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CME-3B – Saudi Capital Market Rules and Regulations (Brokers): free practice test

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Practice test questions with answers and explanations

Try the questions in the test above first, then open each one here to see the correct answer and why every other option is wrong.

01An employee participates in deceptive orders despite reasonable grounds to know their nature, arguing that he never admitted knowledge. What is the assessment?

Practice question Unit: Market Conduct Regulations

  1. ANo admission means exemption

    The test is not confined to admitted knowledge.

  2. BReasonable grounds to know can engage the prohibition ✓ Correct answer

    The article covers knowledge or reasonable grounds to know the practice’s nature.

  3. CHe must be a director

    The prohibition applies to any person, not only directors.

  4. DOnly sellers are covered

    Participation in deceptive conduct is not limited to selling.

Reference: Market Conduct Regulations, Article 2(a), PDF p.4; amended 25 January 2021.

02A programmer configures automated orders to create an artificial price. Does using an algorithm change the prohibition?

Practice question Unit: Market Conduct Regulations

  1. AYes, it only covers manual orders

    The article expressly includes technical tools.

  2. BYes, for institutional accounts

    There is no institutional-account exemption here.

  3. CNo, automated order-generation tools are covered ✓ Correct answer

    Automatically generated orders fall within the same prohibition.

  4. DYes, unless every order executes

    The prohibition covers order entry; execution of every order is not required.

Reference: Market Conduct Regulations, Article 2(c), PDF p.4; amended 25 January 2021.

03A person executes matched market purchases and sales between his own accounts to fabricate trading activity, with no change in beneficial ownership. How is this classified?

Practice question Unit: Market Conduct Regulations

  1. AManipulation creating a misleading impression ✓ Correct answer

    Unchanged beneficial ownership with a deceptive purpose is specified conduct.

  2. BExempt diversification

    Calling it diversification does not remove the deceptive purpose.

  3. CRequired disclosure

    This concerns an artificial transaction, not a disclosure duty.

  4. DAutomatically exempt price stabilisation

    Nothing establishes compliant activity by a stabilisation manager.

Reference: Market Conduct Regulations, Article 3(b)(1), PDF p.4; amended 25 January 2021.

04A trader enters a buy order knowing of a substantially matching sell order in size, timing and price, to fabricate demand. What matters?

Practice question Unit: Market Conduct Regulations

  1. AOnly that the price is high

    Price level alone is not this paragraph’s test.

  2. BOnly that it is a market order

    The paragraph is not limited to market orders.

  3. CThat the account is old

    Account age does not determine whether the practice is lawful.

  4. DPrior knowledge of matching and the deceptive purpose ✓ Correct answer

    Knowing matching orders combined with the deceptive purpose defines this case.

Reference: Market Conduct Regulations, Article 3(b)(2), PDF p.4; amended 25 January 2021.

05A shareholder promotes buying a security in order to sell his holding to the buyers he attracts. Which rule is most relevant?

Practice question Unit: Market Conduct Regulations

  1. AOwnership permits any promotion

    Share ownership does not provide that exemption.

  2. BPromoting purchases for the purpose of selling is specified conduct ✓ Correct answer

    The article specifies promotion of buying for the purpose of selling the security.

  3. CIt only applies to bond sales

    The provision concerns securities, not just bonds.

  4. DOwnership must pass to a relative

    The paragraph does not require a family relationship.

Reference: Market Conduct Regulations, Article 3(a)(2), PDF p.4; amended 25 January 2021.

06A broker has reasonable grounds to believe an order involves manipulation. What must it do?

Practice question Unit: Capital Market Institutions Conduct

  1. ARefuse to accept or execute it ✓ Correct answer

    Article 11(a) prohibits acceptance or execution on these grounds.

  2. BExecute if the client insists

    Client insistence does not override the prohibition.

  3. CWait for a criminal conviction

    The test is reasonable grounds, not a final conviction.

  4. DExecute against a written indemnity

    An indemnity does not authorise the prohibited order.

Reference: Market Conduct Regulations, Article 11(a)

07An overseas order would constitute manipulation if these Regulations applied there. What follows?

Practice question Unit: Capital Market Institutions Conduct

  1. AClient consent removes the test

    Consent does not remove the duty to refuse.

  2. BIt must be refused where reasonable grounds exist ✓ Correct answer

    Article 11(a)(2) expressly covers this other-market scenario.

  3. CIt must always be executed because it is overseas

    The refusal rule covers the specified overseas case.

  4. DThe rule applies only to local shares

    The article does not confine this duty to the local market.

Reference: Market Conduct Regulations, Article 11(a)(2)

08A firm refuses a suspicious order. How must it preserve the reasons?

Practice question Unit: Capital Market Institutions Conduct

  1. AKeep only the order value

    Circumstances and reasons are required, not merely value.

  2. BDelete the order

    Deletion does not satisfy documentation.

  3. CDocument the circumstances and reasons in writing ✓ Correct answer

    Article 11(b) requires written documentation.

  4. DRely on staff memory

    Memory is not written documentation.

Reference: Market Conduct Regulations, Article 11(b)

09When must a firm notify the Authority of a decision to refuse under Article 11?

Practice question Unit: Capital Market Institutions Conduct

  1. AWithin thirty days

    Thirty days exceeds the specified period.

  2. BOnly in its annual report

    Annual reporting cannot replace notification within three days.

  3. CNo notification after refusal

    Refusal does not remove the notification duty.

  4. DWithin three days ✓ Correct answer

    Article 11(b) specifies three days.

Reference: Market Conduct Regulations, Article 11(b)

10An order was executed before the firm learned of reasonable grounds for a client violation. When does notification time run?

Practice question Unit: Capital Market Institutions Conduct

  1. AFrom becoming aware of those grounds ✓ Correct answer

    Article 11(c) runs the three days from awareness.

  2. BFrom the start of the financial year

    The clock is not linked to the financial year.

  3. CFrom a final judgment

    A judgment is not required to start notification.

  4. DFrom client consent to notification

    Consent is not a condition for the clock.

Reference: Market Conduct Regulations, Article 11(c)

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