CMFAS RES 1A Licensing & Business Operations question: Firm X receives a large

CMFAS RES 1ALicensing & Business Operations

A derivatives dealer at Firm X receives a large customer order. A friend at Firm Y, an unrelated broker, asks about its size so he can position ahead of it, and the dealer tells him. Which statement is correct?

A Permitted once the order has been filled, so the only breach is disclosing it before execution
B Permitted, because market colour about order flow is routinely shared between dealers at different firms
C A breach of Regulation 47(2) of the SFR(LCB), as no permitted ground applies; it may also aid front running
D Permitted if the customer is an institutional investor, since confidentiality rules protect retail customers

Show the answer and explanation

Answer: C. A breach of Regulation 47(2) of the SFR(LCB), as no permitted ground applies; it may also aid front running

Regulation 47(2) allows disclosure of a customer's order only where necessary for execution, permitted by exchange or clearing house rules, or required by MAS. Tipping another firm so it can trade ahead is a confidentiality breach and can amount to market misconduct.

Common mistake

Customer type does not matter; the ground for disclosure does.

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Original study material mapped to the public CMFAS RES 1A syllabus. Unofficial, not endorsed by MAS or IBF. Verify figures and rules against current guidance before relying on them.