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CySEC Examination Questions (Advanced) set 2

1. The compliance monitoring program of a CIF must cover:

A. All areas of the Investment Firms

B. Only the areas where high risk of non-compliance has been identified

C. The areas reviewed by other control functions

D. The training programs performed

2. The compliance function:

A. Cannot be combined with other control units unless their independence is safeguarded.

B. Cannot be outsourced

C. Must always be an independent unit

D. It is not compulsory to perform such functions

3. One of the market manipulation practices, Ping orders is defined as:

A. The entry of small orders in order to ascertain the level of hidden orders

B. The entry of large numbers of orders and cancellations so as to create uncertainty for other participants

C. The entry of orders or a series of orders intended to start or exacerbate a trend, and to encourage other participants to accelerate or extend the trend

D. The submission of multiple orders often away from the touch on one side of the order book with the intention of executing a trade on the other side of the order book.

4. 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

5. In assessing suitability, which of the following is not necessary to ask for verification:

A. Payment slips

B. Deposits and loan agreements

C. Rental agreements

D. Address

6. Which information must be included in the prospectus and key investor information for ETFs:

A. The method of valuation and the policies for portfolio transparency

B. The method of valuation and the conflicts of interest policy

C. The main instruments in which it is going to invest

D. The major markets in which it is going to invest

7. Which of the following is an ancillary service:

A. Investment advice

B. Placing of financial instruments without a firm commitment

C. Operating an MTF

D. Research recommendation

8. The electronic trading systems of Regulated Markets (RM) or MTFs must be compliant with the laws and must:

A. Ensure that the system has the capacity to accommodate expected trading volumes

B. Ensure that access to its platform is provided to anyone interested

C. Ensure that testing of the system is done only when the system is offline so as not to disturb the trading

D. Ensure that all monitoring of the member’s trading is done by the members themselves

9. UCITs in the form of a Variable Capital Investment Company (VICI) may not have a depositary.

A. It is not allowed. Every UCITS must have a depositary

B. If the UCITS is listed.

C. When the board of the VICI undertakes to perform the duties of the depositary as well.

D. If the VCIC is listed with at least 80% of its shares traded in the stock exchange

10. An AIFM that also offers Portfolio Management with discretionary powers will:

A. Not invest the client’s portfolio in units of the AIF

B. Obtain prior approval from client before investing his portfolio in units of the AIF

C. The AIFM cannot have discretionary powers in a portfolio

D. The AIFM cannot have discretionary powers in a portfolio unless the client has close links with the AIF

11. Whenever a CIF appoints a new director:

A. The CIF must inform CySEC within 5 days

B. The CIF must inform CySEC within 1 month

C. The CIF must inform CySEC within 1 month of the appointment and then obtain approval

D. The CIF must obtain prior approval from CySEC within 1 month

12. When an EU IF wishes to establish a branch in Cyprus, it must notify the following information:

A. Address, Directors, shareholders and business plan

B. Address, Shareholders and program of operations

C. Address, organizational structure, shareholders and program of operations

D. Address, people responsible for management, organizational structure and program of operations

13. A Systematic Internaliser

A. Must always apply its public quotes on a sale

B. Must always apply its public quotes to retail clients

C. Can offer an improved price to its clients

D. Can apply its quotes on a discretionary basis.

14. What is the penalty for not publishing an inside information without the prior agreement of CySEC:

A. €300.000

B. €175.000

C. €200.000

D. €341.720

15. A CIF must implement procedures to identify:

A. When the CIF is making a profit from the client

B. When the CIF is charging a commission to the client

C. When the client is in the same business with another client

D. When the CIF has an interest to advance the benefits of one client over another

16. The stage at which the ultimate beneficiary appears to be holding legitimate funds is the:

A. Placement

B. Layering

C. Integration

D. Layering & integration

17. The extent of verification obtained regarding the clients suitability varies:

A. According to the CIFs judgment

B. But the standard of service remains the same

C. And the standard of service will vary

D. And the standard of service will vary according to the client’s category

18. The obligation to update client’s information should be fulfilled:

A. Every day

B. Every 10 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

19. International AML provisions are aimed at requiring firms to:

A. Identify customers & suspicious transactions at the placement and layering stages,

B. Keep adequate records which should prevent the integration stage being reached, but also provide an audit trail for investigators

