CME-3B: Saudi Capital Market Rules and Regulations – Brokers Sample Paper

Q: Are these CME-3B: Saudi Capital Market Rules and Regulations – Brokers sample questions updated for 2026?

Yes, these free practice questions are continuously reviewed and updated to reflect the latest official syllabus changes and regulatory requirements for candidates in Saudi Arabia.

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Q: What is the pass mark for the CME-3B: Saudi Capital Market Rules and Regulations – Brokers certification?

While the pass mark can vary slightly by specific exam versions, most CISI exams require a score of 70% to pass. We recommend consistently scoring 80% or higher on our practice question bank before sitting for your real test in Saudi Arabia.

Q: Can I take this free mock exam multiple times?

Yes, you can retake this 30-question sample paper as many times as you like. However, to ensure comprehensive preparation and avoid simply memorizing answers, we highly recommend unlocking our full premium question bank which features over 500 unique scenario-based practice questions.

Question 1

Under general conduct of business principles, Capital Market Institutions must act with 'independence'. This primarily means they should:

Accepted Answer

Avoid conflicts of interest and not let external pressures or personal interests influence client advice or execution.

Answer

Operate completely separate from regulatory oversight.

Answer

Require clients to make all investment decisions without any guidance from the firm.

Answer

Refuse to execute trades for clients who use other brokerages.

Question 2

A broker receives a client order to sell a large block of shares. The broker knows this will depress the market price. The broker quickly sells their own holding of the same shares before entering the client's order. This action is known as:

Accepted Answer

Front-running

Answer

Market timing

Answer

Best execution

Answer

Churning

Question 3

Review Question 13: In the context of Capital Market Institutions' Conduct (Chapter 2), which of the following best defines 'churning'?

Accepted Answer

Question 4

Why is 'painting the tape' considered a deceptive act?

Accepted Answer

It creates an artificial appearance of trading volume or price, misleading other investors.

Answer

It involves executing trades at off-market prices to minimize tax liabilities.

Answer

It allows insiders to trade prior to the public release of financial results.

Answer

It involves altering official market records after trades have been settled.

Question 5

According to the principles of handling client orders, 'best execution' requires Capital Market Institutions to:

Accepted Answer

Achieve the most favourable terms possible overall, considering price, costs, speed, likelihood of execution, and settlement.

Answer

Always secure the absolute lowest purchase price for a security, regardless of the time it takes.

Answer

Execute all trades exclusively through the primary national exchange.

Answer

Guarantee a profit for the client on every trade executed.

Question 6

A broker is accused of 'churning' a client's account. Which factor is most critical in determining whether churning has actually occurred?

Accepted Answer

The trades being excessive relative to the client's investment objectives purely to generate commissions.

Answer

The broker executing trades without the client's prior written consent.

Answer

The client losing money over a continuous three-month period.

Answer

The total number of trades exceeding 50 per month.

Question 7

In an exam scenario, a broker executes 20 trades in a day for a day-trading client whose stated objective is high-frequency speculative trading. The trades generate significant commission. Is this churning?

Accepted Answer

No, because the trading volume aligns with the client's stated high-frequency speculative objectives.

Answer

Yes, because 20 trades in one day is always considered excessive.

Answer

No, because churning only applies to institutional accounts.

Answer

Yes, because the primary outcome was generating significant commission for the broker.

Question 8

Scenario 24: Regarding gifts and inducements under Capital Market Institutions' Conduct (Chapter 2), what is the general principle a CMI must adhere to?

Accepted Answer

Question 9

Mock Problem 5: Under Market Conduct Regulations, what are the criteria for inside information?

Accepted Answer

Question 10

What obligation do Capital Market Institutions (CMIs) have regarding market manipulation and insider trading?

Accepted Answer

They must establish robust policies and procedures to detect and prevent it among employees and clients.

Answer

They are only responsible if the manipulation is committed by their own senior management.

Answer

They must report it to the media to ensure public transparency.

Answer

They must personally compensate any market participant who suffers a loss due to manipulation.

Question 11

Which of the following scenarios is an example of circulating unverified stories?

Accepted Answer

A trader posting a fabricated story on social media about a company's imminent bankruptcy to lower its stock price.

Answer

An analyst issuing a buy recommendation based on public financial statements.

Answer

A journalist publishing a well-researched article based on official public company filings.

Answer

A company releasing a formal press release announcing an upcoming product launch.

Question 12

Scenario 8: Regarding gifts and inducements under Capital Market Institutions' Conduct (Chapter 2), what is the general principle a CMI must adhere to?

Accepted Answer

Question 13

A fund manager promises a broker a luxury car if the broker prioritizes the fund's orders over all retail client orders. What regulatory issue does this scenario present?

Accepted Answer

It violates rules regarding inducements and gifts, creating a conflict of interest that impairs duty to other clients.

Answer

It is an acceptable practice known as 'payment for order flow'.

