Note: Please fill in the answer on the answer card. This exam is comprised

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1 The Senior Securities Specialist Qualification Examination Subject: Securities Trading Regulations and Practice Note: Please fill in the answer on the answer card. This exam is comprised of 50 multiple-choice questions, two points for each question. Please select the correct or most appropriate answer. 1. Where a director, supervisor, or managerial officer of an issuing company or one of its affiliated enterprises subscribes to a private placement of the company's shares, within how many years from the date of delivery will he/she be prohibited from selling the shares? (A) 1 year (B) 2 years (C) 3 years (D) 4 years 2. To spread rumors or false information with the intent to influence the trading prices of securities listed on the central stock exchange is subject to a maximum penalty of imprisonment for? (A) 3 years (B) 5 years (C) 7 years (D) 10 years 3. When a listed company carries out a cash offering of new shares, at least what percentage of the new shares must be offered to the public at market value? (A) 10% (B) 20% (C) 40% (D) 50% 4. The number of directors of a company that has issued stock in accordance with the Securities and Exchange Act may not be less than what number? (A) 1 (B) 3 (C) 5 (D) 7 5. According to the Securities and Exchange Act, when natural persons, juristic persons, funds, or internal persons of the company that meet the conditions prescribed by the competent authority are the placees in a private placement, the total number of such placees may not exceed what number? (A) 30 persons (B) 35 persons (C) 40 persons (D) 45 persons 6. Insider trading as regulated by the Securities and Exchange Act refers to the prohibition against buying or selling any equity-type security of a company upon learning any material information of the company before that information has been publicly disclosed or within a period of after public disclosure. (A) 6 hours (B) 12 hours (C) 18hours (D) 24 hours 7. The act of production and physical delivery or book-entry transfer of securities by an issuer following its public offer is called. (A) Private offering (B) Underwriting (C) Issuance (D) Offering Page 1 of 10

2 8. The must by the fifth day of each month, report to the issuer the changes in the number of shares they held during the preceding month, and the issuer must compile and file such report of changes with the Competent Authority by the fifteenth day of each month. (A) directors, (B) supervisors, (C) managerial officers, or (D) directors, supervisors, managerial officers, and shareholders holding more than ten percent of the total shares of the company 9. What is the longest period of imprisonment that may be imposed on a person who directly or indirectly performs manipulative acts to influence the trading prices of securities on the centralized securities exchange market? (A) 10 years (B) 7 years (C) 5 years (D) 3 years 10. When a public company makes a private placement of shares, when should it apply or report to the Competent Authority (the Financial Supervisory Commission)? (A) It shall apply for approval 3 days prior to undertaking the private placement (B) It shall apply for approval 7 days prior to undertaking the private placement (C) It shall file for recordation within 7 days from the date on which payment is made in full (D) It shall file for recordation within 15 days from the date on which payment is made in full 11. The articles of incorporation of a certain public company state that the company shall have eight directors. According to regulations, how many independent directors at least must it have? (A) 0 (B) 1 (C) 2 (D) When a securities firm that fails to submit documents as ordered by the Competent Authority refuses, impedes, or evades a lawful examination carried out by it, the Competent Authority may issue an administrative fine of what amount? (A) Not more than NT$240,000. (B) Not more than NT$480,000. (C) Not less than NT$240,000 and not more than NT$1.2 million. (D) Not less than NT$240,000 and not more than NT$2.4 million. 13. A certain listed company changes its general manager. Within how many days after the occurrence of the event must it publicly announce the change? (A) 1 day (B) 2 days (C) 3 days (D) It is not required to announce the change Page 2 of 10

