Ethics and Professional Standards (1 - 21)
1.
A material change has occurred in the financial status of one of your best customers.
As a member of CIS, what should you do?
A.
Do nothing.
B.
Update the client’s accounts information file.
C.
Notify your firm’s compliance officer.
D.
Require your client to open a new account with a new account form and financial statements.
2.
You are a dealing clerk in the employment of ABC Stockbrokers. A customer wants to execute a purchase transaction in his account that you consider an inappropriate investment considering the customers financial situation and needs. What is the most appropriate action you would take?
A.
Check with your supervisor before entering the other.
B.
Execute the trade only after obtaining written approval from your supervisor.
C.
Refuse to enter the order.
D.
Execute the trade only after advising the client accordingly and getting a written instruction from him.
3.
Can a stockbroker guarantee return on investment to their customers?
A.
No, under no circumstances.
B.
Yes, if he uses realistic projections.
C.
Yes, provided the transaction is for an amount less than N100,000
D.
Yes provided it is a transaction in Federal Government Bonds.
4.
Solomon Wise is a financial analyst with ABC Stockbrokers. He is preparing a purchase recommendation on PQR Limited stocks. Which of the following situations is least likely to represent a conflict of interest for Solomon that would have to be disclosed?
A.
Solomon is a part-time consultant to PQR Limited.
B.
ABC holds for its own accounts a substantial ordinary shares position in PQR.
C.
Solomon’s cousin is a supplier to PQR Limited.
D.
Solomon has material beneficial ownership of PQR through a family trust.
5.
Stella has been hired by Rock Close Pensions Fund Administrators Limited to manage its pension funds. Stella’s fiduciary duty is owed to:
A.
The management of Rock Close PFA Limited.
B.
The shareholders of Rock Close PFA Limited.
C.
The beneficiaries of Rock Close PFA Limited.
D.
Each of the above equally.
6.
Which of the following statements best describe conflict of interest?
A.
A tension between two employees of the same organization.
B.
A tension between competing obligations and responsibilities.
C.
Having the same obligations and responsibilities as another party.
D.
Not to worry about someone else’s interest if it competes with your own.
7.
Which of the following statements is incorrect under the CIS Code and Standards?
A.
CIS members cannot under any condition receive compensation or benefit in respect of services provided to clients.
B.
CIS members need written consent from their employer to permit independent practice that could result in compensation or other benefit in competition with a member’s employer.
C.
Prior to leaving an employer to work for another firm or start an independent practice, CIS members may not contact their clients to solicit their business for the new venture.
D.
CIS Members are allowed to make arrangements or preparations to go into a competitive business before terminating their relationship with their employer, as long as this does not breach their duty of loyalty.

8.
A stockbroking firm wishes to build a "firewall" between its research and investment management operations to avoid a violation of the provisions of the CIS Code and
Standards on material non-public Information. All of the following elements are vital to building an effective firewall, except:
A.
Interdepartmental communications are filtered through the legal or compliance department.
B.
Employees in possession of material non-public information must immediately place the affected stock on a restricted trading list, with all departments being bound by this list.
C.
Employees trading records must be forwarded to the compliance department.
D.
Employees may be permitted to work in both departments, so long as they are willing to promise (in writing) not to communicate sensitive information to the wrong department.
9.
Which of the following compliance procedures would be effective in enforcing insider trading rules?
I.
A member or registered student who has insider information must inform a supervisor of that fact before doing any trading in that security.
II.
There should be a firewall between the research department and the marketing division of a brokerage firm.
III.
There should be no overlap of even support personnel between the corporate finance department and the brokerage side.
IV.
If a member comes into the possession of inside information then the member's only duty is inform his or her supervisor and refrain from trading.
A.
I and III only
B.
I, II, III and IV only
C.
II, III and IV only
D.
I and IV only
10.
Babayo Boyo, a CIS member, works in the research department of a stockbroking firm where he covers the manufacturing industry. There is a tremendous amount of industry information that is available. In preparing a report on the industry, Babayo must acknowledge all sources of information except in the case where:
A.
The conclusions are his own.
B.
The report is intended to remain only within the firm.
C.
The report is submitted to other analysts.
D.
The information is obtained from recognized financial and statistical reporting services.
11.
Charlie, a graduate member of CIS, works as a marketing officer for Wonders
Investment Advisers. On Monday, Wonders’ research department publishes a negative research report on XYZ Limited. On Tuesday, Charlie's best customer sends in an order to buy 5,000 shares of XYZ in an account where the volume of trading is high. How should Charlie handle this situation?
A.
Take the order based on the customer’s verbal authorization.
B.
Take the order only after obtaining a signed written authorization.
C.
Refuse to take the order.
D.
Take the order but first advise the client of the negative research.
12.
Under what condition should a broker act in the best interest of its clients?
A.
Only if the client’s interest does not conflict with its own.
B.
The broker should always look after itself first.
C.
Irrespective of the circumstance, the broker should act in the client’s best interest.
D.
Only if it is consistent with the internal policy of the firm.

13.
Which of the following is not a procedure of compliance with respect to the standard
“independence and objectivity”?
A.
Protecting the integrity of opinion.
B.
Not offering, soliciting or accepting gift, benefit, compensation that could compromise them.
C.
Not allowing their own securities ownership and personal transactions to inhibit the fairness of their analysis and recommendations.
D.
Reporting unethical trading behaviour.
14.
Which of the following is critical to maintaining the public trust in financial markets and in the investments profession?
A.
High ethical standards and professional conduct.
B.
Effective regulatory monitoring and compliance.
C.
Transparency and accountability.
D.
All of the above.
15.
According to the CIS Code and Standards, an investment adviser should update his knowledge about a client’s circumstances at least:
A.
Every six months.
B.
Every twelve months.
C.
Every eighteen months.
D.
Every twenty four months.
16.
Which of the following statements about the CIS Code of Ethics and Standards of
Professional Conduct for Stockbrokers is correct?
A.
It applies only to CIS associates and fellows.
B.
It applies to all members who voluntarily subscribe to it.
C.
It applies in its entirety to all CIS members irrespective of their location.
D.
It applies to all CIS members, except where a member is practicing outside
Nigeria.
17.
In the event of conflict of provisions, CIS members must comply with which of the following laws, rules, regulation, code or standards?
A.
SEC Rules.
B.
NSE Trading Rules.
C.
CIS Codes of Ethics and Standards of Professional Conduct.
D.
The strictest of the above regulations.
18.
Which of the following statements is correct about how to handle a client’s instruction?
A.
A client’s instruction should be adhered to always.
B.
A client’s instruction should be adhered to only if the representative thinks the client knows what he is doing.
C.
A client’s instruction should be adhered to only if the act will not interfere with what the member wants to do.
D.
A client’s instruction should be adhered to at all times unless it is suspected that the client wants to do something illegal.
19.
Which of the following is not likely to be a factor that would enable a board of directors to exercise its duty to act in the best long-term interest of stakeholders?
A.
Sufficiently empowering the Chairman/CEO to take major decisions.
B.
Ensuring the independence of the board.
C.
Getting people with sufficient experience on the board.
D.
Ensuring adequate disclosure and transparency.

