Podcast
Questions and Answers
What principle must brokerage firms uphold while dealing with clients?
What principle must brokerage firms uphold while dealing with clients?
- Profit maximization
- Customer prioritization
- Fairness (correct)
- Transparency
Which of the following modes of order submission is NOT allowed by brokerage firms?
Which of the following modes of order submission is NOT allowed by brokerage firms?
- Fax orders
- Oral orders (correct)
- Written orders
- Email orders
What must a brokerage firm do to maintain confidentiality regarding client transactions?
What must a brokerage firm do to maintain confidentiality regarding client transactions?
- Share information if they feel it is necessary
- Disclose information with client permission only (correct)
- Require client signatures on all documents
- Regularly update clients on their financial status
Why must brokerage firms segregate accounts?
Why must brokerage firms segregate accounts?
Which statement is true regarding the handling of client complaints?
Which statement is true regarding the handling of client complaints?
What is required of brokerage firms regarding call recording?
What is required of brokerage firms regarding call recording?
Which of the following best describes the obligation of brokerage firms in relation to fairness?
Which of the following best describes the obligation of brokerage firms in relation to fairness?
What must brokerage firms ensure before taking an order from a client?
What must brokerage firms ensure before taking an order from a client?
What happens if a client fails to pay for securities bought on its behalf within the settlement period?
What happens if a client fails to pay for securities bought on its behalf within the settlement period?
Which obligation is NOT required of brokerage firms regarding their employees?
Which obligation is NOT required of brokerage firms regarding their employees?
What are the consequences of losses incurred from selling securities due to a client's non-payment?
What are the consequences of losses incurred from selling securities due to a client's non-payment?
Which of the following is a key expectation of the DFM's Professional Code of Conduct?
Which of the following is a key expectation of the DFM's Professional Code of Conduct?
In which scenario may representatives of a broker execute orders for their own benefit?
In which scenario may representatives of a broker execute orders for their own benefit?
What must brokerage firms ensure about their employees who interact with clients?
What must brokerage firms ensure about their employees who interact with clients?
What type of regulations must brokers follow when dealing with clients in cash?
What type of regulations must brokers follow when dealing with clients in cash?
What is a critical responsibility of brokerage firms regarding their supervision of employees?
What is a critical responsibility of brokerage firms regarding their supervision of employees?
What is the minimum requirement for record keeping as stated in Article 8 of the DFM’s Professional Code of Conduct?
What is the minimum requirement for record keeping as stated in Article 8 of the DFM’s Professional Code of Conduct?
Which of the following is NOT required to be documented by brokerage firms under record keeping regulations?
Which of the following is NOT required to be documented by brokerage firms under record keeping regulations?
On what basis is the opening price for a dual listed company security determined on its first trading day on the DFM?
On what basis is the opening price for a dual listed company security determined on its first trading day on the DFM?
Which activity is primarily conducted during the pre-opening session on the DFM?
Which activity is primarily conducted during the pre-opening session on the DFM?
What exception exists regarding price limits for securities listed on the DFM during their first trading session?
What exception exists regarding price limits for securities listed on the DFM during their first trading session?
What governs the application of daily price margin limits on the DFM?
What governs the application of daily price margin limits on the DFM?
Which of the following records is required to be maintained by brokerage firms about their clients under Article 8?
Which of the following records is required to be maintained by brokerage firms about their clients under Article 8?
Under what circumstance may different procedures apply for the trading of foreign shares on the DFM?
Under what circumstance may different procedures apply for the trading of foreign shares on the DFM?
What must brokerage firms notify the market about?
What must brokerage firms notify the market about?
What is required when a brokerage firm is licensed to carry out multiple activities?
What is required when a brokerage firm is licensed to carry out multiple activities?
What action must brokerage firms take regarding the information they publish?
What action must brokerage firms take regarding the information they publish?
What must brokerage firms verify regarding their clients?
What must brokerage firms verify regarding their clients?
What is a requirement for executing trades outside normal trading hours?
What is a requirement for executing trades outside normal trading hours?
What must brokerage firms provide evidence of for all executed orders?
What must brokerage firms provide evidence of for all executed orders?
What must brokerage firms do regarding obligations from trading activity?
What must brokerage firms do regarding obligations from trading activity?
Which action is required if there are changes in board members?
Which action is required if there are changes in board members?
What circumstance allows a CEO to cancel orders for a particular security?
What circumstance allows a CEO to cancel orders for a particular security?
What must a broker do with the value of securities sold on behalf of a client?
What must a broker do with the value of securities sold on behalf of a client?
What is required for brokers to trade securities listed on the DFM?
What is required for brokers to trade securities listed on the DFM?
Under what condition can the Authority cancel a trading transaction?
Under what condition can the Authority cancel a trading transaction?
What is the maximum time frame a broker has to make payment for sold securities?
What is the maximum time frame a broker has to make payment for sold securities?
What must a client do to pay for securities bought on their behalf?
What must a client do to pay for securities bought on their behalf?
What happens if both brokers of a transaction request cancellation?
