CISI ICWIM Exam With Confidence Using Practice Dumps

In an order-driven market, an electronic order book is used to match buy and sell orders based on strict price and time priority. This system ensures transparency and fair pricing since all orders are visible to market participants.

TheUCITS (Undertakings for the Collective Investment in Transferable Securities)regulations mandate that fund managers provide a standardizedKey Investor Information Document (KIID)to investors. This document ensures that all retail investors receive clear and concise information about the fund’s objectives, risks, charges, and past performance.

Company accounts (A): UCITS does not govern corporate accounting.

Corporate actions (B): Corporate actions such as dividends or mergers are unrelated to UCITS.

Trade settlement (D): UCITS does not standardize trade settlement processes.

References:

International Certificate in Wealth & Investment Management: Regulations surrounding UCITS and KIIDs.

UCITS directives and their implementation across the European Union.

What is an Uncovered Dividend?

An uncovered dividend payment occurs when a company pays a dividenddespite having insufficient earningsto support the payout.

The dividend is effectively "uncovered" by profits, meaning the company might be using reserves, taking on debt, or liquidating assets to fund the dividend.

Why Companies Pay Uncovered Dividends

To maintain investor confidence and avoid negative signals to the market.

Investors may interpret a dividend cut as a sign of financial trouble, so companies sometimes prioritize dividends even at a financial strain.

Other Options Explained

A. Ex-dividend payment: Refers to the status of a stock when a dividend has already been declared, and new buyers are not entitled to the dividend.

B. Proxy dividend payment: No such widely recognized term in this context.

C. Scrip dividend payment: A dividend paid in the form of additional shares rather than cash.

Example

A company reports $500,000 in profits but declares a $1,000,000 dividend, funding the shortfall through borrowing. This is an uncovered dividend.

ICWIM Textbook, Chapter on Corporate Actions: Discusses uncovered dividends and their implications.

Corporate Finance Standards: Defines uncovered dividends and contrasts them with scrip and ex-dividends.

References