Mongolia Securities Market Specialist Exam cheat sheet

Mongolia's Financial Regulatory Commission (FRC) is an integrated regulator covering banking, insurance, securities and non-bank financial institutions; its securities mandate is investor protection, fair and orderly markets, and disclosure.

The Law on Securities Market (2013, as amended) governs public offers, licensing of market participants, ongoing disclosure, tender offers and market-abuse prohibitions.

A public offer requires FRC registration of a prospectus; offers restricted to a limited number of professional or qualified investors normally fall within private-placement exemptions.

Licensable activities include brokerage/dealing, underwriting, investment advice, investment-fund management, exchange operation and central depository operation.

Issuers must publish inside information without delay and file annual and interim financial statements; selective disclosure to analysts or favoured investors is prohibited.

Market abuse - insider dealing, tipping, market manipulation and false disclosure - attracts administrative sanctions, disgorgement orders and criminal referral.

Supervisory toolkit: licensing conditions, fit-and-proper tests, on-site inspections, remedial orders, fines, suspension of licence and receivership.

IOSCO objectives (protect investors, ensure fair, efficient and transparent markets, reduce systemic risk) frame FRC rulemaking; the IOSCO MMoU supports cross-border enforcement cooperation.

Ordinary shares carry residual claims, voting rights and discretionary dividends; preference shares rank ahead for dividends and liquidation but usually carry limited or no votes.

Debt terms to check: coupon, maturity, seniority, covenants, security, call/put options; price = Σ C/(1+y)^t + F/(1+y)^n.

Government bonds are issued by the Ministry of Finance; Bank of Mongolia bills are monetary-policy instruments used to manage liquidity, not long-term government funding.

IPO sequence: engage adviser/underwriter → due diligence → prospectus → FRC approval → MSE listing approval → bookbuilding or auction → allotment → listing and trading.

Seasoned issuance routes: rights issue (pro rata, tradable subscription rights), private placement (restricted investors with resale limits) and secondary or block offerings.

MSE listing rules distinguish categories (such as A and B) with different market-capitalisation, free-float and disclosure thresholds.

Pricing mechanisms include fixed price, bookbuilding with an indicative range, and auction; allocation must follow disclosed, non-discriminatory rules.

Dilution: new shares reduce existing holders' percentage ownership; rights issues mitigate dilution because holders receive subscription rights.

Order types: market, limit, stop and stop-limit, IOC and FOK; the order book matches by best price first, then earliest time (price-time priority).

Continuous trading is bracketed by opening and closing call auctions; published indicative prices and order imbalances reduce opening volatility.

Quoted spread = ask − bid; effective spread ≈ 2 × |trade price − midpoint|; relative spread = spread ÷ midpoint.

Liquidity dimensions: tightness (spread), depth (size at best quotes), immediacy and resiliency; turnover ratio = traded value ÷ market capitalisation.

Price limits and volatility guards can trigger temporary halts; halts are also used when material announcements are pending.

Settlement timing affects trading economics: a purchase executed on T settles on T+2, so cash and securities move two business days after trade date.

Short selling, margin trading and securities lending require specific authorisation, collateral and reporting under exchange and FRC rules.

Block or negotiated trades execute away from the order book but must still be reported, cleared and settled through the exchange and CSD.

The Mongolian Securities Clearing House and Central Depository (MSCHCD) provides clearing, settlement, depository and registry services for MSE trades.

CCP novation: the clearing house becomes buyer to every seller and seller to every buyer, replacing bilateral credit exposure with cleared exposure backed by margin.

Delivery versus payment (DvP) releases securities only against cash, eliminating principal risk but not liquidity or replacement-cost risk.

MSE equity trades settle on a T+2 cycle; other instruments such as government securities may follow different cycles set in CSD rules.

Fails handling: undelivered securities trigger buy-in or close-out procedures, cash penalties and, for persistent fails, disciplinary action.

Client assets are segregated from firm proprietary assets; omnibus and segregated accounts differ in reconciliation duties and shortfall allocation.

Corporate actions: the record date fixes entitlements, the ex-date is when the price adjusts, and the CSD credits dividends, rights and bonus shares.

Dematerialised book-entry holding removes certificate handling; transfer occurs by account entry, with finality at the CSD.

FCFF = EBIT(1−t) + D&A − capex − ΔNWC; FCFE = FCFF − interest(1−t) + net borrowing.

Enterprise value = Σ FCFF/(1+WACC)^t + TV/(1+WACC)^n, with TV = FCFF(n+1)/(WACC − g).

WACC = (E/V)·Re + (D/V)·Rd·(1−t); Re from CAPM = Rf + β(Rm − Rf).

