CISI UAE FRR Market Conduct Rules 1 — Questions and Answers
Question 1: Under UAE SCA regulations, 'insider trading' occurs when a person trades on:
- Material non-public information about a listed company (Correct answer)
- Publicly available analyst reports
- Information from general market commentary
- News published in financial newspapers
Correct answer: Material non-public information about a listed company
Insider trading involves using material, non-public information — to which a person has access by virtue of their position — to trade in securities, gaining an unfair advantage over other market participants.
Question 2: The SCA's Market Conduct Regulations define 'market manipulation' to include:
- Transactions or orders that create a false or misleading impression of supply, demand, or price (Correct answer)
- Any trading activity that results in profit
- Short selling of securities
- Trading after market hours
Correct answer: Transactions or orders that create a false or misleading impression of supply, demand, or price
Market manipulation includes actions designed to artificially influence security prices or create false impressions of market activity, including wash trading, painting the tape, and fictitious orders.
Question 3: Under UAE market conduct rules, 'front running' involves:
- A broker trading for their own account before executing a large client order to benefit from the price movement (Correct answer)
- A firm releasing research before the market opens
- Placing orders immediately after market opening
- Trading securities on behalf of foreign clients
Correct answer: A broker trading for their own account before executing a large client order to benefit from the price movement
Front running is a form of market abuse where a broker trades for their own account ahead of executing a large client order, knowing the client's order will move the market price in a predictable direction.
Question 4: The 'Chinese Wall' in UAE financial institutions is a:
- Information barrier between investment banking and trading/research departments (Correct answer)
- Firewall protecting IT systems from cyber attacks
- Physical security barrier in trading floors
- Regulatory reporting system
Correct answer: Information barrier between investment banking and trading/research departments
Chinese Walls (information barriers) are organisational and procedural controls preventing the flow of material non-public information between different departments, preventing misuse of inside information.
Question 5: Under SCA regulations, companies must announce material price-sensitive information:
- Immediately upon becoming aware, before trading recommences (Correct answer)
- Within 30 days of the information arising
- In the annual report only
- After market close on the day of discovery
Correct answer: Immediately upon becoming aware, before trading recommences
Companies must disclose material price-sensitive information (earnings, M&A, major contracts) immediately and simultaneously to all market participants, ensuring equal access and preventing insider advantage.
Question 6: UAE market conduct rules on 'short selling' require:
- Disclosure of significant net short positions and compliance with approved short selling frameworks (Correct answer)
- Complete prohibition of all short selling
- Short selling only through designated broker-dealers
- Approval of each short sale by the SCA
Correct answer: Disclosure of significant net short positions and compliance with approved short selling frameworks
Regulated short selling is permitted in UAE markets subject to disclosure requirements, approved securities lists, and compliance with SCA frameworks, balancing market efficiency with protection against abusive short selling.
CISI UAE FRR Market Conduct Rules 1
Under UAE SCA regulations, 'insider trading' occurs when a person trades on: