M19 – Sample Questions And Answers

This topic is designed as a reference on the rules and regulations governing advisory services in the Malaysian capital market. Examination candidates should review the notes for the Module 19 (SIDC – Advisory services) and complete the self-assessment questions and answers in the topics.
Objectives
Learners are expected to have good knowledge, understanding and ability to apply in the following areas:
• The principles of contract law and relevant issues
• The laws which are relevant to the advisory services in the Malaysian capital market
• The system and procedures of licensing of persons who carry on the investment advisory business in Malaysia
• The features and prohibitions of investment advisory activities
• The regulations governing the issue and offer of equity securities, listing of corporations and quotations of securities on the Main Market of Bursa Malaysia Securities Berhad (Bursa Securities) (Main Market) and proposals which result in a significant change in the business direction or policy of corporations listed on the Main Market under the Securities Commission Malaysia’s Equity Guidelines
• The regulations setting out who can act as principal advisers for the submission of corporate proposals and the competency standards required
• The regulations governing the conduct of due diligence for corporate proposals by issuers, advisers and experts
• The activities and current trends connected to money laundering and terrorism financing and the Malaysian regulatory approach towards them
• The characteristics and regulations governing take-overs in Malaysia
• The regulations governing valuations of property assets in conjunction with corporate proposals for submission to the Securities Commission Malaysia or for inclusion in prospectuses and circulars
• The regulations governing the issuance and registration of prospectuses
• The regulations governing the issue, subscription, purchase, invitation to subscribe or purchase corporate bonds or sukuk to retail investors
• The regulations that must be observed for the purposes of exclusively making available unlisted capital market products to sophisticated investors in Malaysia or persons outside Malaysia
• The regulations governing the issuers of structured warrants
• The regulations governing listing of securities under the Bursa Securities Main Market Listing Requirements, Bursa Malaysia Securities Berhad ACE Market Listing Requirements and Bursa Malaysia Securities Berhad LEAP Market Listing Requirement.

Question 1
CNC Investment Bank has been appointed as the Principal Advisor and Lead Manager for the upcoming initial public offering (IPO) of shares of TCB International Berhad. MIH Services Berhad will be the issuing house for the shares to be offered. The shares of TCB International Berhad will be listed on Main Market of Bursa Malaysia Securities Berhad. Which of the following is the offeror of TCB International Berhad for the IPO?

A. CNC Investment Bank.
B. MIH Services Berhad.
C. The public who wish to subscribe for the shares.
D. TCB International Berhad.

Answer: C

Question 2
On May 1, 20X5, Ultra Sdn Bhd (Ultra) mailed a written offer to Caltech Corporation Bhd (Caltech) for the sale of an office building. The offer included an express term that it would expire on June 30, 20X5 if the acceptance was not delivered into the hands of the offeror by the expiration date. On June 30, 20X5 at 8:00 a.m., Caltech sent a written acceptance to Ultra via Caltech’s personal messenger. However, the messenger was not able to deliver the acceptance until July 1, 20X5. On July 2, 20X5, Ultra contacted Caltech, informing him that the acceptance had been delivered one day late. As a result, Ultra refused to honour the acceptance. Which of the following is the most correct statement?

A. There is no contract between Ultra and Caltech. However, if Caltech would have mailed the acceptance on June 30, 20X5, a contract would have been created.
B. There is a contract between Ultra and Caltech. The moment that Caltech gave the acceptance to the messenger, a contract was formed because acceptances are valid immediately upon dispatch.
C. There is a contract between Ultra and Caltech. The fact that the acceptance arrived only one day late is of no significance.
D. There is no contract between Ultra and Caltech.

Answer: D

Question 3
A financial advisory firm, Moneyplus Advisers contracts with one of its clients that the professional fees for providing advice on disposal of an asset will be RM480,000 plus a success fee of RM100,000 which will not be declared thereby avoiding tax. However, upon successful completion of the asset disposal, the client refused to pay Moneyplus Advisers the success fee. Moneyplus Advisers are now contemplating legal action against the client to recover the success fee, can they succeed?

A. Yes, Moneyplus Advisers have completed the work as agreed.
B. Yes, provide the contract is in writing.
C. No, the contract is void for illegality.
D. No, the contract is void for mistake.

Answer: C

Question 4
The directors of ABC Corporation were advised by TMA Investment Bank (TIB) on the disposal of a subsidiary of ABC Corporation. After the disposal, it was later found that TIB failed to conduct appropriate due diligence on the subsidiary and the valuation of the subsidiary. The subsidiary was grossly undervalued and was disposed at a price way below its fair value. The valuation as conducted by a professional firm appointed by the Board of Directors of ABC Corporation and accepted by TIB. The shareholders of ABC Corporation are planning to take legal action against TIB. Which of the following statements is CORRECT?

A. The shareholders will fail as there is no contractual relationship between them and TIB.
B. The shareholders will succeed as TIB has breach its duty and the shareholders suffered loss.
C. The shareholder will succeed as TIB is acting as an agent for TIB and the shareholders.
D. The shareholders will fail as TIB owes no duty of care to the shareholders.

Answer: B

Question 5
Which of the following situations may consider as a negligent act by a bank when acting as a financial adviser?

I. A client bought a tanker for RM1.5 million, based on the Bank’s officer recommendation that it was fully functional, but the Bank officer knew it was not the case.
II. A client is solvent, and the Bank issued a statement to another bank stating that the client is a bankrupt.
III. A client bought a big-ticket asset based on the Bank’s officer recommendation, which was made without establishing whether or not the asset is suitable for the client.
IV. The Bank forcefully seizes the property of a client without a court order when the client failed to settle its debt with the bank.

