Elegant Chapter 3 - Investment Funds

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Elegant Chapter 3 - Investment Funds - Part 2

Evaluation of In-Kind Shares – General Rules

Option 1

Clear selection

61. In-kind shares accepted by a fund must satisfy which condition?

1 point

Be consistent with the prospectus and investment policy, liquidatable, and free from disputes or third-party rights

May be pledged as collateral in favour of third parties

Can be accepted even if subject to legal disputes with disclosure

Must always be restricted shares with lock-in

Clear selection

62. How many evaluators must value in-kind shares provided to an investment fund?

1 point

One SCA-approved evaluator

Two evaluators, both financial advisors licensed by SCA

At least three auditors appointed by the Authority

Any single external auditor with 5 years’ experience

Clear selection

63. Which of the following scenarios requires in-kind shares to be evaluated by SCA-licensed financial advisors?

1 point

When the company is unlisted, market prices are unavailable, or trading is inactive for ≥3 months

When the shares are listed and actively traded in UAE markets

When in-kind shares are issued by a sovereign entity

When trading volume exceeds SCA thresholds

Clear selection

64. An evaluator of in-kind shares must have minimum experience of:

1 point

5 years in evaluation + 3 years in evaluating in-kind assets

3 years in audit + 1 year in valuations

7 years in general finance roles

No prior experience required if licensed by Authority

Clear selection

65. Which of the following is a disqualification for an in-kind share evaluator?

1 point

Experience in valuation >5 years

Having joint interests with fund founders or relevant parties

Owning unrelated securities outside UAE

Working with multiple funds as external consultant

Clear selection

66. What is the cooling-off trading restriction for an evaluator regarding securities under evaluation?

1 point

Cannot trade such securities 15 days before to 2 days after issuing report

Cannot trade such securities for 12 months after report

Can only trade with prior SCA approval

No restriction applies if trades are under AED 1 million

Clear selection

67. Who bears the initial expenses of in-kind share evaluation and ownership transfer?

1 point

Management company or fund founders (can later recover as foundation expenses)

The investors providing in-kind shares

Custodian bank only

Option 4

Clear selection

68. If subscription fails, who is responsible for evaluation expenses unless otherwise agreed?

1 point

The management company or self-managed fund founders

The SCA Authority

The investors subscribing with in-kind shares

The external auditors

Clear selection

Evaluator Obligations & Reports

Option 1

Clear selection

69. An evaluator must prepare in-kind share evaluation reports according to:

1 point

UAE GAAP

International valuation standards with complete, sufficient information

IFRS financial reporting templates

Authority-issued templates only

Clear selection

70. The in-kind evaluation report must be valid for no more than:

1 point

3 months before the evaluation date

6 months before the evaluation date

12 months before evaluation date

No validity restriction if signed by auditor

Clear selection

71. The summary of the in-kind evaluation report must be submitted to the Authority:

1 point

Immediately upon preparation

Before disclosure to third parties and no later than 3 months after evaluation date

Only at the end of financial year

Only upon investor request

Clear selection

72. Which of the following is NOT required in the summary of the evaluation report?

1 point

Fair value of evaluated asset

Confirmation of no obligations

Names of all subscribers to the fund

Description of valuation methods used

Clear selection

73. The Authority reserves the right to

1 point

Appoint another evaluator at fund’s expense if necessary

Change valuation without notifying evaluators

Waive valuation if fund is <AED 10 million

Approve valuation only after unit holders’ meeting

Clear selection

74. The evaluator must not object to:

1 point

Confidential storage of report

Publication of report (full or summary) in prospectus, website, and market disclosures

Use of report by auditors

Authority distributing to other regulators

Clear selection

Management Company & Fund Obligations

Option 1

Clear selection

75. What must the management company ensure before accepting in-kind shares?

1 point

Only that they are legally transferable

That they are appropriate for fund’s policy and unit value does not exceed share’s value

That they are pledged against fund borrowing

That they are all from listed companies

Clear selection

76. For how long must the management company maintain all evaluation-related records?

1 point

5 years

10 years

7 years

Indefinitely

Clear selection

77. Which of the following disclosures is required in the fund’s prospectus regarding in-kind shares?

1 point

Full details of shares, owners, values, number of units, and evaluation report summary

