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CMFAS Exam Set One Topics Covers:
The Capital Markets Industry in Singapore and Participants in the Capital Markets
Licensing and Business Operations
Market Conduct
Ethics, Codes and Standards of Professional Conduct for Securities Dealing
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Question 1 of 30
1. Question
What is the primary function of the Monetary Authority of Singapore (MAS) in regulating the capital markets?
Correct
The correct answer is b) Ensuring fair, efficient, and transparent functioning of the markets. MAS plays a crucial role in regulating Singapore’s capital markets. It aims to maintain market integrity, investor confidence, and financial stability. According to the Securities and Futures Act (SFA) 2001, MAS has powers to issue regulations, supervise financial institutions, and enforce compliance to ensure that the markets operate in a fair, efficient, and transparent manner.
Incorrect
The correct answer is b) Ensuring fair, efficient, and transparent functioning of the markets. MAS plays a crucial role in regulating Singapore’s capital markets. It aims to maintain market integrity, investor confidence, and financial stability. According to the Securities and Futures Act (SFA) 2001, MAS has powers to issue regulations, supervise financial institutions, and enforce compliance to ensure that the markets operate in a fair, efficient, and transparent manner.
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Question 2 of 30
2. Question
In which scenario would a person require a license under the Securities and Futures Act (SFA) 2001 in Singapore?
Correct
The correct answer is c) Conducting securities business as a broker for clients. Under the Securities and Futures Act (SFA) 2001, any person who carries on a business of dealing in securities, or holding himself out as carrying on such business, needs to be licensed by the MAS unless exempted by the law. Acting as a broker for clients involves facilitating the buying and selling of securities on behalf of clients, which requires a license under the SFA.
Incorrect
The correct answer is c) Conducting securities business as a broker for clients. Under the Securities and Futures Act (SFA) 2001, any person who carries on a business of dealing in securities, or holding himself out as carrying on such business, needs to be licensed by the MAS unless exempted by the law. Acting as a broker for clients involves facilitating the buying and selling of securities on behalf of clients, which requires a license under the SFA.
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Question 3 of 30
3. Question
Mr. Tan, a licensed securities dealer, receives a tip from his friend about a potential merger involving a company whose shares he trades. What should Mr. Tan do in this situation?
Correct
The correct answer is d) Report the tip to his compliance officer. According to the Market Conduct provisions in the Securities and Futures Act (SFA) 2001, securities dealers have a duty to maintain market integrity and avoid insider trading. Receiving a tip about a potential merger constitutes material non-public information. Mr. Tan should report the tip to his compliance officer, who will assess its legality and may advise appropriate actions to prevent insider trading.
Incorrect
The correct answer is d) Report the tip to his compliance officer. According to the Market Conduct provisions in the Securities and Futures Act (SFA) 2001, securities dealers have a duty to maintain market integrity and avoid insider trading. Receiving a tip about a potential merger constitutes material non-public information. Mr. Tan should report the tip to his compliance officer, who will assess its legality and may advise appropriate actions to prevent insider trading.
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Question 4 of 30
4. Question
What is the main purpose of having codes and standards of professional conduct for securities dealing in Singapore?
Correct
The correct answer is b) To ensure fair treatment of investors and market integrity. Codes and standards of professional conduct are essential in maintaining market confidence and integrity. They outline ethical principles and best practices that securities dealers must adhere to, including fair dealing with clients, maintaining confidentiality, and avoiding conflicts of interest. The aim is to protect investors and uphold the integrity of the capital markets, as stipulated in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is b) To ensure fair treatment of investors and market integrity. Codes and standards of professional conduct are essential in maintaining market confidence and integrity. They outline ethical principles and best practices that securities dealers must adhere to, including fair dealing with clients, maintaining confidentiality, and avoiding conflicts of interest. The aim is to protect investors and uphold the integrity of the capital markets, as stipulated in the Securities and Futures Act (SFA) 2001.
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Question 5 of 30
5. Question
Which of the following actions violates ethical standards for securities dealing?
