CIS Level 2, Paper 2.4 – Full Exam Prep Pack
Includes: Revision Summary • Mock Exam • Cheat Sheet
Section 1: Revision Summary
Key Regulators & Their Roles
- SEC – apex regulator; licensing, investor protection, market surveillance, enforcement.
- NGX – provides trading platform, listing requirements, market discipline.
- CSCS – clearing, settlement, depository.
- CIS – sets professional standards, exams, and ethics for members.
Core Ethical Principles (CIS Code of Conduct)
- Integrity – honesty, fairness in all dealings.
- Objectivity – avoid bias, conflicts of interest.
- Fiduciary Duty – place client’s interest above personal gain.
- Confidentiality – protect client information.
- Professional Competence – act diligently and maintain skills.
Insider Trading & Market Abuse
- Insider trading = trading on Material Non-Public Information (MNPI).
- Market abuse includes: Insider trading, Price manipulation, Spreading false information, Wash
trades.
- Penalties: Fines, imprisonment (up to 7 years), license revocation, reputational damage.
AML/CFT (Anti-Money Laundering / Countering Terrorism Financing)
- KYC/CDD: Proof of identity, proof of address, source of funds, ongoing monitoring.
- Cash Transaction Reporting Thresholds: ■500,000 (individuals), ■1,000,000 (corporates).
- Suspicious Transaction Reports (STRs) must be filed with NFIU.
- Red Flags: reluctance to provide ID, large cash deposits, inconsistent transactions.
Corporate Governance Essentials
- Principles: Accountability, Transparency, Fairness, Responsibility.
- Board Duties: strategy, risk management, oversight of management.
- Best Practices: independent directors, audit committees, whistle-blowing policy.
Professional Misconduct (Examples)
- Insider trading, Churning, Front-running, Unauthorized trading.
- Misrepresentation, Conflicts of interest (undisclosed).
Risk Control Measures
- Compliance function, Segregation of duties, Internal audits.
- Chinese Walls, Record-keeping & client mandates, Whistle-blowing channels.
Key Exam Triggers (Likely Question Phrases)
- Identify the unethical act – think insider trading, conflict, churning.
- State AML obligations – KYC, STR, cash thresholds.
- Explain governance failures – weak controls, poor records, no compliance officer.
- Suggest measures – training, Chinese Walls, risk management, audits.
Section 2: Mock Exam
Sample MCQs (with Answers at End)
- Q1. Which body regulates licensing of capital market operators in Nigeria?
- Q2. What is the cash transaction reporting threshold for corporates?
- Q3. Which of the following is an example of market abuse?
- Q4. What is the fiduciary duty of an investment adviser?
- Q5. When must suspicious transaction reports be filed?
Sample Case Study (Insider Trading)
- Mr. X, a broker, overhears material non-public information and trades for profit.
- Questions: (a) Identify the unethical act. (b) State penalties. (c) Suggest controls.
Sample Case Study (AML)
- Client deposits ■10m in cash with no clear source.
- Questions: (a) Identify red flags. (b) AML obligations. (c) Preventive measures.
Sample Case Study (Corporate Governance)
- Company fails to separate board oversight from management control.
- Questions: (a) Identify governance failure. (b) Risks to investors. (c) Remedies.
Answer Key (Mock Exam)
Q1: SEC • Q2: ■1m • Q3: Insider trading/Price manipulation • Q4: Put client’s interest first • Q5:
Immediately (to NFIU).
Section 3: Quick Cheat Sheet
Key Numbers & Rules
- Cash threshold reports: ■500k (individuals), ■1m (corporates).
- AML red flags: reluctance to provide ID, unusual large cash, inconsistent patterns.
- Insider trading penalty: up to ■1m fine per day of violation OR 7 years imprisonment (SEC Act).
Ethics Quick Recall
- Integrity = honesty, fairness.
- Objectivity = avoid bias/conflicts.
- Fiduciary duty = client interest > self.
- Confidentiality = protect client information.
Governance Principles
- Transparency
- Accountability
- Responsibility
- Fairness
Common Exam Triggers
- Identify the unethical act → Insider trading, churning, front-running.
- State AML obligations → KYC, STR, thresholds.
- Explain governance failures → weak controls, poor records, no compliance.
- Suggest measures → compliance, Chinese Walls, training, audits.