Mixed Deck — All CMFAS Topics Flashcards

What is the maximum civil penalty MAS can impose for market misconduct?

Answer: $2,000,000

Under the civil penalty regime of the SFA, MAS can seek civil penalties up to $2,000,000 for market misconduct offences.

What is the prohibition against market timing abuse in financial advisory?

Answer: Advisers must not exploit time zone differences to gain unfair advantages in fund trading

Market timing abuse involves exploiting stale pricing or time zone differences in fund NAV calculations for unfair gains, which is prohibited.

What is a structured deposit?

Answer: A deposit whose return is linked to the performance of an underlying asset

A structured deposit has returns linked to the performance of underlying financial instruments like equities, interest rates, or currencies.

What does 'ex-dividend' mean?

Answer: The stock trades without entitlement to the declared dividend

When a stock goes ex-dividend, buyers after that date will not receive the declared dividend. The dividend goes to whoever held the shares before the ex-date.

Who is required to pass the CMFAS examinations?

Answer: Representatives of licensed financial institutions

Representatives who carry out regulated activities on behalf of licensed financial institutions must pass the relevant CMFAS modules.

What is a convertible term policy?

Answer: A term policy that can be converted to a permanent policy without a medical exam

A convertible term policy gives the policyholder the option to convert it to a permanent (whole life or endowment) policy without needing to prove insurability.

What is the bid price and offer price in unit trusts?

Answer: Bid is the price at which you sell units; offer is the price at which you buy units

The bid price is what you receive when selling units back to the fund. The offer price is what you pay when buying units. The difference is the spread.

What is the concept of 'leverage' as it applies to futures trading?

Answer: The ability to control a large contract value by depositing only a small initial margin

Leverage in futures arises because the margin deposit is typically a small fraction of the contract's total value, amplifying both potential gains and losses.

What is the proper procedure when a client makes a complaint?

Answer: Acknowledge, investigate, and resolve the complaint fairly and promptly

Complaints must be acknowledged promptly, investigated thoroughly, and resolved fairly. The process should be documented and the client kept informed.

What is churning in financial advisory?

Answer: Excessive trading or switching of products to generate commissions rather than benefit the client

Churning involves advising clients to make unnecessary trades or switch products primarily to generate commissions for the adviser, not to benefit the client.

What is a whole life insurance policy?

Answer: A policy that provides lifelong coverage and may accumulate cash value

Whole life insurance provides coverage for the insured's entire lifetime and typically includes a savings component that builds cash value over time.

Under MAS Notice SFA 02-N02, what is required before a futures broker can execute transactions for a client?

Answer: The client must have a properly completed account opening form and signed risk disclosure documents

Futures brokers are required to complete proper know-your-client (KYC) procedures, obtain signed risk disclosure statements, and complete account opening documentation before executing any trades.

What is switching in unit trusts?

Answer: Moving your investment from one fund to another within the same fund house

Switching allows unitholders to move their investment from one fund to another managed by the same fund manager, often at a reduced fee.

What happens when a life insurance policyholder stops paying premiums?

Answer: The policy may lapse or become paid-up depending on its type and cash value

If premiums stop, the policy enters a grace period. After that, it may lapse or, if it has sufficient cash value, be converted to a paid-up policy with reduced benefits.

What is 'market manipulation' under the SFA?

Answer: Artificially influencing the price or volume of securities

Market manipulation involves actions designed to create a false or misleading appearance of trading activity or to artificially affect the price of securities.

What is the cooling-off period for certain investment products in Singapore?

Answer: A period during which the investor can cancel the investment without penalty

The cooling-off period allows investors a short window (typically 7 calendar days) to review and cancel certain investment products without financial penalty.

What is a treasury bill (T-bill)?

Answer: A short-term government debt instrument issued at a discount

Treasury bills are short-term government securities issued at a discount to face value and redeemed at par upon maturity, typically within one year.

What is the 'know your client' (KYC) requirement?

Answer: Verifying the client's identity and understanding their financial profile

KYC requires financial institutions to verify clients' identities, assess their financial profiles, and understand their investment needs and risk tolerance.

What is a debenture?

Answer: An unsecured bond backed only by the issuer's creditworthiness

A debenture is an unsecured debt instrument backed only by the issuer's reputation and creditworthiness, not by specific collateral.

What is a risk-based approach to AML?

Answer: Allocating resources and applying measures proportionate to the assessed risk level

A risk-based approach means applying AML measures proportionate to the level of risk identified — higher risk warrants more intensive measures.