Answer

It is a legitimate business transaction as long as it is declared to the tax authorities.

Answer

It only violates regulations if the luxury car is given before the orders are executed.

Question 14

Review Question 9: In the context of Capital Market Institutions' Conduct (Chapter 2), which of the following best defines 'churning'?

Accepted Answer

Question 15

Mock Problem 18: A broker receives a large order for a client. The broker buys the same stock for their personal account just before executing the client's order. This is known as:

Accepted Answer

Question 16

Review Question 19: In the context of Capital Market Institutions' Conduct (Chapter 2), which of the following best defines 'churning'?

Accepted Answer

Question 17

Review Question 12: Regarding Market Conduct Regulations (Chapter 1), what constitutes a fictitious trade?

Accepted Answer

Question 18

Which of the following is an accurate statement regarding inside information?

Accepted Answer

Inside information must relate directly to a security or an issuer.

Answer

Inside information loses its status as soon as a single external analyst deduces it.

Answer

Information regarding macroeconomic indicators is always considered inside information.

Answer

Information must be publicly verifiable to be considered inside information.

Question 19

Review Question 23: In the context of Capital Market Institutions' Conduct (Chapter 2), which of the following best defines 'churning'?

Accepted Answer

Question 20

When a Capital Market Institution handles client orders, what does 'prompt and fair allocation' mean?

Accepted Answer

Ensuring that orders are executed and allocated to client accounts without undue delay and on an equitable basis.

Answer

Promptly allocating trades only to clients who pay premium subscription fees.

Answer

Allocating profitable trades to preferred clients and losing trades to retail clients.

Answer

Delaying execution until the end of the day to average out the price for all clients.

Question 21

Review Question 11: In the context of Capital Market Institutions' Conduct (Chapter 2), which of the following best defines 'churning'?

Accepted Answer

Question 22

Scenario 16: Regarding gifts and inducements under Capital Market Institutions' Conduct (Chapter 2), what is the general principle a CMI must adhere to?

Accepted Answer

Question 23

Review Question 22: Regarding Market Conduct Regulations (Chapter 1), what constitutes a fictitious trade?

Accepted Answer

Question 24

A Capital Market Institution (CMI) is offered a lucrative commission rebate from an execution venue if they route all client orders to them, regardless of the price offered. If the CMI accepts, which principle are they primarily violating?

Accepted Answer

Best execution

Answer

Painting the tape

Answer

Prompt allocation

Answer

Client confidentiality

Question 25

A company executive knows their firm is about to lose a major contract. Before the news is public, they tell their spouse not to buy any shares in the company, though the spouse had planned to. Has a violation occurred?

Accepted Answer

Yes, because encouraging someone not to trade based on inside information is generally considered a violation.

Answer

No, because spouses are exempt from insider trading regulations.

Answer

Yes, but only if the spouse tells someone else about the lost contract.

Answer

No, because insider trading rules only apply to the active buying or selling of shares.

Question 26

A trader attempts to manipulate the market price of a stock by aggressively bidding up the price. However, the broader market ignores the bids, and the stock price remains unchanged. Has the trader committed a regulatory violation?

Accepted Answer

Yes, because attempted market manipulation is equally prohibited under the regulations.

Answer

No, because aggressive bidding is a standard market-making practice.

Answer

No, because the attempt to manipulate the market failed and the price did not change.

Answer

Yes, but only if the trader subsequently profits from a short position.

Question 27

Market Conduct Regulations prohibit a person from engaging in manipulative acts. Which of the following is specifically cited as a prohibited action?

Accepted Answer

Creating artificial price levels.

Answer

Refusing to execute a suspicious client order.

Answer

Providing best execution for a retail client.

Answer

Allocating trades promptly and fairly.

Question 28

What are the potential consequences for firms and individuals who violate the Market Conduct Regulations?

Accepted Answer

Significant fines and potential imprisonment.

Answer

Mandatory retraining and a temporary suspension of trading licenses.

Answer

Repayment of profits only, with no additional penalties.

Answer

Only a written warning for first-time offenders.

Question 29

Scenario 3: A person attempts to artificially manipulate the price of a stock but ultimately fails because the market moves against them. According to Market Conduct Regulations:

Accepted Answer

Question 30

Which of the following best represents the general conduct of business principles expected of Capital Market Institutions?

Accepted Answer

Acting with integrity, independence, and avoiding conflicts of interest.

Answer

Prioritizing institutional clients over retail clients and ensuring minimum trading volumes.

Answer

Maximizing firm profits at all costs, aggressive marketing, and leveraging insider information.

Answer

Maintaining public relations, aggressively matching orders, and ignoring settlement risks.

CME-3B: Saudi Capital Market Rules and Regulations – Brokers Free Sample Paper & Question Bank

Under general conduct of business principles, Capital Market Institutions must act with 'independence'. This primarily means they should:

CME-3B: Saudi Capital Market Rules and Regulations – Brokers

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