Free SIDC SCLE Module 6 Practice Exam

SIDC is the Securities Industry Development Corporation. SCLE Module 6 is Stock Market and Securities Law for Malaysia’s dealing-in-securities route and related roles.

This free full-length SIDC SCLE Module 6 practice exam includes 60 original Finance Prep questions across the 12 official syllabus topics.

These are original Finance Prep practice questions aligned to the exam outline. They are not official SIDC SCLE questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with mixed sets, topic drills, and timed mock exams in Finance Prep.

Practice count note: SIDC currently publishes Module 6 as 60 multiple-choice questions in 90 minutes, with a 60% pass mark. Confirm current permitted-reference, candidate, and exam-day rules directly with SIDC before booking.

Practice questions

Questions 1-25

Question 1

Topic: Relationship Between Stockbroking Company and Client

Meranti Securities Sdn Bhd is a Participating Organisation. A CMSRL holder acting as its dealer’s representative receives Nadia’s recorded instruction to buy 10,000 shares only at RM2.00 or below.

• The representative instead enters an on-market order that is executed at an average price of RM2.12.
• Nadia gave no discretionary trading authority.
• Meranti’s internal review confirms that the representative deliberately disregarded the price limit.
• Meranti’s standard client agreement purports to exclude liability for failure to follow client instructions.

Nadia disputes the resulting debit. Which response by Meranti best applies the governing requirements?

• A. Treat the market execution as conclusive client authority, preserve the order records, enforce the resulting debit, and rely on the exclusion to reject responsibility.
• B. Separate the market execution from the client mandate, preserve the order records, assess remediation, and decline to use the exclusion against mandatory duties.
• C. Treat the market execution as automatically void, preserve the order records, reverse the resulting debit, and require Bursa Malaysia to cancel the transaction.
• D. Transfer the mandate dispute to Bursa Malaysia, preserve the order records, defer internal remediation, and accept the market operator’s determination.

Best answer: B

What this tests: Relationship Between Stockbroking Company and Client

Explanation: The on-market transaction and the broker-client mandate are distinct legal relationships. Execution through Bursa Malaysia’s trading system does not retrospectively enlarge a representative’s authority. The recorded price limit and absence of discretionary authority establish that the representative acted outside Nadia’s mandate. Meranti remains responsible for handling the complaint, preserving relevant records, assessing appropriate remediation, and complying with applicable conduct requirements. A standard contractual exclusion cannot displace mandatory statutory, regulatory, Bursa, or conduct duties. However, breach of the client mandate does not automatically void the exchange transaction or empower Meranti to require Bursa Malaysia to cancel it. Any contractual or tortious claim for damages would also depend on causation and proven loss.

• Market execution does not prove that the client authorised a different price, and the exclusion cannot conclusively remove the firm’s responsibility.
• Exceeding the client mandate does not automatically invalidate the separate exchange transaction or require Bursa Malaysia to cancel it.
• Bursa Malaysia’s market-operation role does not transfer the firm’s responsibility for resolving its own client mandate dispute.

The representative exceeded Nadia’s actual authority, and the completed market execution does not permit Meranti to avoid its client duties through an exclusion clause.

Question 2

Topic: Regulation of the Securities Industry

Meranti Securities Sdn Bhd holds a Capital Markets Services Licence (CMSL) only for dealing in securities and is a Bursa Malaysia Participating Organisation. It proposes to introduce a separate service providing tailored recommendations on specific capital market products.

The firm’s Participating Organisation status and trading access will remain unchanged, and no suspected offence or market disruption is involved. What is the required regulatory response before the firm begins the new service?

• A. Submit an application to the SC to vary the firm’s CMSL.
• B. Submit a coordinated application to the SC and Bursa Malaysia for approval.
• C. Obtain internal board approval as authority for the expanded regulated activity.
• D. Submit an application to Bursa Malaysia to vary the firm’s participant status.

Best answer: A

What this tests: Regulation of the Securities Industry

Explanation: Providing tailored recommendations on specific capital market products may constitute the regulated activity of investment advice. Because Meranti Securities is licensed only for dealing in securities, it must obtain the necessary CMSL variation from the Securities Commission Malaysia before introducing the additional regulated activity. Bursa Malaysia oversees exchange participation, trading access, market operations, and compliance with its participant rules, but it does not grant or vary a CMSL. Internal governance approval may support the firm’s decision and readiness, but it cannot expand the statutory scope of its licence. Coordinated regulatory action is unnecessary because the facts do not involve a change to exchange participation, a market disruption, or suspected misconduct engaging another authority.

• Bursa Malaysia participant approval does not vary the scope of a licence issued under the CMSA.
• Board approval cannot authorise an activity outside the firm’s existing licensed scope.
• Joint approval is unsupported because the proposed change does not affect Bursa Malaysia participation or trading access.

The SC controls CMSL variations, and the proposed investment-advice service falls outside the firm’s existing licensed scope.

Question 3

Topic: Law of Contract

Nusantara Securities, a Participating Organisation acting as principal in a proposed Direct Business Transaction, offers to sell 50,000 listed shares to a corporate client at RM1.80 per share. The written offer specifies settlement on Day 3 and expires at noon.

At 11:00 a.m., the client replies:

We accept, provided settlement is changed to Day 5.

The firm does not respond before noon, and no transaction is entered or reported. At 12:15 p.m., the client demands a contract note using Day 5 settlement.

Both parties have capacity and authority, intend legal relations, and provide free consent. The securities, quantity, price, and consideration are certain, the transaction is lawful, and either settlement date is permitted under the applicable Bursa requirements.

What is the BEST response by the Head of Operations?

• A. Issue the contract note using the Day 5 settlement date stated in the client’s reply.
• B. Withhold the contract note until the client pays the full purchase consideration.
• C. Withhold the contract note and secure express, unqualified agreement on one settlement date.
• D. Issue the contract note using the Day 3 settlement date stated in the firm’s offer.

Best answer: C

What this tests: Law of Contract

Explanation: Under the Contracts Act 1950, acceptance must correspond to the offer and be absolute and unqualified. The settlement date was an express transaction term. By accepting only on condition that Day 3 be changed to Day 5, the client made a counteroffer rather than accepting the firm’s original offer. The firm did not accept that counteroffer, and its original offer expired at noon. Consequently, there was no consensus on the settlement date and no concluded contract at 12:15 p.m., even though capacity, consideration, intention, consent, certainty of the other terms, and legality were present. The firm should establish unqualified agreement on all terms before entering the transaction or issuing a contract note.

• Day 3 cannot be used because the client did not accept the original offer without qualification.
• Day 5 cannot be used because the firm did not accept the client’s counteroffer.
• Later payment would not revive the expired offer or resolve the absence of agreement on settlement.

Changing the settlement date made the client’s reply a counteroffer, which the firm had not accepted.

Question 4

Topic: Capital Raising on the Primary Market

Seri Bina Berhad, a Main Market listed issuer, proposes to acquire a factory from Murni Sdn Bhd for its existing manufacturing operations.

Transaction facts:

• The highest applicable percentage ratio is 7.5%.
• Murni is controlled by the spouse of a Seri Bina director.
• The acquisition will not change Seri Bina’s controlling shareholder or business direction.
• No exemption for a recurrent or ordinary-course transaction applies.

Under the applicable Main Market framework, an ordinary acquisition requires shareholder approval at 25%, a very substantial transaction requires a ratio of at least 100%, and a related party transaction at 5% or more requires an announcement, independent advice, a circular, shareholder approval, and abstention by interested parties.

What should Seri Bina’s compliance officer recommend as the best next action?

• A. Classify it as a significant change in business; announce it, appoint a principal adviser, submit the proposal, and seek shareholder approval before completion.
• B. Classify it as a related party transaction; announce it, appoint an independent adviser, issue a circular, and seek non-interested shareholder approval.
• C. Classify it as a very substantial transaction; announce it, appoint a principal adviser, issue a circular, and seek shareholder approval before completion.
• D. Classify it as an ordinary acquisition; announce it, appoint a transaction adviser, issue a circular, and seek approval from all voting shareholders.

Best answer: B

What this tests: Capital Raising on the Primary Market

Explanation: An acquisition can also be a related party transaction when the counterparty is connected to a director. Here, the vendor is controlled by the director’s spouse, so the related party transaction framework governs the proposal. The highest percentage ratio of 7.5% exceeds the stated 5% threshold, requiring an announcement, an independent adviser, a circular and shareholder approval, with interested parties abstaining. The transaction is below the 25% ordinary acquisition approval threshold and far below the 100% threshold for a very substantial transaction. Acquiring a factory for the issuer’s existing operations, without changing its controlling shareholder or business direction, does not constitute a significant change in business.

• Ordinary acquisition treatment disregards the director’s connection to the vendor and would permit interested shareholders to participate improperly.
• Very substantial transaction treatment is unsupported because the highest percentage ratio is only 7.5%.
• Significant change treatment is unsupported because the acquisition continues the existing business and causes no change in control.

The vendor is connected to a director through the director’s spouse, and the 7.5% ratio triggers the stated related party transaction requirements.

Question 5

Topic: Take-Overs and Mergers

Under the applicable Malaysian take-over rules:

• A mandatory offer obligation arises when an offeror and persons acting in concert acquire voting shares that increase their collective holding to more than 33%.
• The separate six-month rule applies when their collective holding is already more than 33% but not more than 50%.
• Acquisitions by persons acting in concert are aggregated.

Meridian Capital Sdn Bhd holds 30% of Vista Berhad’s voting shares. Meridian’s chief executive, who is acting in concert with Meridian, holds 2%. The chief executive then acquires another 2% through an on-market purchase, increasing their collective holding from 32% to 34%. No exemption or waiver applies.

What is the best next action for Meridian’s Head of Compliance?

• A. Treat the collective holding as 34% and initiate the mandatory-offer process.
• B. Treat the collective increase as 2% and monitor the six-month acquisition rule.
• C. Treat the collective holding as 34% and initiate a voluntary-offer process.
• D. Treat Meridian’s holding as 30% and record the acquisition as non-triggering.

Best answer: A

What this tests: Take-Overs and Mergers

Explanation: Voting rights held or acquired by an offeror and persons acting in concert are considered collectively when determining whether a mandatory offer obligation has arisen. Before the purchase, Meridian and its chief executive collectively held 32%. The chief executive’s additional 2% acquisition increased the collective holding to 34%, crossing the threshold of more than 33%.

The six-month acquisition rule does not determine the result because the group was not already above 33% before the transaction. The initial threshold-crossing rule applies instead. As no exemption or waiver applies, the compliance response should recognise the mandatory offer obligation and initiate the required process. Characterising the resulting offer as voluntary would not change the legal effect of the threshold-crossing acquisition.

• Looking only at Meridian’s direct holding incorrectly excludes voting rights held by its concert party.
• Applying the six-month rule overlooks that the group crossed the initial 33% threshold.
• Calling the resulting process voluntary does not satisfy the mandatory obligation created by the acquisition.

The concert party’s acquisition increased the aggregated holding above the 33% mandatory-offer threshold.

Question 6

Topic: Trading on the Secondary Market

A Head of Operations at a Participating Organisation reviews a request involving a dormant cash account.

Account controls:

• The account becomes dormant after 12 months without activity and requires an independent identity and contact-details check before reactivation.
• Only the client or a verified, formally recorded authorised person may place orders.
• Each authorised online user must receive separate access credentials.

Current request:

• The account has been inactive for 18 months but contains sufficient settled cash.
• The client emails from his registered address asking to reactivate the account and permit his sister to use his login for one purchase.
• The sister is not recorded as an authorised person and is waiting to place the order.

What is the best next action?

• A. Reactivate only after verifying both persons, recording the authority, and issuing the sister separate access before execution.
• B. Reactivate after verifying the sister, treat the registered email as client verification, and let her use the client’s login.
• C. Open the sister’s account after verification, transfer the client’s cash, and execute the requested order in her account.
• D. Reactivate after verifying the client, accept the sister’s telephone order, and formalise her authority after execution.

Best answer: A

What this tests: Trading on the Secondary Market

Explanation: Dormant-account reactivation and order authority must be established before trading resumes. The registered email provides evidence of a request, but the stated control requires an independent identity and contact-details check. Because the sister would originate the order, she must also be verified and formally recorded as an authorised person before execution. She should receive separate credentials so the Participating Organisation can identify the actual user and maintain reliable order records. Sufficient settled cash addresses funding but does not cure deficiencies in reactivation, authority, or online-access controls. Transferring the client’s money to another person’s account would also change ownership and require authority that is not present.

• Formalising authority after execution leaves the sister unauthorised when the order is placed.
• Verifying only the sister does not complete the client’s reactivation check, and shared credentials prevent reliable user identification.
• Opening another account does not authorise the transfer of the client’s cash or execution for a different account holder.

The reactivation, authority, and separate-access controls must be completed before the sister may place an order.

Question 7

Topic: Business Structures

A Participating Organisation identifies repeated failures across several branches to explain material client-contract terms. Compliance detected and escalated the issue, operations can revise onboarding processes, and supervisors can coach representatives.

Who has primary accountability for ensuring that organisation-wide conduct culture, governance, oversight, systems, and accountability are effective?

• A. The compliance function, through monitoring, regulatory advice, breach escalation, and control testing.
• B. Dealing-line supervisors, through representative coaching, instruction review, trade supervision, and escalation.
• C. Operations management, through workflow design, document processing, reconciliation, and exception handling.
• D. The board and senior management, through enterprise conduct governance and accountable oversight.

Best answer: D

What this tests: Business Structures

Explanation: The board and senior management retain overall accountability for promoting the required conduct culture and ensuring effective governance, oversight, systems, and individual accountability. They may assign implementation tasks, but delegation does not transfer their organisation-wide responsibility.

Compliance monitors adherence, advises the business, tests controls, and escalates identified breaches. Operations implements procedures and supporting systems, while dealing-line supervisors oversee representatives and day-to-day activities. Representatives also remain responsible for their own conduct. Therefore, detecting the problem, correcting workflows, or coaching staff are supporting responsibilities rather than substitutes for board and senior-management accountability.