A. I only
B. III only
C. I and III only
D. I, II and III only

Answer: B

Question 6
ABC Investment Bank is the Adviser for a corporate transaction undertaken by Company X. As a result of the ABC Investment Bank’s negligence in providing advice on the transaction, Company X incurred certain hardships and financial losses amounting to RM1,500,000. Company X filed and won a lawsuit against ABC Investment Bank. The court judgement required ABC Investment Bank to pay Company X RM1,500,000 for the loss incurred. The court also required ABC Investment Bank pay RM2,000,000 to Company X, to make an example of the Bank’s wrongful behaviour. What type of damages are ABC Investment Bank paying?

I. General damages
II. Special damages
III. Nominal damages
IV. Punitive damages

A. I and III only
B. I and IV only
C. II and III only
D. II and IV only

Answer: D

Question 7
In relation to offences under the Capital Markets and Services Act 2007, select the correct statements.

I. Securities Commission may revoke a Capital Market Services Licence if the holder fails to carry on the business in the regulated activities for a consecutive period of two months.
II. Securities Commission may commence a civil proceeding against an offending party at any time within twelve years from the later of the date the offence is committed or the date on which Securities Commission discovered the contravention.
III. Securities Commission has a right to civil proceeding even if the offending party has not been charged with an offence in respect of the contravention
IV. Securities Commission, upon instituting a civil proceeding against the offending party, loses its right against the same party under other laws.

A. I, II and III only
B. II and III only
C. II, III and IV only
D. I and III only.

Answer: B

Question 8
Su Lin is a licensed representative of Global Capital Sdn Bhd, a Capital Market Service Licence (CMSL) holder. Which of the following situations may cause Su Lin’s licence being revoked by the Securities Commission Malaysia?

I. She allows one of her unlicensed colleagues to represent her in carrying out permitted capital market activities.
II. She was previously a bankrupt.
III. Her previous employer has taken a civil proceeding against her for misappropriation of funds.
IV. The CMSL of Global Capital Sdn Bhd has been revoked by the Securities Commission.

A. I and IV only
B. II and III only
C. I, II and IV only
D. I, III and IV only

Answer: A

Question 9
What is the consequence if Zuraida who had applied for a capital market services representative licence while under the employment of Glonic Financials, a capital market services licence (CMSL) firm, and subsequently leaves the firm while the application is still pending?

A. Securities Commission will approve her application if she joins another CMSL firm that carry out similar regulated activity.
B. Up to the discretion of the Glonic Financials.
C. Securities Commission will give her 30 days to seek employment with another CMSL before revoking her application.
D. Securities Commission will not approve her application.

Answer: D

Question 10
Firm Z has its Capital Market Services Licence (CMSL) revoked by the Securities Commission for failing to comply the certain licensing requirements. However, the firm continues to provide investment advice to clients after the licence was revoked. Which of the following may be imposed on Firm Z by the Securities Commission?

I. A fine of not less than RM1,000,000 and a jail term of less than 10 years or both
II. A fine of not more than RM5,000,000 or a jail term of less than 10 years or both
III. Damages amounted to the loss suffered by clients, if any
IV. A fine of up to RM5,000 for every day after the licence has been revoked.

A. I and III only
B. I and IV only
C. II, III and IV only
D. II and IV only

Answer: D

Question 11
Pentop Advisory is a licence holder as provided under the Capital Markets & Services Act 2007 (CMSA). Which of the following are obligations of Pentop Advisory under the CMSA?

I. To notify the Securities Commission on any change of address, business name or any other information deemed relevant.
II. To seek approval of the Securities Commission when recruiting licensed representatives from other licensee firms.
III. To notify the Securities Commission on ceasing to carry on the business.
IV. To notify the Securities Commission where a representative of the company ceases to be an employee the company.

A. I and III only
B. II and IV only
C. I, III and IV only
D. All of the above

Answer: C

Question 12
Sandy Joe is a capital market services representative licence holder (CMSRL). Which of the following is an example of Sandy Joe abusing information available to him?

A. When he provides a superficial market analysis.
B. When he falsifies client transactions.
C. When he disseminates client’s information.
D. When he manipulates share price of clients.

Answer: C

Question 13
There is a fiduciary relationship between a holder of a Capital Markets Services Licence (CMSL) who carries on the business of advising on corporate finance and a client. This means that the CMSL holder:

A. cannot charge a fee to clients.
B. must act in client’s best interest.
C. must disclose the identity of its client.
D. cannot make use of its position to benefit itself.

Answer: D

Question 14
”Money illegally obtained is integrated into the legitimate economic and financial system and is assimilated with all other assets in the system”
Pursuant to Guidelines on Prevention of Money Laundering and Terrorism Financing for Capital Market Intermediaries, the above process of money laundering is BEST referred to as:

A. integration.
B. layering.
C. leveraging.
D. placement.

Answer: A

Question 15
15. Syarikat Ionetolis was established some eight years ago. Its principal activities are production and marketing of industrial products. The company has been generating consistently after-tax profits of between RM4,000,000 and RM5,000,000 annually. The company paid-up capital consists of two hundred million shares which are currently valued at RM2.70 each. The company is now seeking a listing on the Main Market of Bursa Malaysia. To qualify for the listing, which one of the following tests should the company use?

