CMFAS M4B Exam Free Trial Set Two

In the event that management of a market participant has obtained evidential matter to believe that another market participant it has come into interaction with has breached the guide, it must confront the counterparty in order to settle the matters at hand amicably and to ultimately seek a resolution. If this is deemed to be not possible, either party is given the opportunity to bring the matter to the attention of the secretary, SFEMC upon properly notifying the counterparty. It is also expected of market participants to refer to the principles in Principle 7 of the Global Code in case of any doubts with regards to the breach.

The guidance highly encourages the practice of intra-ray deal checks due to the fact that it paves way for minimizing the number and size of difference, with regards to dealings through voice brokers or for other deals relating to foreign counterparties. It also encourages faster movement of markets particularly in foreign exchange and in dealing with other products characterized by short settlement periods.

The Guidance provides clarity on how the risk-based approach is applied in accordance with the AML/CFT measures for VAs, and gives assistance to the identification of entities that conduct activities or operations relating to VA. The FATF has regarded that despite the potential governments have due to their substantial range of regulatory responses to VAs and as well as on VASPs, many jurisdictions still lack the ability to establish stable and effective AML/CFT frameworks that are catered towards the mitigation of ML/TF risks associated with VA activities due to the fact that VA activities have developed globally and have increasingly established operations across jurisdictions.

An executed trade is influential in terms of subsequent cancellations. Trade may only be permitted cancellation when the price traded is not representative of the prevailing market price. Trades whose errors mainly root from the notional value or the number of contracts traded may not ordinarily be subjected to cancellation unless circumstances deem otherwise. It is relevant to ascertain that a market participant seeking to have a trade canceled due to the fact that the price traded does not reflect the prevailing market price should give notice to its counterparty as soon as possible. Trades will only ever be subject to cancellation if both parties agree to the cancellation.

The back office shall be able to strengthen risk control for a proper functioning financial market. Confirmation procedures must be made in writing to embody the adherence of both parties and should be addressed to the back office or settlements department of the counterparty. However, the format and content will vary in accordance to the product dealt and it is important to refer to any applicable standard terms and conditions that were published in order to ensure the embodiment of accurate content and format for a certain product. If the confirmation made by the counterparty is deemed incorrect, the counterparty must immediately give notice of this fact in writing. Accordingly, a new confirmation or a written agreement of correction must be requested from and be given by the counterparty whose original confirmation was incorrect.

The authority is equipped with general powers that allow them to govern and oversee the operations of financial benchmarks. Among their general powers is the ability to make prohibition orders that obliges a person to whom it is issued to comply with whatever is indicated by the order. This is applicable under circumstances such as when the Authority cancels or revokes the authorization of the relevant person as an authorized benchmark administrator or authorized benchmark submitter.

The Authority is equipped with general powers that allow them to govern and oversee the operations of financial benchmarks. Among their general powers is the ability to make prohibition orders that obliges a person to whom it is issued to comply with whatever is indicated by the order. The guide attaches a list of what constitutes a relevant person to clarify the vagueness of the implications. This list includes any authorised benchmark administrator or a person who was previously an authorised benchmark administrator, any person that is exempt from the requirement to be authorised as an authorised benchmark administrator under section 123K(1) or a person who was previously so exempt or any authorised benchmark submitter or a person who was previously an authorised benchmark submitter.

The RMO regime is an application of MAS’ risk-based approach towards market operators, matching regulatory requirements to the risks posed by the market. Common regulations adhered by RMOs include reporting any irregularities or matters, which based on its judgement, may impact the participant of the RMO to meet the financial obligations pertaining to the said RMO.

Market Participants are expected to uphold high standards with regards to their personal and professional integrity in their conduct, act in an ethical and professional manner, and exhibit clarity and accuracy in their communications, and protect confidential information. In relation to dealings with entertainment, favors and gifts, market participants are required to establish guidelines that are catered towards protection against abusive practices and excess. Meeting over meals is a legitimate practice, but this does not entail that it cannot be a source of abuse. For this reason, reasonable thresholds are put in place in accordance to the relationships and activities to which they relate. In addition to this fact, the solicitation of gifts is not encouraged unless it is considered as genuine and charitable acts. In relation to this, market participants are given the responsibility of notifying management and their compliance department whenever unusual or fraudulent activities take place.

The guidelines for the application of FATF standards to countries and competent authorities covers the necessity to subject VASPs to licensing and registration requirements. Countries are deemed to have responsibility for ascertaining that their respective jurisdictions have designated one or more authorities to facilitate the licensure or registration of VASPs. Licensure and Registration of VASPs are required to take place in the jurisdiction in which they are created. The guidance further highlights the necessity to ensure that efficient legal or regulatory controls are put in place to prevent criminals or their associates from holding the controlling interest in VASPs. This includes the necessity to seek approval from authorities in the event that circumstances require substantive changes to be made with regards to the shareholders, business operations and structures in a VASP. Furthermore, it must be ensured the countries are equipped to conduct an identification of natural or legal persons that are unauthorized to carry out VA activities or operations and exact the appropriate sanctions.