What happens if both brokers of a transaction request cancellation?
What happens if a client does not request the value of sold securities?
What happens if a client does not request the value of sold securities?
What happens to a day order if it is not executed by the end of the trading session?
What happens to a day order if it is not executed by the end of the trading session?
Which type of order must be executed immediately during the trading session?
Which type of order must be executed immediately during the trading session?
What is the main characteristic of a limit order?
What is the main characteristic of a limit order?
Which order type expires at a specified date if not executed?
Which order type expires at a specified date if not executed?
What is the fate of the remaining parts of a market order if it is only partially executed?
What is the fate of the remaining parts of a market order if it is only partially executed?
What distinguishes a good-till-cancelled order from a day order?
What distinguishes a good-till-cancelled order from a day order?
During which session can market orders be placed?
During which session can market orders be placed?
What does an at-the-close order do if it is not executed?
What does an at-the-close order do if it is not executed?
Flashcards
Market Notifications for Brokerage Firms
Market Notifications for Brokerage Firms
Brokerage firms must notify the market of significant events that could influence their financial standing, including changes in management, legal actions, and asset pledging.
Departmental Segregation
Departmental Segregation
Brokerage firms must maintain separate departments for each service they provide, ensuring clear separation to prevent conflicts of interest.
Prohibiting Incorrect Information
Prohibiting Incorrect Information
Brokerage firms are prohibited from spreading false information about companies whose securities are listed on the market.
Client and Transaction Eligibility Verification
Client and Transaction Eligibility Verification
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Trading Outside Session Restrictions
Trading Outside Session Restrictions
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Meeting Trading Obligations
Meeting Trading Obligations
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Evidencing Client Consent
Evidencing Client Consent
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Maintaining Accurate Records
Maintaining Accurate Records
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Employee Qualification Requirement for Brokerage Firms
Employee Qualification Requirement for Brokerage Firms
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Supervision Requirement for Brokerage Firms
Supervision Requirement for Brokerage Firms
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Brokerage Firm Liability for Employee Actions
Brokerage Firm Liability for Employee Actions
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Unauthorized Access to Trading Systems
Unauthorized Access to Trading Systems
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Restrictions on Trading for Broker Representatives
Restrictions on Trading for Broker Representatives
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Brokerage Firm's Right to Sell Client Securities
Brokerage Firm's Right to Sell Client Securities
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Professional Code of Conduct (DFM)
Professional Code of Conduct (DFM)
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Anti-Money Laundering Compliance for Brokerage Firms
Anti-Money Laundering Compliance for Brokerage Firms
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Order Cancellation: What are the reasons?
Order Cancellation: What are the reasons?
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Authority's Power: What are their cancellation powers?
Authority's Power: What are their cancellation powers?
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Broker Trading: Who can trade and how?
Broker Trading: Who can trade and how?
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Broker Settlement: When must brokers pay?
Broker Settlement: When must brokers pay?
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Client Settlement Obligations:
Client Settlement Obligations:
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What is Trading outside the Session?
What is Trading outside the Session?
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What is a settlement period?
What is a settlement period?
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What does Article 10 focus on?
What does Article 10 focus on?
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Limit Order
Limit Order
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Market Order
Market Order
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Day Order
Day Order
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Good-Till-Cancelled (GTC) Order
Good-Till-Cancelled (GTC) Order
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Immediate-Or-Cancel (IOC) Order
Immediate-Or-Cancel (IOC) Order
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Good-Till-Date Order
Good-Till-Date Order
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At-the-Close Order
At-the-Close Order
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Fill-or-Kill (FOK) Order
Fill-or-Kill (FOK) Order
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Fairness in Brokerage
Fairness in Brokerage
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Written Client Orders
Written Client Orders
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Confidentiality in Brokerage
Confidentiality in Brokerage
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Account Segregation
Account Segregation
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Call Recording Requirements
Call Recording Requirements
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Handling Client Complaints
Handling Client Complaints
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Reporting Suspicious Activity
Reporting Suspicious Activity
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Market Data Access and Use
Market Data Access and Use
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What record keeping requirements must brokerage firms meet?
What record keeping requirements must brokerage firms meet?
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How do price limits work on the DFM?
How do price limits work on the DFM?
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What happens during the pre-opening session on the DFM?
What happens during the pre-opening session on the DFM?
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What is the role of the opening session on the DFM?
What is the role of the opening session on the DFM?
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How is the initial opening price set for dual listed companies on the DFM?
How is the initial opening price set for dual listed companies on the DFM?
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What flexibility does the DFM have regarding trading procedures for foreign shares?
What flexibility does the DFM have regarding trading procedures for foreign shares?
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What qualifications must employees dealing with clients possess at brokerage firms?
What qualifications must employees dealing with clients possess at brokerage firms?
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What is the requirement for supervision at brokerage firms?
What is the requirement for supervision at brokerage firms?
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Study Notes
Chapter Eight: Dubai Financial Market (DFM)
- The DFM operates as a secondary market for securities, bonds, and other financial instruments.
- It was established in March 2000.
