Alerts on additional data fields are good practice but not mandatory. -
Question 17 of 20
17. Question
In which case do members not need to send a monthly statement to a customer?
Correct
Members do not need to send a monthly statement to a customer if:
1. The information that is to be contained in the statement has already been sent to the customer by a Clearing House, which the Member is a member of; or
2. There has been no change to the customer’s account in the month; or
3. The customer is an Accredited Investor, or a corporation related to the Member, and: i. Real-time electronic statements have been made available to the customer, and the customer has agreed to using these electronic statements; or
ii. The customer has requested, in writing, not to receive such monthly statementsIncorrect
Members do not need to send a monthly statement to a customer if:
1. The information that is to be contained in the statement has already been sent to the customer by a Clearing House, which the Member is a member of; or
2. There has been no change to the customer’s account in the month; or
3. The customer is an Accredited Investor, or a corporation related to the Member, and: i. Real-time electronic statements have been made available to the customer, and the customer has agreed to using these electronic statements; or
ii. The customer has requested, in writing, not to receive such monthly statements -
Question 18 of 20
18. Question
Which of the following are of the prohibited market conducts according to the SFA & SGX Futures Trading Rules?
I. Having sound and progressive financial services sector.
II. Dissemination of Information about Illegal Transactions.
III. Entering orders in good faith and for the purpose of executing bona fide transactions.
IV. Insider Trading.Correct
II & IV.
The SFA & SGX Futures Trading Rules spell out the prohibited market conduct as:
False Trading and Market Rigging Transactions
Manipulation of Futures Prices Price of Futures Contract and Cornering
Fraudulently Inducing Persons to Trade in Futures Contracts
Employment of Fraudulent or Deceptive Devices,
Insider Trading
Dissemination of Information about Illegal TransactionsIncorrect
II & IV.
The SFA & SGX Futures Trading Rules spell out the prohibited market conduct as:
False Trading and Market Rigging Transactions
Manipulation of Futures Prices Price of Futures Contract and Cornering
Fraudulently Inducing Persons to Trade in Futures Contracts
Employment of Fraudulent or Deceptive Devices,
Insider Trading
Dissemination of Information about Illegal Transactions -
Question 19 of 20
19. Question
On which does the decision whether to register a representative or to revoke a registration depend?
Correct
The decision whether to register a representative or to revoke a registration depends on the following:
1. The seriousness or severity of circumstances surrounding the person’s failure to meet a specific criteria;
2. The relevance of the unfulfilled criteria in relation to the duties that are, or are
to be performed and the responsibilities that are, or are to be assumed by the person; and
3. The amount of time that has lapsed since the person’s failure to meet a specific criteria.Incorrect
The decision whether to register a representative or to revoke a registration depends on the following:
1. The seriousness or severity of circumstances surrounding the person’s failure to meet a specific criteria;
2. The relevance of the unfulfilled criteria in relation to the duties that are, or are
to be performed and the responsibilities that are, or are to be assumed by the person; and
3. The amount of time that has lapsed since the person’s failure to meet a specific criteria. -
Question 20 of 20
20. Question
An investor invests in put warrants of MET Limited. The details of the put warrant are as follows:
Share price = $7.00
Exercise price = $6.75
Warrant price = $0.20
Conversion ratio = 2
Delta = 30%Calculate the effective gearing?
Correct
Gearing ratio = Share price / (Warrant price / Conversion ratio)
Gearing ratio for put warrant = $7.00 / ($0.20/2)
Gearing ratio = 70Given that Delta = 30% = 0.3
Effective gearing = Gearing ratio x delta
Effective gearing = 70 x 0.3 = 21 timesIncorrect
Gearing ratio = Share price / (Warrant price / Conversion ratio)
Gearing ratio for put warrant = $7.00 / ($0.20/2)
Gearing ratio = 70Given that Delta = 30% = 0.3
Effective gearing = Gearing ratio x delta
Effective gearing = 70 x 0.3 = 21 times
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