Correct
The correct answer is a) Frontrunning client orders for personal gain. Frontrunning involves executing trades for personal benefit ahead of known orders from clients. It is a clear violation of ethical standards as it prioritizes the dealer’s interests over those of the client, contrary to the duty of fair dealing and acting in the client’s best interests. Such behavior undermines market integrity and erodes investor trust, contravening the provisions of the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is a) Frontrunning client orders for personal gain. Frontrunning involves executing trades for personal benefit ahead of known orders from clients. It is a clear violation of ethical standards as it prioritizes the dealer’s interests over those of the client, contrary to the duty of fair dealing and acting in the client’s best interests. Such behavior undermines market integrity and erodes investor trust, contravening the provisions of the Securities and Futures Act (SFA) 2001.
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Question 6 of 30
6. Question
What is the role of the Central Depository (CDP) in the Singapore capital markets?
Correct
The correct answer is b) Clearing and settling securities transactions. The Central Depository (CDP) in Singapore is responsible for the clearing, settlement, and custody of securities traded on the Singapore Exchange (SGX). It ensures the efficient transfer of securities between buyers and sellers, reducing counterparty risk and facilitating the smooth functioning of the capital markets. This role is crucial for maintaining market integrity and investor confidence, aligning with the objectives of the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is b) Clearing and settling securities transactions. The Central Depository (CDP) in Singapore is responsible for the clearing, settlement, and custody of securities traded on the Singapore Exchange (SGX). It ensures the efficient transfer of securities between buyers and sellers, reducing counterparty risk and facilitating the smooth functioning of the capital markets. This role is crucial for maintaining market integrity and investor confidence, aligning with the objectives of the Securities and Futures Act (SFA) 2001.
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Question 7 of 30
7. Question
Ms. Lee, a licensed securities dealer, receives a large order from a client to sell a significant portion of their portfolio due to personal financial difficulties. What should Ms. Lee do in this situation?
Correct
The correct answer is c) Advise the client to consult a financial advisor before proceeding. In this scenario, Ms. Lee should act in the best interests of the client, considering their financial difficulties. Providing appropriate advice, such as suggesting consultation with a financial advisor, demonstrates professionalism and adherence to ethical standards. It ensures that the client’s interests are safeguarded and aligns with the duty of care and diligence expected from securities dealers, as outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Advise the client to consult a financial advisor before proceeding. In this scenario, Ms. Lee should act in the best interests of the client, considering their financial difficulties. Providing appropriate advice, such as suggesting consultation with a financial advisor, demonstrates professionalism and adherence to ethical standards. It ensures that the client’s interests are safeguarded and aligns with the duty of care and diligence expected from securities dealers, as outlined in the Securities and Futures Act (SFA) 2001.
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Question 8 of 30
8. Question
Which of the following activities is considered market manipulation and is prohibited under the Securities and Futures Act (SFA) 2001?
Correct
The correct answer is d) Engaging in wash trading to create artificial trading volume. Market manipulation involves activities that distort market prices or trading volumes, undermining market integrity and investor confidence. Wash trading, which involves simultaneous buying and selling of securities to create artificial trading activity, is prohibited under the Securities and Futures Act (SFA) 2001. Such practices deceive market participants and can lead to unfair advantages for certain traders, posing risks to market stability.
Incorrect
The correct answer is d) Engaging in wash trading to create artificial trading volume. Market manipulation involves activities that distort market prices or trading volumes, undermining market integrity and investor confidence. Wash trading, which involves simultaneous buying and selling of securities to create artificial trading activity, is prohibited under the Securities and Futures Act (SFA) 2001. Such practices deceive market participants and can lead to unfair advantages for certain traders, posing risks to market stability.
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Question 9 of 30
9. Question
What is the primary objective of the Code of Conduct for Persons Licensed by or Registered with the Monetary Authority of Singapore (MAS)?
Correct
The correct answer is c) To establish minimum standards of conduct for financial professionals. The Code of Conduct for Persons Licensed by or Registered with the Monetary Authority of Singapore (MAS) sets out principles and standards of behavior expected from financial institutions and professionals operating in Singapore’s capital markets. Its primary objective is to promote integrity, fairness, and transparency in the conduct of financial services, aligning with the regulatory objectives of the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) To establish minimum standards of conduct for financial professionals. The Code of Conduct for Persons Licensed by or Registered with the Monetary Authority of Singapore (MAS) sets out principles and standards of behavior expected from financial institutions and professionals operating in Singapore’s capital markets. Its primary objective is to promote integrity, fairness, and transparency in the conduct of financial services, aligning with the regulatory objectives of the Securities and Futures Act (SFA) 2001.