A. Profit Test.
B. Market Capitalisation Test.
C. Both Profit Test and Market Capitalisation Test.
D. None of the above.

Answer: B

Question 16
Binaan Juta Berhad is currently undertaking a twenty-year concession dam-building project worth RM1.1 billion awarded by the5. Syarikat Ionetolis was established some eight years ago. Its princi South African government. In the financial year just ended, the company recorded a net profit of RM8.5 million. So far, after four years, the company has completed first stage of the project, recorded a profit after tax of RM48 million as well as having a positive operating cash flow. Given its success in the project, it is estimated that the company worth more than RM1 billion now. If the company was to seek a listing on the Main Market of Bursa Malaysia Securities, which of the following routes can the company takes?

A. Infrastructure Project Company test only.
B. Infrastructure Project Company and Market Capitalisation tests only.
C. Infrastructure Project Company and Profit tests only.
D. Infrastructure Project Company, Market Capitalisation and Profit tests.

Answer: D

Question 17
Syarikat Muda Bhd is a subsidiary company of Already Listed Bhd, a company currently listed on the Main Market of Bursa Securities. Syarikat Muda Bhd, a property construction company, is now seeking listing on the exchange on its own. Which of the following situations may frustrate the listing exercise of Syarikat Muda Bhd?

A. Syarikat Muda Bhd, in the last three financial years, on average, contributed 65% of the total revenue of Already Listed Bhd’s group.
B. The business of Syarikat Muda Bhd hardly gives rise to intra-group competition or conflict-of-interest situations.
C. The business of Already Listed Bhd which is the provision of financial-related services.
D. Except for two directors who are non-executive, all directors of Syarikat Muda Bhd is not involved in the management of Already Listed Bhd.

Answer: A

Question 18
18. Xsra Bhd is listing its shares on the Main Market of Bursa Malaysia. Upon listing, the company issued and paid up capital increases from 150,000,000 to 220,000,000 share ordinary shares. The shares will be listed at RM1.25 each. How many shares must be offered to the general public?

A. At least 3,000,000 shares
B. At least 4,400,000 shares
C. At least 7,500,000 shares
D. At least 11,000,000 shares

Answer: B

Question 19
Johnson Products Bhd (JPB) is making a restricted offer for subscription which is undertaken as part of a listing scheme. Which of the following party is NOT eligible to participate in the scheme?

A. Encik Basir, a shareholder of Johnson Group Berhad, a listed entity and the holding company of JPB.
B. Mr. Tan, a friend of the managing director of JPB and a non-executive director of So Fine Sdn Bhd, a major supplier of JPB which has contributed significantly to the success of JPB.
C. Encik Shanmugum, a senior partner of Shan & Associates, a long-time major customer of JPB.
D. Puan Normah, an employee at one of JPB’s subsidiaries.

Answer: B

Question 20
Unicorn Trading Bhd (UTB) will be undertaking an initial public offering (IPO) on Bursa Malaysia Securities Berhad’s Main Market next month. The exercise will involve a public issue of 31,250,000 new shares, representing 20% of its enlarged share capital, as well as an offer for sale of 12,500,000 existing shares. If these shares are to be made available to eligible directors, employees, and persons who have contributed to the success of UTB Group, the maximum number of shares to be offered to them will be:

A. 4,375,000 shares.
B. 7,812,500 shares.
C. 10,937,500 shares
D. 15,625,000 shares

Answer: C

Question 21
Under its initial public offering of ordinary shares, Konsortium Negara Berhad is offering securities to some related parties. What is the minimum price of the shares to be offered to such related parties?

A. 10 sen
B. 50
C. At the discretion of Konsortium Negara
D. Not less than the issue price to the public.

Answer: D

Question 22
After successfully complied with the profit track record requirements of the Equity Guidelines, JYJ Corporation Berhad (JYJ) was successfully listed on the Main Market of Bursa Malaysia Securities on 30 August 20X2. Mr. Joe Yang, the controlling shareholders of JYJ, holds, holds in aggregate 65% of the issued share capital of the company upon its listing on Bursa Malaysia Securities. The issued share capital of JYJ consists of 250,000,000 ordinary shares. Which of the following statements is CORRECT?

A. Mr. Joe Yang can dispose up to 50,000,000 ordinary shares within the first 12 months of 30 August 20X2.
B. Mr. Joe Yang is free to dispose his shareholdings after 28 February 20X3.
C. Mr. Joe Yang is only allowed to dispose his shareholdings if JYJ achieved a full year after-tax profit after the listing exercise.
D. Mr. Joe Yang is free to dispose his shareholdings any time after the listing exercise as long as JYJ is generating operating revenue.

Answer: B

Question 23
Strong Infra Limited is a foreign-based infrastructure project company listed on the Main Market of Bursa Malaysia. Almost all of the company’s projects are located outside Malaysia. Which of the following statements regarding resident directors of the company is correct?

I. The company must have at least two resident directors.
II. At least one of the resident directors must be a member of the company’s audit committee.
III. Majority of its directors must be a Malaysian resident or citizen.
IV. All executive directors must be a Malaysian resident.

A. I and II only
B. II and III only
C. II, III and IV only
D. III and IV only

Answer: A

Question 24
Which of the following is applicable in determining whether the operations of a listed company are Malaysian-based or foreign-based?

I. Sales revenue of the company
II. After-tax profit of the company
III. Net asset of the company
IV. Infrastructure projects undertaken by the company

A. I and II only
B. I, II and III only
C. II and IV only
D. III and IV only

Answer: C

Question 25
Techno Trading is a special purpose acquisition company (SPAC). It is seeking a listing on Bursa Malaysia Securities Berhad (BMSB). The requirements for the listing include:

I. Offer to list the its shares on Bursa Malaysia Securities Berhad’s Main Market only.
II. Appoints a Sponsor to ensure compliance with the listing requirements.
III. Raise at least RM100 million from the listing exercise. IV. Meeting at least the minimum profit or market capitalisation levels set by the Securities Commission.