The chapter governing general dealing principles and market conduct indicates that direct dealing among market participants must be subject relevant guidelines in order to ascertain ethical and responsible conduct among participants with regards to their transactions. Market Participants are not expected to fulfill the responsibility of quoting whenever called upon. However, it is deemed necessary for an answering party to respond and immediately express its unwillingness to quote whenever applicable. Dealing on predetermined amounts is not a requisite that market participants are expected to comply to. Market participants are, although, expected to deviate from placing orders with brokers with the intention of identifying the counterparty,in order to conclude the full amount of the order in a direct transaction.

The general assumption with regards to corporations operating markets is that those that embody systemic importance shall be regulated by the MAS as approved exchanges. In order to examine whether or not an entity represents systemic importance, a list of factors was made available to which the MAS draws reference. One of the factors is the size and structure, or proposed size and structure, of the market operated by the corporation among others. In respect of this, the MAS examines the volume and value of transactions conducted on the market, the number of investors trading on the market and the number of participants in order determine if there are indications of the market’s systemic importance. In addition, the structure of the market is in reference to the means by which the market is organized. The other options are definitive of the other factors that must be examined to determine the systemic importance of an entity.

Confidentiality is made to ascertain that information on contributions shall only be made available for the exclusive use of those involved in or is responsible for the benchmark contribution process. In case any doubts arise with regards to this, the information may be forwarded to regulators.

In accordance with Part II of the SFA, approved exchanges and RMOs are expected to adhere with a list of common obligations. In order to achieve the desired status quo, a supplementary guideline that deems to ensure that access for participation in its facilities is subject to a criteria that are fair and objective. Having said this, the MAS expects approved exchanges and RMOs to ensure that the ability to participate in a market is dependent upon a criteria that is not restrictive and does not limit access on grounds unless the operations of its market becomes susceptible to risks. The approved exchange or RMO is also required to undertake the responsibility of disciplining its members in a fair and objective manner. Proper and sufficient systems and controls should additionally be established to aid in the identification, assessment, monitoring and management of risks to its market operations.

Section III of the Draft Guidance for a risk-based approach to VAs and VASPs paves way for the establishment of efficient measures that allows the identification and mitigation of risks associated with covered VA activities, the application of control measures, the imposition of licensing and registration requirements, and implementation of effective supervision over related financial activities of FIs. The propagation of the said approach also includes national cooperation and coordination as a response to AML/CFT policies, and is therefore directly applicable to the regulation and supervision of covered VA activities. Based on this fact, the right to prohibit VA activities is bestowed upon respective jurisdictions based on their assessment of the risk and national regulatory context. Engagement in ML, TF, and PF corresponds to an offense that should extend to any type of property, regardless of its value, that directly represents the proceeds of crime, including in the context of VA.

The proper accounting of debt securities entails the necessity to accrue interests on a day-to-day basis until it becomes due. The holding of bonds until maturity or until interest payment date is not ascertained. They may be sold in between coupon dates, and the seller must be compensated for the accrued interest for the period the bond was held. This is where the determination of a clean and dirty price comes into play.The guidance for the conduct of business in debt securities states that prices of securities are usually quoted clean, excluding any interest that may have accrued between the scheduled coupon payments for the bond. This is the opposite of a dirty price quotation, which reflects the up-to-date accrued interest by including the said value in the price.

Although meeting over meals and drinks are considered common practice, it is important that value thresholds must be put in place in order to regulate the utilization of entertainment, gifts and favors as a means of facilitating transactions. Giving expensive gifts and favors to other market participants should be prohibited and the receipt of such gifts shall be made known to management. This should be practiced through the use of considerable judgment with regards to the constitution of an unreasonable gift or favor, especially when the transaction involves sovereign entities or government officials.

Recommendation 1 provides the parameters within which the risk-based approach is identified as applicable. This identification is conducted by taking into consideration the following factors: who should be subject to a country’s regime and how those subject to the AML/CFT regime should be supervised or monitored for compliance with the regime, among others. It is also relevant to undertake the examination of various factors such as the potential ML/TF risks associated with a VASP’s connections and links to several jurisdictions, the nature and scope of the VA account, product, or service, and the nature and scope of the VA payment channel or system among others. The participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset fall among the considerations in determining a virtual asset service provider and thus, does not form part of the elements to be examined with regards to the identification of the best means to reduce risks to an acceptable level.

The guide states the brokers must be prohibited from assuming positions through the closure of a deal before a principal is able to substantiate the price and confirm a deal. It also dictates that market participants are not given the capability to hold brokers to a price if they are not able to substantiate it. It must be ascertained, however, that these brokers promptly notify the market participants of the fact and reason that hinders them from substantiating a firm quote. Moreover, market participants should not insist on a replacement deal at the price or with the counterparty originally proposed by the Broker.

The profitability index is used to calculate the profit potential of a certain investment that enables an individual to determine whether to push through with the said investment or not. This value reflects the difference between the initial investment and the stream of future cash flows discounted at present value. The index can be easily derived by dividing the present value of the project by its cost. An attractive investment is usually one with a profitability index that is larger than one, and this factor usually serves as a basis for which a project is either accepted or rejected. The utilization of the profitability index usually assists individuals as they are equipped with the capacity to determine the relative measure of desirability of a given project. However, this presents problems due to the fact that the use of a relative measure often results in ignorance of scale.