SC Licensing Examination Module 19 - Advisory Services: Rules and Regulations (SIDC, Malaysia)

Under Schedule 2 of the Capital Markets and Services Act 2007 (CMSA), which of the following is defined as a regulated activity?

• AAdvising on corporate finance
• BProviding auditing and statutory tax services
• CManaging general corporate communications
• DProviding legal counsel for commercial disputes

Which of the following licenses must be held by an individual who acts as a representative of a corporate licensee to carry out the regulated activity of providing investment advice?

• ACapital Markets Services Licence (CMSL)
• BCapital Markets Services Representative's Licence (CMSRL)
• CFinancial Adviser's Representative Licence (FARL)
• DRegistered Corporate Representative (RCR)

What is the statutory penalty under Section 58 of the Capital Markets and Services Act 2007 (CMSA) for an individual who carries out a regulated activity without holding a valid license or being registered?

• AA fine not exceeding RM100,000 or imprisonment for a term not exceeding 1 year, or both
• BA fine not exceeding RM500,000 or imprisonment for a term not exceeding 5 years, or both
• CA fine not exceeding RM10 million or imprisonment for a term not exceeding 10 years, or b…
• DA fine not exceeding RM20 million and mandatory whipping

According to the Licensing Handbook issued by the Securities Commission Malaysia, which of the following is NOT an element considered under the 'fit and proper' criteria for licensing?

• AHonesty, integrity, and reputation
• BCompetence, capability, and financial soundness
• CAccumulation of personal assets and high net worth
• DEfficiency and fairness in carrying out business

Under Schedule 4 of the Capital Markets and Services Act 2007 (CMSA), which of the following entities is exempt from the requirement to hold a Capital Markets Services Licence (CMSL) for advising on corporate finance?

• AA boutique financial planning corporation registered under the Financial Services Act 2013
• BA licensed bank, licensed investment bank, or licensed Islamic bank under the Financial S…
• CA foreign-incorporated management consulting firm providing strategic advisory services i…
• DAny public listed corporation on the Main Market of Bursa Malaysia when issuing its own s…

How may a person who is aggrieved by a licensing decision of the Securities Commission Malaysia (such as a refusal to grant, or a revocation of, a licence) challenge that decision?

• ABy applying to the Securities Commission for a review of the decision under section 146 o…
• BBy appealing directly to the Bursa Malaysia Appeals Committee
• CBy petitioning the Special Commissioners of Income Tax
• DBy lodging an objection with the Companies Commission of Malaysia (SSM)

Under the Licensing Handbook of the Securities Commission Malaysia, a CMSRL holder must notify the Securities Commission of any change in their employment or material information within what timeframe?

• AWithin 7 days of the occurrence of the change
• BWithin 14 days of the occurrence of the change
• CWithin 30 days of the occurrence of the change
• DOnly during the annual license renewal cycle

Which of the following is defined as 'investment advice' under Schedule 2 of the Capital Markets and Services Act 2007 (CMSA)?

• AGiving advice concerning the purchase or sale of securities or derivatives in exchange fo…
• BExecuting buy and sell orders for securities on the trading platform of Bursa Malaysia
• CIssuing a credit rating for a corporate bond or sukuk offering
• DDrafting legal contracts for the acquisition of a target company

A licensed representative whose CMSRL has been revoked by the Securities Commission may apply for a review of that decision. Within what period must the application for review generally be submitted?

• AWithin 14 days of being notified of the decision
• BWithin 30 days of being notified of the decision
• CWithin 60 days of being notified of the decision
• DThere is no time limit for applying for a review

What is the primary role of the Securities Commission Malaysia (SC) under the Securities Commission Malaysia Act 1993?

• ATo guarantee the profitability and financial returns of listed companies
• BTo regulate all matters relating to securities and derivatives, and protect investors
• CTo operate the trading floor and clearing houses of Bursa Malaysia
• DTo issue commercial banking licenses and set national monetary policy

Under the Licensing Handbook, who is responsible for ensuring that a CMSL holder (corporation) and its representatives (CMSRL holders) comply with all relevant laws, guidelines, and codes of conduct?