• Compliance supports oversight and escalation but does not assume the governing body’s overall accountability.
• Operations implements processes and controls but does not own organisation-wide conduct governance.
• Dealing-line supervisors manage daily representative conduct but do not establish enterprise governance foundations.

The board and senior management are responsible for establishing and overseeing the Participating Organisation’s conduct culture, governance, systems, and accountability.

Question 8

Topic: Trading on the Secondary Market

A Participating Organisation (PO) provides Direct Market Access for Equities (DMAE) to eligible clients. Following a software release, its technology vendor accidentally disables the automated order-size filter, although the trade-exposure and price-limit filters remain active. Several unusually large orders reach Bursa Malaysia’s Automated Trading System before the PO detects the failure. There is no evidence of unauthorised client instructions or market manipulation.

Which supervisory response should the PO take?

• A. Keep DMAE access active, conduct post-trade reviews, restore the size filter during the next release, and assess escalation.
• B. Require the technology vendor to pause DMAE access, certify restored filters, and determine the required escalation.
• C. Close affected client accounts, classify the executed orders as unauthorised, restore the size filter, and report manipulation.
• D. Pause affected DMAE access, investigate the failure, validate restored pre-trade filters, and assess required escalation.

Best answer: D

What this tests: Trading on the Secondary Market

Explanation: A PO remains accountable for orders submitted through its DMAE arrangements, even when a technology vendor operates or maintains the supporting system. Appropriate automated pre-trade filters must operate before orders enter Bursa Malaysia’s Automated Trading System. The required controls include trade-exposure, order-size, and price-limit filters, so the loss of one filter requires prompt containment and remediation. The PO should pause the affected access, investigate the failure and resulting orders, validate the restored control, and assess whether internal or external escalation is required. Vendor involvement does not transfer supervisory responsibility. The facts also do not support treating valid client instructions as unauthorised or alleging market manipulation merely because the orders were unusually large.

• Assigning the escalation decision to the vendor improperly transfers the PO’s supervisory accountability.
• Relying on post-trade review leaves DMAE operating without a required pre-trade control.
• Closing accounts and reporting manipulation are unsupported because no unauthorised instructions or manipulative conduct were identified.

The PO remains responsible for DMAE supervision and must restore effective pre-trade controls while investigating and escalating the failure appropriately.

Question 9

Topic: Trading on the Secondary Market

A Participating Organisation reviews this order before execution:

• Client position: No current holding in the security
• Security status: Approved for IDSS and not suspended
• Order: Sell 20,000 shares, coded IDSS
• Market: Normal Market
• Client’s plan: Buy back the shares on-market that day
• Securities-borrowing arrangement: None
• Order status: Held at the gateway

What is the required operational response?

• A. Release the IDSS order and arrange borrowing only if the same-day close-out fails.
• B. Keep the IDSS order on hold until the required securities-borrowing arrangement is established.
• C. Recode the order as an ordinary sale and rely on the client’s planned buyback.
• D. Convert the order to RSS and execute it before obtaining confirmation of borrowing.

Best answer: B

What this tests: Trading on the Secondary Market

Explanation: The order satisfies several IDSS conditions: it concerns an Approved Security, is coded as IDSS, and is intended for execution in the Normal Market with an on-market buyback on the same market day. However, the client’s plan to close the position does not remove the required securities-borrowing control. The arrangement protects against failed delivery if the client cannot complete the same-day buyback. Because no arrangement exists and the client holds no shares, the Participating Organisation should prevent execution until the requirement is met. The Participating Organisation remains responsible for applying the relevant controls before allowing the order into the market.

• Delaying borrowing until close-out fails removes the required protection against failed delivery.
• Reclassification as RSS does not cure the defect because RSS also requires borrowing or confirmed ability to borrow before sale.
• An ordinary sale is inappropriate because the client has no existing holding available for delivery.

IDSS requires the borrowing arrangement as protection against a failed same-day close-out.

Question 10

Topic: Clearing, Delivery, Settlement and Corporate Actions

A client buys Bursa Malaysia-listed shares through a Participating Organisation on Monday, 8 June. The order is executed and the contract note is issued that day.

• The transaction follows the standard T+2 settlement cycle.
• Tuesday, Wednesday, and Thursday are market days with no public holidays.
• The client agreements require the buyer’s payment and the seller’s securities delivery by the applicable settlement date.

Which statement correctly distinguishes the trade date, settlement date, and client obligations?

• A. Monday is the trade date; Wednesday is the settlement date, with payment and delivery due Wednesday.
• B. Monday is both the trade date and settlement date, with payment and delivery due Monday.
• C. Monday is the trade date; Thursday is the settlement date, with payment and delivery due Thursday.
• D. Monday is the trade date; Tuesday is the settlement date, with payment and delivery due Tuesday.

Best answer: A

What this tests: Clearing, Delivery, Settlement and Corporate Actions

Explanation: Under the T+2 settlement cycle, T is the market day on which the trade is executed. The two succeeding market days are T+1 on Tuesday and T+2 on Wednesday. The transaction is therefore traded on Monday and settled on Wednesday. Trade execution establishes the transaction, while settlement completes the exchange of the buyer’s payment for the seller’s securities. Because the client agreements require payment and delivery by the applicable settlement date, both obligations are due on Wednesday. Public holidays and non-market days would affect the count, but none occur in the stated period.

• Treating Monday as the settlement date incorrectly applies same-day, or T+0, settlement.
• Treating Tuesday as the settlement date applies T+1 rather than T+2.
• Treating Thursday as the settlement date applies T+3 rather than T+2.

Wednesday is T+2, when the buyer’s payment and the seller’s securities delivery become due under the stated agreements.

Question 11

Topic: Negligent Misstatement

A CMSRL holder at Meranti Securities agreed to verify whether a listed issuer had obtained a required regulatory approval. She negligently confirmed that approval had been obtained. Her client read the confirmation and purchased the shares specifically because of it.

Findings and losses:

• The court finds that the client’s reliance on the personalised confirmation was actual and reasonable.
• Before purchasing, the client failed to open a relevant Bursa announcement. The court assesses this contributory conduct at 25%.
• RM80,000 of the share-price loss was caused by the issuer’s correction and was reasonably foreseeable.
• RM20,000 was caused solely by a general market decline.
• A separate RM30,000 loss involving an unrelated property deposit was too remote.

What amount of damages is recoverable for the negligent misstatement?

• A. RM80,000 after causation and remoteness are applied without a contributory reduction.
• B. RM75,000 after both share-price components and the 25% contributory reduction are applied.
• C. RM60,000 after causation, remoteness, and the 25% contributory reduction are applied.
• D. RM0 because the unread Bursa announcement prevents legally reasonable reliance on the representative.

Best answer: C

What this tests: Negligent Misstatement

Explanation: Actual reliance exists because the client read the personalised confirmation and purchased the shares because of it. The court also finds that this reliance was reasonable, so the claim is not defeated by the unread announcement. Causation limits the starting loss to RM80,000 because the general market decline would have occurred independently. The unrelated property loss is excluded as too remote. The client’s failure to open the Bursa announcement is instead addressed through contributory conduct. Applying the 25% reduction to RM80,000 leaves RM60,000 recoverable.

• RM80,000 fails to apply the assessed reduction for contributory conduct.
• RM75,000 incorrectly includes the RM20,000 market-wide loss that was not caused by the misstatement.
• Nil recovery conflicts with the finding that the client’s reliance was actual and reasonable.

The recoverable RM80,000 loss is reduced by 25%, resulting in damages of RM60,000.

Question 12

Topic: Capital Raising on the Primary Market

Meranti Bhd is preparing an initial issue of ordinary shares and admission to Bursa Malaysia’s Main Market. Its directors accept responsibility for the accuracy and completeness of the issue disclosures.

Specialists will separately handle legal due diligence, financial reporting, valuation, underwriting, and placement. The company still needs a party to lead the proposal, coordinate the specialists, and manage regulatory submissions and liaison.

What is the BEST next action?

• A. Appoint a Sponsor to coordinate the proposal and regulatory submissions.
• B. Appoint a principal adviser to coordinate the proposal and regulatory submissions.
• C. Appoint an underwriter to coordinate the proposal and regulatory submissions.
• D. Appoint a placement agent to coordinate the proposal and regulatory submissions.

Best answer: B

What this tests: Capital Raising on the Primary Market

Explanation: For a Main Market initial equity issue, the principal adviser advises on the proposal, coordinates the work of the issuer and specialist advisers, and manages the relevant applications, submissions, and regulatory liaison. This coordination does not transfer responsibility for the disclosures away from the issuer and its directors.

A Sponsor performs the corresponding admission and sponsorship functions within the ACE Market framework. An underwriter undertakes agreed subscription risk if securities are not fully taken up, while a placement agent distributes securities to identified investors. Legal advisers, reporting accountants, and valuers remain responsible for their respective specialist workstreams rather than the overall coordination of the issue.

• A Sponsor is associated with ACE Market admission and continuing sponsorship, whereas the proposed admission is to the Main Market.
• An underwriter manages agreed subscription risk rather than leading the overall regulatory process.
• A placement agent sources investors and places securities rather than coordinating the proposal and submissions.

A principal adviser leads and coordinates a Main Market equity proposal and its regulatory submission process.

Question 13

Topic: Overview of the Malaysian Stock Market

Mutiara Securities holds a CMSL restricted to dealing in listed securities and plans to commence digital-asset broking immediately under Practice Note 1/2026.

• The token is a prescribed security under the applicable Prescription Order, and the SC has concurred with its offering.
• Mutiara will source it through an SC-registered recognised-market operator operating a digital asset exchange.
• Trading will be cash-upfront, with no margin financing, lending, or discretionary authority.
• All required prior-notification steps are complete, and an AOB-registered auditor has validated the readiness declaration.
• Mutiara has applied to use an eligible regulated foreign custodian instead of an SC-registered digital asset custodian, but the SC has not decided the application.

Which course of action complies with the custody requirements while allowing Mutiara to commence immediately?

• A. Appoint the eligible foreign custodian for launch after filing the variation application, and continue while the SC’s decision remains pending.
• B. Appoint the eligible foreign custodian for launch after auditor validation of readiness, and treat that validation as sufficient custody approval.
• C. Appoint the eligible foreign custodian for launch after asset concurrence, and treat that concurrence as sufficient custody approval.
• D. Appoint an SC-registered digital asset custodian for launch, and use the eligible foreign custodian only after receiving the SC’s written approval.

Best answer: D

What this tests: Overview of the Malaysian Stock Market

Explanation: Practice Note 1/2026 permits a CMSL holder restricted to dealing in listed securities to offer digital-asset broking when the prescribed-security, SC concurrence, sourcing, prior-notification, readiness, and cash-upfront conditions are met. These conditions do not remove the separate custody requirement. Client digital assets must be held through an SC-registered digital asset custodian unless the SC gives the required written approval for an eligible foreign custodian arrangement. An application for an exemption or variation has no legal effect until the SC grants it. Auditor validation confirms readiness but does not exercise the SC’s approval power. Mutiara may therefore commence immediately using an SC-registered custodian and adopt the foreign arrangement only after obtaining written approval.

• Filing a variation application does not create a temporary or deemed variation while the decision is pending.
• Auditor validation addresses operational readiness, not regulatory approval of a foreign custody arrangement.
• SC concurrence with a digital asset permits its inclusion in the service but does not approve the chosen custodian.

The pending application does not vary the custody requirement, so immediate commencement requires an SC-registered digital asset custodian.

Question 14

Topic: Trading on the Secondary Market

A CMSRL holder employed as a dealer’s representative at a Participating Organisation reviews a corporate client’s account.

Account findings:

• The client declared that it invests operating surpluses and identified Ms Lim as its 75% beneficial owner.
• Several companies linked to an undeclared individual repeatedly fund the account.
• The funds are used for rapid trades inconsistent with the client’s stated profile, followed by payments to third parties.
• The client refuses to provide updated ownership information and asks the representative not to involve Compliance.
• Screening shows no confirmed targeted financial sanctions match or legal freeze direction.

Which action should the dealer’s representative take now?

• A. Escalate promptly to the firm’s AML compliance function, maintain confidentiality, preserve all relevant records, and assist internally with enhanced review and reporting assessment.
• B. Escalate promptly to Bursa Malaysia’s market surveillance function, maintain confidentiality, preserve all relevant records, and await its reporting decision before internal review.
• C. Escalate promptly to the firm’s AML compliance function, tell the client that suspicious reporting is under consideration, preserve relevant records, and assist with enhanced review.
• D. Conduct additional client questioning before any internal escalation, maintain confidentiality, preserve all relevant records, and report only after obtaining conclusive proof of illegality.

Best answer: A

What this tests: Trading on the Secondary Market

Explanation: The third-party funding, activity inconsistent with the client profile, payments to unrelated parties, beneficial-ownership uncertainty, and refusal to provide information are significant AML risk indicators. The representative should promptly use the firm’s internal escalation process so that the reporting institution can conduct enhanced customer due diligence, verify beneficial ownership and source of funds, review transactions, and assess whether reporting is required. Conclusive proof of criminal conduct is not required before escalation. Relevant records must be retained, and the concern or possible reporting must not be disclosed to the client because that could constitute tipping off. The absence of a confirmed sanctions match does not remove the need for risk-based AML action, although it does not itself require sanctions-related freezing.

• Bursa market surveillance does not replace the reporting institution’s internal AML review and reporting responsibilities.
• Further enquiries may support enhanced due diligence, but internal escalation must not wait for conclusive proof of illegality.
• Informing the client that suspicious reporting is being considered breaches confidentiality and creates tipping-off risk.

The indicators require prompt internal escalation, enhanced review, proper records, and confidential consideration of the reporting institution’s reporting duty.

Question 15

Topic: Securities Offences

Meranti Berhad proposes a Bursa Malaysia announcement forecasting revenue of RM120 million for the next financial year, stating that the forecast is supported by existing firm customer orders. The announcement may influence investors’ trading decisions.

Before approving the announcement, the chief executive officer is informed that a customer has validly cancelled an order representing RM50 million of the forecast. There is no replacement order, but the announcement is released unchanged.