3 14. Which of the following statements is INCORRECT? (A) A securities firm must obtain an approval and certificate of license from the competent authority prior to operating securities business (B) No person other than a securities firm may engage in securities business (C) Recordation with the competent authority must be carried out to establish a branch unit of a securities firm (D) A foreign securities firm that establishes a branch unit within the territory of the Republic of China must obtain an approval and certificate of license from the competent authority 15. Which of the following statements about audit committees is INCORRECT? (A) A company that has established an audit committee is not required to additionally establish supervisors (B) An audit committee may not be composed of less than three persons, each of which shall be independent directors (C) At least one member of the audit committee must have financial or accounting expertise (D) A resolution of the audit committee must have the concurrence of two-thirds or more of all of its members 16. Mr. Li is the business manager of listed company Tian Di Electronics. Mr. Li, his wife Mrs. Li, and his son Li Datong (age 25) all hold shares of Tian Di Electronics. Which of those three persons must first report to the Competent Authority before selling his/her shareholdings? (A) Mr. Li (B) Mr. Li and Mrs. Li (C) Mr. Li, Mrs. Li, and Li Datong (D) None of them are required to report to the Competent Authority 17. When a securities firm engages in business such as opening accounts for securities trading, margin purchases and short sales, or receipt and delivery of securities and payments, what type of securities firm is it? (A) Securities broker. (B) Securities dealer. (C) Securities underwriter. (D) Securities agent. 18. A securities firm that operates derivative financial product trading business at its business premises shall do so in accordance with the rules of which agency? (A) The Taiwan Stock Exchange (B) The securities dealers association (C) The Taiwan Depository & Clearing Corporation (D) The GreTai Securities Market Page 3 of 10

4 19. If the aggregate of the securities acquired by a securities firm through underwriting and those traded for its own account by such firm exceeds a certain amount, the portion in excess must be sold, at the latest, by what time? (A) Within three months after acquisition. (B) Half a year after acquisition. (C) Within one year after acquisition. (D) No special handling is required. 20. The total amount of the current liabilities of a securities firm may not exceed what percentage of its current assets? (A) 50 percent (B) 100 ercent (C) 150 percent (D) 200 percent 21. When a securities firm underwrites or re-sells securities, it must follow the handling rules prescribed by which agency? (A) The GreTai Securities Market (B) The Taiwan Securities Association (C) The Taiwan Stock Exchange (D) The Taiwan Futures Exchang 22. A securities firm may operate derivative financial product trading business at its business premises. Which of the following does NOT fall within the category of such derivative financial products? (A) Convertible corporate bonds (B) Structured notes (C) Equity derivatives (D) Credit derivatives 23 A certain securities firm has paid-in capital of NT$1 billion. Its total amount of transferred investment may not exceed what amount? (A) NT$400 million (B) NT$500 million (C) NT$600 million (D) NT$800 million 24. A securities firm may sell underlying securities short as needed for hedging in the issuance of which of the following types of securities? (A) Convertible corporate bonds (B) Call warrants (C) Put warrants (D) Stocks 25. Which of the following is NOT a financial derivative product that a securities firm may trade at its business premises with someone that is not a qualified institutional investor? (A) Convertible bond asset swaps. (B) Equity derivatives. (C) Credit derivatives. (D) Exchange rate derivatives. Page 4 of 10

5 26. Which type of assets held by a securities firm may not exceed 60 percent of its total assets? (A) Current assets. (B) The total of stocks plus government bonds. (C) The total of fixed assets used for operating purposes plus real property not for operating purposes. (D) Other assets. 27. When securities firms directly or indirectly investing in foreign enterprises holding (A) 20 percent or more (B) 30 percent or more (C) 40 percent or more (D) 50 percent or more of their shares, those foreign securities being thus invested may not further reinvest in securities-related enterprises in the ROC. 28. Which of the following types of conduct are prohibited for securities firms engaging in securities business? (A) Providing opinions on the rise or fall of the price of a particular security in order to induce customers to trade (B) Agreeing to or providing a specified interest or sharing of losses in order to induce customers to trade (C) Providing an account for customers to subscribe to and/or trade securities (D) Each of the above is prohibited 29. Which of the following cases requires filing and effective registration with the competent authority for securities before proceeding? (A) issuance of dragon bonds in Taiwan by the Asian Development Bank (B) private placement of overseas convertible corporate bonds (C) central government development bonds (D) new bonus issues without a public offering and cases of capital reduction 30. When the total of brokerage or dealer trading orders placed by a securities firm in a single day exceeds times its net funds available for use, the Taiwan Stock Exchange may suspend the placing of additional trading orders by it. (A) 10 (B) 15 (C) 20 (D) Which of the following persons may not enter the operating counter of a securities broker? (A) The chairman. (B) The general manager. (C) Associated persons who are registered and qualified to take trading orders. (D) The manager of the dealing department. Page 5 of 10

