RES 3 – Rules, Ethics and Skills for Fund Management

Correct: The single entity limit for the issuer changes from being unrestricted to a maximum of 35% of the scheme’s net asset value because paragraph 2.4 of the Code allows this higher limit for government-guaranteed entities with a minimum rating of BBB, while paragraph 2.6 removes the 10% limit entirely for those rated AA or higher.

Incorrect: The claim that the limit reverts to 10% is incorrect because the 35% limit specifically applies to government entities rated at least BBB according to paragraph 2.4. The 5% limit is wrong as it is reserved for unrated or sub-investment grade corporate debt under paragraph 2.8, which does not apply to a BBB-rated government entity. The use of internal ratings is restricted by paragraph 2.9 to unrated issuers and cannot be used to maintain an unrestricted status for a rated issuer that has been downgraded.

Takeaway: Government-issued or guaranteed securities enjoy higher concentration limits than corporate debt, with the specific limit (35% or unrestricted) depending on whether the credit rating is at least BBB or AA.

Correct: Statements I, II, and III are correct. According to SFA Section 226, a corporation may rely on the Chinese Wall defense if the decision to trade was made by someone other than the officer holding the information (I), the firm had implemented arrangements reasonably expected to prevent the flow of information (II), and no such information or advice was actually communicated to the decision-maker (III).

Incorrect: Statement IV is incorrect because the SFA does not provide an automatic exemption based on an officer’s physical presence or leave status. The defense specifically requires proof of robust internal operations and the total absence of communication or advice regarding the specific transaction to rebut the presumption of attributed knowledge.

Takeaway: To successfully invoke the Chinese Wall defense under Singapore law, a corporation must demonstrate that its internal information barriers effectively isolated the price-sensitive information from the person making the investment decision. Therefore, statements I, II and III are correct.

Correct: Statement I is correct because the definition of an officer under the regulatory framework specifically includes judicial managers and liquidators of a corporation. Statement III is correct because tippees are subject to an ‘actual knowledge’ standard regarding the nature of the information, whereas connected insiders may be liable if they ‘ought reasonably to have known’ the information was price-sensitive. Statement IV is correct because the law applies a presumption of knowledge against connected insiders, shifting the burden of proof to them to show they did not know the information was non-public and price-sensitive.

Incorrect: Statement II is incorrect because the source of the information is irrelevant for tippee liability; the regulations explicitly state that a tippee does not need to have received the information directly from an insider or have any specific arrangement with one.

Takeaway: While connected insiders are subject to a presumption of knowledge and a lower ‘ought to know’ liability threshold, tippees are only liable if actual knowledge of the information’s price-sensitive nature is proven. Therefore, statements I, III and IV are correct.

Correct: The requirement that the underlying fund-of-funds must invest in other schemes directly is the right answer because Paragraph 1.5 of Appendix B specifically prohibits a scheme from feeding into an underlying fund-of-funds that invests through another fund-of-funds layer.

Incorrect: The statement about hedge funds is wrong because the Guidance to Paragraph 1.4(a) explicitly states that a scheme should not invest in an underlying hedge fund or fund-of-hedge-funds, regardless of compliance with Appendix 3. The option regarding listing and daily liquidity is incorrect because while listing is a potential requirement for certain schemes under 1.4(c), it is not the specific structural restriction for fund-of-funds. The mention of a five percent group limit is wrong because the actual group limit specified in Paragraph 2.1(b) is twenty percent of the scheme’s Net Asset Value.

Takeaway: Under the Code on Collective Investment Schemes, fund-of-funds structures are limited to a single layer of underlying schemes to prevent excessive layering of fees and complexity.

Correct: Ensuring the goods or services assist in the provision of investment services to the client and disclosing this arrangement is the right answer because soft dollar arrangements are only acceptable if they provide demonstrable benefits to the client’s portfolio management. Transparency through disclosure is a fundamental requirement to manage the inherent conflict of interest when a manager directs brokerage to specific providers.

Incorrect: The idea that soft dollars can be used for travel and entertainment is wrong because such expenses are generally prohibited as they do not provide direct investment assistance to the client. Requiring written consent from the regulator for every individual transaction is wrong because the regulatory framework relies on firm-level compliance and disclosure rather than micro-managing every trade. The statement that the manager must rebate the full cash value of all soft dollar benefits is wrong because soft dollars are by definition non-cash services, and the rules focus on their utility and disclosure rather than mandatory conversion to cash rebates.