• AThe Compliance Officer of the CMSL holder
• BThe board of directors and senior management of the CMSL holder
• CThe internal auditors of the company
• DThe SIDC examination board

Which statutory document governs the licensing criteria, capital requirements, and organizational structure of capital market intermediaries in Malaysia?

• AThe Bursa Malaysia Listing Requirements
• BThe Licensing Handbook of the Securities Commission Malaysia
• CThe Malaysian Code on Corporate Governance
• DThe Companies Act 2016

Under the CMSA, if a licensed representative is found to have provided false information in their license application, the Securities Commission has the statutory power to:

• ARevoke or suspend the license of the representative
• BImpose a penalty of mandatory winding up on the representative's employer
• CConfiscate the personal assets of the representative's immediate family
• DAutomatically convert the license into a restricted advisory license

A representative's CMSRL will automatically cease to have effect if the representative:

• AFails to meet the annual continuing professional education (CPE) points requirement
• BIs declared bankrupt or ceases to be employed by the principal CMSL holder
• CReceives a client complaint regarding negligent financial advice
• DChanges their residential address without notifying the Securities Commission

Which of the following is NOT categorized as a 'security' under the definition in Section 2 of the Capital Markets and Services Act 2007 (CMSA)?

• AShares in a public listed company
• BDebentures or corporate bonds
• CUnits in a collective investment scheme (such as unit trusts)
• DPhysical commodity contracts traded on a spot market

Under the Licensing Handbook, a corporation applying for a CMSL to advise on corporate finance must satisfy the Securities Commission that it has a minimum paid-up capital and net worth of:

• ARM100,000
• BRM500,000
• CRM2 million
• DRM10 million

Under the CMSA, the Securities Commission may revoke a CMSRL if the representative is convicted of an offence involving:

• AMinor traffic violations or parking offences
• BFraud, dishonesty, or money laundering
• CBreach of a private employment contract
• DFailing to attend an annual general meeting

Who must approve the appointment of a Chief Executive Officer (CEO) and directors of a company holding a CMSL in Malaysia?

• AThe company's shareholders in a general meeting
• BThe Securities Commission Malaysia
• CThe Companies Commission of Malaysia (SSM)
• DThe Bursa Malaysia Board of Directors

Which of the following is NOT an approved exchange under the Capital Markets and Services Act 2007 (CMSA) in Malaysia?

• ABursa Malaysia Securities Berhad
• BBursa Malaysia Derivatives Berhad
• CBursa Malaysia Bonds Berhad
• DThe Singapore Exchange (SGX)

The Securities Commission Malaysia is empowered under Section 377 of the CMSA to issue codes, guidelines, and practice notes. What is the legal status of these guidelines for licensed intermediaries?

• AThey are merely voluntary suggestions with no legal consequences for non-compliance
• BThey are legally binding, and non-compliance can result in administrative actions, fines,…
• CThey only apply to retail investors and have no effect on corporate advisers
• DThey must be passed by the Parliament of Malaysia before they can be enforced

Under the Contracts Act 1950 (Malaysia), a contract is defined as an agreement that is:

• AEnforceable by law
• BReduced to writing and stamped at the tax office
• CRegistered with the Companies Commission of Malaysia
• DWitnessed by a licensed legal practitioner

According to the Contracts Act 1950, when does a proposal (offer) become an agreement?

• AWhen the proposer signs the document
• BWhen the person to whom the proposal is made signifies his assent thereto (acceptance)
• CWhen the proposal is posted in the mail
• DWhen consideration is paid in full

Under the Contracts Act 1950, which of the following renders a contract voidable rather than void?

• AAn agreement where both parties are under a mistake as to a matter of fact essential to t…
• BAn agreement in restraint of marriage of any person other than a minor
• CAn agreement entered into where the consent of a party was caused by coercion, fraud, or…
• DAn agreement where the consideration or object is unlawful

In the law of torts, which of the following is NOT an element that a plaintiff must prove to succeed in an action for negligence against a financial adviser?

