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CySEC Examination Questions (Advanced) set 1

1. What is the initial capital requirement for UCITS with more than one compartment?

A. 200k euros for each compartment

B. 125k euros for each compartment

C. 200k euros in total for the UCITS

D. 125k euros in total for the UCITS

2. After receiving its authorization, the UCITS should invest its assets according to the law in a period of:

A. 1 month

B. 3 months

C. 6 months

D. 12 months

4. Which of the following situations would not be a potential source of conflict of interest for an AIFM?

A. Between the AIFM and AIFs managed by the AIFM

B. Between two AIFs managed by the AIFM

C. Between an AIF managed by the AIFM and an AIF delegated by the AIFM to another AIFM

D. Between an AIF managed by the AIFM and a pension fund managed by the AIFM

3. Up to what percentage of additional capital required from an AIFM can be provided in the form of a guarantee by a credit institution?

A. 25%

B. 50%

C. 75%

D. 100%

5. Which of the following duties is not a requirement for effective liquidity management of AIFMs?

A. Employ an appropriate liquidity management system

B. Ensure that all investments included in the AIF have at least weekly liquidity

C. Adopt procedures which enable them to monitor the liquidity risk of the AIF

D. Ensure that the liquidity profile of the investments of the AIF complies with its underlying obligations

6. Which of the following would not be a permitted investment for UCITS?

A. 10% of total assets in various transferable securities trading on a regulated market of Cyprus

B. 20% of total assets in various money market instruments trading on a regulated market of Germany

C. 10% of total assets in various transferable securities trading on a regulated market in Africa, not included in the list approved by the Minister of Finance and not mentioned in the fund's instruments of incorporation.

D. 20% of total assets in various transferable securities trading on a regulated market in Africa not included in the list approved by the Minister of Finance and not mentioned in the fund's instruments of incorporation.

7. A Variable Capital Investment Company (VCIC) listed in a stock exchange operating in France is not required to appoint a depositary as long as:

A. At least 50% of the VCIC shares are listed in the above exchange

B. At least 60% of the VCIC shares are listed in the above exchange

C. At least 70% of the VCIC shares are listed in the above exchange

D. At least 80% of the VCIC shares are listed in the above exchange

8. A Undertakings for Collective Investment in Transferable Securities (UCITS) may not invest more than 10% of its assets in transferable securities. The permitted investment limit per issuer, for bonds issued by a regulated credit institution, increases from 10% of UCITS assets to:

A. 20%

B. 25%

C. 35%

D. 40%

9. The price of assets used in the valuation of Undertakings for Collective Investment in Transferable Securities (UCITS), if no stock exchange transaction was made on the date of valuation, would take the:

A. Previous day's closing price

B. Valuation day's bid price

C. Valuation day's ask price

D. Valuation day's mid price

10. Which of the following is not a condition for AIFMs to sub-delegate to third parties the task of carrying out functions on their behalf?

A. the AIFM shall notify the competent authority of its home Member State before the delegation arrangements become effective

B. the AIFM must be able to demonstrate that the delegate is qualified and capable of undertaking the functions in question and that it was selected with all due care

C. the AIFM can delegate an activity only for a specified time period and the delegation must be withdrawn when this period lapses

D. the AIFM shall not delegate its functions to the extent that it becomes a letter-box entity

11. During the planning stage of SREP, the CIF should:

A. Submit report to CySEC

B. Be ready to be subject to review regarding its controls and governance

C. Submit additional documentation

D. Informing CySEC if the level of capital resources is below the capital requirements

12. The responsibility for initiating and designing the ICAAP rests with:

A. The Board of directors and senior management

B. Compliance Officer

C. Internal Audit

D. Risk Manager

13. The delay or inability to realize payment from a client in a timely manner is called:

A. Operational risk

B. Market risk

C. Interest rate risk

D. Residual risk

14. Regulation 575/2013 for prudential requirements for credit institutions and investment firms, requires banks and investment firms to hold total capital requirement which includes Tier 1 and Tier 2 capital at:

A. 8% of risk weighted assets

B. 4.5% of risk weighted assets

C. 6% of risk weighted assets

D. 4% of risk weighted assets

15. The variable component of remuneration may reach up to 200% of the fixed component of the total remuneration for each individual provided that:

A. The act is voted by at least of 66% of the shareholders in a meeting representing at least 50% of the shares or ownership rights

B. The act is voted by at least of 50% of the shareholders

C. The act is voted by at least of 75% of the shareholders in a meeting representing at least 66% of the shares or ownership rights

D. The act is voted by at least of 75% of the shareholders

16. The purpose of the business continuity policy is to:

A. Ensure avoidance of undue additional operational risk when outsourcing functions to third parties.

B. Ensure preservation of data and continuation of key functions in case of an interruption to the bank’s systems

C. Keep records of all services and transactions in line with the Cyprus and EU legal requirements.

D. Maintain and operate effective organisational and administrative arrangements to prevent conflicts of interest from adversely affecting clients’ interests.

17. Which function applies the stress testing during the ICAAP preparation:

A. Risk Management Function

B. Finance Function

C. Internal Audit Function

D. Board of Directors and Senior Management

18. When assessing securitization exposure, a CIF should assess:

A. The risk of failure the asset at the time of settlement of a trade

B. The credit quality and risk characteristics of the underlying exposures

C. The risk of movement in foreign exchange rates

D. The risk of the failure of a party to deliver the cash value at the time of settlement of the trade.

19. 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

20. During the SREP phase Review and Assessment of ICAAP, CySEC typically undertakes:

A. Desk-based research of the ICAAP process

B. General research of ICAAP processes in different firms

C. Review of additional information

D. Assessment of supervisory measures

21. Following shareholders’ approval, the variable component of remuneration shall not exceed what percentage of the fixed component of the total remuneration for each individual:

A. 50%

B. 250%

C. 200%

D. 300%

22. At what stage of the SREP does CySEC ask from a CIF to submit its ICAAP?

A. Review and assessment

B. SREP validation

C. Planning Stage

D. Review of additional information

23. 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

24. A suspicious transaction was reported to MOKAS. During further investigations, MOKAS may use as the first point of contact :

A. The Audit Function

B. The Board of Directors

C. The Compliance Function

D. The CEO only

25. An Investment Firm will advise client X on a more complex financial product than client Y. What actions should be taken for assessing suitability of client X:

A. Request more in-depth information from X

B. No further actions

C. Do not take him as a client

D. Offer the same product to both clients

26. You are a bank based in Limassol and building your disaster recovery plan. You are considering choosing the location of your disaster recovery office and you were given three choices. Which one of the following locations is more appropriate:

A. Nicosia

B. Sofia

C. Cairo

D. Malaysia

27. What is the penalty for not complying with the provisions of the Prevention and Suppression of Money Laundering and Terrorist Financing Law?

A. €125.000

B. €200.000

C. €350.000

D. €341.720

28. A potential employee who was bankrupt:

A. Should not be appointed

B. Approved and monitoring his activities in the company

C. Ask for extra reference letters from a bank

D. No extra measures are needed

29. Who appoints the Compliance Officer or Compliance Officer Assistant in a bank?

A. CEO

B. CO

C. BOD

D. CBC

30. Company wishes to appoint X and Y but only X appears on the public register, before being appointed Y has to…..

A. Be pre-approved by CySEC

B. Do nothing

C. Pass an internal test

D. Cannot be appointed

31. Persons are permitted to use inside information to:

A. Buy and sell the financial instrument for their own account

B. Indiscriminately communicate to other people

C. Make investment decisions for clients

D. Undertake the duties of their position

32. A bank shareholder increases his shares. For which of the below percentages of ownership, a permission is needed by CBC:

A. 15%-17%

B. 5%-7%

C. 28%-32%

D. 45-48%

33. Following the application of CRDIV, the capital conservation buffer of CET1 capital should not exceed:

A. 2.5%

B. 3%

C. 1%

D. 1.5%

34. Information provided to a client via email, if:

A. There is proof of regular use of the email by the client

B. The client is working at an IT Company

C. Customer support prefers sending emails to clients

D. The client has an IT related degree

35. When redemption of a UCITS, if closed price of the day is not available, then it can be used the:

A. Closing previous day without adjustments

B. Closing previous day with adjustments

C. Latest price

D. Next day with adjustments

36. The remuneration policy should set maximum variable remuneration for employees of the fixed component to:

A. 300%

B. 100%

C. 50%

D. 250%

37. A client opens an account in the Bank. It is required enhanced due diligence because:

A. Deposit of 17,000 EUR

B. He is currently unemployed

C. Deposit of 9,000 EUR

D. His age is under 17years old

38. Bank carries out simplified due diligence:

A. On a regulated credit institution in France

B. For non face-to-face customers

C. For trust accounts

D. for PEP accounts

39. A CIF authorisation lapses automatically:

A. If it has not used in the last 3 months

B. If it has not been used in the first 3 months

C. If it has not been used in the last 6 months

D. When they have provided false information

40. VCIC is not required to appoint a depositary as long as:

A. At least 80% of the shares are marketed through exchange

B. At least 70% of the shares are marketed through exchange

C. At least 50% of the shares are marketed through exchange

D. At least 10% of the shares are marketed through exchange

41. Once a CIF authorisation is withdrawn:

A. Obligations to be settled within six months

B. Obligations to be settled within three months

C. Obligation has to be settled within one month

D. Obligations has to be settled immediately

42. UCITS units may be redeemed

A. Within four working days at the value of the unit on the day the request was made

B. Within four working days at the value of the unit on the day of redemption

C. Three months after the redemption application

D. Six months after the redemption application

43. During ICAAP preparation, which Function applies the stress testing scenario:

A. Risk Management function

B. Internal Audit

C. Accounting

D. Business operations

44. Which one of the following risks fall under Pillar 1 risks:

A. Securitization

B. Settlement

C. Reputation

D. Legal

45. The CEO and the Board of Directors discuss in an evening meeting the acquisition of a specific listed company. The CEO goes home late and tells his wife. She immediately calls a friend and informs her about the acquisition. The next day and following Board instructions, the CEO, calls an advisor who will perform due diligence and informs him about the company’s intention to acquire a third company. Which act was not prohibited?

A. The disclosure by the CEO of the information to his wife

B. The disclosure by the CEO of the information to the advisor

C. The disclosure by the wife of the information to her friend

D. All of the above

46. The CEO and the BOD discuss the acquisition of a specific company. They call a shareholder to suggest and discuss the idea. A secretary is writing minutes in the meeting. Who of the following might not be a possessor of inside information?

A. CEO

B. External auditor

C. Secretary writing minutes in the meeting

D. The shareholder

47. The main key area of the Capital reform under CRDIV is:

A. Lower capital requirements for counterparty credit risk

B. Better quality of Common Tier 1 capital

C. More gearing

D. Immediate application of the liquidity ratios

48. Bank submits the insiders list:

A. When requested

B. Once per month

C. By 31 January each year

D. End of June and end of December

49. Regulation 231/2013 regulating AIFs provides that:

A. An EU authorized AIFM may market its units anywhere in EU

B. An EU authorized AIFM may market its units to professional investors anywhere in EU

C. An EU authorized AIFM may market its units to professional investors anywhere worldwide

D. An EU authorized AIFM may market its units to investors anywhere worldwide

50. Client and transaction information must be kept:

A. For the duration of the relationship

B. For 5 years from the start of the relationship

C. For 5 years from the date of transaction

D. For 5 years after the relationship has expired

51. In case the issuer judges that the public disclosure of inside information may prejudice his legitimate interests, he may apply to CySEC for delayed publication, provided that

A. The information is only known by the employees of the company

B. The information is sensitive and if it is published it will have a small impact on the prices of financial instruments

C. The non-disclosure of the information will be misleading to the public

D. The issuer is still under negotiations and the agreement is not yet finalized. Disclosing the information now may lead to a collapse in the agreement.

