CME-4B: Saudi Capital Market Rules and Regulations – Asset Managers Sample Paper

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Question 1

A real estate investment fund has reached the end of its offering period but failed to raise the minimum required capital. What is the maximum timeframe allowed to return the collected amounts to the subscribers?

Accepted Answer

Within 5 days

Answer

Within 3 days

Answer

Within 15 days

Answer

Within 10 days

Question 2

If a person arranges a trade to which their relative is a party, this is considered:

Accepted Answer

Indirect trading

Answer

Direct trading

Answer

Dealing ahead

Answer

Wash trading

Question 3

According to the Real Estate Investment Funds Regulations, what is the minimum number of directors required on the board of a public real estate fund?

Accepted Answer

3 directors

Answer

2 directors

Answer

5 directors

Answer

4 directors

Question 4

A public fund has recently completed its first half-year of operations. How must its interim financial statements be prepared and presented?

Accepted Answer

In Arabic and reviewed by an independent auditor.

Answer

In Arabic and fully audited by an independent auditor.

Answer

In English and fully audited by an independent auditor.

Answer

In English and reviewed by an independent auditor.

Question 5

A public investment fund acquires a commercial real estate property. To comply with CMA regulations, how must the title deed of this property be registered?

Accepted Answer

In the name of a fully owned company of the custodian

Answer

In the name of the fund board

Answer

In the name of the fund manager

Answer

In the name of the unitholders

Question 6

Unless a real estate fund is structured as a Special Purpose Entity (SPE), how must the ownership of the fund's real estate assets be legally registered?

Accepted Answer

In the name of a fully owned company of the custodian

Answer

In the name of the fund manager

Answer

Jointly in the names of the unitholders

Answer

In the name of an independent third-party developer

Question 7

When is a CMI permitted to trade contrary to its own active investment recommendation?

Accepted Answer

If the CMI has reasonable grounds to do so.

Answer

Only when trading on behalf of retail clients.

Answer

It is strictly prohibited under any circumstances.

Answer

If the CMI notifies the Exchange immediately.

Question 8

How frequently is the board of a public real estate fund required to meet with the fund's compliance officer?

Accepted Answer

At least twice annually

Answer

At least once every quarter

Answer

At least once a year

Answer

At least once every month

Question 9

A fixed-term public investment fund reaches its expiry date, but several illiquid assets remain unsold in the portfolio. What is the maximum timeframe permitted for the fund manager to complete the liquidation of these assets and distribute the proceeds?

Accepted Answer

6 months from the fund expiry date

Answer

The fund must be extended indefinitely

Answer

12 months from the fund expiry date

Answer

3 months from the fund expiry date

Question 10

An independent custodian is appointed for three different public funds managed by the same fund manager. To simplify administration, the custodian proposes opening a single omnibus bank account for all three funds. Is this allowed?

Accepted Answer

No, the custodian must open a separate bank account for each individual fund.

Answer

Yes, if the funds share similar investment objectives.

Answer

No, the fund manager must open the bank accounts, not the custodian.

Answer

Yes, provided the fund manager agrees in writing.

Question 11

How is insider trading defined under the Market Conduct Regulations?

Accepted Answer

Trading on non-public information that a normal person would realise has a material price effect.

Answer

Buying and selling through accounts with the same ultimate owner.

Answer

Making a bid or offer on the Exchange.

Answer

Trading contrary to a CMI's own investment recommendation.

Question 12

What is the minimum frequency at which the Net Asset Value (NAV) of a public real estate fund must be calculated?

Accepted Answer

At least every 6 months

Answer

Daily

Answer

At least every month

Answer

At least every quarter

Question 13

Which entity is legally responsible for maintaining the original title deeds, material contracts, and accredited valuers' reports for a public real estate fund?

Accepted Answer

The custodian

Answer

The fund manager

Answer

The fund's board of directors

Answer

The Capital Market Authority

Question 14

A large financial institution operates a licensed fund management subsidiary and a separate CMA-licensed custody subsidiary. The fund management subsidiary wants to appoint the custody subsidiary to hold its new public fund's assets. Is this permitted under the Investment Fund Regulations?

Accepted Answer

No, because the custodian must not be an affiliate of the fund manager.

Answer

Yes, provided both entities are CMA-licensed.

Answer

Yes, as long as it is disclosed in the terms and conditions.

Answer

No, because a fund manager must act as its own custodian.

Question 15

A fund manager voluntarily decides to terminate a public investment fund. What is the minimum notice period the manager must provide to unitholders and the Authority before the intended termination date?

Accepted Answer

21 days

Answer

70 days

Answer

5 days

Answer

10 days

Question 16

What is the maximum permissible borrowing limit (leverage) for a public real estate investment fund?