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Question 10 of 30
10. Question
Mr. Lim, a securities dealer, discovers that his colleague has been engaging in unauthorized trading activities on behalf of clients to boost personal commissions. What should Mr. Lim do in this situation?
Correct
The correct answer is a) Report the misconduct to the compliance department or management. Discovering unauthorized trading activities by a colleague is a serious breach of ethical and regulatory standards. Mr. Lim has a duty to report such misconduct to the appropriate authorities within the firm, such as the compliance department or management, to ensure swift action is taken to address the issue. Reporting unethical behavior is essential for maintaining market integrity and investor protection, as emphasized in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is a) Report the misconduct to the compliance department or management. Discovering unauthorized trading activities by a colleague is a serious breach of ethical and regulatory standards. Mr. Lim has a duty to report such misconduct to the appropriate authorities within the firm, such as the compliance department or management, to ensure swift action is taken to address the issue. Reporting unethical behavior is essential for maintaining market integrity and investor protection, as emphasized in the Securities and Futures Act (SFA) 2001.
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Question 11 of 30
11. Question
Which entity in Singapore oversees the regulation and supervision of the securities and futures markets?
Correct
The correct answer is b) Monetary Authority of Singapore (MAS). MAS is the central regulatory authority responsible for overseeing and supervising the securities and futures markets in Singapore. It regulates various aspects of the capital markets, including licensing, market conduct, and investor protection, in accordance with the Securities and Futures Act (SFA) 2001. Its role is crucial in maintaining market integrity, financial stability, and investor confidence.
Incorrect
The correct answer is b) Monetary Authority of Singapore (MAS). MAS is the central regulatory authority responsible for overseeing and supervising the securities and futures markets in Singapore. It regulates various aspects of the capital markets, including licensing, market conduct, and investor protection, in accordance with the Securities and Futures Act (SFA) 2001. Its role is crucial in maintaining market integrity, financial stability, and investor confidence.
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Question 12 of 30
12. Question
Ms. Wong, a licensed securities dealer, receives a significant order from a client to purchase a particular stock. Before executing the order, she discovers that the stock is currently under investigation for financial misconduct. What should Ms. Wong do in this situation?
Correct
The correct answer is c) Advise the client about the ongoing investigation and its implications. Ms. Wong has a duty to act in the best interests of her client and provide them with relevant information to make informed investment decisions. In this scenario, she should inform the client about the ongoing investigation into the stock for financial misconduct and its potential impact on their investment. This aligns with the principles of fair dealing and disclosure required by the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Advise the client about the ongoing investigation and its implications. Ms. Wong has a duty to act in the best interests of her client and provide them with relevant information to make informed investment decisions. In this scenario, she should inform the client about the ongoing investigation into the stock for financial misconduct and its potential impact on their investment. This aligns with the principles of fair dealing and disclosure required by the Securities and Futures Act (SFA) 2001.
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Question 13 of 30
13. Question
What is the primary purpose of the Securities and Futures Act (SFA) 2001 in Singapore?
Correct
The correct answer is d) To regulate the conduct of participants in the capital markets. The Securities and Futures Act (SFA) 2001 is a key legislation in Singapore that regulates various aspects of the securities and futures markets, including licensing, market conduct, and investor protection. Its primary purpose is to ensure the fair, efficient, and transparent functioning of the capital markets while safeguarding investor interests. The SFA establishes regulatory requirements and enforcement mechanisms to maintain market integrity and investor confidence.
Incorrect
The correct answer is d) To regulate the conduct of participants in the capital markets. The Securities and Futures Act (SFA) 2001 is a key legislation in Singapore that regulates various aspects of the securities and futures markets, including licensing, market conduct, and investor protection. Its primary purpose is to ensure the fair, efficient, and transparent functioning of the capital markets while safeguarding investor interests. The SFA establishes regulatory requirements and enforcement mechanisms to maintain market integrity and investor confidence.
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Question 14 of 30
14. Question
Which of the following actions is consistent with ethical standards for securities dealing in Singapore?