20.
According to the Codes and Standards, which of the following best describes appropriate conduct related to the acceptance of gifts from clients?
A.
Members may accept gifts so long as their market value is less than N1,000.
B.
Members cannot accept gifts under any circumstances, in order to avoid even the appearance of a conflict.
C.
Members cannot accept gifts under any circumstances, because research has shown that any gift, large or small, impairs ethical judgment.
D.
Members may accept gifts from clients if they are disclosed and if the employer finds that the gifts will not affect independence and objectivity.
21.
Bola Ogun, ACS, is a General Manager at Danmus Securities Limited. She assures a prospective client who has just inherited N10 million that “we can perform all the financial and investment services you need.” Danmus is well equipped to provide investment services, but cannot provide financial services. Bolatito has violated the
Code and Standards on:
A.
Objectivity.
B.
Integrity.
C.
Misrepresentation.
D.
Manipulation.
Law Relating to Securities and Investments (22 - 39)
22.
Trespass is one of the oldest Torts. Which of the following is not categorized as a trespass to the person?
A.
Assault.
B.
False Imprisonment.
C.
Detinue.
D.
Battery.
23.
For how many years shall a financial institution preserve the record of customers’ identification, or transaction, under the provisions of the Money Laundering Act
2004?
A.
12 years.
B.
10 years.
C.
8 years.
D.
5 years.
24.
A Will takes affect after the death of which of these parties?
A.
Administrator.
B.
Executor.
C.
Testator.
D.
Beneficiary.
25.
Which of the following is not a negotiable instrument?
A.
Postal Orders.
B.
Dividend Warrants.
C.
Share Certificates.
D.
Bills of Exchange.
26.
A merchantile agent who has possession of goods, with an implied authority to sell them in his name is called:
A.
A del credere agent.
B.
A factor.
C.
A broker.
D.
An auctioneer.

27.
Who is referred to as an ‘executor de son tort’?
A.
A person who refuses to act as an executor even though duly appointed.
B.
A person who is opposed by the beneficiaries even though duly appointed by the
Will.
C.
A person who is not appointed by the will as an executor but is directed to perform certain acts.
D.
A person who is not lawfully appointed an executor but who intrudes into the estate of the deceased.
28.
A drawee who indicates a willingness to honour the obligation contained in a bill of exchange is called.
A.
Acceptor.
B.
Obligator.
C.
Drawee.
D.
Endorser.
29.
When two offers identical in terms are sent by two parties to each other, what type of offer arises?
A.
Counter offer.
B.
Revocation of offer.
C.
Acceptance.
D.
Cross offer.
30.
With respect to floating charges, which of these statements is incorrect?
Crystallization occurs when:
A.
The company defaults on the debenture agreement.
B.
The debenture holder appoints a receiver or manager or enters into possession of the assets as stipulated in the trust deed.
C.
The court appoints a receiver or manager for such assets on the application of the debenture holder.
D.
The company goes into liquidation.
31.
Which of the following is NOT a means of creating an agency?
A.
By agreement.
B.
Ratification.
C.
Estoppel.
D.
Marriage.
32.
Aje is critically ill and is unable to write. He intends to give his Lexus car to his faithful driver, John, and hands over the keys of the car to John before his death.
What legal term describes this gift?
A.
Donatio Mortis Causa.
B.
Implied Trust.
C.
Protective Trust.
D.
Legacy.
33.
Which of the following contracts may be enforced?
A.
Oral contract on land.
B.
Contract in restraint of trade.
C.
Oral contract of guarantee.
D.
None of the above.
34.
Which of the following organizations must approve every scheme of arrangement, mergers, and reconstruction of companies in Nigeria?
A.
Economic and Financial Crimes Commission.
B.
The Stock Exchange.
C.
The Securities and Exchange Commission.
D.
The Central Bank of Nigeria.