A. I and III only
B. I and IV only
C. II and III only
D. III and IV only

Answer: A

Question 26
Kiara Advances Berhad is seeking to transfer its listing status from the ACE Market to the Main Market of Bursa Securities. Which of the following requirements are relevant to the company?

I. The market capitalisation of the company after the transfer must be at least RM500 million.
II. The average market capitalisation of the ordinary shares for the one year period ending on the last business day of the calendar month immediately preceding the date of submission of the application to transfer the listing status, is at least RM500 million.
III. The company must have uninterrupted after–tax profit for 3 to 5 years, prior to the submission of application to transfer the listing status, of at least RM20 million in aggregate.
IV. The company must have at least RM6.0 million profit after tax for the most recent financial year.

A. II and IV only
B. I, II and IV only
C. II, III and IV only
D. All of the above.

Answer: A

Question 27
Which of the following statements regarding an initial public offering (IPO) by a company to list its securities on the Main Market of Bursa Malaysia Securities Berhad is CORRECT?

A. The IPO must be underwritten.
B. All companies listed on the Main Market must be incorporated in Malaysia.
C. Moratorium may be placed on executive directors who are substantial shareholders of the company.
D. Shareholders of the company’s holding company are not eligible to participate in restricted offer of the securities.

Answer: C

Question 28
Recently, Kreatif Manufacturing Corporation was successfully listed on the Main Market of Bursa Malaysia Securities Berhad. Which of the following information relating to the listing exercise are required to be submitted to the Securities Commission?

I. A confirmation of all terms and conditions relating to the listing have been complied with.
II. The date of the listing.
III. The management accounts of the company immediately after the listing.
IV. The price at which securities were issued during the listing.

A. I and II only
B. I, II and III only
C. I, II and IV only
D. II, III and IV only

Answer: C

Question 29
The Malaysia Code on Take-overs and Mergers (The Code) and Rules on Takeovers, Mergers and Compulsory Acquisitions (The Code Rules) governs the takeover of companies listed on Bursa Malaysia Securities Berhad. Which of the following statements relating to the Code and Code Rules is CORRECT?

I. A person is deemed to have control of a company if that person appoints the majority of the members of Board of Directors of the company
II. A person gains control of a company if that person acquired more than 30% of its voting shares
III. A voluntary offer can only be made person who has control over the company
IV. A mandatory offer is triggered if a person has gain control of a company.

A. I and II only
B. I and IV only
C. II and III only
D. II and IV only

Answer: B

Question 30
BellyCorp Berhad has announced and served a takeover notice to Jualan Berhad on Monday 3 September 20X1. As a result, BellyCorp Berhad is required under the Malaysian Code of Take-Overs and Mergers to forward offer documents to the shareholders of Jualan Berhad. When must BeLlyCorp Berhad forward the offer documents to Securities Commission for clearance?

A. Within 24 hours of serving the takeover notice.
B. Within 48 hours of making the announcement and serving the takeover notice.
C. Note later than Monday, 10 September 20X1.
D. Not later than Friday, 7 September 20X1.

Answer: D

Question 31
Johan Berhad is making an offer for the entire voting shares in Exin Bhd. After having issued an offer documents for the purpose, Johan Berhad discovered that there is a material omission in the offer document. Which of the following parties must Johan Bhd immediately disclose the material omission to?

I. To Johan Bhd’s shareholders by way of circular
II. To the public by way of press notice
III. To the Securities Commission
IV. To Bursa Malaysia Securities Berhad

A. I, II and III only
B. II and III only
C. II, III and IV only
D. All of the above

Answer: C

Question 32
Which of the following is prohibited, under the Malaysian Code of Takeovers and Mergers, during the offer period of a takeover deal?

I. Appointment of directors onto the Board of Directors of the target company by the offeror
II. Resignation of directors of the offeree before the 1st closing date of the offer or the acceptance condition is met, whichever is later
III. Disposal of the target company’s shares by the offeror
IV. Disclosure of significant events to Bursa Malaysia Securities by the offeror
A. I and III only
B. I, II and III only
C. II and III only
D. II, III and IV only

Answer: B

Question 33
Which of the following information can be found on the inside cover/first page of prospectus issued by a company seeking to be listed on the Main Market of Bursa Malaysia Securities?

I. Indicative timetable for the listing exercise.
II. Name and address of the company.
III. Name and address of the Principal Adviser.
IV. Proposed utilisation of proceeds to be raised from the listing.

A. I and II only
B. I and III only
C. II, III and IV only
D. III and IV only

Answer: B

Question 34
BBM Corporation Berhad (“BBM”) is making an application to the Securities Commission Malaysia to list its shares on the Main Market of Bursa Malaysia Securities (“BMSB”). The after-tax profit of BBM in the years prior to the application was as follow:

The financial information in the prospectus to be issued by BBM for the listing exercise, at the minimum, will include audited financial statements for the year ended:

A. 20X8 only
B. 20X6 to 20X8 only
C. 20X5 to 20X8 only
D. 20X5 to 20X8

Answer: B

Question 35
Which of the following statements regarding the registration of prospectus with the Securities Commission (SC) Malaysia for initial public offer of shares is correct?