Correct
The correct answer is c) Providing investment recommendations based on thorough analysis. Ethical standards for securities dealing in Singapore emphasize honesty, integrity, and transparency in dealing with clients. Providing investment recommendations based on thorough analysis demonstrates professionalism and commitment to client welfare. It ensures that clients receive accurate and reliable advice tailored to their investment objectives and risk tolerance, aligning with the regulatory expectations outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Providing investment recommendations based on thorough analysis. Ethical standards for securities dealing in Singapore emphasize honesty, integrity, and transparency in dealing with clients. Providing investment recommendations based on thorough analysis demonstrates professionalism and commitment to client welfare. It ensures that clients receive accurate and reliable advice tailored to their investment objectives and risk tolerance, aligning with the regulatory expectations outlined in the Securities and Futures Act (SFA) 2001.
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Question 15 of 30
15. Question
Mr. Chan, a securities dealer, receives confidential information about a potential corporate takeover involving one of the stocks he trades. What should Mr. Chan do in this situation?
Correct
The correct answer is d) Refrain from trading the stock and report the information to compliance. Mr. Chan is in possession of material non-public information about a potential corporate takeover, which must be handled with utmost confidentiality and integrity. Trading based on such information would constitute insider trading, a serious violation of securities regulations. Mr. Chan should refrain from trading the stock, maintain confidentiality, and report the information to the compliance department to ensure compliance with the Securities and Futures Act (SFA) 2001 and avoid legal and ethical consequences.
Incorrect
The correct answer is d) Refrain from trading the stock and report the information to compliance. Mr. Chan is in possession of material non-public information about a potential corporate takeover, which must be handled with utmost confidentiality and integrity. Trading based on such information would constitute insider trading, a serious violation of securities regulations. Mr. Chan should refrain from trading the stock, maintain confidentiality, and report the information to the compliance department to ensure compliance with the Securities and Futures Act (SFA) 2001 and avoid legal and ethical consequences.
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Question 16 of 30
16. Question
What is the function of the Securities Industry Council (SIC) in Singapore?
Correct
The correct answer is a) Overseeing takeovers and mergers to ensure fairness and transparency. The Securities Industry Council (SIC) in Singapore plays a crucial role in regulating takeovers and mergers to safeguard the interests of shareholders and ensure fair treatment. It administers the Takeover Code, which sets out rules and guidelines governing the conduct of takeover transactions, disclosure requirements, and measures to protect minority shareholders. The SIC’s oversight helps maintain market integrity and investor confidence, aligning with the objectives of the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is a) Overseeing takeovers and mergers to ensure fairness and transparency. The Securities Industry Council (SIC) in Singapore plays a crucial role in regulating takeovers and mergers to safeguard the interests of shareholders and ensure fair treatment. It administers the Takeover Code, which sets out rules and guidelines governing the conduct of takeover transactions, disclosure requirements, and measures to protect minority shareholders. The SIC’s oversight helps maintain market integrity and investor confidence, aligning with the objectives of the Securities and Futures Act (SFA) 2001.
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Question 17 of 30
17. Question
Mr. Koh, a licensed securities dealer, receives an order from a client to purchase a specific stock. Upon researching the stock, Mr. Koh discovers that it is significantly undervalued compared to its peers. What should Mr. Koh do in this situation?
Correct
The correct answer is d) Disclose the undervaluation to the client and provide recommendations. As a licensed securities dealer, Mr. Koh has a duty to act in the best interests of his client and provide them with relevant information to make informed investment decisions. In this scenario, he should disclose his findings about the undervalued stock to the client and provide recommendations based on thorough analysis. This approach promotes transparency, fosters trust, and ensures compliance with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is d) Disclose the undervaluation to the client and provide recommendations. As a licensed securities dealer, Mr. Koh has a duty to act in the best interests of his client and provide them with relevant information to make informed investment decisions. In this scenario, he should disclose his findings about the undervalued stock to the client and provide recommendations based on thorough analysis. This approach promotes transparency, fosters trust, and ensures compliance with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
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Question 18 of 30
18. Question
Which of the following actions constitutes market abuse and is prohibited under the Securities and Futures Act (SFA) 2001?
Correct
The correct answer is c) Insider trading based on material non-public information. Market abuse refers to activities that distort market prices or undermine market integrity, including insider trading. Insider trading involves trading securities based on material non-public information, giving the trader an unfair advantage over other market participants. Such practices are prohibited under the Securities and Futures Act (SFA) 2001 to ensure a level playing field and maintain investor confidence in the capital markets.
Incorrect
The correct answer is c) Insider trading based on material non-public information. Market abuse refers to activities that distort market prices or undermine market integrity, including insider trading. Insider trading involves trading securities based on material non-public information, giving the trader an unfair advantage over other market participants. Such practices are prohibited under the Securities and Futures Act (SFA) 2001 to ensure a level playing field and maintain investor confidence in the capital markets.