52. The obligation of public disclosure by issuers shall be made:

A. By announcement to CySEC and CSE which list it on the internet site and by announcement to the Internet site of the issuer

B. By announcement to CySEC

C. By announcement to CSE

D. By announcement to the internet site of the issuer

53. The CRDIV Directive sets the maximum countercyclical capital buffer to:

A. 1%

B. 2.5%

C. 4%

D. 1.5%

54. The compliance officer must:

A. Have knowledge of the law and legislation

B. Have knowledge of the law and legislation and prior experience

C. Have a senior management position

D. Have just adequate academic background

55. The spouse of a manager of an issuer, needs to publish a transaction she has made for her own account in financial instruments of the issuer:

A. By the end of each month

B. By the end of each year

C. Prior to the start of the next working day of the stock exchange after the transaction has taken place

D. By 31 January each year

56. During ICAAP preparation, stress testing process needs to be:

A. An integral part of the ICAAP

B. An integral part of the ICAAP and risk management framework of a CIF

C. Used only for supervisory purposes

D. Used only for accounting exercise

57. During the ICAAP preparation, the function which maintains independent is:

A. Risk Management Function

B. Accounting

C. Internal Audit

D. Board of Directors

58. What will the Compliance Officer do in case the CIF deviates from its responsibilities under the Law:

A. Should inform CySEC

B. Should quit his job

C. Should mention this in his Compliance Officer report

D. Should inform the BoD verbally

59. The Senior Management of the CIF reduced the budget of the Compliance function by 35%. What should be done in this case:

A. The Senior Management should inform the Compliance Officer

B. Any significant cuts in the budget should be documented in writing and contain detailed explanations

C. No further actions should be taken

D. The Senior Management should get the approval from the Compliance Officer first

60. Under MiFID, clients are classified as?

A. Retail, professional or intermediate

B. Private, professional or intermediate

C. Private, intermediate or eligible counterparty

D. Retail, professional or eligible counterparty

61. What is the minimum number of feeder UCITS for a master UCITS, in order to have the choice to raise capital from other investors as well?

A. 2

B. 5

C. 1

D. 10

62. Based on the guideline for compliance, the monitoring program must:

A. Concentrate only on the high risk areas

B. Monitor all business areas and concentrate on the high risk ones

C. Monitor all business areas equally.

D. Selects a few areas to be monitored on rotation every year

63. The compliance function reports:

A. To the CEO

B. To the shareholders

C. To the internal auditor

D. To the Board

64. A newly hired employee:

A. Must receive an induction training to ensure awareness with procedures of the company

B. No need to go through an induction training program if the employee is from another similar sized company

C. Must begin from working at the operational level and then moving on to control functions

D. Enroll on the next scheduled training available

65. One of the market manipulation cases, Momentum Ignition is the practice of:

A. Entering of large numbers of orders and or cancellation so as to create uncertainty for other participants, slowing down their process and to camouflage own strategy.

B. Submitting 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.

C. Entry of order, or series of orders, intended to start or exacerbate a trend and encourage other participants to accelerate or extend the trend so as to create an opportunity to unwind.

D. Entering small orders to ascertain the level of hidden orders.

66. When the CIF employee asks the clients to give personal information to assess suitability:

A. The CIF employee need not explain what the CIF’s responsibilities are

B. The CIF employee need to explain the need for the suitability assessment

C. The CIF employee clarifies to client that if he does not cooperate, the employee will make the assessment on his behalf

D. The CIF employee will allow the client to choose the FI he will trade in if client does not provide all the necessary information

67. For illiquid financial instruments, the following information must be additionally asked:

A. The marital status

B. The clients’ assets including liquid assets and real property

C. The client’s dependents

D. The client’s objectives

68. Regulation 575/2013 for the prudential supervision of credit institutions and investment firms dictates the liquidity ratio to be:

A. 100% of level 1 liquid assets

B. 75% of level 1 liquid assets

C. 60% of level 1 liquid assets

D. 80% of level 1 liquid assets

69. A person employed by a CIF must:

A. Submit a criminal record certificate

B. Submit his university degrees

C. Not have a portfolio in another CIF

D. Be clients of the CIF

70. A CIF when providing information to clients regarding past performance of a Financial Institution, the following information must be provided:

A. It must disclose the sources and currency

B. It must disclose the sources, currency and commission paid

C. It must disclose the sources, currency, commission paid and a warning that the figures are merely historic

D. It must disclose the sources, currency, commission paid, warning that the figures are merely historic and any assumptions must be disclosed

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