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IMC UNIT 1 (Edition 21 - Dec 23) > C1 - Financial Markets & Institutions (10-20 Qs) > Flashcards

C1 - Financial Markets & Institutions (10-20 Qs) Flashcards

1
Q

The Financial Reporting Council (FRC) principles aim to make institutional investors actively engage in corporate governance in the interests of their beneficiaries. These are known as:
a) the UK Corporate Governance Code
b) The Agency Code
c) The Takeover Code
d) The UK Stewardship Code

A

D - The UK Stewardship Code

The UK Stewardship Code aims to make shareholders, who manage other people…

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2
Q

On which of the following is the interest paid semi-annually?
A) Eurobond
B) UK Treasury bond
C) UK Equity
D) US Treasury bond

A

D - US Treasury bond

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3
Q

How many days notice does a company have to give to its shareholders when calling an annual general meeting?
A) 14 days
B) 28 days
C) 7 days
D) 21 days

A

D - 21 Days

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4
Q

The role played by the financial services industry in reducing the cost of capital for businesses and consumers is best described as facilitating the:
A) Pooling of capital and the management of risk
B) Pooling of capital risk with capital returns
C) Separation of capital providers from capital consumers
D) Separation of capital risk from capital returns

A

A - Pooling of capital and the management of risk

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5
Q

Which of the below statements are NOT true of disclosure of interest under the disclosure and transparency rules?
1. Acqusitions from below 3% to 3% or more are disclosable
2. A disposal from 5.25% to 4.9% is disclosable
3. Shares owned by spouses, children, and grandchildren are aggregated for disclosure purposes
4. Notification must be within 2 business days of the disclosable transaction

A) 2 only
B) 3 only
C) 1, 2 and 3
D) 3 and 4

A

B - Shares owned by spouses, children, and grandchildren are aggregated for disclosure purposes

Spouses, children, concert parties and companies with ownership of at least one third qof the shares are includes, NOT grandchildren.

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6
Q

What is the purpose of the London Stock Exchange’s (LSE) central counterparty service?
A) To reduce systematic risk through diversification
B) To reduce liabilities by guaranteeing returns
C) To reduce default risk through margin
D) To reduce settlement risk through delivery versus payment

A

C - To reduce default risk through margin

The Central Counterparty Service (CCP) provided by LSE reduces default risk by novating the contract and collecting margin. CREST protects against settlement risk through delivery versus payment (DVP)

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7
Q

An investor would be required to notify the company if their stake goes from:
a) 3.1% to 4.2% of company shares
b) 3.1% to 3.9% of company shares
c) 1.9% to 2.7% of company shares
d) 10.9% to 10.1% of company shares

A

A - 3.1% to 4.2% of company shares

Shareholders who already have a stake in the company above 3% are required to notify the company if their share changes over 1%

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8
Q

What does MTF stand for?
A) Market Trading Function
B) Market Trading Facility
C) MiFID Trading Facility
D) Multilateral Trading Facility

A

D - Multilateral Trading Facility

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9
Q

Directors must disclose which of the following interests in a company in which they are a director?
A) Holding of more than 3%
B) Holding of 3% or more
C) Change of 1% in a holding above 3
D) Any holding

A

D - Any Holding

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10
Q

Where can international shares be traded in London?
A) IOB
B) SETS
C) SETSqx
D) AIM

A

A - the IOB is the International Order Book of the London Stock Exchange

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11
Q

ABC plc is a company with only equity capital. What is the minimum market capitalisation required for listing?
A) £200k
B) £900k
C) £30m
D) £20m

A

C - £30m of Equity Capital

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12
Q

When a listed company receives notification of a 5% interest, to whom must it disclose this information?
A) Treasury
B) FCA
C) Regulatory Information Service
D) Shareholders

A

C - Regulatory Information Service

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13
Q

Which of the following are TRUE of CREST?
1. It only provides a dematerialised facility for settlement
2. It is operated and owned by the Bank of England
3. It is operated and owned by Euroclear UK & Ireland
4. It provides for settlement of dematerialised and paper stock