A. SC may refuse to register the prospectus if it fails to comply with requirements / provision of the Capital Markets and Services Act 2007
B. SC may only for public information, publish the registrable prospectus after the registration of the prospectus.
C. SC cannot for public information, publish the registrable prospectus unless it seeks consent from the company issuing the prospectus.
D. SC will only assume full responsibility of the prospectus when statements made, or opinions or reports expressed in the prospectus is correct.

Answer: A

Question 36
Electron Development Berhad is proposing to issue an Islamic debt securities programme that consists of a combination of medium-term notes and commercial papers. What is the maximum allowable tenure for the debt programme?

A. 1 year
B. 5 years
C. 7 years
D. 10 years

Answer: C

Question 37
The issuance of a sukuk programme by Mydeen Corporation was successfully completed on Tuesday, 29 May 20X5. The responsible party for the sukuk programme must submit the post-issuance notice to the Securities Commission not later than (you may assume there is ni public holiday in months of May and June 20X5):

A. Thursday, 31 May 20X5
B. Friday, 1 June 20X5
C. Tuesday, 5 June 20X5
D. Thursday, 7 June 20X5

Answer: D

Question 38
Aliman Bank has entered into a contract with Shafii Construction to finance the building and constructing of a factory by the latter, at a definite price over a defined period of time, according to certain agreed specifications between the two parties. According to the contract Aliman Bank will allow Shafii Construction to make progress payments as construction of the factory progresses. The principle behind such a financing contract is:

A. Ijarah
B. Istisna
C. Murabahah
D. Musharakah

Answer: B

Question 39
Shamshell Berhad is seeking to raise funds under a debt securities programme by securitising one of its office tower blocks in Kuala Lumpur. Which of the following is relevant to secure the necessary approval for the issuance of the programme?

I. No trust or third party’s interest appears to exist in competition with Shamshell’s interest over the office tower block.
II. There are no impediments (contractual or otherwise) that prevent the effective transfer of the office tower block or the rights in relation to the office tower block from Shamshell to a special-purpose vehicle.
III. The assets are transferred at cost of purchase.
IV. The assets must generate cash flow.

A. I, II and III only
B. I, II and IV only.
C. I, III and IV only.
D. All of the above.

Answer: B

Question 40
Which of the following correctly describe an arrangement which involves the transfer of assets or risks to a third party where such transfer is funded by the issuance of corporate bonds or sukuk to investors?

A. Arbitraging.
B. Regularisation.
C. Securitisation.
D. Underwriting.

Answer: C

Explanations:

Arbitrage - means taking advantage of price differences across markets to make a buck. If a currency, commodity or security—or even a rare pair of sneakers—is priced differently in two separate markets, traders buy the cheaper version and then sell it at the higher price to make money.

The regularisation plan - is able to strengthen the financial position of the PN17 Issuer including its securities holders’ equity, gearing, net asset position, cash flow position, and address its...

Securitization - is the process of financing or refinancing income-generating assets by transforming them into a form that can be traded through the issuance of bonds or other types of securities. It makes it possible for originators to dispose of assets in a time- and cost-effective manner and get a more advantageous financing profile and improved funding conditions.

Underwriting - is the process of taking on risk in a financial transaction, typically a loan, insurance, or investments. The main goal of underwriting is to determine risk. Knowing the amount of risk involved in a financial venture allows for pricing and finally a decision to accept or reject the applicant or venture.

Question 41
Which of the following entities are permitted to issue non-guaranteed bonds to retail investors in Malaysia?

I. A licensed commercial bank.
II. A large textile manufacturing private limited company.
III. A company listed on Main Market of Bursa Malaysia Securities Berhad.
IV. A company listed on ACE Market of Bursa Malaysia Securities Berhad.

A. I and III only
B. I, III and IV only
C. I and II only
D. III and IV only

Answer: B

Explanations:

The retail bonds and sukuk framework is intended to meet retail investors’ demand for access to a wider range of investment products. This is also in line with the SC’s Capital Market Masterplan 2 initiative to promote greater retail participation in the bond and sukuk market.Access for retail investors to bonds and sukuk was largely available through bond and sukuk unit trust funds and exchange traded funds. With the retail bonds and sukuk framework, retail investors will now have direct access to bonds and sukuk...

Question 42
The Guidelines on Submission of Corporate and Capital Market Product Proposals set out the obligations and standards expected of relevant parties in respect of the scope and quality of due diligence undertaken in the preparation and submission of corporate proposal to Securities Commission. Which of the following parties are required to observe the spirits and wordings of these Guidelines?

I. Shareholders of the applicants of corporate proposal.
II. Applicants of corporate proposals.
III. Principal Advisers.
IV. Valuation experts.

A. I, II and III only.
B. I and IV only.
C. II and III only.
D. II, III and IV only

Answer: D

Explanations:

Guidelines on Submission of Corporate and Capital Market Product Proposalsk...

Question 43
ASMP Investment Bank has been appointed as the sole principal adviser for the listing of Fimiler Corporation Berhad (Fimiler) on Bursa Malaysia Securities Berhad. As Principal Adviser for Fimiler, responsibilities of ASMP Investment Bank include:

A. determining whether the fund-raising exercise should be accepted or rejected by shareholders
B. critically assess expert’s reports and input to ensure that the assumptions and information that the opinion is based on are reasonable and consistent with Fimiler and its business
C. ensure that the primary source of information for the exercise is not false or misleading and has no material omission
D. primarily responsible for due diligence in relation to the valuation of assets of Fimiler Corporation Berhad

Answer: B

Explanations:

Principal Adviser Guidelines (Guidelines disapplied from 1 January 2021) - These Guidelines have been replaced by the Guidelines on Submission of Corporate and Capital Market Product Proposals and the Licensing Handbook. For definitions of Principal Adviser and Recognised Principal Adviser and their eligibility requirements, please refer to Chapter 7A of the Licensing Handbook.