Which assessment best applies when the announcement is issued?

• A. A misleading disclosure only if actual revenue later falls below RM120 million
• B. An accurate disclosure because the pre-cancellation order figures were mathematically correct
• C. A materially misleading and incomplete disclosure when the announcement is issued
• D. A non-misleading forecast because forward-looking estimates may differ from eventual results

Best answer: C

What this tests: Securities Offences

Explanation: A disclosure is assessed by the overall impression it creates when issued, not merely by whether individual figures were once accurate. The RM50 million cancellation substantially undermines the stated basis for the RM120 million forecast. Because management knew of the cancellation and had no replacement order, omitting it left investors with a materially inaccurate understanding of the forecast’s support. A forecast is not misleading merely because actual results later differ, but it may be misleading when known material facts make its disclosed basis false or materially incomplete. The chief executive officer should not release the forecast unchanged.

• Forecast uncertainty does not excuse omission of a known fact that substantially changes the forecast’s basis.
• Historical mathematical accuracy does not make an announcement accurate after a material order has been cancelled.
• Misleading character is assessed when the disclosure is made, not only after actual results become known.

The known cancellation removed a material part of the forecast’s stated basis, so omitting it distorted the announcement when issued.

Question 16

Topic: Licensing

A Malaysian stockbroking company holds a CMSL for dealing in securities but not for investment advice. Its marketing employee, who holds no CMSRL, publishes paid social-media posts that:

• recommend buying named listed shares before upcoming results;
• include referral links that generate commissions; and
• carry an “educational content only” disclaimer.

The Head of Compliance concludes that the posts are intended or likely to induce investors to trade. What is the best corrective action?

• A. Keep the communications available, add a prominent educational disclaimer, escalate the matter, and permit further posts if they are addressed to the public generally.
• B. Suspend and remove the communications, preserve the records, escalate the matter, and permit resumption only through a principal and representative holding the required investment-advice authority.
• C. Suspend and remove the communications, preserve the records, obtain retrospective approval from a CMSRL licensed for dealing in securities, and resume publication under that representative’s supervision.
• D. Remove the referral links, retain the named recommendations with clearer risk warnings, notify compliance, and permit the employee to continue without receiving commissions.

Best answer: B

What this tests: Licensing

Explanation: A communication is classified by its substance and context, not its label or delivery channel. Recommending purchases of named shares before a specified event, combined with referral commissions, indicates an intention or likelihood to induce trading. A public audience and an educational disclaimer do not prevent the posts from constituting investment advice. Because the company lacks the relevant CMSL authority and the employee lacks the required CMSRL authority, the activity should be stopped and the existing material removed. Records should be preserved and the matter escalated for investigation and remediation. Publication may resume only through a properly licensed principal and appropriately licensed and authorised representative, subject to applicable conduct controls.

• A stronger disclaimer and public distribution do not change the substantive inducement to trade.
• Retrospective approval by a dealing-only representative does not cure the missing investment-advice authority.
• Removing commissions does not reclassify continuing named buy recommendations as factual information.

The communications constitute investment advice and may resume only under the required CMSL and CMSRL authority after appropriate escalation and remediation.

Question 17

Topic: Trading on the Secondary Market

Meridian Securities Sdn Bhd, a Participating Organisation, provides DMAE access to an eligible institutional client under a written agreement. The client submits an on-market buy order directly, without dealer’s representative intervention. Before transmission into Bursa Malaysia’s Automated Trading System (ATS), the order-size filter flags the order as exceeding the Participating Organisation’s approved parameter.

The client asks Meridian Securities to transmit the order and review it after execution. Which action complies with the DMAE requirements?

• A. Allow the flagged order to enter ATS and review it after execution under the client’s applicable DMAE agreement.
• B. Have a dealer’s representative re-enter the flagged order unchanged and treat manual intervention as satisfying DMAE controls.
• C. Block the flagged order before ATS entry and review it under the Participating Organisation’s approved DMAE control parameters.
• D. Refer the flagged order to Bursa Malaysia for clearance and rely on exchange surveillance before allowing execution.

Best answer: C

What this tests: Trading on the Secondary Market

Explanation: A DMAE order is routed by an eligible client or authorised person without intervention by a dealer’s representative, but it is still treated as an order submitted on the client’s behalf. The Participating Organisation remains responsible for compliance with Bursa requirements. It must apply appropriate automated pre-trade risk filters before the order is executed in the ATS. These controls include trade-exposure, order-size, and price-limit filters, with parameters set and reviewed according to the Participating Organisation’s regulatory risk profile. Because the order exceeded an approved order-size parameter, it should not be transmitted for execution until it has been reviewed and handled under the approved controls. Neither the client agreement nor Bursa’s market surveillance transfers this responsibility away from the Participating Organisation.

• A post-trade review is too late because DMAE risk filters must operate before execution in the ATS.
• Manual re-entry does not cure the flagged risk or replace the required pre-trade control assessment.
• Bursa surveillance does not assume the Participating Organisation’s responsibility for DMAE order controls.

The Participating Organisation remains responsible for applying its order-size filter before a DMAE order enters the ATS.

Question 18

Topic: Relationship Between Stockbroking Company and Client

A corporate client gives its Participating Organisation a revised account mandate that revokes its finance manager’s authority and permits either of two named directors to give trading instructions. The Participating Organisation acknowledges the revision and updates its account records.

The former finance manager later telephones a CMSRL dealer’s representative to place an urgent sell order. He correctly answers the account security questions, but neither authorised director confirms the order, and there is no other evidence of his authority.

What should the dealer’s representative do?

• A. Do not execute, record the attempted instruction, and seek a fresh instruction from a currently authorised director.
• B. Execute the order, record the caller authentication, and send the trade confirmation to a currently authorised director.
• C. Defer execution, record the pending instruction, and seek written confirmation from the former finance manager.
• D. Execute the order, record the urgent circumstances, and seek later ratification from a currently authorised director.

Best answer: A

What this tests: Relationship Between Stockbroking Company and Client

Explanation: A Participating Organisation must administer a client’s account according to the client’s current mandate. Authentication establishes the caller’s identity but does not establish continuing authority to operate the account. Because the revised mandate revoked the finance manager’s authority, his knowledge of the security answers and the urgency of the proposed sale cannot authorise execution. Executing first and seeking ratification later would expose the client to an unauthorised transaction and possible loss. The dealer’s representative should therefore refrain from executing the order, preserve a record of the attempted instruction, and obtain a fresh instruction from a person authorised under the current mandate.

• Caller authentication confirms identity but cannot restore authority revoked by the current mandate.
• Written confirmation from the removed finance manager does not cure his lack of authority.
• Later ratification would expose the account to an unauthorised trade before approval is obtained.

The current mandate does not authorise the former finance manager, so execution requires a fresh instruction from an authorised director.

Question 19

Topic: Trading on the Secondary Market

Mei Lin, Head of Compliance at a CMSL holder, reviews its online share-trading platform.

• The platform recommends particular listed shares using each applicant’s financial circumstances. The firm has confirmed that this is personal advice and that no exclusion or dispensation applies.
• Recommendations can be generated despite missing information about income needs, investment horizon, and capacity for loss.
• Applicants who flag difficulty seeing or understanding the screens receive no assisted process. Three such applicants have accepted the recommendations electronically, although one later said she did not understand the risks.
• The standard contract contains client indemnity and unilateral liquidation terms, but the platform provides only a click-through acknowledgement.
• The control weakness is systemic and has not been reported to the board.

What is Mei Lin’s best next action?

• A. Escalate to the board and senior management, suspend the defective advice journey, reassess affected clients through accessible human review, and remediate suitability and contract-explanation controls before resuming.
• B. Refer the matter to the platform vendor, relabel automated outputs as general information, obtain fresh electronic acknowledgements, and continue processing while the vendor tests improvements.
• C. Report the issue to the board and senior management, keep the journey running, require manual review for self-declared vulnerable clients, and perform monthly sample checks for missing information.
• D. Escalate to senior management, keep the journey running with stronger risk warnings, review only clients who complain, and present complaint trends to the board after remediation.

Best answer: A

What this tests: Trading on the Secondary Market

Explanation: Board and senior management are responsible for governance, oversight, systems, and accountability supporting fair client outcomes. Because the platform tailors recommendations to applicants’ circumstances, it provides personal advice regardless of its automated delivery. The firm must obtain sufficient client information and establish a reasonable basis for suitability before making recommendations. It must also respond to vulnerability through accessible communication and take reasonable steps to explain significant standard-form terms affecting client rights and obligations. Electronic acknowledgements do not replace these duties. The defective journey should not continue producing recommendations while these material weaknesses remain. Affected clients require accessible reassessment, and the systemic failure must be escalated and remediated before the function resumes.

• Stronger warnings and complaint-based reviews leave unsuitable recommendations and vulnerable-client weaknesses operating.
• Relabelling tailored recommendations does not change their substance, and responsibility cannot be transferred to the platform vendor.
• Manual review limited to self-declared vulnerability does not correct missing suitability information or inadequate contract explanations across the journey.

The systemic process provides personal advice without sufficient information or effective vulnerable-client and contract-explanation controls, requiring governance escalation, client reassessment, and control remediation.

Question 20

Topic: Business Structures

Mutiara Tech Berhad, a Main Market listed issuer, proposes a private placement of new ordinary shares.

Approval position:

• Its constitution requires prior approval by ordinary resolution before the directors allot ordinary shares.
• Any authority granted under the resolution expires after 12 months.
• The previous authority was granted 13 months ago.
• No statutory exception applies to the proposed allotment.

What should the directors do before allotting the placement shares?

• A. Approve the placement by board resolution and seek shareholder ratification after the allotment.
• B. Obtain Bursa Malaysia’s listing approval and allot without renewing the shareholder authority.
• C. Renew the expired authority through a directors’ circular resolution before allotting the placement shares.
• D. Obtain a fresh ordinary resolution at a general meeting before allotting the placement shares.

Best answer: D

What this tests: Business Structures

Explanation: Directors must exercise their allotment powers within the company’s constitution and the applicable corporate approval requirements. Mutiara Tech Berhad’s constitution requires prior member approval by ordinary resolution, and the authority lasts only 12 months. Because the earlier authority expired one month ago and no exception applies, the directors cannot rely on it for the proposed placement. As this is a public company, fresh member approval must be obtained at a general meeting before the shares are allotted. A board decision cannot replace approval that the constitution reserves to members. Bursa Malaysia’s listing approval addresses exchange requirements but does not remove the company’s internal approval requirement. Subsequent ratification also fails to satisfy an express requirement for prior approval.

• Post-allotment ratification does not satisfy the requirement that member approval be obtained beforehand.
• Bursa Malaysia’s listing approval does not replace the expired authority granted by the company’s members.
• A directors’ circular resolution cannot renew authority that must be granted by members through an ordinary resolution.

The previous authority has expired, so the directors must obtain fresh member approval before making the allotment.

Question 21

Topic: Business Structures

Meranti Technologies Berhad is an unlisted public company.

• Constitution: The company must not allot ordinary shares that would increase its issued ordinary shares above 10 million unless the constitution is first amended by special resolution.
• Proposal: The company currently has 9.6 million issued ordinary shares, and the board proposes to allot another 600,000.
• Approval: Members validly passed an ordinary resolution authorising the directors to make the proposed allotment. All other statutory requirements are satisfied, and the constitution contains no additional amendment restriction.

What must the company do before making the proposed allotment?

• A. First pass another ordinary resolution waiving the cap, then have the board allot the 600,000 shares.
• B. First approve an override by unanimous board resolution, then have the board allot the 600,000 shares.
• C. First have the board allot under existing approval, then amend the constitution by special resolution.
• D. First amend the constitution by special resolution, then have the board allot the 600,000 shares.

Best answer: D

What this tests: Business Structures

Explanation: The proposed allotment would increase the issued ordinary shares to 10.2 million, exceeding the constitutional cap. The ordinary resolution authorising the directors to allot shares and the special resolution required to alter the constitution serve different purposes. Allotment authority does not override a restriction in the constitution. Because the restriction requires the cap to be amended first, the company must pass the required special resolution and complete the amendment before the board makes the allotment. Proceeding first and seeking later ratification would not comply with the stated sequence.

• A further ordinary resolution cannot alter a provision that requires amendment by special resolution.
• A unanimous board resolution cannot override a restriction imposed by the company’s constitution.
• A later constitutional amendment would not satisfy the express requirement that amendment occur before allotment.

The ordinary resolution authorises the allotment but does not amend the separate constitutional cap.

Question 22

Topic: Regulation of the Securities Industry

A Malaysian capital-market group is assigning regulatory matters between the Securities Commission Malaysia (SC) and Bursa Malaysia. Which matter falls primarily within the SC’s statutory functions rather than Bursa Malaysia’s frontline exchange functions?

• A. Varying the regulated activities authorised under a firm’s CMSL
• B. Conducting frontline surveillance of orders entered in the trading system
• C. Disciplining a Participating Organisation for breaching Bursa rules
• D. Approving the admission of an issuer’s shares to the Main Market

Best answer: A

What this tests: Regulation of the Securities Industry

Explanation: The SC is Malaysia’s statutory capital-market regulator. Its functions include licensing and supervising regulated persons, enforcing securities laws, protecting investors, and promoting capital-market development. Accordingly, a change to the regulated activities authorised under a Capital Markets Services Licence is determined by the SC. Bursa Malaysia performs frontline exchange functions under its market rules. These include admitting securities to its markets, monitoring trading activity, and regulating or disciplining Participating Organisations. Bursa’s frontline responsibilities support the broader regulatory framework but do not transfer statutory licensing authority from the SC.

• Main Market admission is determined by Bursa Malaysia under its listing framework.
• Discipline for a breach of Bursa rules is a frontline exchange responsibility of Bursa Malaysia.
• Surveillance of orders in the trading system is part of Bursa Malaysia’s market-monitoring role.

The SC has statutory authority over the grant, variation, suspension, and revocation of a CMSL.