• AThe adviser owed a duty of care to the client
• BThe adviser breached the duty of care by falling below the standard of a reasonable profe…
• CThe adviser guaranteed that the investment would never suffer a loss
• DThe client suffered financial loss as a direct result of the adviser's breach (causation)

Under the principle established in Hedley Byrne & Co Ltd v Heller & Partners Ltd (which is applied in Malaysia), a duty of care in negligent misstatement arises when:

• AA special relationship exists between the adviser and the client, and the adviser knows o…
• BThe advice is given in an informal, social setting where no fees are charged
• CThe advice is printed in a general newspaper column with a broad public disclaimer
• DThe adviser is unlicensed and does not possess professional qualifications

What is the standard limitation period under the Limitation Act 1953 (Malaysia) for initiating a civil action founded on a breach of contract or an action in tort?

• AWithin 2 years from the date the cause of action accrued
• BWithin 6 years from the date the cause of action accrued
• CWithin 12 years from the date the cause of action accrued
• DThere is no limitation period for civil actions in Malaysia

Which of the following describes the doctrine of vicarious liability as applied to capital market intermediaries?

• AAn adviser is personally liable for the financial losses of their client if the stock mar…
• BAn employer (CMSL holder) is liable for the tortious and wrongful acts committed by its e…
• CDirectors are personally liable for the debts of the corporation under all circumstances
• DMinority shareholders are liable for the regulatory breaches of the majority shareholders

To determine the standard of care expected of a professional corporate finance adviser in a negligence lawsuit, Malaysian courts will apply which legal test?

• AThe standard of an ordinary reasonable person on the street
• BThe standard of a reasonably competent professional exercising that specific skill or cal…
• CThe standard of the most successful and experienced firm in the market
• DThe standard defined by the client's subjective expectations

Under Section 248 of the Capital Markets and Services Act 2007 (CMSA), who may be held civilly liable to pay compensation to investors who suffer loss by subscribing to securities in reliance on a prospectus containing a material misstatement?

• AOnly the chief executive officer of the Securities Commission
• BThe issuer, its directors, and key professionals (like principal advisers and auditors) w…
• CThe exchange (Bursa Malaysia) that approved the listing of the securities
• DOnly the printer of the physical prospectus documents

Under the Contracts Act 1950, what is the effect of an agreement where the consideration or the object of the agreement is forbidden by law?

• AThe agreement is void
• BThe agreement is valid but unenforceable
• CThe agreement is voidable at the option of the proposer
• DThe agreement remains fully valid and binding on both parties

A professional financial adviser publishes a report containing material errors which leads a client to suffer financial loss. The adviser argues they are not liable because of a general exclusion clause in the contract. Under Malaysian law, how do courts assess such disclaimer clauses?

• AGeneral disclaimer clauses are automatically void in all financial contracts under the Co…
• BThe exclusion clause must be clear, unambiguous, and is construed strictly against the pa…
• CDisclaimers are always fully effective to shield professionals from fraud and gross negli…
• DExclusion clauses are only valid if approved in writing by the Securities Commission

Which of the following is a fiduciary duty owed by a corporate finance adviser to their client?

• AA duty to guarantee the target company will meet its revenue projections
• BA duty to avoid conflicts of interest and not make secret profits from the relationship
• CA duty to underwrite the entire equity offering if market demand is low
• DA duty to share half of all transaction fees with the client's internal auditors

Under the law of contract, what is the effect of a contract entered into by a person who is under the age of majority in Malaysia?

• AThe contract is voidable at the option of the adult party
• BThe contract is generally void (subject to exceptions such as contracts for necessaries)
• CThe contract is fully valid and binding as if they were an adult
• DThe contract is deferred until the minor reaches the age of 21

If a corporate finance advisor fails to perform their duties with reasonable care and skill under their engagement letter, the client's claim for breach of contract would seek which primary legal remedy?

• ACompensatory damages to put the client in the position they would have been in had the co…
• BAn order of specific performance to force the adviser to continue advising for free
• CCriminal prosecution and imprisonment of the advisory team
• DA public apology published in the Government Gazette

In tort law, what is meant by 'causation' in a negligence claim against a financial adviser?