6 32. A director, supervisor, or employee of a securities firm may not open an account, broker securities trades, purchase securities, or handle settlement-related matters on behalf of any other person, unless he/she is the statutory agent or guardian of the principal. That is, a securities firm employee may only act on behalf of which of the following in carrying out the above matters? (A) A spouse (B) A parent (C) A minor child (D) None of the above 33. Which of the following persons may not enter the operating counter for brokered securities trades during business hours? (A) The chairman (B) The general manager (C) A branch office manager (D) Clearing and settlement personnel 34. When an employee of a securities firm violates the Articles of Incorporation of the TWSE, its Operating Rules, the Rules Governing Brokerage Contracts, or other rules and regulations, public announcements, and circular letters of the TWSE, the TWSE may, depending upon the severity of the violation, notify the securities firm to give warning to its employee, or to suspend the employee from executing business activities for what period of time? (A) One to three months. (B) Two to four months. (C) Two to six months. (D) One to six months. 35. Which of the following is NOT a reason that a securities broker may refuse to perform its obligations? (A) Default by a principal (B) Delayed settlement by a principal (C) Failure by the authorized discretionary trader for a discretionary investment account to perform on time the obligations arising from a trade exceeding the scope of the discretionary trader's authorization (D) Financial difficulties 36. Which of the following statements is FALSE with respect to securities brokers opening of accounts for customers? (A) Under exceptional circumstances, and where the reasons have been noted, a securities broker may handle an account as an account without a number. (B) An application for opening of a discretionary trading account may be made by a custodian institution representing a principal in discretionary investment. (C) When a securities broker accepts an application to open an account on behalf of a trustee of trust assets, the account name shall indicate that it is a trust account. (D) A securities broker may accept trading orders from a principal with a newly opened account after confirming that the principal s application has been filled out completely and without error. Page 6 of 10

7 37. Which of the following statements about the activities of a securities broker and its branch offices is CORRECT? (A) They may offset purchase orders against sales orders for the same securities, in whole or in part, in private off-market trading. (B) They may engage in matched-order trading with another securities firm or firms outside the Exchange. (C) They may not engage in matched-order trading with another securities firm or firms outside the Exchange. (D) They may trade securities not listed by the TWSE without the approval of the Competent Authority. 38. Trading of the securities of a listed company will be suspended given the occurrence of which of the following events at the listed company? (A) Failure to publicly announce and file a financial report within the deadline set by law and regulation (B) Net worth is less than one-half of its paid-in capital (C) Inability to convert its convertible corporate bonds at their maturity (D) Refusal to honor a negotiable instrument due to insufficient funds on deposit 39. Trade matching is performed in principal based on price priority and time priority. Which of the following is NOT true of priority in trade orders? (A) Higher-priced buy orders have priority over lower-priced buy orders, and lower-priced sell orders have priority over higher-priced sell orders (B) The priority of orders placed prior to the opening of the market is determined randomly by computer (C) The priority of orders placed prior to the opening of the market is determined according to the time the orders were placed (D) The priority of orders placed after market opening is based on the order in which the orders were placed 40. An associated person of a securities firm who is assuming the job for the first time, or who has resumed the job after an absence of three years, must participate in pre-service training within how many months after reporting for work? (A) 3 months (B) 6 months (C) 9 months (D) 1 year 41. Which of the following persons at a securities firm must first undergo review and approval by the competent authority before assuming their position? (A) The chairman of the board of directors (B) The general manager (C) The chief financial officer (D) The head of internal auditing Page 7 of 10