Takeaway: Soft dollar arrangements are permitted only when the services received provide direct assistance in managing the client’s investments and are fully disclosed to the client.

Correct: The requirement to offset both general and specific risks is the right answer because paragraph 3.8(c) of the Code on Collective Investment Schemes explicitly states that a hedging arrangement must offset the general and specific risks linked to the underlying being hedged.

Incorrect: The suggestion that hedging can aim to generate incremental return is wrong because paragraph 3.8(a) states that hedging arrangements should not be aimed at generating a return. The option regarding offsetting beta while keeping alpha is wrong because the Guidance for paragraph 3.8 clarifies that strategies which seek to offset market risk but keep the alpha do not comply with the requirements. The claim that different asset classes can be used is wrong because paragraph 3.8(d) requires the hedging instrument to relate to the same asset class as the underlying being hedged.

Takeaway: To qualify as a hedging arrangement for global exposure calculations, a strategy must result in a verifiable reduction of risk and offset both general and specific risks of the same asset class without aiming for a return.

Correct: Statement I is correct because SGX-DT guidance allows a representative to trade against a customer’s order if the customer’s order is first entered into QUEST and the representative waits at least 10 seconds before entering the opposite order. Statement II is correct because the prohibition on a Member or representative buying from or selling to a customer does not apply if prior written consent has been obtained from the customer.

Incorrect: Statement III is incorrect because according to SFR (LCB) 44, the offence is specifically classified as not compoundable and carries a maximum fine of SGD 100,000, rather than SGD 50,000. Statement IV is incorrect because SGX-ST Rule 13.6 explicitly requires prior written authorisation for third-party trading in a customer’s account; verbal authorization is legally insufficient.

Takeaway: To ensure market transparency and price discovery, representatives must either adhere to the 10-second latency rule or obtain prior written consent before trading against a customer’s order. Therefore, statements I and II are correct.

Correct: The Parity of Information principle is the right answer because Section 231 of the SFA states that if both parties to a transaction possess the same information, they are considered to be on equal footing. This specific defense allows parties to trade with one another as long as the information symmetry is maintained between them.

Incorrect: The Chinese Wall defense is wrong because it specifically addresses how knowledge is attributed within a corporation or partnership, rather than the relationship between two separate transacting parties. The Public Domain defense is wrong because the SFA specifically categorizes the shared knowledge scenario under the Parity of Information principle rather than general public availability. The Fiduciary Duty exception is wrong because it refers to trades made to satisfy legal requirements or court orders, which is a separate category of exception under the SFA.

Takeaway: The Parity of Information principle under Section 231 of the SFA provides a defense for insider trading when both parties to a transaction have access to the same information.

Correct: A CMS license holder is generally required to provide collateral of at least 100% of the market value of borrowed securities, but this specific collateral requirement is waived when the lender is an accredited investor.

Incorrect: The assertion that 105% collateral is always required is incorrect because 105% is the specific threshold under SGX-ST Rules rather than the general SFR baseline, and it fails to account for the accredited investor exemption. The claim that risk explanations are not required is false, as regulations mandate that CMS license holders explain risks to customers and obtain their understanding in writing. The idea that collateral must be exactly 100% without daily valuation is wrong because the law requires collateral to be at least 100% and necessitates daily mark-to-market valuations.

Takeaway: Securities borrowing and lending by CMS license holders require strict collateralization of at least 100% and formal risk disclosure, except when the counterparty is an accredited investor.

Correct: Statement I is correct because according to Appendix B, paragraphs 5.2 and 5.3, a counterparty with a long-term rating of A from Fitch is considered an eligible financial institution, which permits a maximum exposure limit of 10% of the scheme’s NAV. Statement III is correct because Table 2 of the Code specifies that equity derivative contracts with a residual term of more than one year but less than five years require an add-on factor of 8%.

Incorrect: Statement II is incorrect because paragraph 5.4 explicitly states that exposure to a counterparty must be measured based on the maximum potential loss incurred if the counterparty defaults, not on the notional value. Statement IV is incorrect because paragraph 5.5(a) requires the current replacement cost to be determined by carrying out a valuation at market price, rather than the original contract price.