Question 44
Maju Construction Berhad (MCB) is embarking on listing its shares on Bursa Malaysia Securities. Which of the following entities may be appointed MCB to submit its listing proposal to the Securities Commission Malaysia?

I. Investment banks.
II. Licensed banks.
III. Special scheme brokers.
IV. Universal brokers.

A. I and II only
B. I, III and IV only
C. I and IV only
D. III and IV only

Answer: C

Explanations:

Investment bank and universal broker – All proposals

The establishment of investment banks - in line with the recommendation of the Financial Sector Masterplan, aims to strengthen the capacity and capabilities of domestic banking groups through internal rationalisation so that they can contribute to the economic transformation process and better face the challenges of liberalisation and globalisation. Following the successful rationalisation of the commercial banks and finance companies within the banking groups, the model is now extended to the merchant banks, discount houses and stockbroking companies within the banking groups to achieve greater efficiency and effectiveness. With enhanced capacity, the new investment banks would also play a greater role in developing a more dynamic and efficient domestic capital market.

Universal Broker - means a stockbroking company that has merged with or acquired at least three other stockbroking companies and has fulfilled the necessary qualifying criteria as set out in these Guidelines.

Guidelines on Submission of Corporate and Capital Markets Product Proposal

Listing requirements of Bursa Malaysia Securities Berhad

Question 45
Hario Securities is a 1+1 broker licensed by the Securities Commission Malaysia. Which one of the following applications can Hario Securities submit to the Securities Commission Malaysia?

I. Application for offering of corporate bonds.
II. Application for offering of non-Shariah compliant securities to be listed on Bursa Malaysia Securities Berhad.
III. Application for offering of Shariah compliant securities to be listed on Bursa Malaysia Securities Berhad.
IV. Application for offering of structured warrants.

A. I and II only
B. I, II and III only
C. II and IV only
D. II, III and IV only

Answer: C

Explanations:

1 + 1 Brokers - All proposals, except for proposals relating to corporate bonds and Islamic securities.

Investment bank and universal broker – All proposals

KAF Investment Bank Berhad - Proposal relating to issue of securities.

Licensed Banks - Proposal relating to- (a) corporate bonds and sukuk, except for those issued by Malaysian-incorporated public companies or foreign corporations that are: (i) capable of being converted into equity; or (ii) issued together with warrants; (b) structured warrants.

Islamic Banks - Proposal relating to issue of securities.

Bank Pembangunan Malaysia Bhd - Proposal relating to - (a) equity securities of listed or unlisted foreign issuers to sophisticated investors; and (b) structured warrants.

Guidelines on Submission of Corporate and Capital Markets Product Proposal

Submitting Party and Types of Proposals Relating to Collective Investment Schemes - Appendix 2 / Page 22

Listing requirements of Bursa Malaysia Securities Berhad

Question 46
DMAL Bhd is embarking of a corporate exercise that requires shareholder’s approval. A circular for the corporate exercise, dated 28 February 20Y3, will be sent to shareholders, incorporating, among others, a valuation certificate on a piece of property owned by the company. The corporate exercise is expected to complete by 1 May 20Y3. The valuation certificate must be dated not later than:

A. 1 March 20Y3
B. 1 May 20Y3
C. 1 December 20Y2
D. 1 September 20Y2

Answer: D

Explanations:

The Adviser/Applicant has 6 months from the date of the SC’s decision letter to implement the listing proposal of the Applicant.

The Approval Process of Main Market IPOs in Malaysia

Asset Valuation Guidelines

Question 47
The Securities Commission Malaysia (SC) is initiating its own valuation to obtain a second opinion on a valuation report submitted by a listed corporation. Which of the following statements regarding SC’s initiative is correct?

I. The SC may appoint the valuer for the second opinion valuation.
II. The Principal Adviser of the listed corporation has a right of refusal over the appointment of the second opinion valuer.
III. SC will likely to adopt the higher of the original valuation and the value obtained from the second opinion valuation.
IV. The listed corporation has to bear the cost of the second opinion valuation.

A. I and III only
B. I, III and IV only
C. I and IV only
D. II, III and IV only

Answer: C

Explanations:

The SC may obtain a second opinion on the valuation report submitted by the applicant. Where a second opinion valuation is required, the valuer conducting the valuation has to be appointed by the SC, at the cost of the applicant and the lower of the two valuations must be adopted as the basis for the purchase consideration.

A valuation report has to be submitted on asset other than property assets where– (a) the SC had required a valuation to be conducted; or (b) a valuation report had been prepared by an expert.

For valuation of assets other than property assets, a valuation report prepared by an expert should be submitted where available.
The SC, whenever it deems appropriate, may also require an applicant to conduct a valuation on any asset other than those referred to in paragraphs 9.04 and 9.05.

Where a second opinion valuation is conducted, the valuer has to submit the valuation report to the SC.

The Approval Process of Main Market IPOs in Malaysia

The Latest Asset Valuation Guideline by Malaysia Security Commission (SC)

Asset Valuation Guidelines

Question 48
On 31 December 20X1, the issued and paid-up capital of Rosewang Bhd is RM80 million. The company has also issued RM6 million convertible securities. On 15 May 20X2, Rosewang Bhd wishes to issue new convertible securities in addition to those already issued. According to Listing Requirements of Bursa Malaysia Securities, how many new convertible securities can the company issue without securing shareholder approval?

