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CISI UAE > The Regulatory Infrastructure > Flashcards

The Regulatory Infrastructure Flashcards

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1
Q

What is the purpose of the Securities & Commodities Authority (SCA)?

A

To provide investment opportunities, develop investment awareness, and ensure financial stability.

The SCA’s objectives include securing the integrity of transactions and protecting investors.

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2
Q

What law established the Securities & Commodities Authority (SCA)?

A

Federal Law No. 4 of 2000.

This law outlines the functions, powers, and regulations of the SCA.

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3
Q

Where is the Securities & Commodities Authority (SCA) incorporated?

A

Abu Dhabi, the capital of the UAE.

The SCA operates as a public authority with financial and administrative independence.

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4
Q

What are the SCA’s powers under Article 4 of Federal Law No. 4 of 2000?

A

To propose regulations, create market regulations, form technical committees, maintain international contacts, and perform acts to achieve its objectives.

These powers enable the SCA to regulate markets and protect investors.

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5
Q

What is the term duration for SCA board members?

A

Four years, renewable once.

The chief executive has a different appointment term.

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6
Q

What events lead to the immediate termination of SCA board membership?

A

Conviction of an offence, bankruptcy, or failure to attend three consecutive meetings.

Membership requires active participation and integrity.

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7
Q

What financial documents must markets and brokers submit to the SCA?

A

Balance sheets, profit and loss accounts, and annual financial statements.

These should be audited by an accredited auditor and submitted within one month of the financial year-end.

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8
Q

What are the sources of income for the SCA?

A
  • Annual funds from the federal government
  • Listing and annual fees from companies and brokers
  • Trading fees and service fees
  • Fines on brokers and companies

These sources support the SCA’s operations and regulatory activities.

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9
Q

What type of establishment must markets for trading in securities and commodities be?

A

Local public establishment or public joint-stock company licensed by the SCA.

Markets must be electronically linked at the state level.

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10
Q

What must members of a market’s board do regarding their securities ownership?

A

Declare ownership and any changes within one week.

This ensures transparency and prevents conflicts of interest.

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11
Q

Under what circumstances can the market’s board suspend trading?

A

In exceptional circumstances or when the market’s proper functioning is threatened.

A majority of board members must be present to make this decision.

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12
Q

What is required for a company whose securities are listed to disclose?

A

Any price-sensitive information immediately.

This promotes market integrity and investor confidence.

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13
Q

What actions are prohibited regarding insider information?

A

Using insider information for personal gain and falsifying information.

Breaching these provisions renders transactions null and void.

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14
Q

What must be done before employees of a listed company can buy or sell shares?

A

Transaction approval by the board and disclosure of transaction details.

This ensures accountability and transparency in trading activities.

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15
Q

What is the fiscal year for the SCA?

A

From January 1 to December 31.

The annual budget is prepared by the chief executive and approved by the board.

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16
Q

What are the responsibilities of the board of directors of the SCA?

A
  • Ensure regulations compliance
  • Handle market notifications and complaints
  • Ensure financial statements submission
  • Maintain transparency and disclosure
  • Manage market membership and trading regulations
  • Report activities to the Cabinet of Ministers

These responsibilities help maintain market integrity and investor protection.

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17
Q

Fill in the blank: The SCA is not permitted to enter into _______.

A

[commercial activities].

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18
Q

True or False: The SCA can own or issue securities.

A

False.

The SCA must remain independent and free from commercial interests.

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19
Q

What is required for the validity of board meetings?

A

Attendance by the majority of members.

The chairman or deputy must also be present.

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20
Q

What financial actions can the SCA take against markets that fail to comply?

A
  • Warning
  • Notice to rectify
  • Penalty
  • Suspension

These actions ensure compliance and accountability in the market operations.

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21
Q

What is the function of the Securities & Commodities Authority (SCA)?

A

To regulate and supervise securities and commodities markets in the UAE

The SCA aims to provide a suitable climate for investment and protect investors.

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22
Q

What are the five strategic goals of the SCA?

A
  • Enhance legislative framework for UAE capital markets
  • Safeguard rights of financial market investors
  • Promote transparency and corporate governance
  • Ensure administrative services meet transparency and quality standards
  • Foster a culture of innovation in the workplace
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23
Q

What powers does the SCA have?

A
  • Define regulations
  • Supervise and monitor markets
  • License markets and brokers
  • Authorize securities and commodities for trading
  • Remove brokers from the licensed register
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24
Q

Who heads the SCA?

A

The chairman of the board

The chairman represents the SCA to third parties and oversees board meetings.

