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CySEC Examination Questions (Advanced) set 3

1. Regulation 1287/2006 outlines the record-keeping obligations for investment firms and it provides:

A. For the provision of a single global authorization for firms providing investment services

B. For the provision of a single EU authorization for firms providing investment services

C. For marketing units of UCITS globally

D. For marketing units of UCITS in Europe

2. A shareholder of a Credit Institution wishing to acquire more shares so as to increase his shareholding from 25% to 32% needs to apply for prior approval to CBC has:

A. 1 month to reply from the date of receipt of application

B. 2 months to reply from the date of receipt of application

C. 60 working days to reply from the date of receipt of application

D. 90 working days to reply from the date of receipt of application

3. Any person who provides false/misleading information to CySEC may be liable for:

A. A criminal offence punishable with maximum 5 years imprisonment and/or a fine maximum €350.000

B. An administrative fine maximum €175.000

C. A criminal offence punishable with maximum 5 years imprisonment and a fine maximum €175.000

D. An administrative fine maximum €100.000

4. Where the AIFM cooperates with a prime broker:

A. Must obtain prior approval by CySEC

B. Must obtain consent of client

C. Must inform the depositary

D. Must inform the competent authority of the depositary if in another member state

5. According to the market abuse regulation, the fine imposed by CySEC for not making a suspicious report is :

A. €512.580

B. €341.720

C. €683.440

D. €300.000

6. The Ifs/Banks/Coops-Members of the fund have a duty:

A. To inform their clients on the cover provided by the fund upon the payment of small fee as consulting services

B. Not to disclose to their clients the existence of the fund in order to avoid abuse of the fund by the clients

C. To use the membership of the fund in its marketing material

D. To inform their clients on the cover provided by the fund, the covered clients, the maximum amount of compensation, the conditions for payment of compensation prior to entering into an agreement.

7. CySEC has the power to:

A. Enter any premises and investigate

B. Confiscate and retain any information

C. To imprison anyone refusing to cooparate

D. Refer anyone to the Attorney General when there are suspicions of a criminal offence

8. A delayed publication of inside information is only allowed if:

A. Its disclosure will affect the public

B. Disclosing it will damage the issuer

C. It has already leaked to the public

D. If only the employees of the company are aware of the information

9. The Board of Directors of a financial institution are responsible for:

A. Assessing and approving the annual report

B. Advising and guiding employees in relation to money laundering and terrorist financing

C. Preparing the annual report

D. Maintaining a registry for all reports and relative information

10. Inside information is:

A. An information included in a newspaper article which however has not yet been endorsed

B. An information included in the chairman’s statement in the financial statements

C. An information discussed only at Board meetings and has yet to be announced

D. An information that has leaked into the market but has not yet been confirmed

11. A person employed by a CIF in the execution department as a minimum must:

A. Have a university degree

B. A diploma

C. A postgraduate degree

D. 5 years’ experience in the financial market

12. A CIF authorization lapses automatically:

A. If it has not used it in the last 12 months

B. If it has not used it in the last 6 months

C. If it has not used it in the first 6 months

D. When they have provided false or misleading information

13. When a CIF disseminates investment research and recommendation the CIF must ensure:

A. That the recommendation is suitable for the client

B. The recommendation is appropriate for the client

C. The issuer on whom the research was performed has not reviewed the draft research recommendation

D. The CIF is paid a fee for such a research by the issuer the research is concerned

14. When offering the service of safekeeping, the Bank:

A. Does not need to inform the client if they outsource the service

B. Only needs to inform the client when outsourcing in a 3rd country

C. Only needs to inform the client when outsourcing in a 3rd country where the laws of the 3rd country are not equivalent to EU laws regarding safekeeping of clients’ assets

D. Needs to inform the client if the service is outsourced

15. The UCITS ETFS:

A. Cannot be redeemed from the fund

B. Cannot be redeemed from the fund if purchased in the secondary market

C. Can be redeemed from the fund

D. Cannot be traded in the stock exchange

16. A retail client who has applied to the CIF to be treated as a professional must prove:

A. He has a portfolio of €500.000 and effected to transactions per quarter for the last four quarters

B. He has a portfolio of €500.000, effected to transactions per quarter for the last four quarters and has been employed for at least 1 year in a position that requires knowledge of the capital market