35.
A company limited by shares may reduce its capital by complying with which of the following procedures?
A.
Passing an ordinary resolution and obtaining permission from the federal high court.
B.
Passing a special resolution and obtaining permission from the federal high court.
C.
Passing an ordinary resolution with special notice.
D.
Passing a special resolution with special notice.
36.
The powers of a company to enter into a contract are determined by which of the following documents?
A.
The production schedule.
B.
The articles of association.
C.
The prospectus.
D.
The memorandum of association.
37.
The principle which provides that only a party to a contract can sue and be sued in respect of the contract is referred to as:
A.
Excluding and limiting clause.
B.
Privity of contract.
C.
Contract in restraint of trade.
D.
None of the above.
38.
A tort by which a person presents his goods or services as that of another in order to deceive, with the purpose of making profit is called:
A.
Patent.
B.
Passing-off.
C.
Plagiarism.
D.
Copyright.
39.
The power of a court to order that property given for certain charitable purposes be applied for another charitable purpose when it is shown that the original purpose cannot be carried out or achieved, is referred to as:
A.
Apportionment.
B.
Rule against perpetuity.
C.
Cy-pres doctrine.
D.
Aggregation.
Regulations of Securities and Corporate Finance (40 - 60)
40.
Money Bag Securities Limited, a member of NSE wants to open a stock broking account for a staff of Broad Street Securities, another member of NSE. Which of the following statement is correct?
A.
This transaction is prohibited.
B.
Prior written permission must be obtained from the NSE.
C.
Duplicate copies of account opening documents must be forwarded to Broad street securities.
D.
Prior written permission must be obtained from the management of Broad Street
Securities.
41.
Which of the following statements is not true under relevant securities regulations in
Nigeria?
A.
A stockbroker must always act in the best interest of the customer.
B.
The stockbroker must notify the NSE if he gets involved in a serious legal matter.
C.
A broker/dealer may be disciplined for violations committed by a dealing clerk who is an employee of the broker/dealer.
D.
None of the above.

42.
Self regulatory organizations like the Nigerian Stock Exchange are normally engaged in which of the following activities?
I.
Setting of arbitration policies.
II.
Establishing fair trading practices.
III.
Filling criminal prosecution.
IV.
Setting prices in the market.
A.
I and II only.
B.
II and IV only.
C.
I, II and III only.
D.
I, II, III and IV.
43.
Payment for sale or purchase of shares in cash:
A.
Is prohibited in Nigeria.
B.
Is allowed for small investors only.
C.
Is allowed subject to a maximum of N20,000
D.
Is allowed subject to a maximum of N50,000
44.
Shares normally settle on:
A.
Trade date (T).
B.
Second business day after trade date (T + 2).
C.
Third business day after trade date (T + 3).
D.
Fourth business day after trade date (T + 4).
45.
All of the following are prohibited activities except:
A.
Commingling.
B.
Hypothecation.
C.
Insider trading.
D.
Front running.
46.
When opening an account for a customer, which of the following is not required?
47.
A fiduciary is a person vested with the legal right and powers to be exercised for the benefit of another person. Which of the following are fiduciaries?
A.
Address of the customer.
B.
Bank statement for the last six months.
C.
Acceptable means of identification.
D.
Utilities’ bills.
I.
Trustee.
II.
Guardians.
III.
Executors.
IV.
Administrators.
A.
I, II and IV
B.
I, III and IV
C.
II, III and IV
D.
I, II, III and IV
48.
The Code of Conduct for Management and staff of a rating agency does not include which of the following requirements?
A.
A provision prohibiting key officers of the rating firm from investing in the client’s shares.
B.
A provision prohibiting the Chief Executive Officer from having shareholding in any quoted company.
C.
Disclosure of its Board of Director’s interest in any of the rated issues.
D.
Sworn undertaking that undue advantage would not be taken of any unpublished price-sensitive information.

