SCA Market Conduct and Compliance

Question 1

What constitutes insider trading under SCA regulations?

Accepted Answer

Trading securities based on material non-public information obtained through a privileged position, or tipping others to trade on such information

Answer

SCA regulations define insider trading as buying or selling securities based on material non-public information, or communicating such information to others for trading purposes, both carrying severe penalties.

Question 2

What is market manipulation as defined by the SCA?

Accepted Answer

Artificial interference with the free formation of prices through false or misleading practices such as wash trading, spoofing, or disseminating false information

Answer

Market manipulation includes creating misleading market activity through wash trades (trading with yourself), spoofing (placing and canceling orders), disseminating false information, and any scheme to artificially influence security prices.

Question 3

What disclosure requirements does the SCA impose on major shareholders?

Accepted Answer

Major shareholders must disclose when their holdings cross specified thresholds (typically 5%), report changes in holdings, and disclose any trading by board members

Answer

SCA requires disclosure when shareholdings cross specified thresholds (typically 5% and subsequent increments), timely reporting of changes in holdings, and mandatory disclosure of all trading by directors and senior management.

Question 4

What AML/CFT obligations does the SCA impose on securities market participants?

Accepted Answer

Customer due diligence, ongoing monitoring, suspicious transaction reporting to FIU, record keeping, and compliance officer appointment

Answer

SCA-regulated firms must implement comprehensive AML/CFT programs: customer due diligence and KYC, ongoing transaction monitoring, suspicious activity reporting to the FIU, record retention, staff training, and MLRO appointment.

Question 5

What conduct of business rules does the SCA establish for licensed firms?

Accepted Answer

Fair dealing, best execution obligation, suitability assessments, conflict of interest management, client communication standards, and complaints handling procedures

Answer

SCA conduct rules require: fair dealing with all clients, best execution when handling orders, product suitability assessment, managing and disclosing conflicts of interest, clear client communication, and formal complaints procedures.

SCA Practice Test

SCA Practice Test

SCA Market Conduct and Compliance