Question 23

Topic: Relationship Between Stockbroking Company and Client

A Participating Organisation opens a joint trading account for Farah and Ravi. The signed account terms:

• identify both as clients and joint beneficial owners;
• authorise either holder to give dealing instructions separately; and
• require written notice to change or terminate that authority.

Contract notes and statements are sent to both holders. Ravi gives a properly verified telephone instruction to sell securities in the account, and the sale is executed accurately. Farah later objects because she did not consent. No written notice changing the authority had been given.

Which conclusion best reflects the broker-client relationship?

• A. The sale remains provisional because both holders must accept the contract note before execution becomes binding.
• B. The sale is unauthorised because joint beneficial ownership requires both holders to approve every disposal.
• C. The sale binds Ravi alone because only the holder who communicated the instruction became the broker’s client.
• D. The sale binds the joint account because Ravi acted within the separate authority granted to each holder.

Best answer: D

What this tests: Relationship Between Stockbroking Company and Client

Explanation: The signed account terms establish both Farah and Ravi as clients and define their authority to operate the joint account. Although they jointly own the securities, the mandate expressly allows either holder to give dealing instructions separately. Ravi’s verified instruction therefore binds the joint account because no written notice had changed or terminated that authority. Joint ownership does not necessarily require joint instructions; the account mandate determines how the broker may act. Contract notes and statements confirm and record transactions, but they do not ordinarily require post-execution acceptance when the broker has already acted on a valid instruction within the agreed authority.

• Ravi did not become the sole client merely by communicating the instruction; both named holders remain clients under the account terms.
• Joint beneficial ownership does not override the express mandate permitting separate instructions.
• The contract note confirms the executed transaction rather than making it conditional on later approval by both holders.

The signed account terms authorised either joint client to instruct the Participating Organisation separately.

Question 24

Topic: Clearing, Delivery, Settlement and Corporate Actions

A Head of Operations at a Participating Organisation reviews a client’s purchase executed on Bursa Malaysia on Monday. There are no intervening public holidays.

Processing status:

• The order was matched in the Automated Trading System, and an execution confirmation was issued.
• Bursa Malaysia Securities Clearing became counterparty through novation and calculated the clearing participant’s net settlement obligation.
• On Wednesday (T+2), the securities and payment obligations were fully settled.
• The client’s custody and cash sub-ledgers remain unposted because of an interface queue.

What is the BEST next action to complete the transaction processing?

• A. Request the clearing house to novate the matched trade again, then post after a replacement obligation is created.
• B. Reconcile completed settlement against the clearing output, then post the purchase to the client’s custody and cash records.
• C. Re-enter the matched order into the trading system, then post the purchase after a second execution confirmation is generated.
• D. Treat the net settlement obligation as the client’s final holding record, then release the shares without ledger posting.

Best answer: B

What this tests: Clearing, Delivery, Settlement and Corporate Actions

Explanation: Trade execution, clearing and settlement are separate stages. Execution occurs when the order is matched and creates the market transaction. Through novation, the clearing house becomes the counterparty to the clearing participants. Netting then determines the aggregate delivery and payment obligations. Settlement discharges those obligations through delivery of securities and payment, normally on T+2 for Bursa Malaysia securities.

Here, execution, novation, netting and settlement have already occurred. The unresolved matter is the final allocation and recording in the client’s custody and cash sub-ledgers. Operations should reconcile the completed settlement against the clearing output and post the client records. Repeating execution or novation would duplicate completed stages, while a clearing participant’s net obligation does not replace the client’s individual account records.

• Re-entering the order would create a duplicate trade rather than correct the unposted client records.
• Repeating novation is inappropriate because the clearing house has already assumed the counterparty role.
• A net settlement obligation is an aggregate clearing amount, not the client’s final custody record.

Settlement is complete, so the remaining step is to reconcile the outcome and make the final client record entries.

Question 25

Topic: Trading on the Secondary Market

A client of a Participating Organisation holds no shares in an Approved Security and is not a registered market maker or derivatives specialist. During a permitted IDSS trading phase:

• The client’s designated IDSS account and required securities-borrowing arrangement are in place.
• The client intends to sell first and close the position through an on-market purchase that day.
• The client asks for the sale to be executed as a married Direct Business Transaction with another client of the same Participating Organisation.

Which action should the dealer’s representative take to comply with Bursa Malaysia’s short-selling rules?

• A. Decline the DBT route and enter a designated IDSS sale in the Normal Market, with an on-market buy closeout that day.
• B. Decline the DBT route and enter a designated PSS sale in the Normal Market, with an on-market buy closeout that day.
• C. Decline the DBT route and enter an ordinary sale in the Normal Market, with an on-market buy closeout that day.
• D. Use the DBT route and report the IDSS sale in the trading system, with an on-market buy closeout that day.

Best answer: A

What this tests: Trading on the Secondary Market

Explanation: Intraday Short Selling applies when an investor sells an Approved Security without holding it and closes the position through an on-market purchase on the same market day. The sale must use the designated IDSS account and order treatment, and it must be conducted in the Normal Market. A Direct Business Transaction is executed outside Bursa Malaysia’s Automated Trading System and therefore cannot be used for an IDSS sale. The required securities-borrowing arrangement remains a control against failed closeout. Permitted Short Selling does not apply because the client is not acting as an eligible registered market maker or derivatives specialist. Treating the transaction as an ordinary sale would also misstate its short-selling nature.

• Reporting a married transaction afterward does not convert a Direct Business Transaction into an eligible IDSS transaction.
• PSS is unavailable because the client is not acting in an eligible market-making or derivatives-specialist capacity.
• An ordinary-sale designation is inappropriate because the client does not hold the securities being sold.

IDSS must be conducted in the Normal Market with the required designation and closed through an on-market purchase on the same market day.

Questions 26-50

Question 26

Topic: Overview of the Malaysian Stock Market

A CMSRL holder is reviewing a product offered by a Malaysian licensed bank.

• The product has an 18-month term.
• Its maturity payment depends on the performance of three Bursa Malaysia-listed shares.
• An embedded equity-linked formula determines the return and possible loss of principal.
• Investors receive no ownership or voting rights in the bank.
• Investors’ money is not pooled in a managed investment portfolio.

How should the product be classified?

• A. A preference share issued by the bank
• B. A collective investment interest issued by the bank
• C. A debt security issued by the bank
• D. An unlisted structured product issued by the bank

Best answer: D

What this tests: Overview of the Malaysian Stock Market

Explanation: A structured product combines financial components so that its return or repayment depends on an underlying asset, index, rate, or formula. Here, the payment depends on three listed shares through an embedded equity-linked formula, and the investor may lose part of the principal. These features support classification as an unlisted structured product. The absence of ownership and voting rights rules out an equity interest such as a preference share. The absence of pooled contributions and collective portfolio management rules out a collective investment interest. Although the product has a fixed term and is issued by a bank, its contingent equity-linked payoff makes structured product the more specific classification than an ordinary debt security.

• A preference share represents an equity interest, but investors receive no ownership or voting rights.
• A collective investment interest requires pooled money or assets managed collectively, which is absent here.
• A debt security does not capture the embedded derivative that determines both the return and possible principal loss.

The embedded equity-linked formula makes the maturity payment and principal contingent on underlying shares, which characterises a structured product.

Question 27

Topic: Clearing, Delivery, Settlement and Corporate Actions

Arif buys RM80,000 of shares on-market through Meridian Securities. Settlement is due on T+2.

Roles and events:

• Meridian is both a Participating Organisation and a clearing participant of Bursa Malaysia Securities Clearing (BMSC).
• Arif’s agreement requires him to pay Meridian by T+1, and he pays in full on time.
• An internal posting error leaves Arif’s account marked unpaid, and the funds are omitted from Meridian’s settlement funding.
• On T+2, BMSC notifies Meridian that its net cash settlement obligation is due. No extension has been granted.

Which action should Meridian’s Head of Operations take as the best response?

• A. Correct the client ledger, obtain a replacement payment from Arif, and use it to complete Meridian’s settlement with BMSC on T+2.
• B. Correct the client ledger, make the required funding available, and discharge Meridian’s net obligation to BMSC in its clearing-participant capacity.
• C. Correct the client ledger, direct Arif to pay BMSC directly, and ask BMSC to apply his payment to Meridian’s net obligation.
• D. Correct the client ledger, request a deferral from BMSC, and carry Meridian’s net obligation into the next settlement cycle for reconciliation.

Best answer: B

What this tests: Clearing, Delivery, Settlement and Corporate Actions

Explanation: BMSC administers clearing and settlement at the clearing-participant level. Meridian therefore owes the net cash settlement obligation to BMSC in its capacity as a clearing participant. Its internal posting error does not transfer that obligation to Arif or suspend the T+2 deadline.

In its Participating Organisation capacity, Meridian maintains the client relationship, receives Arif’s payment and records the transaction correctly. Arif fulfilled his contractual payment responsibility by paying Meridian in full on T+1. Meridian should correct the client ledger and ensure that its clearing obligation is funded and settled. BMSC is not responsible for collecting the purchase price directly from an individual client, and Meridian should not demand a duplicate payment to remedy its own processing error.

• Direct payment to BMSC wrongly shifts a clearing participant’s obligation to an individual client.
• A replacement payment would make Arif pay twice despite his timely payment to Meridian.
• An internal posting error does not itself justify carrying a due settlement obligation into another cycle.

Arif has paid Meridian, while Meridian remains responsible for satisfying its participant-level settlement obligation to BMSC.

Question 28

Topic: Trading on the Secondary Market

A dealer’s representative receives the following orders while the security is in continuous trading with an Open market status:

• At 10:00, the representative enters a client buy order for 10,000 shares at RM2.00. Of these, 4,000 shares execute and 6,000 remain.
• At 10:04, another buy order for 5,000 shares at RM2.02 enters the order book.
• At 10:05, the client gives an authenticated instruction to increase the remaining order to 8,000 shares and change its limit price to RM2.02.
• After the instruction is processed, a sell order for 10,000 shares at RM2.02 arrives.

Under the applicable trading rules, changing an order’s limit price or increasing its outstanding quantity gives the amended order a new timestamp. Orders at the same price are matched by time priority, and completed executions are unaffected by later amendments.

What is the dealer’s representative’s best response?

• A. Amend the balance to 8,000 shares at RM2.02 with 10:05 priority; execute 5,000 shares and leave 3,000 shares resting.
• B. Keep 6,000 shares at RM2.00 and enter 2,000 shares at RM2.02; execute 2,000 shares and leave 6,000 shares resting.
• C. Amend the balance to 8,000 shares at RM2.02 with 10:05 priority; execute all 8,000 shares and leave no shares resting.
• D. Amend the balance to 8,000 shares at RM2.02 with 10:00 priority; execute all 8,000 shares and leave no shares resting.

Best answer: A

What this tests: Trading on the Secondary Market

Explanation: The client’s authenticated instruction changes both the limit price and the outstanding quantity. The amended order therefore receives a new timestamp at 10:05 rather than retaining its original 10:00 priority. The completed purchase of 4,000 shares remains effective.

At RM2.02, the other buy order has priority because it entered at 10:04. When the sell order for 10,000 shares arrives at RM2.02, the earlier buy order receives 5,000 shares first. The remaining 5,000 shares execute against the client’s amended 8,000-share order. The client’s unexecuted balance is therefore 3,000 shares, which remains on the order book at RM2.02 with its 10:05 priority.

• Retaining the 10:00 timestamp conflicts with the stated effect of changing the price and increasing the outstanding quantity.
• Allocating all 10,000 incoming shares to the client ignores the earlier 5,000-share buy order at the same price.
• Splitting the instruction between two prices fails to amend the full outstanding order as the client directed.

The amended order ranks behind the earlier RM2.02 buy order, which leaves 5,000 shares available from the incoming sell order.

Question 29

Topic: Clearing, Delivery, Settlement and Corporate Actions

An on-market equity trade is matched in Bursa Malaysia’s trading system. Before T+2 settlement, Bursa Malaysia Securities Clearing acts as the central counterparty. Which event constitutes novation?

• A. Replacing the original contract by becoming buyer to the seller and seller to the buyer
• B. Matching the buy and sell orders at an agreed price and quantity in the trading system
• C. Aggregating purchases and sales to calculate each clearing participant’s net delivery and payment obligations
• D. Posting the securities debit and credit entries to the relevant depository accounts after settlement

Best answer: A

What this tests: Clearing, Delivery, Settlement and Corporate Actions

Explanation: Trade execution occurs when compatible buy and sell orders are matched in the trading system. Clearing follows execution and determines how the resulting obligations will be fulfilled. Through novation, the clearing house replaces the original contract and becomes the buyer to the seller and the seller to the buyer. Netting is a separate clearing function that aggregates transactions to determine each clearing participant’s net securities and payment obligations. Settlement then discharges those obligations through delivery and payment, normally on T+2 for Bursa Malaysia securities. The final depository entries record the completed movement of securities but do not create the central-counterparty relationship.

• Matching buy and sell orders describes trade execution, which occurs before post-trade clearing.
• Aggregating transactions describes netting, which calculates net settlement obligations.
• Posting depository debits and credits describes the final securities record after settlement processing.

Novation substitutes the clearing house as counterparty to both sides of the matched trade.

Question 30

Topic: Regulation of the Securities Industry

A client purchases listed shares through a Participating Organisation. After clearing and settlement, the shares must be recorded electronically in the client’s Central Depository System account.

Which entity performs the central depository function of maintaining that securities account record?

• A. Bursa Malaysia Securities Berhad
• B. Bursa Malaysia Securities Clearing Sdn Bhd
• C. The client’s Participating Organisation
• D. Bursa Malaysia Depository Sdn Bhd

Best answer: D

What this tests: Regulation of the Securities Industry

Explanation: Bursa Malaysia Depository performs the central depository function through the Central Depository System, which records deposited securities, account balances, and book-entry transfers. This role is distinct from operating the securities market or clearing transactions. Bursa Malaysia Securities operates the stock exchange and administers trading by Participating Organisations. Bursa Malaysia Securities Clearing provides clearing and settlement services for securities transactions. A Participating Organisation deals with clients, handles and executes orders, maintains required client records, and fulfils its responsibilities under Bursa rules, but it does not operate the central securities depository. The decisive fact is that the shares must be reflected in the client’s Central Depository System account after settlement.