- The DFM has a capital of AED 8 billion, divided into 8 billion shares, 20% of which were offered via IPO.
- Operations follow Sharia principles and are regulated by the UAE Securities and Commodities Authority (SCA).
- The syllabus area covers approximately 11 of 100 examination questions.
Brokerage Firms
- Brokerage firms operating in the DFM must maintain financial solvency in accordance with authority criteria.
- They must notify the market of significant changes or developments that may affect their financial position.
- Adjustments to license applications and order system modifications must be reported.
- Employees need to adhere to laws, regulations, and circulars.
- Firms must operate separate departments if handling multiple activities.
- Brokerages must not publish inaccurate information about firms with traded securities.
- Firms must verify client eligibility and transaction soundness.
- Brokerages are prohibited from executing transactions outside trading sessions unless allowed by applicable laws.
- They must maintain books and records that meet IFRS, or through computerised means, for ten years.
- Copies of client orders, regardless of method, must be retained.
Obligations of Brokerage Firms to Clients
- Brokerage firms must comply with the Professional Code of Conduct, refraining from actions that compromise the reputation of the market.
- Brokers cannot trade securities for clients before a formal, signed contract is in place.
- Brokers must verify client payment ability before settlement.
- Brokers must not deal with third parties for clients lacking a proper authorization document.
- Orders must include date, time, security type, number, and price, and client or representative signatures when written.
- Blank and signed order forms should not be accepted.
- Brokerages are responsible for client funds according to instructions.
- Executed transactions must be communicated to the client in writing or through agreed-upon channels.
Trading Members and Clearing Members
- Trading members need to contract a clearing member to manage client accounts and commission distribution.
- This contract must be submitted to both the DFM and the SCA.
- Trading members must not receive client cash directly; clearing members manage client payments.
- Brokerage firms must adhere to margin trading regulations.
- Payment cannot be made through post-dated cheques unless already cashed.
Rules of Securities Trading in the DFM: Order Handling
- Client orders (buying or selling securities) can come through fax, email or other electronic means.
- The broker must be able to verify order details (client name, security, type (buy/sell), number, price , and validity date).
- Brokerages must handle orders fairly, prioritizing client orders over their own.
- Only authorized representatives can enter orders.
- Order priority is determined by price (best price), time of entry (earlier orders get priority) if prices are equal.
Broker Reporting Requirements
- Upon order execution, brokers must notify clients regarding the transactions.
- Clients must receive a statement of account every three months detailing their securities, cash balances, and executed transactions.
Conflicts of Interest
- Brokers involved in transactions that create conflicts of interest must take steps to avoid harming client interests.
Internal/Insider Information
- Brokers cannot use internal knowledge to profit from transactions, including information related to large specific security transactions.
- Pre-publication financial consultations are considered internal information.
Dealing for Board Members
- Firms must ensure board member transactions do not violate regulations regarding the disclosure of price-sensitive information.
Mistakes
- Brokers can request to correct trading session account number errors within 30 minutes, and in exceptional cases, within approval, if deemed acceptable under DFM rules.
Cancellations
- Orders can be cancelled in specific situations outlined by DFM regulations.
Obligations to Employees and Representatives
- Brokerage firms must ensure employees involved in client interactions have appropriate qualifications and experience.
- Firms must have the ability to continually supervise staff members.
- Firms are held accountable for the actions of their staff.
- The use of electronic platforms must be in accordance with DFM guidelines.
Obligations in Relation to Client Due Diligence (CDD)
- Brokerage firms must gather client information, including full name, passport details, nationality and profession as well as address and other relevant information.
Other Obligations
- Brokerage firms uphold fairness in client interactions, avoiding any actions that may provide unfair advantage to clients.
- All client complaints must be dealt with promptly and in a professional manner.
- If suspicious market activity is detected, the DFM must be immediately informed.
Prohibited Actions
- Firms cannot profit from client orders or mislead investors through manipulative trading activities.
- Brokerages may not use knowledge of client orders to execute self-beneficial transactions.
Record Keeping
- Firms must maintain accurate records of all client agreements and transactions.
Online Trading Regulations(DFM): Price Limits
- Securities have price limits set by the market, but during their first trading session, a floating price is allowed.
- Opening prices are determined by pre-opening sessions reflecting demand and supply within the given period, and these are applicable limits for foreign firms operating within the DFM.
Order Types(DFM)
- Orders are categorized based on price (limit and market orders)
- Valid orders may vary in the nature of their expiration and executability, such as day orders that expire at the end of a specific trading session.
Order Handling(DFM): Prioritization of Orders
- Order executions prioritize price (highest for buying, lowest for selling), and time of entry (earlier order trumps a later order with the same price).
- When prices are equal, previous day orders are processed before current day orders.
- Adjustments to order details (such as price or volume) will lead to the order losing its prioritisation according to the date and time of adjustments.
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Description
Test your knowledge on the principles and regulations that brokerage firms must follow while dealing with clients. This quiz covers topics such as order submission, confidentiality, account segregation, and more. See how well you understand the obligations of brokerage firms in maintaining client trust and compliance.