Accepted Answer

50% of the fund's total asset value

Answer

30% of the fund's Net Asset Value (NAV)

Answer

75% of the fund's total asset value

Answer

50% of the fund's Net Asset Value (NAV)

Question 17

How long must a CMI retain the records of its decision to refuse a suspicious client order?

Accepted Answer

10 years

Answer

5 years

Answer

7 years

Answer

3 years

Question 18

A fund manager is establishing a new public fund and is structuring the fund board. What is the minimum number of directors required for a public fund board?

Accepted Answer

3 directors

Answer

5 directors

Answer

2 directors

Answer

7 directors

Question 19

A fund manager sells several equities within the fund's portfolio, resulting in a large uninvested cash balance. Where must this uninvested cash be held?

Accepted Answer

In the custodian's segregated bank account designated for the fund

Answer

It must be immediately reinvested; uninvested cash is prohibited

Answer

In a short-term deposit account in the fund manager's name

Answer

In the fund manager's corporate account

Question 20

A client invests in a public investment fund and subsequently asks the fund manager who legally owns the underlying securities in the fund's portfolio. What is the correct response?

Accepted Answer

The unitholders collectively

Answer

The fund manager

Answer

The appointed custodian

Answer

The Capital Market Authority (CMA)

Question 21

Which of the following provides a valid defence for an investor whose agent engaged in insider trading on their behalf?

Accepted Answer

The investor took reasonable steps to prevent the violation.

Answer

The investor reported the trade to the CMI within 10 days.

Answer

The investor did not personally profit from the trades.

Answer

The investor had no knowledge of the specific security traded.

Question 22

If a CMI decides to refuse a client order due to suspected insider trading, within what timeframe must it notify the Authority?

Accepted Answer

Within 3 days

Answer

Within 5 days

Answer

Within 10 days

Answer

Immediately

Question 23

Which action is explicitly classified as direct trading?

Accepted Answer

Making a bid or offer on the Exchange for the security.

Answer

Acting as an attorney-in-fact for another person.

Answer

Arranging a trade to which a relative is party.

Answer

Giving inside information to a third party.

Question 24

Which of the following best describes the primary capacity in which a fund manager must act for unitholders under the Investment Fund Regulations?

Accepted Answer

In a fiduciary capacity

Answer

In an advisory capacity

Answer

In an agency execution capacity

Answer

In a strictly administrative capacity

Question 25

Which of the following is NOT one of the permitted purposes for a real estate investment fund in Saudi Arabia?

Accepted Answer

Acquiring raw 'white lands' for long-term speculative capital appreciation

Answer

Construction development followed by selling the real estate

Answer

Initial development followed by selling the real estate

Answer

Investing in constructionally developed real estate to generate periodic rental income

Question 26

A specific event clearly outlined in a fund's terms and conditions has just occurred, which automatically triggers the fund's termination. What action must the fund manager take regarding notification?

Accepted Answer

Notify the Authority and unitholders in writing within 5 days of the event.

Answer

Notify the Authority and unitholders at least 21 days before initiating termination.

Answer

Cease all trading immediately and notify the Authority within 70 days.

Answer

Publish a termination report on their website within 10 days.

Question 27

Once accredited valuers issue their property valuation reports for a public real estate fund, what is the deadline for publishing these reports on the relevant websites?

Accepted Answer

Within 15 days of the issue date

Answer

Within 10 days of the issue date

Answer

Within 30 days of the issue date

Answer

Within 5 days of the issue date

Question 28

A fund manager wishes to pledge a real estate asset owned by the fund as collateral to secure an external credit facility. Under what specific condition is this pledging permitted?

Accepted Answer

It can only be pledged to a licensed lender that has extended a loan to the fund.

Answer

It can only be pledged to the fund's appointed custodian.

Answer

It can be pledged to any CMA-licensed financial institution.

Answer

Real estate assets owned by a fund can never be pledged under any circumstances.

Question 29

A client buys and sells the same security through different accounts they own to artificially inflate the trading volume. What is this practice called?

Accepted Answer

Wash trading

Answer

Dealing ahead

Answer

Indirect trading

Answer

Tipping off

Question 30

Following the completion of an investment fund's termination process, the fund manager is required to provide a final report, including audited financial statements. What is the deadline for this submission?

Accepted Answer

Within 70 days of completion

Answer

Within 5 days of completion

Answer

Within 21 days of completion

Answer

Within 30 days of completion

CME-4B: Saudi Capital Market Rules and Regulations – Asset Managers Free Sample Paper & Question Bank

A real estate investment fund has reached the end of its offering period but failed to raise the minimum required capital. What is the maximum timeframe allowed to return the collected amounts to the subscribers?

CME-4B: Saudi Capital Market Rules and Regulations – Asset Managers

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