A) 1 and 2
B) 2 and 4
C) 1 and 3
D) 3 and 4

A

D - 3 (operated/owned by Euroclear UK&I) and 4 (provides settlement of dematerialised and paper stock)

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14
Q

Which currency is an ADR issued in?
A) Sterling
B) US dollars
C) Euros
D) Eurodollars

A

B - US Dollars

An American depositary receipt (ADR) is a U.S. bank-issued certificate representing shares in a foreign company for trade on American stock exchanges.

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15
Q

Which of the following is a deposit-accepting institution?
a) A mutual fund
b) A commercial bank
c) An investment trust
d) A pension fund

A

B - Commercial Bank

Only banks accept deposits to fund their assets. All the other institutiions are investment

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16
Q

Which one of the following is NOT a characteristic of the SETS trading system on the London Stock Exchange?
A) There is an opening auction
B) It is a quote display system
C) Stocks listed in the FTSE Small-Cap can be traded through the system
D) It is an electronic limit order system

A

B - It is a quote display system

SETS is an order-driven system for FTSE 100, 250 and small cap. SEAQ is a quote driven display system.

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17
Q

What is the minimum level of notifiable interest under the disclosure and transparency rules?
A) 1%
B) 3%
C) 5%
D) 8%

A

B - 3%

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18
Q

What is the standard settlement period for shares traded on the LSE?
A) 2 days
B) 3 days
C) 5 days
D) 7 days

A

A - 2 Days

Standard settlement is T+2

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19
Q

Which of the following would be described as a Eurobond?
A) $ denominated issue by a non-US company in New York
B) $ denominated issue by a US company in New York
C) £ denominated issue by a US company in London
D) £ denominated issue by a UK company in New York and Tokyo

A

D - £ denominated issue by a UK company in New York and Tokyo

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20
Q

Who issues ADRs?
A) US corporations
B) Non-US corporations
C) US government
D) Non-US governments

A

B - Non-US corporations

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21
Q

What level of votes cast, either at the meeting or by proxy, is required to pass an ordinary resolution at an AGM?
A) at least 25%
B) greater than 50%
C) at least 75%
D) greater than 90%

A

B - Greater than 50%

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22
Q

Which of the following provide clearing/settlement facilities for the Eurobond transactions?
1. Clearstream
2. LCH.Clearnet
3. Euroclear
4. Eurosettle

A) 3 and 4
B) 1 and 4
C) 1 and 3
D) 2 and 3

A

** C - 1 (Clearstream) and 3 (Euroclear)**

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23
Q

A company seeking a listing on AQSE (formerly NEX) Exchange Main Market must have an expected minimum market value of securities to be listed of?
A) £5,000
B) £75,000
C) £150,000
D) £700,000

A

D - £700k

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24
Q

Who auctions gilts in the UK market?
A) The Treasury
B) The Bank of England
C) The DMO
D) The LSE

A

C - the DMO

DMO is the Debt Managment Office

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25
Q

For a company listing, what is the minimum market value for debt?
A) £200k
B) £700k
C) £1m
D) £1.5m

A

A - £200m of Debt

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26
Q

Under the disclosure and transparaency rules, within how many days must a shareholder inform the company one obtaining a notifiable interest?

A) 1 business day
B) 2 business days
C) 5 business days
D) 10 business days

A

B - 2 Business Days

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27
Q

The issuance of gilts is managed by which of the following bodies.
a) The Gilt-Edged Market Makers Association (GEMMA).
b) The Central Gilts Office (CGO)
c) CREST.
d) The Debt Management Office (DMO)

A

D - The Debt Management Office (DMO)

The DMO is the body responsible for gilt issuance and general management

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28
Q

At what stage does a clearing house become the central counterparty to a trade?
A) When the trade is struck
B) When the trade is reported
C) When the trade is settled
D) When the trade is registered

A

D - When the trade is registered

Once the trade has been allocated and assigned in the trade registration system, it is passed to the clearing process system and onto the clearing house.