Gordon growth: P0 = D1/(r − g); sustainable growth g ≈ ROE × retention ratio.

Multiples: P/E, P/B, EV/EBITDA, EV/Sales and dividend yield; use forward earnings for cyclicals and adjust for leverage and accounting differences.

Bond price = Σ C/(1+y)^t + F/(1+y)^n; modified duration ≈ −(ΔP/P)/Δy; convexity adds the second-order price term.

Spot rates discount each cash flow; forward rates are implied by the spot curve; credit spread = corporate yield − benchmark yield.

DCF is most sensitive to terminal growth and WACC; multiples require genuinely comparable peers and normalised earnings.

Portfolio expected return = Σ w_i·E(R_i); variance = ΣΣ w_i·w_j·Cov(i,j); σp = √variance.

Diversification removes idiosyncratic risk; systematic risk remains and is measured by beta = Cov(Ri,Rm)/Var(Rm).

Mean-variance optimisation yields the efficient frontier, the minimum-variance portfolio and the tangency portfolio with the highest Sharpe ratio.

Performance measures: Sharpe = (Rp − Rf)/σp; Treynor = (Rp − Rf)/βp; Jensen's alpha = Rp − [Rf + βp(Rm − Rf)].

IPS components: return and risk objectives plus liquidity, time horizon, tax, legal and unique constraints, and a rebalancing policy.

Strategic asset allocation is the long-term policy mix; tactical allocation makes deliberate short-term deviations within permitted ranges.

Liability-driven investing matches asset duration and convexity to liabilities; immunisation protects the surplus against parallel rate shifts.

Rebalancing: calendar rules (e.g., quarterly) versus threshold rules (e.g., ±5% of target weight); thresholds trade less in trending markets.

Parametric VaR = z_α × σ × V, scaled by √h for h periods; it assumes normal returns and understates fat tails.

Expected shortfall (CVaR) is the average loss beyond the VaR threshold; it is coherent and tail-sensitive, and is used in internal-model capital.

Expected loss = PD × LGD × EAD; credit capital covers unexpected loss above the expected level.

Stress testing uses hypothetical and historical scenarios plus reverse stress tests; it complements VaR for tail and liquidity risk.

Liquidity risk splits into market liquidity (spread, depth) and funding liquidity (rollover); LCR = HQLA ÷ net cash outflows over 30 days.

Three lines of defence: the business owns risk, risk and compliance set limits and monitor, internal audit provides independent assurance.

AML/CFT: customer due diligence, beneficial-ownership identification, ongoing monitoring and suspicious transaction reports to the Financial Intelligence Unit, with no tipping off.

Operational risk arises from process, people, systems and external events; controls include segregation of duties, reconciliation and business continuity planning.

Core duties: integrity, objectivity, competence, confidentiality, fair dealing, and compliance with law and professional standards.

Fiduciary standard: act in the client's best interest with loyalty, prudence and care; identify, avoid or disclose and manage conflicts.

Material non-public information: do not trade, tip or cause others to trade; combining public data into a mosaic is permissible.

Suitability requires understanding the client's objectives, risk tolerance, horizon, liquidity needs and constraints before recommending or dealing.

Fair dealing: no preferential disclosure; allocate orders and IPO shares under disclosed, non-discriminatory policies.

Inducements: gifts, entertainment and soft dollars must be disclosed and must not compromise independence; client brokerage is client property.

Market integrity: wash trades, spoofing, marking the close and false or misleading statements are prohibited manipulation.

Supervision and records: maintain records, supervise subordinates, escalate breaches and respect whistleblowing protections.

Mongolia applies IFRS as adopted by the Ministry of Finance; the Law on Accounting sets financial reporting and audit obligations.

IFRS 15 five steps: identify the contract → identify performance obligations → determine transaction price → allocate → recognise revenue when control transfers.

IFRS 9 classifies financial assets by business model and SPPI test, measuring at amortised cost, FVOCI or FVTPL, with forward-looking expected credit losses.

IFRS 16: the lessee recognises a right-of-use asset and a lease liability at the present value of lease payments, removing most off-balance-sheet operating leases.

IFRS 10 control test: power over the investee, exposure to variable returns, and ability to use power to affect those returns; consolidation follows control, not ownership percentage.

EPS (IAS 33): basic = (net profit − preference dividends) ÷ weighted-average ordinary shares; diluted EPS adds potential ordinary shares.

Fair value (IFRS 13) is an exit price; hierarchy: Level 1 quoted prices, Level 2 observable inputs, Level 3 unobservable inputs, each with disclosures.

Audit opinions: unmodified, qualified, adverse or disclaimer; listed entities also disclose key audit matters.