Only aggregate in-kind contribution value

Names of evaluators but not their reports

No disclosure required if shares are family-owned

Clear selection

78. The management company may recover expenses of in-kind share evaluation:

1 point

Immediately from investors

As foundation expenses after fund setup, or as auditor deems appropriate

Never; must be borne permanently by manager

Only after Authority grants explicit approval

Clear selection

79. If evaluators disclose ownership of securities under evaluation before report preparation, what must they do?

1 point

Cancel evaluation

Disclose ownership in report and refrain from trading during restriction period

Seek approval from SCA for trading

Sell securities immediately at market price

Clear selection

80. What happens if a fund fails to disclose in-kind share evaluation details in the prospectus?

1 point

Breach of disclosure obligations; Authority may reject approval or take enforcement actions

No consequence if shares are family-owned

Allowed if investors agree in writing

Report submission to SCA alone is sufficient

Clear selection

Local Funds – Licensing & Renewal

Option 1

Clear selection

81. The SCA must issue a certificate of establishing and licensing a Local Fund within:

1 point

10 working days of final approval

5 working days from receipt of auditor’s certificate and ownership evidence

30 calendar days from subscription closing

7 working days from application submission

Clear selection

82. The term of a Local Fund license is:

1 point

1 year, renewable annually at least 1 month before expiry

2 years, renewable every alternate year

Unlimited once licensed

5 years, renewable every 3 years

Clear selection

83. A Local Fund must commence its investment policy within what period from licensing?

1 point

6 months

12 months

18 months

24 months

Clear selection

84. Who bears the incorporation expenses of offering documents and public fund promotion?

1 point

Fund manager or founders personally (not charged to the fund)

The Authority through licensing fees

Custodian and administrative agent

Subscribers to the fund

Clear selection

Reporting & Disclosure

Option 1

Clear selection

85. The first financial year of a Local Fund must not be shorter than:

1 point

3 months

6 months from licensing date

12 months

18 months

Clear selection

86. Semi-annual financial reports of a Local Fund must be audited within:

1 point

30 days of half-year end

60 days (2 months) of half-year end

90 days of half-year end

120 days of half-year end

Clear selection

87. Which of the following must be included in the annual performance report of a Local Fund?

1 point

Only investment returns

Related party transactions, investment restriction breaches, corrective actions, and provider performance