C. Report suspicious activity or behaviour to the relevant regulatory/legislative authority

D. All of the above

20. Systemic risk is also known as:

A. Credit Risk

B. Market Risk

C. Operational Risk

D. Residual Risk

21. Under pillar 1 the three types of risks that need to be managed are:

A. Credit Risk, Operational Risk and Foreign exchange risk

B. Residual Risk, Systemic Risk and Market Risk

C. Credit Risk, Systemic Risk and Operational Risk

D. Credit Concentration Risk, Market Risk and Operational Risk

22. Risks not fully covered in pillar 1 include:

A. Residual Risk,

B. Liquidity Risk

C. Business Risk

D. Group Risk

23. A business continuity plan must cover:

A. Back up procedures and operating from another premises

B. Back up procedures and operating from another premises and lines of reporting in emergency situations

C. Arrangements made for reporting to CySEC of the event

D. Only possible scenarios

24. Which of the following would not fall under the scope of MiFID I regulation?

A. banks

B. Investment Firms

C. Insurance Firms

D. Cooperative Societies

25. Which of the following may not be generally categorized as a professional client:

A. An individual working in an Investment Firm as an investment advisor

B. A US Investment Firm

C. A Russian bank

D. A close-end listed investment organization

26. What is a qualifying holding in an investment firm?

A. 10% or more of the share capital or the voting rights

B. 20% or more of the share capital or the voting rights

C. 33% or more of the share capital or the voting rights

D. 50% or more of the share capital or the voting rights

27. Which of the following cases requires clients to take the suitability test?

A. The provision of portfolio management to a professional client concerning stocks listed in a stock exchange

B. The provision of investment advice to a retail client concerning a stock listed in a stock exchange

C. The provision of portfolio management to a retail client concerning stocks listed on a multilateral facility

D. All of the above

28. Which of the following information is not necessary to be provided by investment firms to clients in relation to financial instruments?

A. Explanation of specific type of financial instruments

B. Volatility of each type of financial instrument

C. Expected return of the financial instrument in the following 12 months

D. Number of staff employed by the IF

29. What is not a condition for granting authorization by CySEC?

A. the CIF must have a separate compliance unit

B. To have at least 2 managerial staff with good reputation and sufficient experience

C. CYSEC must approve of the shareholders and beneficiaries of the investment firm

D. the CIF must have its registered office in Cyprus

30. When does CYSEC withdraw a CIF’s authorization?

A. When the CIF has renounced its license

B. When there are suspicions that a violation may endanger the client’s interests

C. When the CIF systematically infringes the provisions of the law

D. If the CIF has not used its license for the last 6 months

31. What is not true about financial reports of UCITS

A. The accounting information given in the annual report shall be audited by one auditor according to international audit standards

B. The annual and half-yearly reports are available to the investors in all selling points of the units

C. The annual and half-yearly reports must compulsorily be given to the investors before any investment is made in a UCITS

D. The delivery of the reports in paper copy is compulsory in case that the investor requests it.

32. The Annual Report of a UCITS is available to the investor within:

A. 2 months from the end of the financial year

B. 4 months from the end of the financial year

C. 6 months from the end of the financial year

D. 8 months from the end of the financial year

33. Which of the following in not a requirement for the risk management function of an AIFM?

A. functionally and hierarchically separate the functions of risk management from the operating units of the AIFM

B. Outsource at least part of the risk management function to ensure independence from all internal operating units of the AIFM

C. Establish and implement adequate risk management systems in order to identify, measure, manage and monitor appropriately all risks relevant to each AIF investment strategy

D. Review the risk management systems with appropriate frequency at least once a year and adapt them whenever necessary

34. Which of the following is a form of Concentration Risk:

A. Securitization exposures which the CIF does not understand the credit quality and risk characteristics of the underlying exposure

B. Large exposures to a large number of counterparties.

C. Large exposures to a limited number of counterparties.

D. One party fails to deliver the cash value at the time of settlement of the trade.

35. Stress tests designed to assess scenarios and circumstances that would render its business models unviable is known as:

A. Scenario analysis

B. Reverse stress testing

C. Back testing

D. Sensitivity analysis

36. According to CySEC’s Guidelines on Suitability, what should an IF do?

A. Take reasonable steps to ensure any personal recommendations are suitable for the firm

B. Take reasonable steps to ensure any personal recommendations are suitable for the timeline of the product

C. Take reasonable steps to ensure any personal recommendations are suitable for its clients

D. Take reasonable steps to ensure any personal recommendations are suitable for the market being invested into

37. Please selected the correct missing word in the following sentence: “It is important that when assessing a customer’s ___________ to risk, the firm checks with the customer that it has correctly identified and understood the risk that the customer is willing and able to take”.