• AThe adviser was the primary cause of the market downturn
• BThe client would have suffered the loss anyway, regardless of the adviser's conduct
• CThe client's financial loss was directly caused by the adviser's breach of duty (the 'but…
• DThe adviser had a bad motive or intended to harm the client

Under the Guidelines on Conduct for Capital Market Intermediaries, when a licensed adviser is faced with a conflict of interest, the adviser must prioritize:

• AThe interest of the client over the interest of the adviser or their firm
• BThe profitability of their own advisory firm
• CThe interest of the transaction's lead underwriter
• DThe interest of the exchange (Bursa Malaysia)

Which of the following practices is specifically prohibited under the licensing and conduct guidelines for investment advisers in Malaysia?

• AProviding research reports that contain both buy and sell ratings
• BGuaranteeing a client a specific rate of return or promising to bear any losses
• CCharging a fixed percentage fee for assets under management
• DDiscussing historical performance figures of a public fund

Before recommending a capital market product to a retail client, a licensed representative must conduct a suitability assessment. This assessment must evaluate the client's:

• AInvestment objectives, financial situation, and risk tolerance
• BPolitical affiliations and community standing
• CWillingness to refer family and friends to the firm
• DLevel of satisfaction with competitor advisory firms

What is the term used to describe the unethical practice where an adviser executes excessive buy and sell transactions on a client's account primarily to generate commissions for the firm?

• AFront-running
• BChurning
• CScalping
• DInsider dealing

Under the Guidelines on Conduct for Capital Market Intermediaries, proprietary trades (trades made by the firm or its representatives for their own account) must be:

• AExecuted before client orders to test market liquidity
• BDeferred to ensure that all pending client orders in the same security are executed first
• CExecuted at the same price as the client's orders under all circumstances
• DHidden from the compliance department to prevent conflicts of interest

Under the CMSA, if a representative has material, non-public information regarding a public listed company, they are prohibited from:

• ATrading in the company's shares or procuring another person to trade in those shares
• BAnswering general questions about the company's historical financial statements
• CAttending the annual general meeting of the company
• DConducting public research based on publicly available annual reports

Under Section 188 of the CMSA, which of the following elements is NOT required to establish an offence of insider trading?

• AThe person possesses information that is not generally available
• BThe information, if generally available, would be expected to have a material effect on t…
• CThe person made a personal profit from the trade
• DThe person knows or ought reasonably to know that the information is not generally availa…

Under the CMSA, what is the statutory defence available to a corporation against an insider trading charge if a representative of the corporation executed a trade while in possession of inside information?

• AThe corporation had established and maintained effective Chinese Walls (information barri…
• BThe trade was approved by the internal audit committee after execution
• CThe corporation lost money on the trade
• DThe representative was acting without the knowledge of the board of directors

Section 175 of the CMSA prohibits false trading and market rigging. Which of the following activities constitutes this offence?

• AExecuting buy and sell orders that do not involve any change in beneficial ownership of t…
• BBuying shares during a market dip and holding them for long-term investment
• CSelling shares to fund a real estate transaction
• DPlacing a limit order that is executed at the market price

Under Section 176 of the CMSA, stock market manipulation occurs when a person carries out transactions that:

• AAre executed during the first 15 minutes of the exchange opening
• BHave the effect of raising, lowering, or pegging the price of a security to induce others…
• CAre reported immediately to the Securities Commission
• DAre conducted solely by foreign institutional investors

What constitutes the offence of making false or misleading statements under Section 177 of the CMSA?

• APublishing a statement that is false or misleading in a material particular, which is lik…
• BExpressing an honest, subjective opinion on a stock that subsequently loses value
• CQuoting a correct financial figure from an official audited annual report
• DCorrecting a typographical error in a previously released press release

Under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA), licensed capital market intermediaries are classified as:

• ARegulatory authorities
• BReporting institutions
• CExempt corporations
• DInvestigation units