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Question 19 of 30
19. Question
What is the purpose of the Financial Advisers Act (FAA) in Singapore?
Correct
The correct answer is b) To establish licensing requirements for individuals providing financial advice. The Financial Advisers Act (FAA) in Singapore regulates the provision of financial advisory services and sets out licensing requirements for individuals and entities engaged in such activities. It aims to ensure that individuals providing financial advice possess the necessary qualifications, competence, and integrity to safeguard the interests of clients. The FAA complements the regulatory framework established under the Securities and Futures Act (SFA) 2001 to promote investor protection and market integrity.
Incorrect
The correct answer is b) To establish licensing requirements for individuals providing financial advice. The Financial Advisers Act (FAA) in Singapore regulates the provision of financial advisory services and sets out licensing requirements for individuals and entities engaged in such activities. It aims to ensure that individuals providing financial advice possess the necessary qualifications, competence, and integrity to safeguard the interests of clients. The FAA complements the regulatory framework established under the Securities and Futures Act (SFA) 2001 to promote investor protection and market integrity.
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Question 20 of 30
20. Question
Ms. Tan, a licensed securities dealer, receives confidential information about an upcoming corporate earnings announcement for a stock she trades. What should Ms. Tan do in this situation?
Correct
The correct answer is d) Refrain from trading the stock and maintain confidentiality. Ms. Tan is in possession of material non-public information about an upcoming corporate earnings announcement, which must be handled with confidentiality and integrity. Trading based on such information would constitute insider trading, a violation of securities regulations. Ms. Tan should refrain from trading the stock, maintain confidentiality, and avoid disclosing the information to others to prevent the misuse of privileged information. This approach aligns with the principles of fairness and market integrity outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is d) Refrain from trading the stock and maintain confidentiality. Ms. Tan is in possession of material non-public information about an upcoming corporate earnings announcement, which must be handled with confidentiality and integrity. Trading based on such information would constitute insider trading, a violation of securities regulations. Ms. Tan should refrain from trading the stock, maintain confidentiality, and avoid disclosing the information to others to prevent the misuse of privileged information. This approach aligns with the principles of fairness and market integrity outlined in the Securities and Futures Act (SFA) 2001.
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Question 21 of 30
21. Question
What is the role of the Securities Investors Association (Singapore) (SIAS) in the capital markets?
Correct
The correct answer is c) Advocating for investor rights and education. The Securities Investors Association (Singapore) (SIAS) is a non-profit organization dedicated to advocating for investor rights, promoting corporate governance, and providing investor education and assistance. SIAS plays a crucial role in representing the interests of retail investors, enhancing transparency and accountability in the capital markets, and fostering investor confidence. Its activities align with the objectives of investor protection outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Advocating for investor rights and education. The Securities Investors Association (Singapore) (SIAS) is a non-profit organization dedicated to advocating for investor rights, promoting corporate governance, and providing investor education and assistance. SIAS plays a crucial role in representing the interests of retail investors, enhancing transparency and accountability in the capital markets, and fostering investor confidence. Its activities align with the objectives of investor protection outlined in the Securities and Futures Act (SFA) 2001.
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Question 22 of 30
22. Question
Mr. Lee, a licensed securities dealer, receives a large order from a client to purchase shares of a company. Before executing the order, Mr. Lee discovers that the company is planning to announce a significant acquisition that could impact its stock price. What should Mr. Lee do in this situation?
Correct
The correct answer is a) Inform the client about the potential impact of the impending announcement. Mr. Lee has a duty to act in the best interests of his client and provide them with relevant information to make informed investment decisions. In this scenario, he should inform the client about the impending announcement of a significant acquisition and its potential impact on the stock price. This approach promotes transparency, ensures fair treatment of clients, and aligns with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is a) Inform the client about the potential impact of the impending announcement. Mr. Lee has a duty to act in the best interests of his client and provide them with relevant information to make informed investment decisions. In this scenario, he should inform the client about the impending announcement of a significant acquisition and its potential impact on the stock price. This approach promotes transparency, ensures fair treatment of clients, and aligns with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
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Question 23 of 30
23. Question
Which of the following activities is considered market manipulation and is prohibited under the Securities and Futures Act (SFA) 2001?