C. Turnover of €40m and balance sheet total of €20m

D. Turnover of €20m and balance sheet total of €40

17. Identification of all risks faced by CIFs should be the responsibility of

A. The internal audit function

B. The risk management function

C. Departments within the CIF

D. The BoD and a Senior Management

18. Preparation of budgets based in accordance with the strategic plan is the responsibility of:

A. The internal audit function

B. The risk management function

C. Finance function

D. The BoD and Senior Management

19. In order for a CIF to assess suitability, the client needs to provide information:

A. In order to provide them the best service

B. In order to ascertain the reasons for using the CIF’s services

C. In order to decide if the CIF will accept them

D. To ensure that the client is not involved in money laundering

20. Independent review of the risk assessment, stress testing and capital allocation exercises should be the responsibility of:

A. The internal audit function

B. The risk management function

C. Departments within the CIF

D. The BoD and Senior Management

21. The responsibility of the design and ongoing development of the ICAAP is assigned to:

A. The internal audit function

B. The risk management function

C. Departments within the CIF

D. The BoD and Senior Management

22. If the client is a legal entity and there is no agreement as to the appropriate person, then the suitability will be assessed on the person with:

A. The least knowledge and experience in the market

B. The least financial commitments

C. The less risk averse profile

D. On the CEO of the company

23. The ICAAP should be forward looking:

A. 1-3 years budgets and stress tests

B. 2-5 years budgets and stress tests

C. 3-5 years budgets and stress tests

D. 5-10 years budgets and stress tests

24. What information is necessary to collect from a professional client seeking an investment advice:

A. About this past experience is dealing with the specific financial statements and venue

B. About his academic background

C. About his monthly commitments

D. About his short term and long term objectives 3

25. The extent of supervisory expectations (SREP) regarding the internal capital requirement calculation depends on:

A. The nature, scale complexity and systemic importance of the CIF

B. The nature & scale but not the complexity and systemic importance of the CIF

C. The systemic importance of the CIF

D. The complexity and systemic importance of the CIF

26. A retail client who has opted to be treated as a professional, when asking for investment advice by the CIF, the CIF must assess:

A. He has the knowledge and experience to assess the risks of the proposed transaction

B. He has the knowledge and experience to assess the risks of the proposed transaction and he can bear the financial risks

C. He can bear the financial risks

D. He can bear financial risks and the advice given meets his investment objectives

27. Updating client’s information must be done:

A. Annually

B. Every 5 years

C. Whenever an event which has changed the client’s particulars has occurred

D. There is no requirement to update the information the client is obliged to inform the CIF whenever necessary

28. Which is not true regarding outsourcing of services to third parties:

A. A CIF cannot outsource investment services

B. When outsourcing the execution service, the CIF must maintain its license for execution

C. A CIF must maintain the knowledge to effectively supervising the 3rd party

D. The 3rd party oversees the manner of execution and manage accordingly the risks that arise

29. In which of the following situations the CIF will assess the knowledge and experience of the client before effecting the transaction?

A. A professional client wanting to sell share

B. A retail client wanting to sell shares

C. A retail client wanting to sell forward rate agreements

D. A retail client wanting to sell bonds

30. Authorisation does not lapse in which circumstances:

A. The CIF has not used its license within 8 months of the date it was granted

B. The CIF has not used its licence within 6 months of the date it was granted

C. The CIF has renounced its licence

D. The CIF has not used its licence within 3 months of the date it was granted

31. The minimum capital for a CIF licensed to provide the investment service of “Dealing on Own Account” is:

A. €125,000

B. €50,000

C. €1,000,000

D. None of the above

32. When the CIF offers investment advice to a professional client, the client needs to give the CIF the following information:

A. The nature and volume of his past transactions

B. The level of his education

C. His liquid assets and real property

D. The length of time for which he wishes to hold the investment

33. The Best execution policy must contain:

A. Factors affecting choice of venue

B. Factors affecting client categorization

C. Factors affecting limits per client

D. Costs and charges of each venue

34. On 31st of January every year what information needs to be reported:

A. List of Compliance Officers

B. List of people who may possess inside information

C. List of people with a qualifying holding

D. List of Directors

35. When the authorization of a Regulated Market is withdrawn, the RM must cease operating:

A. Within 3 months

B. Within 6 months

C. Within 12 months

D. Immediately

36. A UCITs may invest:

A. More than 10% in transferable securities that are not listed in a RM or a 3rd country stock exchange

B. In any deposits in credit institutions

C. In any derivatives

D. Recently issued transferable securities that will be listed within 1 year in a Regulated Market

37. The AIFM’s remuneration is governed by rules. The remuneration policy should:

A. Be applied to all employees of the AIFM

B. Provide for early termination payments

C. The compliance function should receive remuneration according to the performance of the fund

D. The policy must be reviewed annually by someone independent

38. The preparation of a risk management procedures manual covering the risk regarding money laundering and terrorist financing is the responsibility of:

