December 2025 Financial Markets and Specialised Institutions Past Paper Answers

Description

CERTIFIED SECRETARIES (CS)

INTERMEDIATE LEVEL

FINANCIAL MARKETS AND SPECIALISED INSTITUTIONS

WEDNESDAY: 3 December 2025. Afternoon Paper. Time Allowed: 3 hours.

This paper consists of five (5) questions. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

(a) According to Sarr and Lybek (2002), there are five dimensions to judge the liquidity of a financial market that comprise of depth, breadth, resilience, tightness and immediacy.

In relation to the above statement, explain each of the following terms:
(i) Depth. (2 marks)
(ii) Breadth. (2 marks)
(iii) Resilience. (2 marks)
(iv) Tightness. (2 marks)
(v) Immediacy. (2 marks)

(b) Identify THREE functions of Insurance Regulatory Authority (IRA) in your country. (3 marks)

(c) According to Llewellyn (1999), there are two main generic types of financial regulations and supervision.

In relation to the above statement, describe TWO main types of financial regulation and supervision. (4 marks)

(d)Explain THREE alternative investments available to investors in financial markets. (3 marks)

QUESTION TWO

(a) Summarise THREE roles of a Central Depository Agent (CDA) in the dematerialization of securities in an economy. (6 marks)

(b) Mwamba Ltd. is a private company seeking to raise Sh.500 million from a select group of institutional investors to fund a new expansion project. The company’s management has decided to issue a new class of debentures and is in the process of preparing a key document for this purpose.

Required:
Advise Mwamba Ltd. on THREE roles of an information memorandum in this private capital-raising process. (6 marks)

(c)Explain FOUR characteristics of a private offer as a method of raising capital in the securities market. (8 marks)

QUESTION THREE

(a) Crypto currencies have attracted a reputation as unstable investment vehicles in the recent past.
In relation to the above statement, identify SIX risks associated with crypto currency. (6 marks)

(b) The liquidity of a Society and Credit Co-operative Organisation (SACCO) is determined by its ability to meet its short-term obligations in a timely and efficient manner.
With reference to the above statement, outline SIX causes of liquidity problems in SACCOs. (6 marks)

(c) Summarise EIGHT requirements that must be met to enable Unclaimed Financial Asset Authority (UFAA) process an application for release of an unclaimed asset to a beneficiary in your country. (8 marks)
(Total: 20 marks)

QUESTION FOUR
(a) With reference to the Capital Markets Authority (CMA) guidelines:
(i) State the purpose of the Central Depository Guarantee Fund (CDGF). (2 marks)
(ii) Describe TWO conditions under which the CDGF would compensate an investor for a loss. (4 marks)
(b) Evaluate THREE advantages of cross-border listing for a company. (6 marks)
(c) Explain FOUR security measures implemented within a Central Depository System (CDS) to safeguard investor securities. (8 marks)
(Total: 20 marks)

QUESTION FIVE
(a) The securities of Bwako Limited Company have been suspended at the Nairobi Securities Exchange.

Identify SIX likely causes of this suspension. (6 marks)
(b) Outline SIX ways of promoting public confidence in a financial system. (6 marks)

(c) Explain FOUR reasons why investors prefer futures market over the cash market trading vehicles. (8 marks)
(Total: 20 marks)
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