49.
According to SEC Rule 203, all unclaimed return monies due to subscribers or purchasers of securities shall after 6 month be transferred into which account?
50.
In line with SEC Rule 40(a), which of the under listed securities must be registered by SEC?
A.
Special bank account maintained by the Registrar.
B.
Special bank account maintained by SEC for this purpose.
C.
Special bank account maintained by the issuer.
D.
Investors’ protection fund.
I.
Offer-for-sale.
II.
Federal Government bonds through DMO.
III.
Bonus issue.
IV.
Offer by introduction.
A.
I and IV only
B.
I, II and III only
C.
I, III and IV only
D.
I, II, III and IV
51.
Which of these is not a benefit of the Automated Trading System and CSCS?
A.
Increased opportunity for price discovery.
B.
Enhanced transparency and efficiency of the market.
C.
Increased opportunity for margin trading.
D.
Obviated the risks associated with loss of share certificate.
52.
The NSE is gradually moving to a regime whereby share certificates will no longer be issued to shareholders by companies. This is called:
A.
Demobilization.
B.
Immobilization.
C.
Dematerialization.
D.
None of the above.
53.
Which of the following is not involved in dispute resolution in the Nigerian capital market?
A.
Investment and Securities Tribunal.
B.
Administrative Proceedings Committee of SEC.
C.
Investigating Panel and Disciplinary Tribunal of CIS.
D.
Special monitoring and adjudicating unit of SEC.
54.
Upon the approval of the basis of allotment in a public offer of securities, the issuing house is required to publish the allotment in at least two national daily papers within how many working days?
A.
2 days.
B.
3 days.
C.
5 days.
D.
15 days.
55.
According to SEC rule 110, which of the following is considered an ‘insider’?
A.
An officer of a company.
B.
The spouse of a company’s Chairman.
C.
A bookkeeper working in a company’s accounts department.
D.
A shareholder who owns 5% of the shares of a company.
56.
Which of the following is not a content of an abridged prospectus?
A.
Indebtedness of the company.
B.
History and business of company.
C.
Parties to the issue.
D.
List of shareholders.

57.
Which of the following is not a function of CSCS?
A.
Serves as central depository for share certificates.
B.
Adjudicates in disputes relating to share transfers.
C.
Acts as sub-registry for all quoted securities.
D.
Issues central securities identification numbers to shareholders.
58.
At which stage of the share issue process in the primary market is the certificate of exemption required?
A.
Completion board meeting.
B.
Regulatory approval.
C.
Allotment.
D.
Listing/quotation.
59.
How frequently is a stockbroking firm required to furnish its clients their CSCS statement of stock position?
A.
Monthly.
B.
Every two months.
C.
Quarterly.
D.
Half yearly.
60.
Most capital market operators are required to obtain an insurance document against defalcation by their personnel. The document is called:
A.
No fraud bond.
B.
Platinum bond.
C.
Fidelity bond.
D.
Guaranty bond.
Total = 60 marks

Question 2 - Ethics and Professional Standards
List four requirements of the general code of conduct for employees of capital market institutions (operators) as stipulated by Securities and Exchange Commission. (4 marks)
Question 3 – Law Relating to Securities and Investments
Mention three exceptions to the rule that a trustee gives a labour of love (3 marks)
Question 4 – Regulations of Securities and Corporate Finance
Briefly explain what you understand by ‘buying on margin’ in the stock market. Mention any three risks involved. (3 marks)
Question 5 - Ethics and Professional Standards
With specific reference to the CIS Code of Ethics and Standards of Professional Conduct, discuss key requirements under the following headings:
5(a) Competency. (3 marks)
5(b) Fiduciary duties. (4 marks)
5(c) Responsibility of supervisors. (4 marks)
Question 6 - Law Relating to Securities and Investments
6(a) What does ‘lifting the veil of incorporation’ mean? (3 marks)
6(b) At the 2009 Annual General Meeting of Pencils Plc, the shareholders in general meeting assigned specific projects to Directors John, Smith and Dan, and authorized the sum of N10 million for each of the projects. John was able to execute his project to the satisfaction of the shareholders with the sum of N9.5 million. He credited the account of the company with the sum of N400,000.00 and kept N100,000.00 for himself. The shareholders, who have just learnt of this, have demanded a refund of the N100,000 from John who has refused to pay.
Required:
Advise the shareholders. (6 marks)
Question 7 - Regulations of Securities and Corporate Finance
In the last 20 years, you have developed a very good relationship with your client – Mr.
Julius Olowo who died as a result of the recent flood that ravaged some parts of Ibadan.
You have been approached by his wife, who is also very well known to you to assist the family to sell part of the holdings of the deceased domiciled in the depository in order to raise N1,000,000 to pay their children’s school fees, which have become due.
Required:
7(a) Advise of the required procedures to enable Mrs. Olowo to achieve her objectives.
(6 marks)
7(b) Clearly identify the roles of all concerned with this transaction. (4 marks)