A. The internal auditor

B. The board of directors

C. The finance department

D. The compliance officer;

39. The compliance function is responsible:

A. For drafting the know your customer procedures

B. For ensuring compliance with internal procedures

C. For ensuring compliance with auditor’s recommendations

D. To review remuneration received by senior management and directors;

40. A CIF operates a branch in New York. One of the general operational requirements for CIFs operating in the Republic is to establish, implement, and maintain an adequate business continuity plan policy. The possible issues that this policy needs to handle are in case of emergency:

A. Replacing employees

B. Errors relating to IT

C. Establishing communication between the systems

D. Loss of reputation

41. As a Compliance Officer of a small CIF, you are asked to provide training to all departments. How would the training be held:

A. Arrange so that the training be separately to each Department

B. Proceed as deemed appropriate

C. Arrange to train all departments together

D. Risk and compliance department together

42. When an AIF gains control over a non-listed company through an AIFM, it is not allowed to change the capital strucure for a period of

A. 1 year

B. 2 years

C. 3 years

D. 4 years

43. A CIF authorized in Cyprus can also provide services to:

A. Greece

B. Greece and Turkey

C. All EU member states

D. Worldwide

44. Who appoints the Assistant Compliance Officer in a bank?

A. CEO

B. CO

C. BOD

D. CBC

45. What is the role of the Business Function in the ICAAP process?

A. Application of stress testing scenarios and analysis of the results

B. Provide data

C. Independent confirmation that the process followed is according to the Board of Directors requirements

D. Proposal for a capital allocation for Pillar 2

46. What is the reason when after the sale of UCITS units you are getting less money compared to the purchase price?

A. The management company fees on units sale;

B. The difference between the purchase and sale price of units

C. The difference between the bid and ask price of units.

47. Richard is working as a Manager at a Management Company having access to inside information of various issuers. He just found out that his cousin Ron is executing a personal transaction for financial instruments regarding one of the issuer under management. Richard is obliged to include Ron in the insiders' list because:

A. Ron used to work under Richard's supervision for many years in the past

B. Ron used to live in Richard's house for more than one year

C. Richard financially contributed in Ron's education

D. Richard and Ron hold equal managerial positions in competitive companies

48. If there are some doubts that the bank will be able to fulfill it's obligations, the CBC has the power to:

A. To replace (remove) the CEO of that bank.

B. To replace (remove) the Chairman of that bank

C. To replace (remove) both CEO and Chairman

D. To replace (remove) the Chairman

49. Professional clients who are large undertakings must have net turnover of at least:

A. €40,000,000

B. €20,000,000

C. €2,000,000

D. €10,000,000

50. The compliance risk assessment needs to be undertaken on the basis of:

A. Compliance risk approach

B. Risk principles approach

C. Risk-based approach

D. Principles-based approach

51. The frequency with which client suitability information must be updated:

A. Differently between individual and legal persons

B. Depends on the frequency the client visits the bank

C. The same way for all types of clients

D. Depends on the client’s risk profile

52. At the suitability assessment process of a legal client, when there is no agreement on the most appropriate person, the investment firm should consider:

A. The person with risk-neutral risk objectives

B. The person with the strongest financial situation

C. The person with the most experience and knowledge

D. The person with the weakest financial situation

53. Inside information regarding an issuer has been disclosed in a newspaper outside Cyprus. This information is not regarded as inside because:

A. The issuer and its investors are located in Cyprus;

B. The information can only be derived from investors residing out of Cyprus;

C. The information comes to the knowledge of investors outside of Cyprus;

D. The information should be disclosed in other means as well;

54. The practice of front running is prohibited because:

A. It violates the guidelines of fair electronic systems;

B. It is considered unethical since the broker is making a profit at the expense of the client;

C. It creates conflicts between two clients;

D. Market Abuse Regulation does not allow it

55. Two issuers whose shares are not traded in a regulated stock exchange are discussing the possibility of merging.

A. CySEC should be informed immediately as the information is considered inside because non-disclosure will mislead the public

B. CySEC is not required to be informed as the information is not considered inside because non-disclosure will not mislead the public