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29
Q

When floating on the LSE, which of the following are generally TRUE?
1. Must issue a prospectus
2. Must advertise in a national newspaper
3. Prospectuses must be reported on by the accountants

A) Only 1
B) 1 and 2
C) 2 and 3
D) All of the above

A

D - All of the above

30
Q

The standard settlement time for gilts is:
a) T+3
b) T+2
c) T+1
d) Same Day

A

C - T+1

The standard settlement time for gilts through CREST is T+1 (i.e. one working days after the transaction)

31
Q

Which organisation acts as a central counterparty and clearing house for SETS trades?
A) LCH.Clearnet
B) RCH
C) OM London Exchange
D) CREST

A

A - LCH.Clearnet

LCH.Clearnet is a recognised clearing house (RCH) which acts as a central coounterparty for trades

32
Q

Which of the following is most likely outcome of an increase in the liquidity risk of an asset?
A) A lowering of transaction costs
B) An increase in the order size that has price impact
C) Increased bid-offer spread
D) Increasing future price certainty

A

C - Increased bid-offer spread

Liquidity Risk: An imbalance in financial assets and liabilities with reference to maturities, unforeseen needs, and financial pbligations

33
Q

To whom does a company apply in order to be admitted to the Main Market on the LSE?
A) Bank of England
B) Treasury
C) FCA
D) LSE

A

C - FCA

34
Q

Which of the following needs disclosing as part of the notifiable interest rules?
A) Value of holding
B) Price paid for shares
C) Percentage of holding
D) Nominal value of holding

A

C - Percentage of holding

The trigger level for notifiable interests is 3%

35
Q

Which of the following do NOT need to disclose their holdings?
A) The spouse of the company director who holds 0.5% of the share capital of the company
B) The director who holds 1% of the share capital of the company
C) A shareholder who owns 2% of the share capital of the company
D) A shareholder who owns 4% of the share capital of the company

A

C - Shareholder who owns 2% of the share capital of the company

Directors and their spouses must always disclose, and the trigger level for shareholders is 3%.

36
Q

Which combination of the below statements are true of a company AGM?
1. Legally it must be held annually
2. A special resolution may be considered
3. A person must attend in person to vote
4. 21 Days notice is required

A) 1 and 4
B) 1, 3 and 4
C) 1, 2 and 4
D) 2 and 4

A

C - 1, 2 and 4

Shareholder can vote by proxy, they do not need to attend.

37
Q

When is settlement for Eurobonds transactions?
A) 1 business day
B) 2 business days
C) 5 calendar days
D) 3 business days

A

B - 2 business days

38
Q

A company wishing to list shares on the main market must ensure these securities have a minimum market capitalisation of at least:
a) £1 million
b) £30 million
c) £50 million
d) £70 million

A

B - £30 million

For both a premium and standard listing on the main market the minimum volume of £30m

39
Q

Market makers are required to do what?
A) Quote indicative bid and offer prices but do not have to deal
B) Quote firm and offer prices but do not have to deal
C) Quote bid and offer prices up to EMS, above which prices are firm
D) Quote bid and offer prices up to EMS, below which prices are firm

A

D - Quote bid and offer prices up to EMS, below which prices are firm

40
Q

SETSqx is a London Stock Exchange trading system for trading:
a) International securities
b) Retail bonds
c) Less liquid equity securities
d) Equity derivative securities

A

C - Less Liquid Equity Securities

SETSqx is a trading system from less liquid equity securities.