• Bursa Malaysia Securities operates the securities exchange rather than the central securities depository.
• Bursa Malaysia Securities Clearing handles clearing and settlement rather than maintaining Central Depository System account records.
• The Participating Organisation executes and administers the client’s transaction but does not operate the central depository.

Bursa Malaysia Depository maintains the Central Depository System in which securities holdings and transfers are recorded electronically.

Question 31

Topic: Licensing

Aster Securities Sdn Bhd holds a CMSL solely for dealing in securities. Its dealer’s representatives hold CMSRLs solely for that activity.

The firm plans a separately remunerated service involving tailored recommendations on specific listed securities, based on each client’s circumstances and intended to induce trades. The Head of Compliance confirms that:

• The service constitutes investment advice as a separate regulated activity.
• No licensing exemption applies.
• No advice has yet been provided.

What is the best next action before the firm begins providing the service?

• A. Begin the service and notify the SC of the firm’s and representatives’ changed licence scope after commencement.
• B. Defer the service and obtain Bursa Malaysia approval to extend the firm’s PO status before launch.
• C. Begin the service under existing dealing licences after documenting staff competence and obtaining client acknowledgements.
• D. Defer the service and obtain SC approval to vary the firm’s CMSL and relevant CMSRLs before launch.

Best answer: D

What this tests: Licensing

Explanation: A CMSL and CMSRL authorise only the regulated activities within their approved scope. Here, the proposed service is expressly classified as investment advice, is separately remunerated, and is not covered by an exemption. The firm’s dealing-in-securities CMSL and the representatives’ corresponding CMSRLs therefore do not authorise the new service. The firm must defer commencement and obtain the necessary variations from the SC for both the principal and the relevant representatives. Bursa Malaysia’s approval of a Participating Organisation does not vary an SC-issued licence. Staff competence, documentation, disclosures, and client acknowledgements remain important conduct controls, but they cannot replace the required licensing authority.

• Notification after commencement is insufficient because the additional regulated activity requires prior SC approval.
• Bursa Malaysia administers PO participation but does not vary a CMSL or CMSRL issued by the SC.
• Competence records and client acknowledgements do not expand the scope of existing dealing licences.

The principal and relevant representatives must obtain SC-approved licence variations before carrying on the additional regulated activity.

Question 32

Topic: Relationship Between Stockbroking Company and Client

A dealer’s representative of a Participating Organisation (PO) purchases listed shares in a client’s cash account. The PO’s order records and call recordings confirm that the client gave no instruction, and the account has no discretionary trading authority. The client promptly disputes the purchase and refuses to ratify it. The executed market trade can no longer be cancelled.

What is the most appropriate corrective action by the PO?

• A. Remove the shares from the client account, debit the resulting market loss, and issue a corrected statement.
• B. Retain the shares in the client account, waive brokerage charges, and seek a fresh instruction to sell them.
• C. Restore the client account to its pre-trade position, issue corrected records, and process the trade under approved error procedures.
• D. Retain the shares pending retrospective approval, obtain signed authority, and amend the order record to show approval.

Best answer: C

What this tests: Relationship Between Stockbroking Company and Client

Explanation: The PO’s obligation arising from an executed market trade is separate from whether the client authorised the transaction. The records establish that the representative acted outside the client’s mandate, and the client did not ratify the purchase. The PO should therefore restore the client’s account to the position it would have occupied without the unauthorised trade, correct the relevant records, and manage the transaction through its approved error procedures. It should not transfer the resulting market exposure or loss to the client. Retrospective documentation cannot create an instruction that did not exist when the trade was executed. Any investigation, disciplinary action, or recovery involving the representative is an internal matter and does not replace client remediation.

• Waiving brokerage leaves the unauthorised position and its market risk in the client’s account.
• Debiting the market loss improperly transfers the consequence of the unauthorised transaction to the client.
• Retrospective approval does not establish prior authority, and amending the record would misstate the transaction chronology.

Because the purchase lacked client authority and was not ratified, the PO must remediate the client account while handling the executed trade internally.

Question 33

Topic: Relationship Between Stockbroking Company and Client

A Participating Organisation is completing a properly approved Direct Business Transaction for a client.

Transaction facts:

• The client initially asked to acquire 50,000 listed shares.
• With the client’s agreement, the Participating Organisation will supply the shares from its proprietary account.
• The Participating Organisation is named as seller, receives the sale proceeds, and bears the seller’s settlement obligation.
• The draft contract note describes the Participating Organisation as the client’s agent.

All applicable approval and reporting requirements have been satisfied. What is the best next action before issuing the contract note?

• A. Correct the draft to identify the company as execution provider and inform the client of its routing capacity.
• B. Correct the draft to identify the company as nominee holder and inform the client of its registered-holder capacity.
• C. Correct the draft to identify the company as principal seller and inform the client of its counterparty capacity.
• D. Retain the draft identifying the company as agent and inform the client of its representative capacity.

Best answer: C

What this tests: Relationship Between Stockbroking Company and Client

Explanation: A stockbroking company’s capacity depends on the substance of the transaction. Here, the Participating Organisation supplies shares from its proprietary account, is named as seller, receives the proceeds, and bears the seller’s settlement obligation. It is therefore acting as principal and is the client’s counterparty. The transaction documents and client communication should accurately reflect that capacity.

A company acts as agent when it executes a transaction on a client’s behalf without itself becoming the buyer or seller. An execution service provider routes or executes an instruction but does not necessarily supply the securities as counterparty. A nominee holds registered title for another person’s beneficial interest. None of those capacities describes the proprietary sale shown by the facts.

• Agency treatment is inconsistent with the company being the named seller of its own proprietary shares.
• Execution-provider treatment overlooks that the company supplies the securities and assumes the seller’s obligations.
• Nominee treatment concerns holding registered title for a beneficial owner, not selling proprietary inventory.

The company acts as principal because it sells shares from its proprietary account as the client’s contractual counterparty.

Question 34

Topic: Securities Offences

Farid, a dealer’s representative at a Participating Organisation, reads Kencana Tech Berhad’s Bursa Malaysia announcement confirming that its tender for an RM200 million contract was unsuccessful. He then posts to a public investment channel with 18,000 followers:

“Kencana has secured the RM200 million contract. Buy now before the price jumps.”

Farid admits that he posted the message without caring whether it was accurate. The contract was material to Kencana’s business, the message was widely forwarded, and its share price rose by 6%. Farid deleted the message 25 minutes later, and his firm issued a correction. Surveillance cannot identify whether any particular purchaser relied on the message.

Which conclusion is most directly supported under the CMSA prohibition against false or misleading statements?

• A. Farid may be liable because he recklessly disseminated a material false claim likely to induce securities purchases.
• B. Farid is not liable because responsibility for the contract claim rests with Kencana as the affected issuer.
• C. Farid is not liable because the prompt correction displaced the earlier false claim before the market closed.
• D. Farid may be liable only if identified clients prove actual reliance by completing purchases after receiving the message.

Best answer: A

What this tests: Securities Offences

Explanation: A false-statement offence may arise when a person makes or disseminates information that is false or misleading in a material particular, is likely to induce securities dealings or affect the market price, and is accompanied by the required knowledge or reckless disregard for truth. Farid had read the issuer’s contrary announcement and admitted that he did not care whether his claim was accurate. The RM200 million contract was material, while the instruction to “buy now” directly supported likely inducement. Public posting and widespread forwarding constituted dissemination. The later correction may reduce continuing harm but does not erase the earlier conduct. Proof that a named investor actually relied on the statement is unnecessary where the statement was likely to induce trading or affect the market.

• A later correction does not retrospectively remove the completed dissemination or the state of mind present when it occurred.
• The prohibition can apply to the person making or disseminating the statement, not merely to the affected issuer.
• Actual reliance and completed purchases are not essential when likely inducement or likely market-price effect is established.

Farid consciously disregarded the truth and disseminated a material false statement with an express inducement to purchase securities.

Question 35

Topic: Trading on the Secondary Market

A dealer’s representative at a Malaysian Participating Organisation first gives a client Awana Technology Berhad’s current share price and announced dividend. The representative then makes a non-tailored comment that technology shares can be volatile.

The client says:

“I want growth over five years, can accept moderate volatility, and currently hold mainly fixed-income investments. Should I buy Awana Technology shares?”

The client has not placed an order or granted discretionary authority. The client profile is two years old. The firm permits the representative to provide personal advice, and no exclusion or dispensation applies. The representative intends to recommend the shares based on the circumstances stated by the client.

What should the representative do before communicating the recommendation?

• A. Apply the factual-information process: provide the latest price and announced dividend, avoid evaluative comments, and leave the purchase decision for the client.
• B. Apply the personal-advice process: update sufficient client information, assess reasonable basis and suitability, explain relevant risks, and document the recommendation.
• C. Apply the execution-only process: confirm quantity and price instructions, record the client’s order, and submit it without making a product recommendation.
• D. Apply the general-communication process: provide a non-tailored technology-sector outlook, include a generic market-risk warning, and avoid referring to the client’s circumstances.

Best answer: B

What this tests: Trading on the Secondary Market

Explanation: The substance and context of a communication determine whether it is personal advice. Providing a current share price or announced dividend is factual product information. A broad comment about technology-sector volatility is a general, non-tailored communication. However, recommending a specific listed share by reference to the client’s five-year horizon, risk tolerance, and existing investments is personal advice.

Because the client profile is outdated, the representative must obtain sufficient current information before assessing whether there is a reasonable basis for the recommendation and whether it is suitable. Relevant explanations, risk warnings, and records are also required. The interaction is not execution-only because the client has asked a question rather than given an order. It is not discretionary management because the representative has no authority to make and execute investment decisions for the client.

• Execution-only treatment is inappropriate because the client has not given a firm trading instruction.
• Price and dividend data are factual, but that classification does not cover the intended tailored recommendation.
• A general sector outlook is non-tailored, while the intended recommendation expressly relies on the client’s circumstances.

The intended recommendation concerns a specific share and is tailored using the client’s investment horizon, risk tolerance, and existing holdings.

Question 36

Topic: Licensing

A dealer’s representative publishes the following message on a public social-media channel:

“Buy shares in Laksana Berhad today. I expect the price to rise 20% within three months. Use my referral link to place the order.”

The post carries an educational content only disclaimer, and the representative receives referral payments. The representative’s CMSRL and the principal’s CMSL cover dealing in securities but not investment advice. No licensing exclusion applies.

Which corrective action should the principal take?

• A. Withdraw the post, preserve the record, and continue similar recommendations after obtaining written approval from the firm’s Head of Compliance.
• B. Withdraw the post, preserve the record, and suspend similar recommendations until the required principal licensing and representative authority are in place.
• C. Withdraw the post, preserve the record, and continue similar recommendations after ending referral payments and making the content available without charge.
• D. Retain the post, preserve the record, and continue similar recommendations after adding a prominent disclaimer that labels them as educational content.

Best answer: B

What this tests: Licensing

Explanation: Investment advice is classified by the substance, context, and likely effect of a communication. A specific recommendation to buy named securities, supported by a price expectation and an immediate call to action, is intended or likely to induce action concerning a capital-market product. Its publication to a general audience does not prevent it from constituting investment advice. The disclaimer and referral arrangement are relevant contextual facts, but neither determines the classification by itself. Because the principal and representative lack the required licensing and authority, the recommendation should be withdrawn and retained as a compliance record. Similar recommendations must not resume until the proper licensing and representative authority are in place.

• An educational-content disclaimer does not override the substance and likely effect of the recommendation.
• Removing referral payments does not convert an inducive recommendation into unregulated commentary.
• Internal compliance approval cannot substitute for licensing and representative authority required under the CMSA framework.

The communication is intended to induce securities transactions, so it must cease unless the required licensing and representative authority are in place.

Question 37

Topic: Law of Contract

A dealer’s representative of Meranti Securities, a Participating Organisation (PO), executes a purchase on Bursa Malaysia for a client account. A contract note is issued to Mr Lim.

Before T+2 settlement, Mr Lim disputes the purchase. The PO confirms that the representative entered the wrong account number and that Mr Lim neither authorised nor ratified the transaction.

Which action should the PO take?

• A. The PO must meet the market settlement obligation, rectify the account under approved error-trade controls, preserve the audit trail, and not classify Mr Lim as defaulting.
• B. The PO must enforce the contract note against Mr Lim, demand payment by T+2, preserve the audit trail, and classify any non-payment as a client default.
• C. The PO must request cancellation of the matched Bursa transaction, suspend settlement pending the request, reverse the contract note, and treat Mr Lim’s denial as ending the trade.
• D. The PO must keep the purchase in Mr Lim’s account through T+2, fund settlement temporarily, record non-payment, and rectify the allocation after declaring client default.

Best answer: A

What this tests: Law of Contract

Explanation: The exchange transaction and the broker-client mandate are separate legal relationships. Once the purchase is executed on Bursa Malaysia, the PO remains responsible for meeting its market-level settlement obligation. The client’s dispute does not by itself cancel the matched transaction. However, a contract note records an execution; it does not create authority that was absent when the order was entered. Because Mr Lim neither instructed nor ratified the purchase, his failure to pay cannot properly be treated as default. The PO should apply its controlled error-trade and rectification procedures while retaining the original order record, contract note, dispute, investigation findings, approvals, and correcting entries as an audit trail.

• Issuing a contract note does not conclusively establish that the client authorised the purchase.
• A client’s denial does not automatically cancel a matched Bursa transaction or suspend settlement.
• Delaying rectification until after declaring default wrongly attributes an unauthorised trade to the client.

The PO remains responsible for the executed exchange transaction, while Mr Lim lacks a payment obligation because he neither authorised nor ratified it.

Question 38

Topic: Capital Raising on the Primary Market

Seroja Capital Berhad is an Eligible Issuer of an unlisted structured product, but it is neither a qualified bank nor a qualified dealer. It appoints Nusa Advisory, a principal adviser, as the Lodgement Party. The distributor and calculation agent are other Responsible Parties.