A. Attitude

B. Appetite

C. Willingness

D. Ability

38. In the course of assessing the suitability of an investment, the Investment Advisor of a client has requested from the client to consent in writing that the investment recommended is suitable for him/her. Was the said request for consent in-line with CySEC’s Suitability Guidelines?

A. Yes

B. No

39. The Compliance Officer has to decide how to allocate the resources to an Investment Firm. The decision of the allocation is dependent on:

A. The experience of the compliance staff

B. b. The nature of the business undertaken

C. The level of compliance risk the firm is exposed to

D. The level of the training the compliance staff has

40. Why is a Trading Platform required to have in place pre- and post-trade controls?

A. To ensure orderly trading

B. To ensure market transparency

C. To ensure business continuity

D. To ensure compatibility of systems

41. The Compliance Officer of a Regulated Market discovers a violation of the markets’ trading rules conducted by a client of a CIF which trades on the Trading Platform via Sponsored Access. What should the Trading Platform do?

A. Block the Sponsored Access to the CIF

B. Block the Sponsored Access to the specific client of the CIF

C. Allow the client to continue trading but warn him and set a deadline to comply with the market’s rules

D. Halt the entire trading undertaken on the platform

42. What is the capital requirement of a market operator of a Regulated Market?

A. EUR 2m

B. EUR 5m

C. EUR10m

D. EUR20m

43. When testing a disaster recovery plan which scenario would you not consider from the following:

A. IT system failures

B. Loss of important key employees

C. Flooding/fire

D. Sudden loss of any firms you outsource functions to

44. An EU Non Financial Counterparty (NFC) with thresholds lower than the limit and an EU NFC with above the limit have entered into an OTC derivative transaction. Assuming that the respective derivative contract falls under an asset class where ESMA decided mandatory clearing, which counterparty (ies) must undertake clearing based on EMIR’s requirements?

A. Both the NFC- and NFC+ are not required to clear the transaction

B. Both the NFC+ and NFC- must clear the transaction

C. Only the NFC+ must clear the transaction

D. Only the NFC- must clear the transaction

45. The minimum capital for a CIF licensed to provide Portfolio Management and does not hold clients’ money is:

A. €1 million

B. €730,000

C. €50,000

D. None of the above

46. As part of a CIF’s business continuity arrangements for its electronic trading systems, the IT dept. Of the CIF hosts a back-up server within the CIF’s head office. Once up and running the back-up server is able to resume trading within 3 hours. Do the said business continuity arrangements satisfy the requirements of CySEC’s Guidelines on systems and controls in an automated trading environment?

A. Yes

B. No

C. N/A

D. N/A

47. Entering large numbers of order and/or cancellations/updates to orders so as to create uncertainty for other participants, slowing down their process and to camouflage their own strategy

A. Ping Orders

B. Momentum Ignition

C. Quote Stuffing

D. Layering and Spoofing

48. The adverse perception of the image of a CIF by customers is

A. Strategic Risk

B. Group Risk

C. Legal Risk

D. Reputational Risk

49. Which Risk is not fully covered within Pillar 1

A. Settlement risk

B. Operational Risk

C. Business Risk

D. Strategic Risk

50. Which of the below is a Pillar II risk:

A. Credit Risk

B. Market Risk

C. Operational Risk

D. Strategic Risk

51. When executing a client’s order:

A. Similar orders by different clients may be aggregated and executed together

B. Clients’ orders may be aggregated only with prior consent by client

C. Clients orders can never be aggregated

D. Retail clients’ orders must be executed first and in priority from professional clients’ orders

52. Information shall be deemed as having been “made public” when there occurs one, or more of the following situations:

A. It is discussed at a board meeting

B. It is discussed at a board meeting in the presence of the Company’s legal advisors

C. It is referred to in an article published in a newspaper

D. All of the above

53. When a tied agent holds clients monies:

A. This constitutes a criminal offence, punishable with imprisonment maximum 5 years and an administrative find of maximum €350.000

B. This constitutes an administrative offence punishable with a fine of maximum €350.000

C. This constitutes an administrative offence punishable with a fine of maximum €175.000

D. This constitutes a criminal offence, punishable with imprisonment maximum 5 years and/or a fine of maximum €350.000 and an administrative fine of maximum €350.000