8 42. When a responsible person or associated person of the headquarters or branch office of a domestic securities firm is promoted, reassigned, or retires, within how many days must the securities firm report to the Stock Exchange or other related agency to register the change? (A) 3 days (B) 5 days (C) 10 days (D) 15 days 43. In a foreign securities firm's branch unit within the ROC, which persons must be qualified as senior agents? (A) The responsible person of the branch unit (B) The manager of the clearing and settlement department (C) The shareholder services manager (D) The financial affairs department manager 44. A responsible person of a securities firm or their spouse may not participate in any policy decisions of the securities firm with regard to a public company when either of them holds shares of the company equal to or higher than what amount? (A) 3% (B) 5% (C) 10% (D) 20% 45. Which of the following statements is INCORRECT with regard to the qualifications required for the responsible persons of foreign securities firms branch units in the ROC? (A) They must be a graduate of a local or foreign junior college recognized by the Ministry of Education, or have an equivalent or higher degree, with five or more years of sales experience in securities, futures, finance, or insurance, and have held the position of assistant general manager or an equivalent position for one year or more at a securities or futures institution, or the position of manager or an equivalent position at a securities or futures institution for three years or more, with a good performance record. (B) They must have six years or more of work experience at a securities institution, and have served in the position of assistant general manager or an equivalent position at a securities or futures institution for one year or more, or in the position of manager or an equivalent position at a securities or futures institution for three years or more, with a good performance record. (C) They must have six years or more of work experience at a securities institution, and have held the position of assistant general manager or an equivalent position for one-half year or more at a securities or futures institution, or the position of manager or an equivalent position at a securities or futures institution for three years or more, with a good performance record. (D)They must have other academic or work qualifications demonstrating possession of professional knowledge of securities and operations and management experience that would enable sound and effective management of securities firm business. 46. A securities firm that conducts margin purchase and short sale business must have operated what kind of business for a period of at least one year? (A) Securities dealing (B) Securities brokerage (C) Securities underwriting (D) Trust business Page 8 of 10

9 47. When securities firms open margin accounts for principals, what is the limit on the number of accounts per principal? (A) one account (B) two accounts (C) there is no limit (D) through a single securities firm, one account can be opened per each securities finance Company 48. When a securities firm engages in securities margin purchase and short sale business and securities borrowing and lending business, the combined total amount of short sales and securities loans of any given type of securities that it provides may not exceed what percentage of its net worth? (A) 5% (B) 10% (C) 15% (D) 20% 49. When a securities firm conducts securities margin purchase and short sale business, the total amount, respectively, of margin purchases or short sales that it provides to customers may not exceed what percentage of its net worth? (A) 150 percent (B) 200 percent (C) 250 percent (D) 300 percent 50. When the reporting and handling of an out-trade or account number correction by a securities broker results in a dispute or a loss to the rights and interests of an investor, which of the following will bear responsibility? (A) The Taiwan Stock Exchange. (B) A court will oversee coordination of the matter. (C) The investor. (D) The securities broker. Page 9 of 10

10 Answers For" Securities Trading Regulations and Practice" 證券交易相關法規與實務 答案 ( ) 1 C 11 C 21 B 31 D 41 B 2 D 12 D 22 A 32 C 42 B 3 A 13 B 23 A 33 D 43 B 4 C 14 C 24 C 34 D 44 B 5 B 15 D 25 D 35 D 45 C 6 C 16 B 26 C 36 D 46 B 7 C 17 A 27 D 37 C 47 A 8 D 18 D 28 D 38 A 48 A 9 A 19 C 29 D 39 C 49 C 10 D 20 B 30 C 40 B 50 D 本測驗試題及解答, 係以測驗當時所適用法規為準 嗣後如因法規修訂, 致試題不適用或解答有誤時, 煩請讀者自行更正 The test questions and answers in this exam were based on the regulations current as of the exam date. After the exam date, if any of the test questions is not applicable or the answer is not correct because the regulations have been subsequently amended, exam candidates need to be aware of the latest amendments and make corrections on their own to the information contained herein. Page 10 of 10