Elegant Chapter 3 - Investment Funds

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Elegant Chapter 3 - Investment Funds - Part 1

Local Funds – Definitions & Establishment

Option 1

Clear selection

1. Which of the following most accurately defines a Local Fund under UAE regulations?

1 point

A fund incorporated in the UAE but managed exclusively by foreign managers

A public or private investment fund established and licensed in the UAE by the Authority

Any family fund whose units are 100% owned by UAE nationals only

An offshore private equity vehicle with limited partners registered in DIFC

Clear selection

2. Under the SCA rules, which of the following entities is NOT eligible to establish a Local Fund?

1 point

An unlicensed corporate entity conducting only trading activities in the UAE

An SCA-licensed investment management company

Two or more natural/corporate persons meeting capital and qualification conditions

An entity licensed by the Authority to conduct family investment management

Clear selection

3. In relation to a Family Fund, which condition is mandatory for its recognition?

1 point

The fund’s ownership units must be listed on a UAE market

The unit holders must be a mix of family members and professional investors

The unit holders must be 100% beneficial owners belonging to one or more family members (natural or corporate)

The Authority must approve the family definition upon application but not thereafter

Clear selection

Self-Managed Fund Requirements

Option 1

Clear selection

4. A corporate person establishing a self-managed fund must satisfy which of the following?

1 point

Be incorporated abroad but have a representative office in UAE

Be incorporated in UAE with minimum AED 20 million capital and profitable for the past two years

Be licensed solely in insurance activities with no other activities permitted

Have no obligation to subscribe to the fund units themselves

Clear selection

5. Which of the following restrictions applies to founders of a self-managed fund regarding disposal of their units?

1 point

Units cannot be sold for 3 months from licensing date

Units cannot be disposed of for at least 6 months from foundation date

Units cannot be disposed of until the fund achieves profitability

Units cannot be sold unless to another approved founder

Clear selection

6. The minimum founder subscription requirement in a self-managed fund is:

1 point

AED 2 million

AED 5 million

AED 10 million

AED 20 million

Clear selection

Initial & Final Approval Process

Option 1

Clear selection

7. The SCA’s initial approval period for reviewing a Local Fund application is:

1 point

10 working days for a public fund, 5 working days for a private fund

5 working days for both public and private funds

30 calendar days for all types of funds

7 working days for public funds, 3 for private funds

Clear selection

8. Which of the following is NOT permitted during the initial approval stage of a Local Fund?

1 point

Preparing the offering document

Promoting, announcing, or collecting subscriptions from the public

Opening bank accounts in the name of the fund

Leasing premises required for operations

Clear selection

9. If a fund fails to submit the auditor’s certificate and proof of ownership for a Family Fund within 30 days of closing subscriptions, what happens?

1 point

The fund is penalised with a fine but may continue operations

The establishment procedure is deemed non-existent and subscriptions must be refunded

The Authority automatically grants a 60-day extension

The Authority allows operation but suspends dividend distributions

Clear selection

Reporting & Timelines

Option 1

Clear selection

10. What is the maximum length permitted for the first financial year of a Local Fund?

1 point

12 months only

18 months, but not less than 6 months from licensing date

24 months with Authority approval

6 months only regardless of licensing date

Clear selection

11. The deadline for submitting an annual financial report audited by an external auditor is:

1 point

3 months from the end of financial year

90 days from financial year-end

4 months from the end of financial year

6 months from financial year-end

Clear selection

12. Which of the following reports must be prepared within 45 days of the semi-annual period?

1 point

Semi-annual report on a public fund’s performance, including material changes and policy updates

Annual fund performance report for local funds

Quarterly NAV valuation report

Risk assessment summary for SCA submission

Clear selection

Private Funds – Promotion & Transfer Rules

Option 1

Clear selection

13. Under UAE regulations, which of the following is strictly prohibited for promoting Private Funds?

1 point

Distribution of offering documents to professional investors only

Use of public advertising media including TV, radio, print, and social media

Circulation of promotional material copied to the Authority

Use of Authority-prescribed disclaimer on promotional documents

Clear selection

14. When transferring title of Private Fund units, which condition is NOT permitted?

1 point

Transfer to existing unit holders

Transfer to a professional investor if value ≥ AED 500,000

Transfer to a family member in case of family fund

Pledging or selling units of a family fund to non-family third parties

Clear selection

15. What is the minimum nominal value of Private Fund units transferable to professional investors or counterparties?

1 point

AED 100,000

AED 250,000

AED 500,000 (180,000 dirhams in syllabus equivalent currency terms)

AED 1,000,000

Clear selection

Private Equity Funds

Option 1

Clear selection

16. Which of the following is a defining feature of a Private Equity Fund?

1 point

Generally closed-ended with a General Partner (GP) and Limited Partners (LP)

Open-ended vehicle investing primarily in listed securities

Public subscription model governed by mutual fund rules

Exclusively managed by government-related entities

Clear selection

17. Which of the following must be explicitly included in a Private Equity Fund’s incorporation agreement?

1 point

Only the name and address of the General Partner

Fund size, intended investments, GP remuneration, borrowing limits, and liquidation terms