A. RM2 million
B. RM4 million
C. RM6 million
B. RM8 million

Answer: A

Explanations:

Must not exceeds 10% of the total number of issued shares (excluding treasury shares) of the listed issuer except where the shares or convertible securities are issued with the prior shareholder approval in a general meeting of the precise terms and conditions of the issue.

6.03 General mandate for issue of securities (1) Subject to paragraph 6.06 and notwithstanding the existence of a resolution pursuant to sections 75(1) and 76(1) of the Companies Act, or in relation to a foreign corporation, a resolution of a similar nature pursuant to the relevant laws of the place of incorporation, a listed issuer must not issue any shares or convertible securities if the total number of those shares or convertible securities, when aggregated with the total number of any such shares or convertible securities issued during the preceding 12 months, exceeds 10% of the total number of issued shares (excluding treasury shares) of the listed issuer except where the shares or convertible securities are issued with the prior shareholder approval in a general meeting of the precise terms and conditions of the issue.

Chapter 6 - New issue of securities.

Question 49
Thomas exercised an American-style structured warrant that is traded on Bursa Malaysia Securities Berhad and linked to the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), at 11.55 am today (Thursday, 2/4/20X1). Which of the following will be used to calculate the settlement price for this transaction?

A. The FBM KLCI closing level of Wednesday, 1/4/20X1
B. The FBM KLCI mid-day closing level of Thursday, 2/4/20X1
C. The FBM KLCI closing level of Thursday, 2/4/20X1.
D. The FBM KLCI closing level of Friday, 3/4/20X1.

Answer: C

Explanations:

FTSE Bursa Malaysia KLCI

Question 50
Sampro Berhad is proposing a 1 for 3 rights issue for its shares and has decided to close its books for the exercise by Friday, 25 April, 20X5. If there is no public holiday in April 20X5, what will be the latest date for Sampro to announce the book closure?

A. 1 April 20X5
B. 11 April 20X5
C. 15 April 20X5
D. 18 April 20X5

Answer: B

Explanations:

6.22​ Notice of books closing date for a rights issue ​ ​ ​ ​A listed issuer must ensure that the period from the date it announces the books closing date for a rights issue to the books closing date is not less than 10 market days.

Question 51
Encik Shahwan, the managing director of Shahwanco Berhad (Shawanco), together with his immediately family members, held 23% of the issued and paid-up capital of Shahwanco. The company will be issuing 50 million new shares under a scheme for employees. What is the maximum number of new shares Encik Shahwan can acquire under the scheme?

A. 2.5 million
B. 5.0 million
C. 7.5 nillion
D. 25 million

Answer: B

Explanations:

Allocation to Directors and Employees - SC's Guidelines allow all applicant companies, as part of its flotation scheme, to provide an allocation of shares to the directors and employees of the company and its immediate holding company so long as the total allocation does not exceed 5% of its enlarged share capital.

Question 52
The revenue for the most recent financial quarter of Yangro Berhad Group (the Group), listed on the Main Market of Bursa Malaysia Securities, is RM685.4 million. The Group proposed to cease the operations of one of its subsidiary companies, Company A. To ensure that the Group continues to maintain an adequate level of operations, as required under the Listing Requirements of Bursa Malaysia Securities, the revenue of Company A must not exceed:

A. RM68.5 million
B. RM342.6 million
C. RM479.8 million
D. RM616.9 million

Answer: C

Explanations:

The REVENUE of subsidiary company must not exceed 70%

Chapter 8 - Continuing Listing Obligations

Main Market Listing Requirements

Listing Requirement of Bursa Malaysia Securities

Listing on Bursa Malaysia

Question 53
Labtrack Berhad, listed on the ACE Market, is considered as a Cash Company by Bursa Malaysia Securities Berhad (BMSB). Which of the following are applicable to Labtrack Berhad?

I. Must place all its assets in cash or short-term money market instruments.
II. Must submit a proposal to acquire a new core business, to BMSB within 12 months after being informed that it is a Cash Company.
III. Must reduce cash or/and short-term investments to less than 70% of its total assets within three months of announcing that it is a Cash Company.
IV. Must appoint a Sponsor within three months of announcing that it is a Cash Company.

A. I and IV only
B. I, III and IV only
C. II and IV only
D. II, III and IV only

Answer: C

Explanations:

The REVENUE of subsidiary company must not exceed 70%

Chapter 8 - Continuing Listing Obligations

Main Market Listing Requirements

Listing Requirement of Bursa Malaysia Securities

Listing on Bursa Malaysia

Question 54
Which of the following requires immediate announcement by a listed corporation to Bursa Malaysia Securities?

I. The intention to fix a book closing date for right issues.
II. A proposal to change of name of the company.
III. A deviation of 2.5% or more between the profit or loss after tax and minority interest stated in the announced unaudited financial statements and audited financial statements.
IV. A change of internal auditors of the company.

A. I and II only
B. I and III only
C. I, II and IV only
D. II, III and IV only

Answer: C

Explanations:

Chapter 9 - sets out the continuing disclosure requirements that must be complied with, amongst others, by a listed issuer, its directors or advisers.

Corporate Disclosure Guide:
Obligation to Make Immediate Announcement - There are 2 types of material disclosure requirements under the LR. First is where a listed issuer is required to undertake a materiality assessment of the information before making an announcement. Secondly is where a listed issuer must announce any information which has been predetermined under the LR to be material.

