CMFAS RES 1A Licensing & Business Operations question: enters into an OTC swap with a corporate

CMFAS RES 1ALicensing & Business Operations

Vega Capital, a CMS licence holder, enters into an OTC swap with a corporate customer on Tuesday, dealing as principal. On Wednesday it sends the customer a confirmation stating Vega's name, the customer's name, the date the transaction was entered into, and the type and notional value of the contract. The confirmation says nothing about the capacity in which Vega dealt. What must Vega do?

A Issue a contract note, because a confirmation replaces it only if it has every prescribed item, including the principal statement
B Include the missing capacity statement in the next monthly statement of account sent to the corporate customer
C Nothing, because a confirmation always replaces a contract note for OTC derivatives contracts dealt with corporate customers
D Nothing, because contract notes are required only for exchange-traded contracts and never for bilateral OTC swaps

Show the answer and explanation

Answer: A. Issue a contract note, because a confirmation replaces it only if it has every prescribed item, including the principal statement

Regulation 42 of the SFR(LCB) dispenses with a contract note for an OTC derivatives transaction only where the holder gives a confirmation stating the holder's name, the counterparty's name, a statement that it is acting as principal where that is so, the trade date, and the type and notional value of the contract. Leaving out the principal capacity statement takes the transaction outside the carve-out.

Common mistake

The OTC carve-out is all or nothing; an incomplete confirmation does not replace a contract note.

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Study note: Licensing & Business Operations CMFAS RES 1Apractice questions & mock exams

Related CMFAS RES 1A questions

Which of the following persons are exempt from holding a CMS licence for dealing in capital markets products?Which of the following is NOT generally regarded as an exempt financial institution able to conduct regulated activities without a CMS licence?An individual who has been licensed for derivatives dealing in a comparable overseas jurisdiction for the past 2 years joins a Singapore CMS licence holder and has not yet passed the requisite CMFAS module. Which status allows him to start conducting regulated activities while he sits the examination?

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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.

CMFAS RES 1A Licensing & Business Operations question: enters into an OTC swap with a corporate

CMFAS RES 1ALicensing & Business Operations

A Issue a contract note, because a confirmation replaces it only if it has every prescribed item, including the principal statement
B Include the missing capacity statement in the next monthly statement of account sent to the corporate customer
C Nothing, because a confirmation always replaces a contract note for OTC derivatives contracts dealt with corporate customers
D Nothing, because contract notes are required only for exchange-traded contracts and never for bilateral OTC swaps

Show the answer and explanation

Answer: A. Issue a contract note, because a confirmation replaces it only if it has every prescribed item, including the principal statement

Common mistake

The OTC carve-out is all or nothing; an incomplete confirmation does not replace a contract note.

Practise more RES 1A Licensing & Business Operations questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

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.