C. The issuers have to update their insiders’ list immediately

D. The information is in the interest of the public so CySEC should be informed

56. Unitholders have applied for redemption of units and the Management Company of the UCITs has notified the suspension of the redemption to CySEC:

A. The redemption application will not be honoured because the MC has notified CySEC the redemption suspension.

B. The redemption application will be honoured because it has been applied before the notification.

C. The Management Company is not allowed to suspend the units redemption

D. The redemption application will also be suspended.

57. According to the Law, failure to make a suspicious transaction report, administrative penalty may be imposed for:

A. €350,000 with maximum penalty €700,000

B. €341,720 with maximum penalty €683,440

C. €512,580 with maximum penalty €1,025,160

D. €730,000 with maximum penalty €1,460,000

58. A common fund may be dissolved when:

A. The assets value have decreased to 20% of the threshold

B. The assets value have decreased to less than one half of the initial capital

C. The assets value have decreased to less than two thirds of the initial capital

D. The assets value have decreased to 33% of the threshold

59. Clients’ information related to suitability assessment should be accessible to:

A. Relevant persons in the firm and competent authority

B. Relevant persons in the firm only

C. Clients and relevant persons in the firm

D. Competent authority, clients and relevant persons in the firm

60. Authorized Credit Institutions (ACIs) in Cyprus may sell or part of their business provided that:

A. The voting rights of the buyer do not exceed the limit of 10%

B. Central Bank of Cyprus (CBC) has given its approval

C. Central Bank of Cyprus (CBC) has provided for the shareholders protection

D. It is made public as soon as the transaction is completed

61. Which of the following is not an organizational requirement a CIF must abide?

A. Establish adequate policies and procedures to comply with its legal obligations

B. Maintain and operate effective organizational and administrative arrangements preventing conflicts of interest

C. The investment research and the investment advice department are next to each other on the same floor

D. Have sound administration and accounting procedures, internal control mechanisms and effective risk-assessment procedures

62. The risk management function monitors and checks all of the below except:

A. Adequacy and effectiveness of the risk management policies and procedures

B. Level of compliance by the bank, its departments, and its members of staff

C. Instruments investments and assessment of their profit potential

D. Adequacy and effectiveness of measures taken to address deficiencies

63. Which of the following constitutes an inducement?

A. Actual fees payable for the provision of investment services such as custody cost, settlement and exchange fees and regulatory charges

B. Present/gift acquired by a client because of a good trading recommendation/investment research report provided to him by the CIF

C. Benefits paid to the client or someone acting on their behalf

D. None of the above constitutes an inducement

64. Which of the following is not a reason for a CIF to undertake periodic internal reviews?

A. To prevent conflicts of interest between the CIF and its clients or between two clients

B. To make sure that the rules and conditions cover organizational requirements, ongoing capital requirements and outsourcing

C. To ensure that the employees are sufficiently educated and trained

D. To ensure that the rules and conditions governing its authorization remain appropriate

65. Which of the following activities is not permitted by a management company?

A. Record keeping

B. Distribution of profits

C. Maintenance of unit holder register

D. None of the above – all above activities are permitted by a management company

66. The five steps of the SREP include all of the following except:

A. Planning

B. Risk management and internal control procedures

C. Validation

D. Review and assessment of ICAAP

67. Which CIFs are directly exposed to market risk?

A. CIFs providing investment research services

B. Firms acting as an agent to execute client’s orders

C. CIFs providing ancillary services

D. CIFs dealing on their own account

68. Which of the following is a general principle for AIFMs?

A. AIFMs do not have to act honestly, fairly, and with due skill with regards to professional clients who have the knowledge and experience of financial instruments the AIFM invests on

B. AIFMs investors may not be given preferential treatment, unless such treatment is disclosed in the AIF’s rules or instructions of incorporation

C. AIFs are only responsible for fair treatment as far as retail clients is concerned only

D. It is not the responsibility of the AIFMs to avoid any conflicts of interest this is primarily the function of the compliance function

69. Which of the following is not a requirement for transparency and market integrity?

A. To report transactions and keep records

B. To have internalisers (firms dealing on own account or MTF to disclose prices)

C. To have sufficient capital to support clients volumes and transactions

D. All of them are correct

70. A management company will be granted permission except if:

A. The directors are of sufficient good repute and experience for their role

B. Initial fully paid up capital is at least €125.000

C. A minimum of two directors are appointed

D. The application includes a business plan but no organisational structure

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