41
Q

How often must a statement of funding principles drawn up in relation to an occupational pension scheme be reviewed?
A) Every 6 months
B) Every 1 year
C) Every 3 years
D) Every 5 years

A

C - Every 3 years

42
Q

Standard settlement for an equity transaction on the LSE is:
A) T+1
B) T+2
C) T+3
D) T+4

A

B - T+2

Gilts T+1 (shorter word, shorter settlement)
Equity T+2 (longer word, longer settlement)

43
Q

Which one of the following does ICMA regulate?
A) the Eurobond markets
B) the American bond market
C) the Australian bond market
D) the German markets

A

A - ICMA regulates the Eurobonds market

44
Q

One of the criteria for determining whether the Competition and Markets Authority investigates a merger is called the ‘turnover test’.

What is the minimum level of UK turnover necessary for the ‘turnover test’ to qualify a transaction for investigation?
A) £30m
B) £50m
C) £70m
D) £100m

A

D - £100m

A merger usually only qualifies for a CMA investigation if either: the business being taken over has a UK annual turnover of at least £100 million. the combined businesses have at least a 25% share of any reasonable market.

Was previously £70m

45
Q

Which of the following are settled through CREST?
A) Property
B) Equities
C) Currencies
D) Eurobonds

A

B - Equities are settled through CREST

46
Q

Which one of the following is an advantage achieved by a gilt-edged market maker when trading through an inter-dealer broker?
A) Ability to strip a gilt-edged security
B) Anonymity of trade
C) Preferential tax rates
D) Special dealing arrangements with the Debt Management Office

A

B - Anonymity of trade

47
Q

What is the minimum percentage of the voting shareholders of a company required to call a general meeting?
A) 5%
B) 50%
C) 75%
D) 25%

A

**A - 5% **

Shareholders owning at least 5% of the voting share capital (or directors themselves) can request a general meeting.

48
Q

What period after being sent an electronic communication from a company to a shareholder to be deemed delivered?
A) 12 hours
B) 24 hors
C) 48 hours
D) 72 hours

A

C - 48 hours

49
Q

Four investors acting together to achieve a single objective each buy 1% of XYZ plc
Which of the following is true?
A) Each investor is deemed to hold 1% and must disclose their position to the company
B) Each investor is deemed to hold 1% but need not disclose their position to the company
C) Each investor is deemed to hold 4% and must disclose their position to the company
D) Each investor is deemed to hold 4% but need not disclose their position to the company

A

C - Each investor is deemed to hold 4% and must disclose their position to the company

50
Q

Which of the following are recurring business at AGMs?
1. Declaration of the final dividend
2. Approval of the accounts
3. Reappointment of the auditors

A) 1 and 2
B) 1 and 3
C) All of the above
D) 2 and 3

A

C - All of the above

51
Q

What term best describes the settlement procedure for CREST?
a) Physical settlement
b) Certified settlement
c) Paperless settlement
d) Materialised settlement

A

C - Paperless settlement

Settlement through CREST is electronic and hence paperless

52
Q

Which of the following is TRUE in respect of proxy voting powers at a company meeting?
1. A proxy is entitled to vote on a show of hands
2. A proxy is entitled to vote on a poll
3. A proxy form returned without an indication of how the proxy will vote is assumed to be a ‘general proxy’
4. A ‘special’ proxy can vote on any topic at the meeting using his own discretion

A) 2 and 3
B) All of the above
C) 1, 2 and 3
D) 2 and 4

A

C - 1, 2 and 3

A special proxy is a one where thet have been given explicit instructions on how to vote at the company meeting.

53
Q

What percentage of shareholders voting rights is required to demand a poll vote?
A) 5%
B) 10%
C) 2%
D) 1%

A

B - 10% of voting rights

54
Q

Somebody who wants to appoint another person to vote as they think fit on their behalf at a company meeting would appoint:
a) Two-way proxy
b) General proxy
c) Agent proxy
d) Special proxy

A

B - General Proxy

Two main types - a general and a special. A general proxy can vote as they see fit, special proxy they must vote as instructed.