The distributor discovers a change likely to make information provided to the SC and investors materially incomplete. Separately, the calculation agent will cease performing its declared role.

Which action correctly allocates the responsibilities under the Lodge and Launch framework?

• A. The distributor notifies Nusa Advisory immediately; the departing calculation agent lodges the revision and identifies its replacement.
• B. The distributor notifies Seroja Capital immediately; Seroja lodges the revision and identifies the replacement calculation agent.
• C. The distributor lodges the revision directly with the SC; Nusa Advisory identifies the replacement calculation agent.
• D. The distributor notifies Nusa Advisory immediately; Nusa lodges the revision and identifies the replacement calculation agent.

Best answer: D

What this tests: Capital Raising on the Primary Market

Explanation: Each Responsible Party remains accountable for its declared role, but the Lodgement Party serves as the central lodgement channel. A Responsible Party that becomes aware of a change likely to make information false, misleading, or materially incomplete must immediately notify the Lodgement Party. The Lodgement Party then makes the required revision and identifies a replacement when another Responsible Party ceases performing its role.

For a structured product, an Eligible Issuer that is neither a qualified bank nor a qualified dealer must lodge through a principal adviser. Nusa Advisory is both the principal adviser and designated Lodgement Party. Therefore, the distributor must notify Nusa, and Nusa must manage the revised lodgement and replacement details.

• Notification to the issuer wrongly assigns the lodgement function to an Eligible Issuer that must lodge through a principal adviser.
• Direct filing by the distributor confuses a Responsible Party’s notification duty with the Lodgement Party’s filing duty.
• The departing calculation agent does not acquire the Lodgement Party’s revision and replacement responsibilities.

The distributor must notify the Lodgement Party, which handles the revision and identifies a replacement for the departing Responsible Party.

Question 39

Topic: Securities Offences

At Nusa Securities Sdn Bhd, a Participating Organisation and CMSL holder, surveillance identifies matched trades that legal review confirms were intended to create a false appearance of market activity.

• Lim designed the arrangement, recruited Mei, and dictated every trade.
• Mei, the named account holder, knowingly acted as Lim’s agent, relayed his orders, and received a fee.
• Ravi, Nusa’s CMSRL holder, knew the purpose, entered the orders, and recorded Mei as their originator.
• Nusa’s management did not approve the arrangement, but possible supervisory failures remain under review.
• Hana contributed capital and was entitled to profits, but had no knowledge, control, instructions, or involvement in the trades.

The relevant accounts have been restricted and the evidence preserved. What should Nusa’s Compliance Officer do next when framing the responsibility assessment?

• A. Escalate Lim alone as controller, because responsibility for the account holder, representative, and licensed principal merges into the liability of the person directing the trades.
• B. Escalate Mei, Ravi, and Nusa alone, because responsibility follows the named account holder, the order-entering representative, and the representative’s licensed principal.
• C. Escalate an actor-specific assessment covering Lim’s control and procurement, Mei’s knowing agency, Ravi’s knowing assistance, Nusa’s principal responsibility, and Hana only if participation evidence emerges.
• D. Escalate Lim, Mei, Ravi, Nusa, and Hana as equally responsible, because direction, account use, representation, employment, and economic benefit establish the same liability.

Best answer: C

What this tests: Securities Offences

Explanation: Responsibility for an unlawful dealing arrangement must be assessed separately for each actor. A controller or procurer need not be the named account holder or personally enter the orders. An account holder or agent may bear responsibility when knowingly facilitating the arrangement, while a CMSRL holder may remain personally responsible for knowingly entering or disguising the orders. Nusa’s position as the CMSL principal and Participating Organisation requires a separate assessment of its applicable representative and supervisory responsibilities; this does not replace Ravi’s individual responsibility. Hana’s entitlement to profits identifies her as a beneficiary, but economic benefit alone does not prove that she knowingly participated, assisted, procured, or controlled the unlawful dealing.

• Lim’s controlling role does not eliminate the potentially separate responsibility of knowing agents, representatives, or the licensed principal.
• Recorded account and order names do not exclude a person who controlled or procured the arrangement behind the scenes.
• Treating every participant equally confuses passive economic benefit with knowing participation and overlooks distinct legal bases of responsibility.

Each actor’s responsibility depends on control, procurement, knowing assistance, principal obligations, or proven participation rather than title or economic benefit alone.

Question 40

Topic: Overview of the Malaysian Stock Market

Meranti Berhad plans an Islamic capital market issuance. Its principal adviser has structured the proposal, and a CMSL holder will distribute the securities. A dispute arises over the Shariah principles applicable to a novel contractual arrangement.

Which actor has the governing role in authoritatively ascertaining the applicable Shariah principles?

• A. Responsibility rests with the Securities Commission Malaysia as the market regulator.
• B. Responsibility rests with the Shariah Advisory Council established by the SC.
• C. Responsibility rests with the principal adviser structuring the proposed issuance.
• D. Responsibility rests with the issuer’s board overseeing the proposed issuance.

Best answer: B

What this tests: Overview of the Malaysian Stock Market

Explanation: The Shariah Advisory Council has the central role in ascertaining the Shariah principles applicable to Islamic capital market business. The SC regulates and supervises the capital market, but the specialised Shariah ascertainment function rests with the Council. The issuer remains responsible for its issuance, disclosures, approvals, and continuing obligations. Advisers structure the transaction, prepare or coordinate documentation, and advise the issuer within their appointed scope. Market intermediaries distribute, deal in, or otherwise facilitate the securities in accordance with their licences and conduct duties. These functions support the issuance but do not transfer the Council’s authoritative Shariah role to the issuer, adviser, or distributor.

• The SC performs regulatory, supervisory, and enforcement functions but does not replace the Council’s specialised Shariah role.
• The issuer’s board oversees the issuance and corporate decisions but is not the central Shariah authority.
• The principal adviser structures and coordinates the issuance but cannot assume the Council’s authoritative function.

The Shariah Advisory Council is the central authority for ascertaining Shariah principles applicable to Islamic capital market business.

Question 41

Topic: Securities Offences

A Participating Organisation’s surveillance team reviews trading in a listed counter:

• One client beneficially controls two separately identified accounts.
• The accounts repeatedly place matching buy and sell orders at progressively higher prices.
• The client’s overall beneficial holding remains essentially unchanged, while reported volume and the last traded price increase.
• A recorded call states, “Make the counter look active so others buy, then sell the remaining shares.”

Which conclusion most directly applies under the CMSA?

• A. False trading through matched orders simulating genuine market activity and price formation
• B. Permissible portfolio rebalancing through separately identified accounts with valid trading access
• C. Ordinary price discovery through repeated orders executed in Bursa Malaysia’s trading system
• D. Insider trading through orders placed before the client’s intended later disposal

Best answer: A

What this tests: Securities Offences

Explanation: False trading focuses on conduct that creates or is likely to create a false or misleading appearance of active trading, market activity, price, or demand. Here, the same beneficial owner controls both accounts, coordinates matching orders, and retains essentially the same overall holding. The trades nevertheless increase reported volume and the last traded price. The recorded statement confirms that the intended effect is to attract other investors by creating artificial market interest. Separate account identifiers and execution through Bursa Malaysia’s trading system do not make the transactions genuine when their economic substance and intended market appearance are misleading.

• Separate account identifiers do not establish genuine portfolio rebalancing when the same beneficial owner coordinates both sides.
• A planned later disposal does not establish insider trading because no material non-public information is involved.
• Execution through the trading system does not make artificial volume and price movements ordinary price discovery.

The coordinated trades and stated purpose show conduct likely to create a false appearance of activity and price.

Question 42

Topic: Securities Offences

A Compliance Officer of a Participating Organisation reviews a client broadcast prepared by a CMSRL holder:

Buy Serai Berhad now. The company has secured RM80 million in sales under a signed supply agreement.

The message is intended to encourage retail clients to purchase Serai Berhad shares. The compliance file shows that:

• RM80 million is the agreement’s maximum potential value, not committed sales.
• The customer has no purchase obligation unless Serai Berhad obtains an environmental permit by September.
• Serai Berhad has not applied for the permit.
• The customer may terminate without penalty if the condition is not met.
• The CMSRL holder knows these facts but omitted them from the message.

What is the Compliance Officer’s best next action?

• A. Block distribution, require wording that accurately describes the contingent agreement, and escalate the material omission through compliance.
• B. Remove the buy recommendation, present the message as factual information, and retain the sales claim without the conditions.
• C. Allow distribution, add a standard investment-risk warning, and retain the sales claim because the agreement was signed.
• D. Limit distribution to sophisticated clients, provide the omitted conditions only upon request, and retain the original sales claim.

Best answer: A

What this tests: Securities Offences

Explanation: A statement can be misleading even when it refers to an actual signed agreement. Its overall impression must fairly reflect material conditions. Here, the agreement provides only a maximum potential value, and the customer has no purchase obligation unless an unfulfilled permit condition is met. The termination right further undermines the claim that RM80 million in sales has been secured.

Because the communication is intended to induce purchases of securities and the CMSRL holder knows about the omitted conditions, distribution should be blocked. The description must be revised to explain the contingent nature of the agreement, and the matter should be escalated through compliance. A general risk warning cannot cure a specific misleading claim, while changing the audience or removing the express recommendation does not make the underlying statement accurate.

• A general investment-risk warning does not correct the specific impression that committed sales already exist.
• Restricting recipients by investor category does not make a material omission acceptable.
• Removing the purchase recommendation or changing the message’s label does not correct the inaccurate sales claim.

The omitted conditions negate the impression that RM80 million in sales is secured, making the proposed communication materially misleading.

Question 43

Topic: Trading on the Secondary Market

A Participating Organisation’s dealer’s representative is monitoring a client’s designated Intraday Short Selling (IDSS) account.

Trading facts:

• The client sold 20,000 shares of an Approved Security in the Normal Market.
• The client has bought 15,000 shares, leaving 5,000 shares uncovered.
• The Normal Market continuous trading session remains open, and sufficient sell orders are available within the permitted price limits.
• The security is not suspended, and the client has sufficient cash and trading limit.
• A securities-borrowing arrangement is in place.
• The IDSS agreement authorises the Participating Organisation to close any remaining position before the end of the market day.

What should the dealer’s representative do next?

• A. Arrange the remaining 5,000-share purchase as a Direct Business Transaction after close and report it in the Automated Trading System.
• B. Retain the remaining 5,000-share position overnight under the borrowing arrangement and buy it back in Normal Market next day.
• C. Execute an on-market buy for the remaining 5,000 shares in Normal Market before close to complete IDSS closure.
• D. Reclassify the remaining 5,000-share position from IDSS to RSS before close and carry it through settlement.

Best answer: C

What this tests: Trading on the Secondary Market

Explanation: An IDSS position must be closed by an on-market buy on the same market day. The client still has an uncovered position of 5,000 shares, the Normal Market remains open, and sufficient sell orders and funds are available. The IDSS agreement also gives the Participating Organisation authority to complete the close-out. The securities-borrowing arrangement protects against failed delivery if the same-day close-out is unsuccessful; it does not permit the position to be intentionally carried overnight. The dealer’s representative should therefore execute the remaining buy before the market closes and ensure that the full IDSS quantity is covered.

• Carrying the position overnight breaches the same-day close-out requirement despite the borrowing arrangement.
• Reclassifying an existing IDSS position as RSS does not replace the required IDSS close-out.
• A Direct Business Transaction is outside the on-market process required to close the IDSS position.

IDSS requires the remaining short position to be closed by an on-market purchase on the same market day.

Question 44

Topic: Law of Contract

A dealer’s representative of Meranti Securities Sdn Bhd, a Participating Organisation, entered a client’s RM80,000 purchase order into Bursa Malaysia’s trading system. The order matched with an order from another Participating Organisation.

Relevant facts:

• The Bursa transaction is valid, and no basis for cancelling the market contract has been identified.
• The client disputes giving the instruction, and the available records do not establish whether express authority was given.
• The client agreement provides no margin facility or security right over shares held through Meranti’s nominee.
• Settlement is due on T+2.

As Head of Operations, what is the best next action?

• A. Settle the market contract on T+2 and fund the purchase as secured financing against the nominee-held shares.
• B. Ensure the market contract settles on T+2 while investigating the mandate and determining the client’s account liability separately.
• C. Seek cancellation of the market contract while investigating the mandate and postponing settlement until the client’s liability is established.
• D. Settle the market contract on T+2 and charge the client because the matched transaction establishes the client’s authority.

Best answer: B

What this tests: Law of Contract

Explanation: A contract concluded through Bursa Malaysia between Participating Organisations is distinct from the contractual mandate between a stockbroking company and its client. A dispute over whether the client authorised an order does not, without an applicable basis for cancellation, suspend or invalidate the Participating Organisation’s market settlement obligation. Meranti should therefore meet the T+2 obligation and separately investigate the instruction records, the representative’s authority and the client’s resulting liability. The matched transaction does not itself prove that the client gave an instruction. Payment, margin financing, custody and nominee arrangements are also separate relationships. Nominee custody alone does not create a financing facility or a security right over the client’s other securities.

• Postponing settlement incorrectly treats client authority as a condition of the separate inter-PO market obligation.
• Charging the client assumes that a valid market trade proves an authorised client instruction.
• Using nominee-held shares invents financing and security rights that the client agreement does not provide.

The inter-PO market contract remains enforceable while authority and liability under the separate broker-client mandate are investigated.

Question 45

Topic: Regulation of the Securities Industry

A compliance officer catalogues the following sources:

• Source 1: Capital Markets and Services Act 2007, enacted by Parliament.
• Source 2: Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, as amended, made under the CMSA and gazetted.
• Source 3: Rules of Bursa Malaysia Securities governing Participating Organisations.
• Source 4: Main Market Listing Requirements governing listed issuers.
• Source 5: SC Guidelines on Conduct for Capital Market Intermediaries.
• Source 6: A Bursa Malaysia practice note supplementing the Main Market Listing Requirements.
• Source 7: A signed stockbroking company-client agreement.

Which sequence correctly classifies Sources 1-7?