Shareholder details only if they exceed 10% ownership

Only investment management outsourcing agreements

Clear selection

18. The obligations of the General Partner in a Private Equity Fund include:

1 point

NAV valuation every 6 months only

Calculating NAV every 3 months and conducting annual asset valuation

Delegating full liability to Limited Partners for operational losses

Avoiding involvement in investment decision-making

Clear selection

19. In terms of permitted investments, a Private Equity Fund is NOT allowed to:

1 point

Invest in limited liability companies

Invest in private shareholding companies

Invest in partnerships and limited partnerships

Invest in publicly listed companies (unless under conversion/liquidation)

Clear selection

Venture Capital Funds

Option 1

Clear selection

20. A Venture Capital Fund must invest at least what minimum proportion of assets in eligible investments?

1 point

30%

50%

70%

90%

Clear selection

21. Which of the following is NOT a permitted investment for Venture Capital Funds?

1 point

Units in other VC funds (≤10% of assets)

Lending up to 30% of assets to unlisted companies in which the fund is an investor

Lending up to 70% of assets to distressed projects

Equity instruments issued by unlisted companies

Clear selection

22. For a Venture Capital Fund with assets valued at AED 200 million, which obligations apply?

1 point

Prepare full IFRS annual report and appoint a Risk Management Officer

Only summary report required, no risk officer mandatory

May exceed net asset value exposure to risks if approved by SCA

Not required to comply with IFRS for annual reporting

Clear selection

23. For a Venture Capital Fund with assets below AED 180 million, which rule applies?

1 point

Mandatory risk management function

Preparation of summary IFRS-compliant annual report only

Obligation to maintain NAV exposure above asset value

Public listing requirement within 2 years

Clear selection

General & Limited Partnership Funds (GP/LP)

Option 1

Clear selection

24. In a GP/LP Fund, which of the following parties must be licensed by the SCA to manage investment funds?

1 point

Limited Partner

General Partner

Fund Administrator

Custodian

Clear selection

25. Limited Partners in a GP/LP Fund are:

1 point

Fully liable for fund obligations alongside General Partners

Liable only to the extent of their capital contribution

Prohibited from being natural persons with solvency

Required to be exclusively institutional investors

Clear selection

26. The licensing application for a GP/LP Fund must be submitted by:

1 point

General Partner or their representative only

Limited Partner with ≥20% shareholding

Any corporate partner with solvency certification

Custodian licensed by the Authority

Clear selection

27. Which of the following investors is eligible to participate as a Limited Partner in a GP/LP Fund?

1 point

Natural person with annual income ≥ AED 1 million or net equity ≥ AED 4 million (excluding residence), with sufficient investment knowledge

Any individual without minimum solvency or experience

Solely foreign investors with SCA approval

Retail investors subscribing via public advertisement

Clear selection

28. The General Partner of a GP/LP Fund must retain all fund records, books, and data for a minimum of:

1 point

5 years

10 years

7 years

15 years

Clear selection

Cash Investment Funds

Option 1

Clear selection

29. Which of the following best defines a Cash Investment Fund under UAE rules?

1 point

Public fund investing mainly in highly liquid instruments with ≤397-day maturity (or 2 years)

Private vehicle investing solely in UAE equities

Public fund allowed to invest only in foreign sovereign debt

Closed-ended fund investing in real estate and bank deposits

Clear selection

30. What is the minimum proportion of assets a Cash Investment Fund must invest in highly liquid cash instruments?

1 point

50%

70%

80%

90%

Clear selection

31. The maximum weighted average maturity (WAM) permitted for a Cash Investment Fund’s investments is:

1 point

120 days

180 days

365 days

397 days

Clear selection

32. Cash Investment Funds must not invest in instruments with credit ratings lower than:

1 point

BBB

BBB+ (or equivalent by recognized rating agencies)

A-

BB+

Clear selection

33. What is the maximum borrowing permitted for a Cash Investment Fund?

1 point

5% of NAV

10% of NAV (for redemption purposes only)

20% of NAV for leverage

Unlimited if approved by the custodian

Clear selection

34. The maximum exposure to debt instruments of a single issuer in a Cash Investment Fund is:

1 point

10% of the fund’s net assets

15% of NAV

25% of NAV

No restriction if issuer is sovereign

Clear selection

Exchange-Traded Funds (ETFs)

Option 1

Clear selection

35. ETF units must be:

1 point

Subscribed privately and traded only over-the-counter

Listed in one or more UAE markets

Traded solely on foreign exchanges with SCA approval

Offered only to professional investors

Clear selection

36. The index tracked by an ETF must:

1 point

Be approved only by the custodian

Have a clearly defined and transparent target

Remain confidential to unit holders only

Be updated at least once every 10 years

Clear selection

37. Which of the following must be included in the ETF Prospectus?

1 point

Details of the tracked index, listing markets, authorized agent, spread limits, and redemption mechanism