Takeaway: Under the Code on CIS, OTC counterparty exposure is calculated as the sum of the current market replacement cost and a risk-weighted add-on factor, with limits determined by the counterparty’s credit rating. Therefore, statements I and III are correct.

Correct: The component’s economic characteristics and risks are not closely related to the host contract and it significantly impacts the instrument’s pricing is the right answer because paragraph 4.5 of Appendix B of the Code on Collective Investment Schemes states that a component is considered an embedded derivative only if its risks are not closely related to the host contract and it has a significant impact on the risk profile and pricing of the instrument.

Incorrect: The statement about independent transferability is wrong because paragraph 4.6 explicitly states that if a component is contractually transferable independently of the host instrument, it is deemed a separate financial instrument rather than an embedded derivative. The claim regarding proportional cash flows and negligible risk is incorrect because paragraph 4.5(c) requires the component to have a significant, not negligible, impact on the risk profile and pricing. The suggestion that the component matches the host’s economic characteristics with fixed rates is wrong because paragraph 4.5(a) and (b) require the component to modify cash flows based on a variable and possess risks that are not closely related to the host contract.

Takeaway: For a component to be classified as an embedded derivative under the Code, it must significantly alter the host instrument’s risk profile using variables whose economic characteristics are not closely related to the host contract.

Correct: The practice described is late trading, which the regulatory text specifies is not considered a statutory market misconduct or a legal offence, although it violates fund management best practices by giving certain investors an unfair advantage.

Incorrect: The assertion that late trading is a criminal offence with mandatory fines is incorrect because the text explicitly states it is not an offence. The suggestion that the practice is permitted if disclosed in a prospectus is wrong because fund managers are required to implement robust internal controls to prevent such trades entirely. The claim that it is a form of market manipulation requiring immediate reporting is inaccurate as the regulatory focus is on internal prevention rather than statutory reporting for this specific activity.

Takeaway: Fund managers must maintain robust internal controls to prevent late trading, as it provides an unfair advantage by allowing trades at stale prices after significant information is released.

Correct: Statement I is correct because paragraph 6.4(b) of the Code on Collective Investment Schemes requires a counterparty to a securities lending agreement to have a minimum long-term rating of A by Moody’s, Standard and Poor’s, or Fitch. Statement III is correct because paragraph 5.15(c) stipulates that for netting to be recognized, the manager must obtain legal opinions confirming enforceability under the law of the jurisdiction where the counterparty is incorporated.

Incorrect: Statement II is incorrect because the Guidance to paragraph 6.6 requires a marked-to-market shortfall to be rectified by the receipt of additional collateral by T+1 business days, not T+3. Statement IV is incorrect because the Guidance to paragraph 5.17 specifically states that exposures from margins held with brokers need not be included in the counterparty limit if the margins are maintained in trust accounts.

Takeaway: Fund managers must adhere to strict counterparty credit ratings and ensure that any collateral shortfalls in securities lending are rectified within one business day to manage credit risk effectively. Therefore, statements I and III are correct.

Correct: The primary concern is that the orders are not genuine and are intended to entice other participants to enter the market so that an opposing order can be filled. According to SGX-ST Rule 13.8.2(8), it is a breach if a trader cancels an order they had no intention of executing, as this creates a false impression of market interest.

Incorrect: The suggestion that this behavior primarily indicates a lack of capital is incorrect; while capital adequacy is a separate requirement, this specific rule focuses on the manipulative intent behind non-genuine orders. The claim that it is only a breach during the pre-closing phase is wrong because the rule applies whenever a pattern of non-genuine orders is observed to mislead the market. The idea that this is a legitimate way to test market depth is incorrect because entering orders without the intent to buy or sell is explicitly identified as a manipulative practice.

Takeaway: Market participants must ensure all orders reflect a bona fide intention to trade, as entering and then removing orders to bait other investors constitutes market misconduct.

Correct: Statement I is correct because paragraph 5.6(a) requires daily marking-to-market and paragraph 5.11 specifies that shortfalls must be rectified by the close of the next business day (T+1). Statement IV is correct because paragraph 5.14 explicitly states that non-cash collateral obtained by the scheme may not be reinvested.

Incorrect: Statement II is incorrect because paragraph 5.8 requires money market instruments to have a long-term rating of AAA (or equivalent), not AA. Statement III is incorrect because paragraph 5.13 prohibits the investment of cash collateral in transferable securities issued by the counterparty or its related corporations.