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25
How often must the SCA board convene?
At least once every two months ## Footnote Meetings may occur more often if required.
26
What is required for a market to obtain a trading license from the SCA?
* Be a public institution or company * Occupy an appropriate building with technical equipment * Be electronically linked with other state markets
27
What documents must accompany a market license application?
* Local resolution establishing the market * Board members' declarations regarding securities ownership * Internal regulations of the market * Electronic registration system details
28
What is the role of the chief executive in the SCA?
To prepare the draft budget and manage personnel issues ## Footnote The chief executive reports to the chairman of the board.
29
What is the fiscal year for the SCA?
1 January to 31 December ## Footnote The chief executive prepares the draft budget before the new fiscal year.
30
What happens if a market's license application is rejected?
The reasons for rejection must be stated, and the applicant can re-submit once reasons are resolved.
31
What can the SCA do if it receives complaints about market activities?
Conduct investigations and require written statements from involved parties.
32
What are the consequences for a market during exceptional circumstances?
The SCA board may temporarily halt trading or suspend rules and regulations.
33
True or False: The SCA can freeze or reinstate market regulations.
True
34
What must markets provide to the SCA after their financial year?
Balance sheet, profit and loss account, and annual financial statements certified by an auditor.
35
Fill in the blank: The SCA's mission is to safeguard the rights of investors, promote sound practices, and create an environment attractive to _______.
[capital]
36
What is the role of the SCA board regarding complaints related to market activities?
To adjudicate appeals against penalties imposed by the market's board of directors.
37
What is a requirement for the board of directors of a market?
None of its members can be part of a public joint-stock company or a broker.
38
What is required for a market to be established by the competent local authority?
A resolution by the competent local authority and management by a board of directors constituted by resolution. ## Footnote Members of the board cannot be from a public joint-stock company or a broker.
39
Who must be appointed in each market?
A director general and a deputy to the director general, along with sufficient officers and administrative staff. ## Footnote This is required for the market's operations.
40
List the conditions that must be satisfied before granting a licence to any market.
* It must be in the form of a public institution or company. * It must occupy an appropriate building equipped with necessary technology. * It must be electronically linked with other markets in the State. * It must secure proper performance of electronic data processing and data recovery systems.
41
What is the role of the SCA regarding the markets?
The SCA operates under supervision and control of the markets and may conduct inspections and investigations. ## Footnote Investigations require specification of scope and designation of the person conducting it.
42
What must markets do concerning transactions in listed securities?
Enter all transactions in their records; transactions not entered are null and void. ## Footnote Entries are deemed legal evidence unless proved otherwise.
43
In the event of a dispute in the securities market, what option do parties have?
They can choose to enter into arbitration, applying the regulations issued by the SCA. ## Footnote This is an alternative to litigation.
44
What are the responsibilities of the market’s board of directors?
* Appoint the director general and deputy. * Establish the organisational structure and internal regulations. * Monitor trading transactions. * Present reports to the SCA. * Approve the annual balance sheet. * Levy penalties on brokers.
45
What is required for the market’s internal regulations regarding board meetings?
They must specify the procedure for calling meetings, meeting place, quorum, resolution passing, and member remuneration.
46
What must the market’s General Assembly monitor?
General conditions in the market and suggest ways to enhance efficiency. ## Footnote Its views are submitted to the SCA through the board of directors.
47
What is the trading requirement for securities in the market?
Trading must occur at least five working days a week for at least two hours each day. ## Footnote Official holidays are excluded.
48
What is a special order in trading?
Any order approved in advance for a securities transaction exceeding 80% of the broker's bank guarantee.
49
What are the sources of financing for each market?
* Listing fees and annual fees from listed companies and brokers. * Fees levied on trading and services. * Fines levied on brokers or listed entities.
50
What does corporate governance involve?
The regulations, criteria, and procedures ensuring discipline in managing companies and protecting shareholder rights.
51
What are the main pillars of the Corporate Governance Guide?
* Accountability * Fairness * Disclosure * Transparency * Responsibility
52
What are the principles of corporate governance according to the guide?
* Accountability towards shareholders and stakeholders. * Equity for all shareholders. * Transparency and disclosure of material matters. * Responsibility towards stakeholders.
53
Who is primarily responsible for implementing the Corporate Governance Guide?
The board of directors. ## Footnote They monitor adherence to principles and rules.
54
What is the regulation regarding gifts for board members?
Gifts that may influence a board member in their duties should not be accepted, except for items valued at AED 500 or less.
55
How should conflicts of interest be managed according to the guide?
Board members must disclose conflicts and not participate in voting on related decisions. ## Footnote Failure to disclose may lead to legal action.
56
What can a company or shareholders do if a board member fails to inform the board about a conflict of interest?
They may resort to the competent court to invalidate the contract or order the member to return any profit obtained from it. ## Footnote This provision ensures accountability and transparency in corporate governance.
57
Who should a board member disclose potential conflicts of interest to?
The chairman or designee. ## Footnote This helps in determining whether there is a conflict of interest.