Only historical NAV performance data

Names of all limited partners and their nationalities

Only fund manager’s biography and prior performance

Clear selection

38. Who is responsible for ensuring that ETF prices in the secondary market align with NAV or indicative NAV?

1 point

Custodian

Authorized Agent and Investment Manager jointly

Investors holding >5% of ETF units

External auditor only

Clear selection

39. Which of the following is a key duty of the ETF’s Administrative Services Company?

1 point

Determining ETF investment policy

Announcing NAV daily and publishing index components regularly

Setting bid-ask spreads for ETF units

Submitting quarterly valuation reports to custodians

Clear selection

40. The Authorized Agent of an ETF is primarily responsible for:

1 point

Providing continuous buy/sell orders to maintain liquidity and spreads within limits

Determining the ETF’s investment strategy

Setting NAV independently of fund manager

Auditing semi-annual performance

Clear selection

41. Which of the following is a main duty of the Safe Custodian of an ETF?

1 point

Ensuring proper transfer of ownership of ETF units before issuance, redemption, or cancellation

Setting index correlation levels

Managing investor subscriptions directly

Publishing indicative NAV during trading

Clear selection

Real Estate Investment Funds

Option 1

Clear selection

42. A Real Estate Fund must invest at least what proportion of its assets in real estate?

1 point

50%

75%

80%

90%

Clear selection

43. A Real Estate Fund is prohibited from:

1 point

Leasing property assets

Owning more than 30% of total assets in real estate services subsidiaries

Disposing of usufruct rights with 40-year duration

Generating rental income from ≥5% of assets

Clear selection

44. What is the minimum percentage of a Real Estate Fund’s assets that must generate revenue?

1 point

10%

20%

25%

Clear selection

45. Revenue generated from real estate must constitute at least what percentage of total fund revenue?

1 point

50%

70%

80%

90%

Clear selection

46. The percentage of investment in usufructuary rights with remaining period less than 30 years must not exceed:

1 point

25% of net assets

30% of NAV

40% of NAV

50% of NAV

Clear selection

47. The maximum borrowing allowed for a Real Estate Fund is:

1 point

50% of total asset value

25% of NAV

75% of NAV

No borrowing permitted under UAE rules

Clear selection

48. A Public Real Estate Fund must distribute at least what portion of achieved net profits?

1 point

50%

60%

80%

100%

Clear selection

49. Which of the following is a specific obligation of a Real Estate Fund’s Management Company?

1 point

Value all real estate assets before purchase or sale and use reports not older than 3 months

Rely on internal valuation without external appraisers

Avoid signing contracts with external real estate developers

Exclude related party transactions from financial reports

Clear selection

50. A Real Estate Fund’s annual report must include:

1 point

Only rental income generated from UAE assets

Full details of investments, credit ratings of bond holdings, and disposals of assets during the year

Only audited NAV performance data

Manager’s commentary without supporting valuations

Clear selection

51. Which of the following contracts must a Real Estate Fund’s Management Company sign mandatorily?

1 point

Contracts with legal advisors, real estate appraisers, developers, distributors, and service providers

Only developer contracts, with no legal advisor needed

Appraisal contracts only when fund owns >50% of asset

None; outsourcing is optional

Clear selection

52. A Real Estate Appraiser’s evaluation report must contain all EXCEPT:

1 point

Market risk analysis and demand-supply variables

Property particulars and disclosure of violations

Forecast of minimum investor return over 5 years

Remedial mechanisms for identified risks

Clear selection

53. A Real Estate Appraiser must provide evaluation at least:

1 point

Every 6 months

Annually

Quarterly

Every 2 years

Clear selection

54. The Real Estate Appraiser must remain independent of:

1 point

The fund and any related party to it

Only the developers involved

The custodian but not the fund

The legal advisor

Clear selection

55. Who must receive the Real Estate Appraiser’s evaluation reports?

1 point

SCA, management company/board, investment manager, admin services company, and auditor

Only the Authority and the investors

Only the fund manager and custodian

Only listed markets

Clear selection

56. Which of the following best describes the usufructuary rights condition for a Real Estate Fund?

1 point

Rights must not have restrictions; minimum remaining period 30 years

Rights may be restricted by lease agreements

No minimum duration required under law

Must be pledged to fund creditors

Clear selection

57. If a Real Estate Fund borrows 60% of asset value, what is the regulatory breach?

1 point

No breach if approved by Authority

Breach of 50% borrowing cap under UAE rules

Breach only if borrowing exceeds NAV

Breach only if borrowing used for refinancing

Clear selection

58. Which of the following is NOT an obligation of a Real Estate Fund’s Board?

1 point

Insure assets against risk

Sign contracts with appraisers and developers

Guarantee minimum annual returns to unit holders

Value assets before purchase/sale

Clear selection

59. Which of the following is mandatory for a Real Estate Fund’s Management Company regarding legal aspects?

1 point

Contracting a legal advisor to review contracts, obligations, and ownership restrictions

Preparing contracts internally without legal oversight

Appointing a family member as legal officer

Reporting contracts to investors only on request

Clear selection

60. The frequency of distribution of profits by a Public Real Estate Fund is:

1 point

Annually only

At least annually, distributing ≥80% of net profits

Quarterly mandatory by law

Biennially as per board discretion

Clear selection

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