• A. Subsidiary legislation; primary legislation; exchange rules; listing requirements; regulatory guidelines; practice note; contractual obligations
• B. Primary legislation; subsidiary legislation; exchange rules; listing requirements; practice note; contractual obligations; regulatory guidelines
• C. Primary legislation; subsidiary legislation; exchange rules; listing requirements; regulatory guidelines; practice note; contractual obligations
• D. Primary legislation; subsidiary legislation; listing requirements; exchange rules; regulatory guidelines; practice note; contractual obligations

Best answer: C

What this tests: Regulation of the Securities Industry

Explanation: Classification depends on the source and authority of each instrument. The CMSA is an Act enacted by Parliament, making it primary legislation. An Order made under delegated power in the CMSA is subsidiary legislation. Bursa Malaysia Securities rules governing Participating Organisations are exchange rules, while the Main Market Listing Requirements govern listed issuers. SC-issued guidelines are regulatory guidelines. A Bursa Malaysia practice note remains a practice note even when it supplements binding listing requirements. A signed client agreement creates contractual obligations between its parties. Regulatory or disciplinary consequences attached to a non-statutory instrument do not convert it into legislation, and contractual terms cannot override mandatory statutory, regulatory, or exchange obligations.

• Reversing the Bursa rules and Main Market Listing Requirements confuses participant regulation with issuer listing obligations.
• Reversing the CMSA and the gazetted Order confuses legislation enacted by Parliament with legislation made under delegated authority.
• Treating an SC guideline as a practice note, a Bursa practice note as a contract, and a client agreement as a guideline misidentifies each source’s issuer and legal basis.

Each source is classified according to its issuing authority, legal basis, intended addressee, and document type.

Question 46

Topic: Take-Overs and Mergers

A CMSL holder is advising Orkid Capital on acquiring all voting shares of Melur Berhad, a Main Market listed company. The acquisition will be implemented through a court-sanctioned scheme of arrangement under the Companies Act 2016. If approved, Orkid Capital will obtain 100% control.

The transaction is not structured as a contractual take-over offer. The advisory team therefore proposes treating it solely as a Companies Act and Bursa Malaysia matter.

What is the Head of Compliance’s best response before the adviser proceeds?

• A. Treat it as a covered scheme: use CMSA statutory authority, Code principles and Rules procedures, with required engagement with the SC.
• B. Treat it as a court-only scheme: use Companies Act authority and Bursa procedures, with SC engagement deferred until after court sanction.
• C. Treat it as a private acquisition: use contractual authority and Bursa procedures, without applying the Code, Rules or SC take-over oversight.
• D. Treat it as a voluntary offer: use CMSA authority and Code principles, replace scheme procedures with offer procedures, and engage the SC.

Best answer: A

What this tests: Take-Overs and Mergers

Explanation: The transaction falls within the Malaysian take-over framework because the scheme is intended to transfer control of a listed company to Orkid Capital. Its form as a court-sanctioned scheme, rather than a contractual take-over offer, does not remove it from that framework.

The CMSA provides the statutory foundation for regulating take-overs, mergers, schemes and compulsory acquisitions. The Malaysian Code on Take-Overs and Mergers 2016 establishes the governing principles, including fair treatment and informed decision-making. The Rules provide the detailed procedural and compliance requirements. The SC administers and enforces this regulatory framework. The Companies Act court process and applicable Bursa Malaysia requirements operate alongside these obligations rather than replacing them.

• A court sanction does not postpone the SC’s regulatory role or displace the take-over framework.
• A scheme need not be converted into a voluntary contractual offer merely because both can transfer control.
• Acquiring 100% control of a listed company through a scheme is not merely a private contractual acquisition outside SC oversight.

A scheme to acquire control falls within the Malaysian take-over framework even though it is implemented through a Companies Act court process.

Question 47

Topic: Overview of the Malaysian Stock Market

Nurul instructs a dealer’s representative of Meridian Securities Sdn Bhd to purchase listed shares in an ordinary on-market transaction. Meridian Securities is both a Participating Organisation and an authorised depository agent for Nurul’s CDS account.

The order is matched through Bursa Malaysia’s trading system. On T+2, the resulting obligations must be centrally cleared and settled between the clearing participants.

Which participant is responsible for this central clearing and settlement function?

• A. Meridian Securities Sdn Bhd, as the authorised depository agent
• B. Bursa Malaysia Securities Clearing Sdn Bhd, as the clearing house
• C. Meridian Securities Sdn Bhd, as the Participating Organisation
• D. Bursa Malaysia Securities Berhad, as the securities exchange

Best answer: B

What this tests: Overview of the Malaysian Stock Market

Explanation: Malaysian securities-market responsibilities are allocated according to each participant’s capacity. Bursa Malaysia Securities Berhad operates the securities exchange and trading system through which the order is matched. Bursa Malaysia Securities Clearing Sdn Bhd performs the central clearing and settlement function for the resulting obligations between clearing participants. Meridian Securities remains responsible for handling the client’s order and fulfilling its obligations as a Participating Organisation. Its separate capacity as an authorised depository agent concerns services relating to the client’s CDS account, not central clearing between market participants.

• The securities exchange provides the market and trading system but does not perform the central clearing function described.
• The Participating Organisation handles the client order and its own settlement obligations but is not the central clearing entity.
• The authorised depository agent services the CDS account rather than clearing obligations between clearing participants.

It centrally clears and settles matched securities transactions between clearing participants.

Question 48

Topic: Take-Overs and Mergers

During a Malaysian take-over offer, a licensed adviser omits a disclosure required by the Rules on Take-Overs, Mergers and Compulsory Acquisitions.

Regulatory review:

• The SC establishes the non-compliance and directs prompt correction.
• There is no evidence of dishonesty, shareholder reliance and loss, or a breach of Bursa Malaysia’s trading rules.

Which consequence is most directly supported by these facts?

• A. Disciplinary action by Bursa suspending the adviser from securities trading
• B. Regulatory action by the SC requiring correction and issuing a reprimand
• C. Criminal punishment by the court convicting the representative of fraudulent disclosure
• D. Civil relief by the court awarding compensation to affected offeree shareholders

Best answer: B

What this tests: Take-Overs and Mergers

Explanation: A contravention of the Malaysian take-over requirements can support regulatory action by the SC, including a corrective direction or reprimand. Other consequences require additional legal foundations. Civil compensation would require an actionable civil claim supported by elements such as reasonable reliance, causation, and loss. A criminal conviction cannot arise merely from regulatory non-compliance; the relevant offence and mental element must be proved through criminal proceedings. Bursa disciplinary action requires a breach within Bursa’s jurisdiction, such as its trading, listing, or participant rules. Here, the established facts concern non-compliance with the take-over Rules supervised by the SC, while the additional foundations for civil, criminal, or Bursa disciplinary consequences are absent.

• Civil compensation is unsupported because shareholder reliance, causation, and loss have not been established.
• Criminal conviction is unsupported because the facts do not establish fraudulent conduct or criminal proceedings.
• Bursa discipline is unsupported because no breach of a Bursa trading or participant rule is identified.

The established take-over non-compliance directly supports supervisory and regulatory action by the SC.

Question 49

Topic: Overview of the Malaysian Stock Market

During a morning trading session, a Malaysian Participating Organisation records the following:

• Online clients can log in, enter orders, and receive order acknowledgements.
• Bursa Malaysia’s Automated Trading System matches eligible orders in the correct price-time sequence.
• Surveillance alerts and post-trade clearing records are generated normally.
• The online display freezes at 10:05 a.m. and shows stale bid, offer, and last-done prices until 10:17 a.m.

Which technology function was primarily impaired?

• A. Post-trade processing, which creates execution records for clearing and settlement.
• B. Electronic order entry, which captures and routes client instructions to the market.
• C. Order matching, which pairs compatible buy and sell orders by market priority.
• D. Market data dissemination, which delivers current quotations and trade information to users.

Best answer: D

What this tests: Overview of the Malaysian Stock Market

Explanation: Market data systems distribute current information such as bid prices, offer prices, last-done prices, and trading activity to market participants. Here, clients retained online access, orders were accepted, and acknowledgements were issued, so electronic order entry remained operational. Bursa Malaysia’s Automated Trading System also matched eligible orders correctly, while surveillance alerts and post-trade records continued to operate. The isolated failure was therefore the delivery of timely market data to the Participating Organisation’s online users. Accurate and timely market data supports informed order decisions, even though it performs a different function from order routing, trade matching, surveillance, clearing, and settlement.

• Electronic order entry remained operational because clients could submit orders and receive acknowledgements.
• Order matching remained operational because eligible orders were matched in the correct price-time sequence.
• Post-trade processing remained operational because clearing records were generated normally.

The frozen quotations show that current market information was not being delivered to online users.

Question 50

Topic: Capital Raising on the Primary Market

An ACE Market listed corporation is still within its required sponsorship period. It has negotiated a cash acquisition from an unrelated seller, and the highest applicable percentage ratio is 28%. The board plans to approve the final terms today.

For this transaction, the applicable ACE Market requirements provide that:

• A percentage ratio of 25% or more requires shareholder approval before completion.
• The transaction must be announced promptly once terms are agreed.
• The sponsor must guide the issuer and review the relevant announcement and circular.

What is the sponsor’s best next action?

• A. Advise the issuer to complete after board approval, announce promptly once terms are agreed, and seek shareholder ratification through a sponsor-reviewed circular.
• B. Advise the issuer to condition completion on shareholder approval, defer the announcement until the circular is ready, and submit both documents for sponsor review.
• C. Advise the issuer to condition completion on shareholder approval, announce promptly once terms are agreed, and prepare a sponsor-reviewed circular for shareholders.
• D. Advise the issuer to condition completion on sponsor approval, announce promptly once terms are agreed, and issue a sponsor-reviewed circular without convening shareholders.

Best answer: C

What this tests: Capital Raising on the Primary Market

Explanation: The acquisition has a percentage ratio above the stated 25% threshold, so the issuer must obtain shareholder approval before completing it. Board approval does not replace shareholder approval, and approval obtained after completion would not satisfy the requirement. The disclosure obligation operates separately: once the parties agree on the transaction terms, the issuer must announce the transaction promptly rather than waiting for the circular. Because the issuer remains within its sponsorship period, the sponsor must guide it through compliance and review the relevant announcement and shareholder circular. Sponsor involvement supports compliance but does not replace the shareholders’ decision.

• Delaying the announcement until the circular is ready fails the prompt disclosure requirement.
• Completing after board approval and seeking later ratification fails the requirement for prior shareholder approval.
• Sponsor approval cannot replace the shareholder approval required by the applicable percentage ratio.

The 28% ratio triggers prior shareholder approval, while prompt disclosure and sponsor oversight apply once terms are agreed.

Questions 51-60

Question 51

Topic: Capital Raising on the Primary Market

A company is conducting an initial public offering of ordinary shares on the Main Market.

Offering arrangements:

• The prospectus discloses an over-allotment and related stabilisation arrangement.
• A licensed firm is appointed as the stabilising manager.
• Purchases are limited to 30 calendar days after trading begins and may not exceed the RM2.00 offer price.
• On day 8, the stabilising manager purchases shares at RM1.95 solely to cover the disclosed over-allotment and completes the required reporting.

How should these purchases be classified?

• A. Treat the purchases as ETF market-making activity conducted by an appointed securities market maker.
• B. Treat the purchases as an issuer share buy-back conducted under the Main Market listing framework.
• C. Treat the purchases as prohibited false trading intended to create a misleading market appearance.
• D. Treat the purchases as permitted Main Market IPO price stabilisation by the appointed stabilising manager.

Best answer: D

What this tests: Capital Raising on the Primary Market

Explanation: Price stabilisation is a controlled post-IPO mechanism intended to support an orderly market while covering a disclosed over-allotment. Here, the licensed stabilising manager acts within every supplied boundary: the arrangement was disclosed, the purchase occurred during the permitted period, the RM1.95 price was below the RM2.00 offer price, the purchase covered the over-allotment, and reporting was completed. The transaction is not an issuer share buy-back because the appointed manager, rather than the issuer under a buy-back mandate, makes the purchase. It is not ETF market making because the securities are ordinary company shares. Properly conducted price stabilisation is also distinct from false trading intended to create a misleading market appearance.

• An issuer share buy-back involves the issuer acquiring its own shares under the applicable buy-back requirements.
• ETF market making concerns liquidity in exchange-traded fund units, not ordinary shares issued through this IPO.
• False trading is not established where the disclosed and limited purchases satisfy the supplied stabilisation conditions.

The disclosed purchases satisfy the stated purpose, timing, price, appointment, and reporting conditions for IPO price stabilisation.

Question 52

Topic: Capital Raising on the Primary Market

Meranti Capital is an Eligible Issuer of an unlisted structured product, but it is neither a qualified bank nor a qualified dealer. It therefore lodges through Aras Advisory, its principal adviser and identified Lodgement Party. Bayu Distribution is identified as another Responsible Party.

After the programme lodgement, Bayu discovers that the lodged product description omits an early termination condition, making the information materially incomplete.

What is Bayu’s best next action under the Lodge and Launch framework?

• A. Immediately update the investor materials and defer the SC correction until the post-issuance report.
• B. Immediately notify Aras Advisory so it can make the required revision to the lodged information.
• C. Immediately submit the correction directly to the SC because Bayu is also a Responsible Party.
• D. Immediately ask Meranti Capital to become the Lodgement Party and submit the correction itself.

Best answer: B

What this tests: Capital Raising on the Primary Market

Explanation: Each Responsible Party remains accountable for its declared role, but the Lodgement Party is responsible for lodging the required information and documents with the SC. When another Responsible Party becomes aware of a change likely to make information given to the SC or investors false, misleading, or materially incomplete, it must immediately notify the Lodgement Party so the required revision can be made. Bayu therefore reports the omission to Aras Advisory. Meranti Capital cannot lodge directly because an Eligible Issuer that is neither a qualified bank nor a qualified dealer must lodge through a principal adviser. Correcting investor materials alone does not satisfy the duty concerning materially incomplete lodged information.