Takeaway: Collateral for OTC derivatives must meet strict liquidity and credit quality standards (AAA rating), and while cash collateral can be reinvested under specific conditions, non-cash collateral cannot be reinvested at all. Therefore, statements I and IV are correct.

Correct: Lodging Form F1 within 5 working days is the specific requirement under Notice CMG-01 for reporting suspicious activities or incidents of fraud to the MAS. This ensures that the regulator is notified of potential market misconduct in a timely manner.

Incorrect: The suggestion of a 2-working-day deadline is incorrect because the regulation allows for a 5-working-day period for the MAS report. The mention of Form F2 and a 7-working-day timeline is incorrect as the required form is F1 and the deadline is 5 days. The reference to a 10-working-day deadline is incorrect because it exceeds the mandatory 5-working-day reporting window.

Takeaway: Fund management companies must report suspicious activities to MAS using Form F1 within 5 working days of discovery to comply with market conduct regulations.

Correct: Obtaining prior consent and not withholding the order is required because SFR(LCB) 47C and related rules require representatives to secure a customer’s permission before taking the opposite side of their trade. This prevents bucketing, where a customer is deprived of market competition, and ensures that orders are not withheld from the trading system unless it is for the customer’s benefit.

Incorrect: The claim that the practice is strictly prohibited under all circumstances is wrong because the regulations provide a specific exception for cases where prior consent is obtained. The suggestion that a better execution price justifies the trade without consent is incorrect because the legal requirement for consent is absolute regardless of the price achieved. The assertion that notification can be provided after the trade is wrong because the law mandates that consent must be obtained prior to the execution of the order.

Takeaway: Representatives must obtain prior consent before trading against a customer’s order to comply with anti-bucketing regulations and maintain market integrity.

Correct: Statement I is correct because the SGX-ST rules specify that a trading halt is typically an intra-day event and must last for a minimum duration of 30 minutes. Statement II is correct as the SGX-ST has the explicit authority to extend the duration of a trading halt beyond 3 Market Days upon receiving a request.

Incorrect: Statement III is incorrect because SGX-ST Rule 8.10 explicitly states that such offences are not compoundable and are subject to a mandatory minimum imposable penalty. Statement IV is incorrect because the regulations prohibit any trading of suspended securities unless specifically approved by the SGX-ST, regardless of the fund manager’s internal assessment of market conditions.

Takeaway: SGX-ST maintains strict oversight of market order by mandating minimum durations for trading halts and requiring specific regulatory approval for any transactions involving suspended securities. Therefore, statements I and II are correct.

Correct: The requirement that borrowing must not exceed 10% of the scheme’s NAV and must be repaid within a period of one month is the right answer because according to Section 7 of Appendix B of the Code on Collective Investment Schemes, a scheme may borrow on a temporary basis for redemptions or bridging requirements, provided the aggregate borrowings do not exceed 10% of the scheme’s NAV at the time of borrowing and the period does not exceed one month.

Incorrect: The options suggesting a borrowing limit of 20% of the scheme’s NAV are wrong because the Code on CIS explicitly caps aggregate borrowings at 10% of the NAV to limit the scheme’s leverage. The options suggesting a borrowing period of three months are wrong because the regulations mandate that such temporary borrowings must be repaid within a maximum period of one month.

Takeaway: Collective investment schemes are permitted to borrow for temporary liquidity needs, but such borrowings are strictly limited to 10% of the scheme’s NAV and a duration of one month.

Correct: The lowest, highest, and average utilization of the VaR limit during the period, along with the model and inputs used for calculation is the right answer because the Guidance to paragraph 8.4(a) of the Code on Collective Investment Schemes explicitly mandates these specific data points for the description of the VaR Approach in periodic reports.

Incorrect: The statement regarding the number of days the VaR limit was exceeded is wrong because the Code requires utilization levels (lowest, highest, average) rather than a count of limit breaches for this disclosure. The statement regarding peer group comparison is wrong because while a reference portfolio is required for relative VaR, a peer group comparison is not a mandated disclosure under the Code. The statement regarding counterparty names and credit ratings is wrong because these specific details are required for reporting collateral holdings under paragraph 8.7, not for the description of the VaR methodology itself.