Correct
The correct answer is c) Spreading false rumors to manipulate stock prices. Market manipulation involves activities that distort market prices or undermine market integrity, including spreading false or misleading information to influence investor behavior and stock prices. Such practices are prohibited under the Securities and Futures Act (SFA) 2001 to maintain market integrity, protect investors, and ensure a level playing field in the capital markets.
Incorrect
The correct answer is c) Spreading false rumors to manipulate stock prices. Market manipulation involves activities that distort market prices or undermine market integrity, including spreading false or misleading information to influence investor behavior and stock prices. Such practices are prohibited under the Securities and Futures Act (SFA) 2001 to maintain market integrity, protect investors, and ensure a level playing field in the capital markets.
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Question 24 of 30
24. Question
What is the primary role of the Singapore Exchange (SGX) in the capital markets?
Correct
The correct answer is c) Facilitating the trading of securities. The primary role of the Singapore Exchange (SGX) is to provide a platform for the trading of securities, including stocks, bonds, derivatives, and other financial instruments. SGX operates securities and derivatives markets, providing listing, trading, clearing, and settlement services to market participants. Its functions include maintaining market integrity, promoting liquidity, and enhancing efficiency in the capital markets, aligning with the regulatory objectives outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Facilitating the trading of securities. The primary role of the Singapore Exchange (SGX) is to provide a platform for the trading of securities, including stocks, bonds, derivatives, and other financial instruments. SGX operates securities and derivatives markets, providing listing, trading, clearing, and settlement services to market participants. Its functions include maintaining market integrity, promoting liquidity, and enhancing efficiency in the capital markets, aligning with the regulatory objectives outlined in the Securities and Futures Act (SFA) 2001.
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Question 25 of 30
25. Question
Mr. Tan, a licensed securities dealer, receives an order from his client, Ms. Koh, to purchase shares of a technology company. Before executing the order, Mr. Tan learns from a reliable source that the company is planning to announce a major breakthrough in its research and development division. What should Mr. Tan do in this situation?
Correct
The correct answer is c) Inform Ms. Koh about the potential impact of the impending announcement. Mr. Tan should act in the best interests of his client, Ms. Koh, and provide her with relevant information to make informed investment decisions. Disclosing the information about the company’s major breakthrough in research and development allows Ms. Koh to assess the potential impact on her investment. This approach promotes transparency, ensures fair treatment of clients, and aligns with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is c) Inform Ms. Koh about the potential impact of the impending announcement. Mr. Tan should act in the best interests of his client, Ms. Koh, and provide her with relevant information to make informed investment decisions. Disclosing the information about the company’s major breakthrough in research and development allows Ms. Koh to assess the potential impact on her investment. This approach promotes transparency, ensures fair treatment of clients, and aligns with ethical standards and regulatory requirements outlined in the Securities and Futures Act (SFA) 2001.
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Question 26 of 30
26. Question
Which of the following actions is considered front-running and is prohibited under the Securities and Futures Act (SFA) 2001?
Correct
The correct answer is b) Purchasing securities ahead of a known client order to benefit personally. Front-running involves trading securities ahead of known client orders to benefit personally from the anticipated price movement. It is considered unethical and constitutes market abuse under the Securities and Futures Act (SFA) 2001. Front-running undermines market integrity, erodes investor confidence, and violates the duty of loyalty and fair dealing expected from securities dealers.
Incorrect
The correct answer is b) Purchasing securities ahead of a known client order to benefit personally. Front-running involves trading securities ahead of known client orders to benefit personally from the anticipated price movement. It is considered unethical and constitutes market abuse under the Securities and Futures Act (SFA) 2001. Front-running undermines market integrity, erodes investor confidence, and violates the duty of loyalty and fair dealing expected from securities dealers.
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Question 27 of 30
27. Question
What is the primary function of the Securities Industry Council (SIC) in Singapore?
Correct
The correct answer is d) Enforcing the Takeover Code to ensure fairness in corporate takeovers. The Securities Industry Council (SIC) in Singapore administers the Takeover Code, which regulates corporate takeovers and mergers to ensure fairness, transparency, and equal treatment of shareholders. SIC oversees the conduct of parties involved in takeover transactions, including offerors and directors of target companies, to uphold the principles of fairness and integrity in the capital markets, aligning with the regulatory objectives of the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is d) Enforcing the Takeover Code to ensure fairness in corporate takeovers. The Securities Industry Council (SIC) in Singapore administers the Takeover Code, which regulates corporate takeovers and mergers to ensure fairness, transparency, and equal treatment of shareholders. SIC oversees the conduct of parties involved in takeover transactions, including offerors and directors of target companies, to uphold the principles of fairness and integrity in the capital markets, aligning with the regulatory objectives of the Securities and Futures Act (SFA) 2001.