Investor list with nationality and profession

Names of auditors for the past 5 years

Clear selection

88. In what languages must required reports of Local Funds be published?

1 point

Arabic and English, optional other languages

English only

Arabic only

At least three languages

Clear selection

Private Funds – Restrictions

Option 1

Clear selection

89. Private Funds are prohibited from:

1 point

Using any public advertising media for promotion

Disclosing fund details to professional investors

Providing Authority-approved disclaimers

Sending reports to existing unit holders

Clear selection

90. In a Family Fund, units must not be:

1 point

Transferred to family members

Transferred to wholly-owned family companies

Sold or pledged to non-family third parties

Allocated within the same family

Clear selection

Private Equity & VC Funds

Option 1

Clear selection

91. Private Equity Funds must value assets at least:

1 point

Once annually (detailed valuation) + NAV quarterly

Every 6 months

Quarterly only

Once every 2 years

Clear selection

92. In a Private Equity Fund, Limited Partners are liable for:

1 point

Only up to the amount invested

Unlimited liability

Only dividends declared

Management fees proportionate to GP’s liability

Clear selection

93. Venture Capital Funds cannot invest more than what proportion of assets in other VC funds?

1 point

10%

20%

25%

Clear selection

94. A VC Fund with AED 150 million assets must:

1 point

Prepare only a summary IFRS annual report

Appoint a Risk Management Officer

Disclose NAV quarterly to public

Distribute at least 80% of revenue

Clear selection

GP/LP Funds

Option 1

Clear selection

95. The GP/LP Fund license application must exclude:

1 point

Trade name and HQ of general partners

Notarized partnership agreement

Details of every unit holder in the market

Declaration of capital payment

Clear selection

96. The SCA decides on a GP/LP Fund license application within:

1 point

15 days

30 days

45 days

60 days

Clear selection

97. Any change in names or addresses of partners in a GP/LP Fund must be notified to SCA within:

1 point

14 days

7 days

30 days

Immediately

Clear selection

98. GP/LP Funds must retain documents and records for:

1 point

5 years

10 years with backup copies

7 years minimum

Until liquidation only

Clear selection

Cash Funds

99. A Cash Fund’s credit rating requirement is minimum:

1 point

BBB

BBB+

A-

BB+

Clear selection

100. Borrowing is allowed in Cash Funds only to cover redemptions up to:

1 point

5% of NAV

10% of NAV

15% of NAV

20% of NAV

Clear selection

ETFs

Option 1

Clear selection

101. The ETF correlation coefficient between unit value and tracked index must not be less than:

1 point

0.8

0.85

Value announced in prospectus and investment policy

No minimum required

Clear selection

102. The ETF Authorized Agent must ensure buy/sell orders:

1 point

Are valid weekly

Maintain liquidity and spreads as per prospectus, updated daily

Match historical NAV only

Depend solely on investor demand

Clear selection

103. ETF Administrative Services Company must announce NAV:

1 point

Weekly

Monthly

Daily

Only at financial year end

Clear selection

104. ETF Safe Custodian must ensure:

1 point

Ownership transfer of units is completed before redemption or issuance

Management sets NAV daily

Spreads do not exceed 5%

Valuation quarterly by auditor

Clear selection

Real Estate Funds

Option 1

Clear selection

105. Real Estate Funds must be valued at least:

1 point

Every 6 months by qualified appraiser

Annually

Every quarter

Once every 2 years

Clear selection

106. The minimum revenue-producing real estate asset proportion is:

1 point

5% of assets

10%

20%

25%

Clear selection

107. Public Real Estate Funds must distribute what minimum proportion of net profits?

1 point

50%

60%

80%

100%

Clear selection

108. Maximum borrowing allowed for Real Estate Funds:

1 point

25%

50% of asset value

75%

No borrowing allowed

Clear selection

109. Evaluation reports by Real Estate Appraisers must disclose:

1 point

Market risks, violations, remedial actions, demand-supply variables

Investors’ personal data

Management company details only

Only credit ratings of tenants

Clear selection

110. Real Estate Appraiser reports must be shared with:

1 point

SCA, fund board, manager, admin company, and auditor

Only the Authority

Only investors with >5% holding

Only stock exchange

Clear selection

In-Kind Shares

Option 1

Clear selection

111. In-kind shares must be valued by 2 evaluators if:

1 point

Listed company shares inactive for 3 months or no prices available

Listed shares with daily trading

Government bonds only

NAV is above AED 50 million

Clear selection

112. Evaluator independence requires:

1 point

No joint interest with founders or related parties

Reporting only to custodian

Being external auditor of same fund

Affiliation with family of founders

Clear selection

113. An in-kind evaluation report must include: An in-kind evaluation report must include:

1 point

Fair value, absence of obligations, and valuation methods

Only book value of assets

Names of all subscribers

Only SCA approval stamp

Clear selection

114. Management company must disclose in prospectus:

1 point

Each in-kind share’s details, owners, values, and number of units issued

Aggregate total in-kind value only

Investor identities confidentially

Nothing if shares are privately held

Clear selection

115. All evaluation reports must be stored for:

1 point

5 years

10 years

7 years

Indefinitely

Clear selection

116. Expenses of in-kind evaluation can be recovered as:

1 point

Foundation expenses or as deemed appropriate by auditor

Permanent management liability only

Subscriber expenses always

Authority-borne costs

Clear selection

117. If subscription fails, who bears evaluation costs unless agreed otherwise?

1 point

Management company/founders

Authority

Subscribers

Custodian

Clear selection

118. Evaluators must refrain from trading evaluated securities for:

1 point

15 days before to 2 days after report issuance

1 year post-evaluation

6 months post-report

Only until subscription closes

Clear selection

119. Failure to disclose in-kind share details in prospectus results in:

1 point

Breach of disclosure; Authority may reject or sanction

No breach if family-owned

Automatic approval by Authority

Only warning without consequences

Clear selection

120. The Authority may appoint another evaluator at whose expense?

1 point

At the expense of the management company or fund

Authority bears costs

Custodian pays fees

Investors collectively

Clear selection

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