Takeaway: For schemes using the VaR approach, the Code requires detailed disclosure of limit utilization and the specific model and inputs used in periodic reports.

Correct: The manager should notify the Authority within three business days and stop adding new positions while winding down existing positions is the right answer because 12 exceptions place the scheme in the Red Zone (10 or more exceptions) according to paragraph 4.6(c).

Incorrect: Investigating and proposing remedial actions is the requirement for the Yellow Zone, which applies to 5-9 exceptions. Reassessing the model for overstating risk is suggested when a model shows no exceptions for long periods, not when there are many. Reverting to the Commitment Approach is an action the Authority may require, but the manager’s primary obligation is to stop and wind down positions.

Takeaway: Back-testing results are categorized into Green, Yellow, and Red zones, with the Red Zone (10 or more exceptions) requiring the manager to stop adding positions and wind down existing ones.

Correct: Statement I is correct because Section 339(2) of the SFA extends jurisdiction to acts committed outside Singapore if they have a substantial and reasonably foreseeable effect in Singapore. Statement III is correct because the SFA specifies that a corporation may face a civil penalty equal to the higher of three times the profit gained/loss avoided or SGD 100,000.

Incorrect: Statement II is incorrect because the SFA explicitly states that the provisions regarding leveraged foreign exchange trading do not apply to insider trading offences. Statement IV is incorrect because the SFA provides that civil penalty proceedings shall not be commenced if the defendant has already been convicted or acquitted in a criminal trial for the same set of facts.

Takeaway: The SFA establishes extraterritorial jurisdiction based on domestic effects and ensures that civil and criminal penalties are mutually exclusive once a criminal verdict is reached. Therefore, statements I and III are correct.

Correct: Statement II is correct because the front running prohibition does not apply if the CMS license holder or representative has no access to the customer’s order flow information. Statement III is correct because, under normal circumstances, a trade is not considered a pre-arranged cross trade if there is a gap of more than 10 seconds between the first and second legs of the order.

Incorrect: Statement I is incorrect because CMS license holders are explicitly prohibited from matching buy and sell orders internally (crossing) when received at the same time and price; they must expose the orders to the market. Statement IV is incorrect because the market conduct rules have extra-territorial reach, applying to acts in Singapore regarding foreign-listed contracts and acts outside Singapore regarding local-listed contracts.

Takeaway: Singapore’s market conduct regulations prohibit front running and internal crossing of trades while maintaining extra-territorial jurisdiction to ensure the integrity of both local and relevant foreign markets. Therefore, statements II and III are correct.

Correct: Statement I is correct because the Code on Collective Investment Schemes specifies that for schemes using the absolute VaR approach, the global exposure should generally not exceed 20% of the Net Asset Value (NAV). Statement II is correct because the relative VaR limit is set at 1.5 times the VaR of the reference portfolio or benchmark. Statement III is correct because the manager is required to perform stress tests at a frequency in line with the scheme’s risk profile, with a minimum requirement of once every month.

Incorrect: Statement IV is incorrect because the Code requires the manager to back-test the VaR model at a minimum frequency of monthly, not quarterly. While reports on back-testing are submitted to senior management quarterly, the actual testing process must occur at least once a month.

Takeaway: Fund managers using the VaR approach must comply with specific exposure limits (20% absolute or 1.5x relative) and maintain both stress testing and back-testing programs at a minimum monthly frequency. Therefore, statements I, II and III are correct.

Correct: Statement I is correct because the Code on CIS is a non-statutory document that sets out best practices for the management, operation, and marketing of schemes in Singapore. Statement III is correct because MAS may take breaches of the Code into account when deciding whether to refuse to authorize or recognize new schemes proposed by the same responsible person.

Incorrect: Statement II is incorrect because the source explicitly states that a person who only breaches the requirements in the Code is not liable to criminal proceedings. Statement IV is incorrect because the use of the terms ‘capital protected’ and ‘principal protected’ (or any derivatives) in a CIS’s name and description is strictly prohibited, without exception for guarantees.

Takeaway: The Code on CIS is a non-statutory set of best practices; while breaches do not lead to criminal charges, they can result in MAS revoking a scheme’s authorization or refusing new applications. Therefore, statements I and III are correct.