Main Market Listing Requirements

Listing on Bursa Malaysia

Question 55
Sunbright Berhad, a company listed on the Main Market of Bursa Securities, is proposing to acquire an asset from one of its directors. The value of the asset is equal to approximately 8% of the net asset value of Sunbright Berhad. In relation to the proposed acquisition, the obligations of Sunbright Berhad include:

I. seeking approval from the Securities Commission.
II. sending a circular to the shareholders.
III. seeking shareholders’ approval of the transaction in general meeting.
IV. appointing a corporate independent adviser.

A. I and III only.
B. I, III and IV only.
C. II and IV only.
D. II, III and IV only.

Answer: D

Chapter 10 (Transactions) - sets out the requirements that must be complied with in respect of transactions entered into by a listed issuer or its subsidiaries.

Main Market Listing Requirements

Listing on Bursa Malaysia

Question 56
Husina Bhd is implementing a share buy-back scheme and the weighted average market price of its shares for the last five market days was RM4.20. What is the maximum repurchase price can the company offer for the shares?

A. RM4.20 per share
B. RM4.62 per share
C. RM4.83 per share
D. RM5.04 per share

Answer: C

Explanations:

Chapter 12 (A share buy-back) - sets out the requirements that must be complied with by a listed corporation or a listed issuer which is a business trust in respect of the purchase of its own securities.

Main Market Listing Requirements

Listing on Bursa Malaysia

Question 57
Which of the following statements relating to the purchase by a listed company of own shares listed on the Main Market of Bursa Securities are correct?

I. A listed company can purchase its own shares up to 10% of its issued and paid-up capital without approval from Bursa Malaysia Securities.
II. A listed company may only purchase its own shares at a price which is not more than 15% above the weighted average market price for the shares for the 5 market days immediately before the purchase.
III. A listed issuer may purchase of its own shares using funds from retained profits and/or other reserve accounts available within its group.
IV. A special resolution passed as a general meeting is required for the company to purchase its own shares.

A. I and II only.
B. I, II and III only.
C. I, III and IV only.
D. All of the above.

Answer: A

Question 58
Rex Industrial Berhad, a Main Market listed company, intends to issue shares pursuant to a Dividend Reinvestment Scheme. To comply with the Listing Requirements of Bursa Malaysia Securities Berhad (BMSB), Rex Industrial Berhad must:

I. obtain the approval of BMSB for the Scheme.
II. issue circular informing shareholders that, among others, they may receive odd lots if the elect to receive shares under the Scheme.
III. allow all its shareholders who are entitled to dividend to participate in the Scheme.
IV. allow shareholders to receive the entitlement partly in cash and partly in shares, or wholly in cash or shares.

A. I, II and III only
B. I, III and IV only
C. II, III and IV only
D. II and IV only

Answer: C

Question 59
Various enforcement actions may be taken by Bursa Malaysia Securities Berhad against parties that failed to comply with its listing requirements. The penalty involving a fine of up to RM1,000,000 may be imposed on:

I. Directors of listed corporations.
II. Listed corporations.
III. Principal advisers of listed corporations undertaking a corporal proposal.
IV. Shareholders of listed corporations.

A. I and II only
B. I, II and III only
C. I, III and IV only
D. II and III only

Answer: B

Explanations:

16.19 Types of actions or penalties
(1) Without prejudice to any of the powers granted to the Exchange under any written law in relation to the enforcement of these Requirements, the types of action or penalty that the Exchange may take or impose for a breach of these Requirements include any one or more of the following:

Listing Requirements Enforcement in Focus

Civil Action 2021

Main Market Listing Requirements

Listing on Bursa Malaysia

Question 60
Which of the following corporate activities requires the approval of Bursa Malaysia Securities Berhad?

I. Issuance of shares by a listed corporation under share options scheme for employees.
II. Secondary offerings of right issuance of shares by a listed corporation.
III. Offering to acquire shares of a listed corporation via a partial offer.
IV. Review and registration of prospectus for issuance of shares by a listed corporation.

A. I and II only
B. I, II and III only
C. I, III and IV only
D. II and IV only

Answer: A

Useful links

CMSA 2007

Guidelines issued by the SC

Find the guidelines issued by the SC on various aspects of the capital market, such as advertising, valuation, audit, business trusts, bonds, collective investment schemes, and more.

Bursa Malaysia - Main Market Requirements

Main Market is a prime market for established companies that have met the standards in terms of quality, size and operations. Potential issuers for the Main Market must demonstrate that they have achieved minimum profit track record or minimum size measured by market capitalization.

Equity guidelines

The Equity Guidelines are issued under section 377 of the Capital Markets and Services Act 2007 (CMSA) and applied by the SC in considering the following proposals under section 212 of the CMSA: (a) Issues and offerings of equity securities; (b) Listings of corporations and quotations of securities on the Main Market; and (c) Proposals which result in a significant change in the business direction or policy of corporations listed on the Main Market. These Guidelines are generally applicable to body corporates whether they are incorporated in Malaysia or outside Malaysia.

Licensing handbook

The CMSA, which takes effect on 28 September 2007, introduces a single licensing regime for capital market intermediaries. Under this regime, a capital market intermediary will only need one licence to carry on the business in any one or more regulated activities. This will mean less cost and paperwork for capital market intermediaries that carry on more than one regulated activity. 1.02 This handbook sets out– (a) the single licensing regime under the CMSA; (b) the criteria to be met for applying and varying a licence; (c) the application procedures; and (d) ongoing obligations imposed on licensed persons, including conditions and restrictions attached to a licence.