58
What must the company maintain regarding conflicts of interest?
A register of conflicts of interests that records cases and measures taken. ## Footnote This is part of good corporate governance practices.
59
What should the board secretary do regarding conflicts of interest?
Record the conflict of interest in the related board minutes. ## Footnote This documentation is important for transparency.
60
In conflict cases, what must remaining board members consider about the involved board member's participation?
Whether it is appropriate for the member to participate in discussing that item. ## Footnote This ensures fairness in decision-making.
61
What is the definition of a 'related party' according to the Corporate Governance Guide?
The chairman, board members, senior executive management, employees, and companies where these persons hold 30% or more of the capital. ## Footnote Understanding related parties is crucial for managing potential conflicts.
62
What is required for transactions with related parties that exceed 5% of the company's capital?
They must be evaluated by an assessor accredited by the SCA. ## Footnote This helps ensure fairness and compliance.
63
What must the company maintain regarding related parties?
A register for related parties that records names, transactions, details, and actions taken. ## Footnote This promotes accountability in related party transactions.
64
What must the chairman provide to the SCA when entering into transactions with related parties?
A notice including details of the related party, the transaction, and a confirmation that the terms are fair and reasonable. ## Footnote This is to ensure transparency and protect shareholders' interests.
65
What must a related party disclose before entering into a transaction?
The nature of the transaction, conditions, and substantial information about their stake in the companies involved. ## Footnote This requirement enhances transparency.
66
What rights does a shareholder owning 5% or more of the company's shares have regarding transactions with related parties?
They can review company records and file a lawsuit regarding transactions. ## Footnote This empowers shareholders to protect their interests.
67
What is the CISI Code of Conduct?
A set of standards that members must meet, obligating them to act with integrity and comply with legal and regulatory requirements. ## Footnote Adherence to the Code is essential for maintaining professional standards.
68
What is one of the principles of the CISI Code of Conduct related to personal accountability?
To uphold the highest levels of personal and professional standards at all times. ## Footnote This emphasizes the importance of integrity in professional conduct.
69
What does the CISI Code of Conduct require regarding conflicts of interest?
Members must actively manage conflicts of interest and comply with regulations. ## Footnote This is crucial for maintaining trust in the financial services profession.
70
What is the minimum capital requirement for firms dealing in securities?
AED 30 million in paid-up capital. ## Footnote This ensures that firms have sufficient financial stability to operate.
71
What are some of the main functions expected within firms dealing in securities?
* Category Manager or Official * Compliance Officer * Risk Management Officer ## Footnote These roles are essential for managing regulatory compliance and risk.
72
What is the minimum capital requirement for firms dealing in investment?
AED 50 million in paid-up capital. ## Footnote This requirement aims to ensure that investment firms are adequately capitalized.
73
What types of firms can operate in the custody, clearing, and recording category?
Joint stock companies established within the State, banks, or branches of foreign banks. ## Footnote This ensures that only regulated entities can engage in these activities.
74
What is the minimum paid-up capital requirement for a third category financial institution?
AED 50 million ## Footnote The third category includes institutions like registrars of private joint-stock companies.
75
What are the main functions expected for the third category financial institutions?
* Category Manager or Official * Compliance Officer * Risk Management Officer * Operations Manager (not required for firms only acting as registrar of private joint-stock companies) ## Footnote These roles are outlined by the SCA.
76
Name one financial activity included within 'custody, clearing and recording'.
Safe custody ## Footnote Other activities include general clearing and registrar of private joint-stock companies.
77
What is the minimum paid-up capital requirement for credit rating agencies?
AED 5 million ## Footnote This applies to the fourth category of financial institutions.
78
What legal forms can credit rating agencies take?
* A legal person incorporated within the State * A branch of a foreign company * A body licensed to work in financial free zones ## Footnote These agencies must adhere to the relevant laws and regulations.
79
What are the main functions expected for credit rating agencies?
* Category Manager or Official * Compliance Officer * Credit Rating Analyst * Credit Rating Analysis Official ## Footnote The credit rating analyst and analysis official may need to be accredited by the Authority.
80
True or False: There is a capital requirement for firms providing ranking and advice.
False ## Footnote Firms licensed for ranking and advice do not have a capital requirement.
81
List three professional roles expected within firms providing ranking and advice.
* Category Manager or Official * Compliance Officer * Risk Management Officer ## Footnote These roles ensure compliance and effective operation within the firms.
82
What is the electronic accounting system required for licensed firms in the first category called?
Unified Centralised Back Office System ## Footnote This system manages the accounts of the licensed firm and its clients.
83
What is one technical condition for the electronic accounting system?
* A password and separate powers for each user ## Footnote This ensures security and appropriate user access.
84
Fill in the blank: The licensed body must keep an updated copy of the _______.
User Manual for the accounting system ## Footnote This is essential for maintaining operational standards.
85
What must a licensed body do in case of a malfunction in the accounting system?
Notify the Authority immediately and provide a technical report ## Footnote This ensures transparency and prompt remedial action.

CISI UAE (2 decks)

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