Correct: Statement I is correct because the SFA defines fund management as undertaking the management of a portfolio of securities or futures contracts on behalf of a customer. Statement II is correct because an advisor or research provider is deemed to be conducting fund management if they exercise direct or indirect control over the portfolio, such as being involved in its construction.

Incorrect: Statement III is incorrect because the SFA explicitly excludes real estate investment trust (REIT) management from the definition of fund management, as it is a separate regulated activity. Statement IV is incorrect because a corporation licensed only for fund management must apply to MAS to add additional regulated activities to its CMS license and meet specific criteria for those activities.

Takeaway: Fund management involves managing portfolios or related FX trading, and while it includes advisors with portfolio control, it specifically excludes REIT management and requires separate licensing for other regulated activities. Therefore, statements I and II are correct.

Correct: Statement I is correct because paragraph 4.2 of Appendix B establishes a standard group limit of 10% of the fund’s NAV for aggregate exposures to an entity and its subsidiaries. Statement III is correct because paragraph 4.3 allows this limit to be raised to 20% when the fund invests in non-deposit instruments or Singapore-dollar deposits with a bank in Singapore. Statement IV is correct because paragraph 4.4 permits the group limit to reach 30% if the Singapore bank maintains a high short-term rating of F-1, P-1, or A-1.

Incorrect: Statement II is incorrect because the Guidance to paragraph 3.1 explicitly prohibits money market funds from investing in debt securities or money market instruments that embed financial derivatives, regardless of the issuer’s credit rating.

Takeaway: While the default group exposure limit for money market funds is 10%, it can be increased to 20% or 30% for Singapore-based banks depending on their specific credit ratings. Therefore, statements I, III and IV are correct.

Correct: A sum of not less than SGD 50,000 and not more than SGD 2,000,000 is the right answer because the Securities and Futures Act (SFA) specifies this exact range for corporations that are found liable due to negligence in preventing market misconduct by an employee when no profit was gained or loss avoided.

Incorrect: The option citing SGD 100,000 to SGD 5,000,000 is wrong because it incorrectly identifies both the floor and the ceiling of the statutory penalty range provided in the text. The option suggesting SGD 25,000 to SGD 1,000,000 is incorrect as it underestimates the minimum penalty of SGD 50,000 and the maximum limit of SGD 2 million. The option proposing SGD 50,000 to SGD 3,000,000 is wrong because the maximum penalty allowed under this specific provision is capped at SGD 2 million, not SGD 3 million.

Takeaway: Under the SFA, corporations face civil penalties between SGD 50,000 and SGD 2 million for negligent failure to prevent employee misconduct if no financial gain resulted from the offence.

Correct: Statement I is correct because the manager or trustee is required to notify MAS of any breaches of the Code’s guidelines or limits within 3 business days of becoming aware of the breach. Statement III is correct because breaches resulting from market movements, such as the appreciation or depreciation of underlying investments, are considered passive and do not require reporting if they are rectified within 3 months. Statement IV is correct because if a rectification period for a passive breach is extended beyond 3 months, the extension must be in the best interest of participants and is subject to a monthly review by the trustee.

Incorrect: Statement II is incorrect because a downgrade in a credit rating is specifically classified as a type of breach that does not need to be reported to MAS, provided it is rectified within the standard 3-month window allowed for passive breaches.

Takeaway: While active breaches must be reported to MAS within 3 business days, passive breaches caused by external market factors or rating changes generally do not require reporting if rectified within 3 months. Therefore, statements I, III and IV are correct.

Correct: Statement I is correct because the SFA requires that if more than 10% of an authorised CIS’s NAV is sub-managed abroad, the manager and its related corporations must manage at least SGD 500 million of discretionary funds in Singapore. Statement II is correct because the independence criteria for trustees states that a trustee is not independent if a person has an interest of 20% or more in both the trustee and the manager; since the interest in the manager is only 15%, the independence requirement is satisfied. Statement IV is correct because MAS is legally obligated to provide an applicant an opportunity to be heard before refusing authorisation, except when it is against public interest.

Incorrect: Statement III is incorrect because the maximum fine for failing to comply with SFA Section 286 regarding authorised schemes is SGD 100,000, not SGD 250,000, as prescribed in the regulatory framework.

Takeaway: Managers of authorised schemes must meet specific AUM thresholds for foreign sub-management, while trustees must maintain independence based on a 20% shareholding cross-ownership limit. Therefore, statements I, II and IV are correct.