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Question 28 of 30
28. Question
Mr. Chan, a licensed securities dealer, receives a request from his client, Ms. Lee, to sell a substantial portion of her portfolio. Ms. Lee explains that she urgently needs funds to cover medical expenses for her sick child. What should Mr. Chan do in this situation?
Correct
The correct answer is b) Advise Ms. Lee to consult a financial advisor before proceeding. Mr. Chan should act in the best interests of his client, Ms. Lee, and ensure that she receives appropriate advice considering her urgent financial situation. Advising her to consult a financial advisor demonstrates professionalism and adherence to ethical standards. It ensures that Ms. Lee receives comprehensive guidance on her financial decisions, including the potential impact of selling her portfolio to cover medical expenses. This approach aligns with the duty of care and diligence expected from securities dealers, as outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is b) Advise Ms. Lee to consult a financial advisor before proceeding. Mr. Chan should act in the best interests of his client, Ms. Lee, and ensure that she receives appropriate advice considering her urgent financial situation. Advising her to consult a financial advisor demonstrates professionalism and adherence to ethical standards. It ensures that Ms. Lee receives comprehensive guidance on her financial decisions, including the potential impact of selling her portfolio to cover medical expenses. This approach aligns with the duty of care and diligence expected from securities dealers, as outlined in the Securities and Futures Act (SFA) 2001.
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Question 29 of 30
29. Question
Ms. Lim, a licensed securities dealer, receives confidential information about a potential merger between two companies she trades. The merger is expected to be announced publicly next week. What should Ms. Lim do in this situation?
Correct
The correct answer is d) Refrain from trading the stocks and maintain confidentiality. Ms. Lim is in possession of material non-public information about an upcoming corporate event, which must be handled with confidentiality and integrity. Trading based on such information would constitute insider trading, a violation of securities regulations. Ms. Lim should refrain from trading the stocks involved in the potential merger, maintain confidentiality, and avoid disclosing the information to others to prevent the misuse of privileged information. This approach aligns with the principles of fairness and market integrity outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is d) Refrain from trading the stocks and maintain confidentiality. Ms. Lim is in possession of material non-public information about an upcoming corporate event, which must be handled with confidentiality and integrity. Trading based on such information would constitute insider trading, a violation of securities regulations. Ms. Lim should refrain from trading the stocks involved in the potential merger, maintain confidentiality, and avoid disclosing the information to others to prevent the misuse of privileged information. This approach aligns with the principles of fairness and market integrity outlined in the Securities and Futures Act (SFA) 2001.
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Question 30 of 30
30. Question
Ms. Tan, a licensed securities dealer, receives an order from her client, Mr. Lim, to purchase shares of a pharmaceutical company. Mr. Lim informs Ms. Tan that he has recently discovered insider information about the company’s upcoming FDA approval for a groundbreaking new drug. What should Ms. Tan do in this situation?
Correct
The correct answer is a) Advise Mr. Lim to refrain from trading based on insider information. Ms. Tan, as a licensed securities dealer, has a duty to act in the best interests of her client and ensure compliance with securities regulations. Insider information, such as advance knowledge of FDA approvals, is material non-public information that cannot be used for trading purposes. Ms. Tan should advise Mr. Lim against trading based on insider information to avoid legal and ethical violations. This action upholds market integrity and investor confidence, aligning with the principles outlined in the Securities and Futures Act (SFA) 2001.
Incorrect
The correct answer is a) Advise Mr. Lim to refrain from trading based on insider information. Ms. Tan, as a licensed securities dealer, has a duty to act in the best interests of her client and ensure compliance with securities regulations. Insider information, such as advance knowledge of FDA approvals, is material non-public information that cannot be used for trading purposes. Ms. Tan should advise Mr. Lim against trading based on insider information to avoid legal and ethical violations. This action upholds market integrity and investor confidence, aligning with the principles outlined in the Securities and Futures Act (SFA) 2001.