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SIDC Exam Module 6: Stock Market and Securities Law Free Practice Test

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60 real exam Qs90 min exam60% pass mark
Question 1 of 200/0 correct
Ali is a freelance consultant who provides advice to companies on initial public offerings and mergers and acquisitions. He does not hold any license from the Securities Commission Malaysia. Recently, he was paid for advising a company on its IPO listing on the ACE Market. Under the Capital Markets and Services Act 2007, which of the following best describes Ali's situation?
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Order Authority: Separate Instructions from Discretion

Resolve a share-order discrepancy by separating client authority, execution quality, error handling, and conflicts.

Read the lesson transcript

A better price, but the wrong quantity

A client instructs a dealer to buy eight thousand shares at no more than two ringgit forty sen each. The dealer buys ten thousand at two ringgit thirty eight sen, then argues that the better price makes the transaction acceptable. In this original Module Six scenario, which fact resolves the dispute? The problem concerns the scope of client authority. A favourable execution price does not establish permission to increase the quantity, so examine the instruction before evaluating the result.

Test each part of the instruction

Separate the order into instrument, direction, quantity, and price condition. Buying the specified share satisfies the instrument and direction. Paying two ringgit thirty eight sen satisfies the stated ceiling. Buying ten thousand fails the quantity condition because the client authorised eight thousand. The extra two thousand shares represent four thousand seven hundred sixty ringgit of additional purchase exposure before charges. That amount identifies the disputed exposure; it is not automatically the client's recoverable loss or a regulatory penalty.

Execution is different from discretion

Next distinguish carrying out a specific instruction from exercising investment discretion. Choosing how to execute within an instruction is different from choosing a larger investment for the client. A dealer cannot infer broader authority simply because the client has traded frequently or trusted earlier suggestions. If discretionary authority is asserted, examine its actual documentation and scope. The outline expressly includes discretionary trades and the stockbroking company and client relationship, making the source of authority central to this analysis.

Handle the discrepancy with an audit trail

Once the mismatch is identified, preserve the original instruction, order entries, execution records, and relevant communications. Refer the discrepancy through the firm's error handling and supervisory procedures, explain the facts accurately, and establish the appropriate correction under the applicable framework. Quietly assigning the excess shares to another client would create a fresh authority problem. Keeping a profitable excess personally could also create a conflict. Treat documentation, fair client treatment, and conflict management as connected controls, rather than competing priorities.

Mini-check: favourable execution within scope

Change the facts. The dealer buys exactly eight thousand shares at two ringgit thirty nine sen, and the client later complains because the market falls. Does the loss itself establish an execution error? No. On these facts, the quantity and price satisfy the instruction. Other issues could still require investigation, such as misleading advice, but a later price decline does not prove unauthorised execution. Compare conduct with the authority and information available when the order was handled, not merely the eventual outcome.

Carry the authority test into the next case

The transferable method is to reconstruct what the client authorised, compare each material order term with the execution, and investigate any mismatch through a documented process. Keep authority separate from price improvement, investment performance, and the dealer's preferred remedy. In a stockbroking case, a transaction can achieve a good price while exceeding its mandate, or lose money while following the instruction. This focused lesson applies the syllabus topics on discretionary trades, handling errors, client duties, and records to one concrete problem.

In this lesson

  1. 1.A better price, but the wrong quantity
  2. 2.Test each part of the instruction
  3. 3.Execution is different from discretion
  4. 4.Handle the discrepancy with an audit trail
  5. 5.Mini-check: favourable execution within scope
  6. 6.Carry the authority test into the next case

Aligned to the SIDC July–December 2026 study outline. Independent teaching with original examples; this focused lesson does not cover the entire syllabus.

Exam Syllabus

Core SIDC Exam Module 6: Stock Market and Securities Law topics

01

CMSA and Licensing Framework

Capital Markets and Services Act 2007 | CMSL and CMSRL licensing concepts | Regulated activity of dealing in securities | Role of the Securities Commission Malaysia

02

Equity Market Institutions

Bursa Malaysia Securities Berhad | clearing and settlement infrastructure | central depository functions | stockbroking operational roles

03

Bursa Securities Trading Rules

order handling | trading sessions and trading phases | market orders and limit orders | prohibited trading conduct

04

Clearing, Settlement, and Depository

settlement cycles | delivery and payment obligations | depository transfers | failed trades

05

Market Conduct and Client Protection

client asset protection | suitability and disclosure | conflicts of interest | complaint handling

06

AML/CFT/CPF and Compliance

customer due diligence | suspicious transaction reporting | targeted financial sanctions | ongoing monitoring

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