• Responsible Party status does not authorise Bayu to bypass the identified Lodgement Party and lodge directly.
• Meranti cannot assume direct lodgement because it is neither a qualified bank nor a qualified dealer.
• Updating investor materials does not justify delaying the required correction of information provided to the SC.

Bayu must immediately notify the Lodgement Party when it discovers a change making lodged information materially incomplete.

Question 53

Topic: Licensing

Meridian Securities Sdn Bhd holds a Capital Markets Services Licence (CMSL) that authorises only dealing in securities. It now intends to carry on investment advice as an additional regulated activity. Its representatives will not provide investment advice until the required licensing process is completed.

What must Meridian Securities do before commencing the additional activity?

• A. Submit to the SC a fresh CMSL application replacing its dealing-in-securities licence.
• B. Submit to the SC a notification that its existing CMSL will cover investment advice.
• C. Submit to Bursa Malaysia an application to vary its CMSL to include investment advice.
• D. Submit to the SC an application to vary its CMSL to include investment advice.

Best answer: D

What this tests: Licensing

Explanation: A CMSL authorises its holder to carry on the regulated activities specified in the licence. When a CMSL holder intends to add another regulated activity, it must apply to the Securities Commission Malaysia (SC) for a variation of its CMSL and obtain approval before commencing that activity. A notification alone does not expand the licence’s scope. Bursa Malaysia regulates participating organisations and operates the securities market, but it does not grant or vary a CMSL. The existing dealing-in-securities authorisation need not be replaced merely because the firm seeks to add investment advice; the appropriate licensing response is a variation.

• A notification to the SC does not authorise an additional regulated activity.
• Bursa Malaysia does not exercise the SC’s statutory power to vary a CMSL.
• A replacement licence application is unnecessary when the required change is an expansion of the existing CMSL.

The SC must approve a variation of the CMSL before the firm carries on the additional regulated activity.

Question 54

Topic: Capital Raising on the Primary Market

Nusa ACE Berhad’s audit committee currently comprises:

• An independent non-executive chair who is a Malaysian Institute of Accountants member
• A second independent non-executive director
• The executive finance director

Which action should the board take to comply with the ACE Market Listing Requirements?

• A. Replace the executive finance director with a non-independent non-executive director, retaining both independent directors.
• B. Retain the executive finance director after obtaining written concurrence from the company’s continuing sponsor.
• C. Replace one independent director with a non-independent non-executive director, retaining the executive finance director.
• D. Retain the executive finance director and add a non-independent non-executive director to the existing committee.

Best answer: A

What this tests: Capital Raising on the Primary Market

Explanation: Under the ACE Market Listing Requirements, an audit committee must have at least three members, all of whom are non-executive directors, with a majority being independent directors. Its chair must be an independent director, and at least one member must possess the prescribed financial qualification or experience. The existing committee meets the minimum size, independence-majority, chair and financial-competence requirements. However, the executive finance director cannot serve because every member must be non-executive. Replacing that director with a non-independent non-executive director produces a three-member committee containing two independent directors while preserving the qualified independent chair.

• Replacing an independent director leaves the executive director on the committee and also removes the independent majority.
• Adding a fourth member does not cure the executive director’s ineligibility and leaves only half the members independent.
• A continuing sponsor’s concurrence cannot waive the mandatory audit committee composition requirements.

The resulting committee would comprise only non-executive directors, with a majority being independent directors.

Question 55

Topic: Clearing, Delivery, Settlement and Corporate Actions

A client instructs a Participating Organisation (PO) to buy listed shares. The PO executes the order on Bursa Malaysia, and a separate clearing participant clears the transaction through Bursa Malaysia Securities Clearing.

Which party is directly responsible for meeting the settlement obligation owed to Bursa Malaysia Securities Clearing?

• A. The buying client that placed the securities order
• B. Bursa Malaysia Securities Clearing as central counterparty
• C. The appointed clearing participant that clears the transaction
• D. The Participating Organisation that executed the client order

Best answer: C

What this tests: Clearing, Delivery, Settlement and Corporate Actions

Explanation: The clearing participant has the direct settlement relationship with Bursa Malaysia Securities Clearing for the cleared transaction. Bursa Malaysia Securities Clearing performs the clearing and central counterparty function. The PO receives and executes the client’s order and manages the client-facing account arrangements, while the client must provide the required payment or securities to the PO. Because the facts specify a separate clearing participant, neither the PO nor the client directly assumes that participant’s settlement obligation to the clearing house.

• The PO executed the order but, under the stated arrangement, does not hold the direct clearing obligation.
• The client must settle with the PO rather than directly with the clearing house.
• Bursa Malaysia Securities Clearing acts as the clearing facility and central counterparty, not the broker-side clearing participant.

The clearing participant is directly accountable to Bursa Malaysia Securities Clearing for settling the cleared transaction.

Question 56

Topic: Trading on the Secondary Market

A Participating Organisation’s intraday control report shows:

Order type: IDSS
Security status: Approved Security; trading active
Market: Normal Market
Opening sale: Executed at 10:05 a.m.
Borrowing arrangement: Active
Position at 4:30 p.m.: Short 20,000 shares
Market status: Open; on-market execution available

What operational response is required?

• A. Arrange a Direct Business Transaction today to close the remaining IDSS position.
• B. Enter an on-market buy today to close the remaining IDSS position.
• C. Carry the remaining IDSS position overnight under the active borrowing arrangement.
• D. Reclassify the remaining IDSS position as RSS before the market closes.

Best answer: B

What this tests: Trading on the Secondary Market

Explanation: Intraday Short Selling (IDSS) permits an investor to sell an Approved Security short on-market, subject to the applicable controls. The resulting short position must be closed by an on-market buy on the same market day. Here, the position remains short while the market is still open and on-market execution is available, so the Participating Organisation must ensure that a closing buy is entered before the end of the trading day. The borrowing arrangement protects against failed delivery if the position is not closed, but it does not convert IDSS into an overnight short-selling facility or remove the same-day close-out requirement.

• A Direct Business Transaction is conducted outside the Automated Trading System and does not satisfy the required on-market close-out.
• Reclassification as RSS does not cure an unclosed IDSS position or replace the required closing purchase.
• An active borrowing arrangement does not permit an IDSS position to remain open overnight.

An IDSS position must be closed by an on-market buy on the same market day.

Question 57

Topic: Business Structures

Sentosa Industries Berhad is a Malaysian public company. Its constitution states that a director appointed for a fixed term may be removed early only by special resolution.

Members have delivered valid special notice proposing the director’s removal. There is sufficient time to notify the director and members and to address the director’s representation rights.

What should the company secretary recommend as the best next action?

• A. Convene a members’ meeting for a special resolution and complete the statutory notice and representation steps.
• B. Convene a members’ meeting for an ordinary resolution and complete the statutory notice and representation steps.
• C. Amend the constitution by special resolution before convening a members’ meeting on the proposed removal.
• D. Ask the board to remove the director by board resolution and then notify members of the vacancy.

Best answer: B

What this tests: Business Structures

Explanation: A company’s constitution governs its internal powers, procedures, rights, and restrictions, but it operates subject to mandatory provisions of the Companies Act 2016. For a Malaysian public company, members may remove a director before the end of the director’s term by ordinary resolution at a meeting, notwithstanding anything contrary in the constitution or an agreement. The constitutional requirement for a special resolution therefore cannot increase the statutory voting threshold. However, the company must still comply with the applicable special-notice procedure and protect the director’s procedural rights, including notice and the opportunity to make representations. The constitution remains effective for internal matters to the extent that it is consistent with applicable law.

• Using a special resolution incorrectly treats the constitutional threshold as overriding the statutory public-company rule.
• Amending the constitution first is unnecessary because the inconsistent restriction does not prevent use of the statutory removal procedure.
• A board resolution uses the wrong decision-making body because the statutory removal power belongs to members at a meeting.

The Companies Act 2016 permits a public company to remove a director by ordinary resolution notwithstanding a contrary constitutional provision.

Question 58

Topic: Negligent Misstatement

A CMSRL holder dealing in securities receives a client’s query before an order in Kencana Biotech Berhad:

“Has the company received final regulatory approval for its new product?”

The representative replies through the firm’s recorded messaging channel:

“Yes. Final approval was announced this morning. I checked it.”

Known facts:

• The announcement stated only that an application had been submitted.
• The representative had skimmed the announcement and did not intend to deceive the client.
• Relying on the assurance, the client immediately bought 50,000 shares at RM1.80.
• The issuer clarified the next morning that approval had not been obtained. The client then sold at RM1.35.
• No other material event explains the price decline.
• The orders were authorised and executed correctly, and no contractual term governed the separate factual assurance.

What is the Head of Compliance’s best next action under Malaysian law?

• A. Treat the complaint as potential negligent misstatement, preserve the communication and trade records, and assess duty, reasonable reliance, breach, causation, and loss.
• B. Treat the complaint as suspected fraud, preserve the communication and trade records, and proceed on the basis that the incorrect assurance proves dishonest inducement.
• C. Treat the complaint as ordinary investment loss, preserve the communication and trade records, and assess only whether the client authorised the trades and received proper execution.
• D. Treat the complaint solely as contractual breach, preserve the communication and trade records, and assess whether the accurately executed orders breached the execution terms.

Best answer: A

What this tests: Negligent Misstatement

Explanation: Negligent misstatement may arise when a person assumes responsibility for a factual statement, fails to exercise reasonable care, and causes loss through the recipient’s reasonable reliance. The representative gave a specific assurance that he had checked the approval status, although he had merely skimmed the announcement. The client’s immediate purchase, stated reliance, and loss following the issuer’s clarification support investigation of reliance and causation.

Fraud is not established merely because information was wrong; dishonesty or another relevant fraudulent mental element must be supported. Contractual breach is not the primary classification because the authorised orders were executed correctly and the factual assurance was not governed by an identified contractual term. This is also more than a non-actionable opinion or an ordinary market loss because the statement concerned a verifiable fact and the facts connect it to the client’s decision and loss.

• Fraud is not established because the facts indicate carelessness rather than dishonest inducement.
• Contractual breach does not fit the identified facts because the execution obligations were performed correctly.
• Proper execution does not make the loss ordinary when a careless factual assurance caused the investment decision.

The specific but careless factual assurance apparently induced reasonable reliance and a resulting loss, supporting assessment as negligent misstatement.

Question 59

Topic: Capital Raising on the Primary Market

A Bursa Malaysia-listed company wants to preserve cash after declaring a dividend. Under an arrangement approved by shareholders:

• Every shareholder entitled to the dividend may elect to receive newly issued ordinary shares instead of cash.
• The dividend amount otherwise payable funds the elected allotment, with no additional payment required.
• Non-electing shareholders receive the cash dividend.
• The allotment increases the company’s issued share capital.

Which post-listing securities issue does this arrangement constitute?

• A. A dividend reinvestment issue applying electing shareholders’ cash dividend entitlements
• B. A bonus issue capitalising reserves for entitled existing ordinary shareholders
• C. A rights issue seeking cash subscriptions from entitled existing ordinary shareholders
• D. A private placement seeking cash subscriptions from selected approved investors

Best answer: A

What this tests: Capital Raising on the Primary Market

Explanation: A dividend reinvestment arrangement allows an entitled shareholder to apply a dividend otherwise payable in cash toward newly issued shares. It preserves cash for the issuer, involves an election by dividend-entitled shareholders, and increases issued share capital when new shares are allotted. A rights issue instead requires shareholders to subscribe for new shares using additional cash. A bonus issue generally capitalises reserves and allots shares without using a dividend entitlement as consideration. A private placement raises funds by issuing shares to selected investors rather than offering them to shareholders based on dividend entitlement. The source of consideration and eligible recipients therefore identify the arrangement as dividend reinvestment.

• A rights issue requires a separate subscription payment rather than applying a declared dividend entitlement.
• A bonus issue capitalises reserves and does not depend on a shareholder electing to reinvest a cash dividend.
• A private placement targets selected investors rather than all shareholders entitled to the dividend.

The dividend entitlement provides the consideration for new shares issued to electing shareholders.

Question 60

Topic: Capital Raising on the Primary Market

A Main Market listed company proposes to retain and motivate its workforce through a new share arrangement.

Proposed arrangement:

• New ordinary shares will be offered only to eligible employees and executive directors.
• Awards will vest based on continued service over three years.
• Recipients must pay a specified exercise or subscription price.
• Issued capital will increase only when the awards are exercised.
• Existing shareholders will receive no entitlement, and no reserves will be capitalised.
• No existing shareholder approval or mandate covers the arrangement.

What is the best next action for the company?

• A. Classify it as an employee share scheme and seek shareholder approval before implementation.
• B. Classify it as a private placement and seek a general allotment mandate before implementation.
• C. Classify it as a bonus issue and capitalise reserves for distribution to existing shareholders.
• D. Classify it as a rights issue and offer renounceable entitlements to existing shareholders.

Best answer: A

What this tests: Capital Raising on the Primary Market

Explanation: A post-listing issue is classified by its commercial purpose, eligible recipients, consideration, mandate, and effect on issued capital. Here, participation is limited to employees and executive directors, vesting depends on continued service, and recipients pay an exercise or subscription price. These features identify an employee share scheme rather than a general capital-raising exercise. Because no existing approval covers the arrangement, the company should obtain the shareholder approval required for the scheme before implementation. A rights issue would offer securities proportionately to existing shareholders, usually for consideration. A bonus issue would distribute securities to existing shareholders without payment, commonly through capitalisation of reserves. A private placement ordinarily raises capital from selected investors rather than providing service-based awards to employees.

• A private placement does not reflect the service-based vesting and workforce-retention purpose.
• A rights issue requires an entitlement offered to existing shareholders, which is absent here.
• A bonus issue involves no recipient payment and generally distributes shares to existing shareholders.

The recipients, retention purpose, vesting terms, and exercise consideration identify an employee share scheme requiring shareholder approval.

Exam snapshot

Full-length exam mix

Continue in the web app

Use Finance Prep for interactive SIDC SCLE Module 6 practice with mixed sets, timed mock exams, topic drills, explanations, and progress tracking.

Practice next step

Use the full Finance Prep practice page above for the latest review links and practice page.