54. Which of the following may operate an MTF:

A. Pension Funds

B. Insurance Companies

C. Market Operators

D. Listed Companies

55. Which is not an objective of MiFID I:

A. Internal procedures and controls of Investment Firms

B. Code of Conduct of persons employed in Investment Firms

C. Best Execution of orders

D. Good corporate governance in listed companies

56. Which of the following would not fall under the scope of MiFID I regulation?

A. banks

B. Investment Firms

C. Insurance Firms

D. Cooperative Societies

57. The Risk Management’s responsibility is not:

A. To ensure compliance with the risk management procedures

B. To identify risk of non-compliance with the law

C. Consult persons providing investment services in complying with the law

D. To ensure conformance with suggestions for improvement of internal control procedures

58. When offering safeguarding of client’s assets:

A. The CIF can aggregate a client’s assets with another client

B. The CIF can aggregate a client’s assets with the CIF’s assets

C. The CIF must give monthly reports to its client as to the condition of the assets

D. The CIF must perform on a regular basis reconciliations between internal records and external records

59. Which of the following cases requires clients to take the suitability test?

A. The provision of portfolio management to a professional client concerning stocks listed in a stock exchange

B. The provision of investment advice to a retail client concerning a stock listed in a stock exchange

C. The provision of portfolio management to a retail client concerning stocks listed on a multilateral facility

D. All of the above

60. Which of the following information is not necessary to be provided by investment firms to clients in relation to financial instruments?

A. Explanation of specific type of financial instruments

B. Volatility of each type of financial instrument

C. Expected return of the financial instrument in the following 12 months

D. Number of staff employed by the IF

61. Which of the following services is not an investment service?

A. Investment advice

B. Underwriting

C. Operation of multilateral trading facilities

D. Investment research

62. Which one of the following statements is not true for regulated markets?

A. Regulated markets establish and maintain effective arrangements to verify that issuers of transferable securities that are admitted to trading comply with their obligations in respect of initial, ongoing or ad-hoc disclosure obligations.

B. Regulated markets may be operated by investment firms or market operators

C. Regulated markets have clear and transparent rules regarding the admission of financial instruments to trading

D. Regulated markets establish arrangements which facilitate their members in obtaining access to information which has been made public regarding listed financial instruments

63. Which is the supervisory of Cypriot banks which offer their services to another EU country by the establishment of a branch?

A. Both Central Bank of Cyprus and the Cyprus Securities and Exchange Commission

B. The Central Bank of Cyprus

C. The European Central Bank

D. The Central Bank of Cyprus and the European Central Bank together

64. No authorization is needed under Law144/2007 to:

A. A subsidiary of an Investment Firm that performs investment services to clients

B. A subsidiary of an insurance authorized by the Republic that provides investment advice to clients

C. A subsidiary of a credit institution authorized by the a 3rd country that provides portfolio management to clients

D. A subsidiary of a parent undertaking that provides investment advice only to the parent

65. Which investment services and activities can a Cyprus Investment Firm provide in another EU Country via its Single passport?

A. Any investment and ancillary services under Law 144/2007

B. Any investment services only

C. Any of the investment and ancillary services covered under the Cyprus Investment Firm’s licence.

D. any Investment services covered under the Cyprus Investment Firm’s license and all the ancillary services

66. Shareholders of CIFs must report to the issuer and to CySEC if their shareholding exceeds or falls below the following levels:

A. 5%, 10%, 20%, 30%, 50%, 75%

B. 10%, 20%, 30%, 50%

C. 5%, 10%, 20%, 25%, 30%, 50%, 75%

D. 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75%

67. Which of the following payments may be prohibited to be received by investment firms when providing investment services to clients?

A. Brokerage commission charged to clients for the sale of a specific stock

B. Custody fees for the safekeeping of financial instruments

C. Commission from 3rd party investment firms for executing a specific transaction when this is disclosed to the client

D. Fees which aim at increasing the order flow from an investment firm to another

68. Which of the following services may not be provided by a tied agent?

A. Portfolio management

B. Reception and transmission of orders

C. Placing financial instruments

D. Investment advice

69. Any violation of Law 144/2007, if not otherwise stated will be fined by:

A. €175.000

B. €350.000

C. €300.000

D. €200.000

70. The assessment period that CBC has in reviewing an application for purchase of shares in an Authorised Credit Institution (ACI):

A. Lasts for 60 calendar days

B. May be extended by 20 days

C. Lasts for 1 month

D. May be interrupted by maximum 20 days

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