55
Q

Which of the following statements best describes a dark pool?
A) An investment firm which deals on its own account by executing customer order flow in listed securities outside a regulated market
B) An electronic crossing network which provide liquidity that is not displayed on a conventional order book of an organised exchange
C) An exchange for trading non-standardised contracts such as swaps
D) A quote-driven market for trading stocks and bonds with market makers providing liquidity

A

B - An electronic crossing network which provide liquidity that is not displayed on a conventional order book of an organised exchange

56
Q

Who has the responsibility for setting UK interest rates?
A) The FPC
B) The MPC
C) The Treasury
D) The Stock Exchange

A

B - the MPC

The Bank of England’s Monetary Policy Committee is responsible for making decisions about the Bank Rate

57
Q

Which of the following are TRUE regarding Eurobonds?
1. They settle T+2
2. Notice is always required before the payment of interest
3. They can only be issued by international bodies and governments
4. They are normally bearer investments

A) 1 and 2
B) 1 and 3
C) 1 and 4
D) 3 only

A

C - 1 and 4 are true

A variety of institutions raise money through the issue of Eurobonds including corporations, banks, public sector bodies and supranationals.

58
Q

What is EMS?

A) Exchange Multiplier System
B) Exchange Market System
C) Exchange Market Size
D) Exchnage Multiplier Size

A

C - Exchange Market Size

Exchange Market Size is used by LSE as a measure of the normal volume of trades executed in a particular security.

59
Q

Under the disclosure rules, directors must disclose all dealings in their company’s own shares within:
A) T+2 days
B) T+3 days
C) T+4 days
D) T+7days

A

C T+4 Days

60
Q

Who issues ADRs?
A) US corporations
B) Non-US corporations
C) US government
D) Non-US governments

A

B - Non-US corporations

61
Q

Which of the following is MOST likely to be described as operating as a sell side firm?
A) A pension fund
B) A hedge fund
C) An insurance company
D) A broker

A

D - A broker

62
Q

How is the process for trading ordinary FTSE 100 shares best described?
a) Quote-driven
b) Order-driven
c) Open outcry
d) Price-driven

A

B - Order-Driven

FTSE 100 shares are traded on the Stock Exchange Trading Service (SETS),

63
Q

UK Gilts usually pay:
a) Gross coupons annually
b) Net coupons annually
c) Net coupons semi-annually
d) Gross coupons semi-annually

A

D - Gross Coupons semi-annually

UK Gilts pay interest semi-annually and pay interest gross on new holdin

64
Q

Which organisation is responsible for setting rules for trading in the Eurobond market?
a) International Capital Markets Association (ICMA)
b) Euroclear
c) The Financial Conduct Authority (FCA)
d) The Securities and Exchange Commission (SEC)

A

A - International Capital Markets Association (ICMA)

Eurobonds are normally traded over the counter and the rules for trading are set by the ICMA

65
Q

What level of votes cast, either at the meeting or by proxy, is required to pass a special resolution at an AGM?
A) 25%
B) 50%
C) 75%
D) 90%

A

C - 75%

66
Q

What are GEMMs?
A) German-edged money makers
B) Gilt-edged money markets
C) Gilt-edged money makers
D) Gilt-edged money managers

A

C - Gilt-edged money makers

67
Q

Which main market trades less liquid stocks by combining a periodic auction book with quote-driven market making?
A) SETS
B) SETqx
C) SEAQ
D) LME

A

B - SETqx

68
Q

What is it called when 2 corporations function as a single operating business but retain separate legal entities and stock exchange listings?

A) Double Listing
B) Repeat Listing
C) Dual Listing
D) Linked Listing

A

C - Dual Listing

69
Q

Who is the competent authority in the UK?
A) Bank of England
B) MPC
C) PRA
D) FCA

A

D - FCA

FCA is the competent authority, colloquially known as the UK listing authority.

70
Q

Which of the following is NOT one of the three requirements for listing on the main market?
A) 3 years of published accounts
B) Balance sheet of over £100m
C) Over £30m of listed stocks
D) £200k of debt securities

A

B - Balance sheet of over £100m

IMC UNIT 1 (Edition 21 - Dec 23) (7 decks)

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