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2CEXAM Mock Question

Licensing Examination Paper 1

16-Sep-19
19:41:01
1 The existence of the financial markets in Hong Kong can satisfy which of the following demands? Topic 1
I. Meet demands for investment, capitalization and risk management.
II. Meet demands for employment
III. Provide an avenue for price discovery
IV. Provide liquidity for investments
A I, II, IV Chapter 1

B I, III, IV Section 1

C II, III QID 1

D II, III, IV Ans B Hot

Exp The demands for employment is not a function satisfied by financial market alone, thus is not a primary
reason for the existence of the financial markets in Hong Kong.
2 Which of the following demands have to be satisfied by the wide range of financial products and services Topic 1
available in Hong Kong?
I. Meet demands for investment
II. Employment opportunities for locals
III. Employment opportunities for expatriates
IV. Capital and investment protection
A I, IV Chapter 1

B I, III, IV Section 1

C II, III QID 780

D I, II, IV Ans A Hot

Exp Hong Kong's status as an international financial centre is reflected in the wide range of financial products
and services available in Hong Kong, developed to meet demands for investment, capital and income
formation and capital raising, the facilitation of cash and capital flows, capital and investment protection
(for example, hedging), safe custody and security, speculation and insurance. The financial markets also
provide an avenue for price discovery and liquidity of investments.
3 Which of the following demands or needs can be satisfied by the wide range of financial products and Topic 1
services available in Hong Kong?
I. The demands for investment opportunities
II. Employment opportunities for professional locals in overseas
III. Local employment opportunities for unskilled locals
IV. The demand for insurance and reinsurance
A I, IV Chapter 1

B I, III, IV Section 1

C II, III QID 2

D I, II, IV Ans A Hot

Exp The existence of financial markets is to meet the demands of different financial needs. Providing
employment opportunities is not a primary function of the financial markets, therefore II and III are
incorrect.

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4 Which of the followings is not a service provider in the asset management industry? Topic 1

A Auditor Chapter 1

B Fund Manager Section 3

C Stock Brokers QID 5

D Independent Financial Advisers Ans A Hot

Exp The definition of asset management is to manage securities and futures portfolio or real estate investment
trust for others. Auditors do not manage asset; they merely audit as their primary business. Fund
managers manage Collective Investment Schemes; that is managing portfolios of securities and futures or
real estate trust for a group of people. Therefore they are service providers in the asset management
industry. Stockbrokers buy and sell Collective Investments Schemes on behalf of clients and may also
manage securities portfolio for clients. Therefore they are service providers in the asset management
industry. Independent Financial Advisers (IFA) provides advice on buying and selling Collective
Investment Schemes. Therefore they are service providers of the asset management industry.
5 Which of the following are service providers in the asset management industry? Topic 1
I. Banks
II. Trustees
III. Custodians
IV. Financial Planners
A I, II, III Chapter 1

B I, II, III, IV Section 3

C II, III, IV QID 1500

D I, II, IV Ans B Hot

Exp Typical service providers include:


(d) banks; (e.) trustees; (f) custodians; (g) financial planners
6 Which of the following are service providers of the Asset Management Industry in Hong Kong? Topic 1
I. Fund houses
II. Auditors
III. Fund management companies
IV. Stockbrokers
A I, III, IV Chapter 1

B I, II Section 3

C I, II, III QID 1499

D II, III, IV Ans A Hot

Exp Typical service providers include:


(a) fund houses; (b) fund management companies; (c.) stockbrokers
7 Which of the following are major financial services provided in Hong Kong? Topic 1
I. Trading securities on behalf of clients on the Stock Exchange of Hong Kong (SEHK).
II. Providing margin financing and accommodation on securities trading
III. Acting as an “introducing agent”
IV. Conducting stock borrowing and lending transactions.
A I, II, III Chapter 1

B II, III, IV Section 3

C I, III, IV QID 789

D I, II, III, IV Ans D Hot

Exp All of these services are provided by Hong Kong financial companies.

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8 Which of the following is NOT a major financial service provided in Hong Kong? Topic 1

A Securities borrowing and lending Chapter 1

B Clients' Asset Management Section 3

C Operating ATS QID 790

D Advising on trusts Ans D Hot

Exp This service is not provided by any Hong Kong financial actor.
9 Hong Kong Financial Regulatory Regime is Topic 1

A Compliant with US Standards Chapter 1

B Compliant with PRC Standards Section 4

C Compliant with EU Standards QID 1658

D Able to address new and complex financial products. Ans D Hot

Exp Hong Kong Financial Regulatory Regime is able to address new and complex financial products.
10 Which of the following is not a common objective of the financial regulators in Hong Kong? Topic 1

A By ensuring that the regulations they apply are necessary for the proper supervision of the financial Chapter 1
markets in Hong Kong and maintains Hong Kong's position as a leading financial centre.
B They aim to achieve this goal through financial regulations of an acceptable international standard. Section 7

C Maintain the stability of the Hong Kong Dollar. QID 7

D Take measures that can enhance international and local confidence in the financial markets of Hong Kong. Ans C Hot

Exp A common objective is something that all financial regulators must achieve, maintaining currency stability
is an objective specific to the HKMA. Other financial regulators are not responsible for maintaining
currency stability of the Hong Kong Dollar, thus its not a common objective.
11 Which of the following is a primary objective of Hong Kong financial regulators? Topic 1

A Enhance international and local confidence in the financial markets of Hong Kong. Chapter 1

B Encourage the development of new products Section 7

C Operate profitable exchanges in Hong Kong QID 6

D Reduce trading hours Ans A Hot

Exp Encouraging the development of new products, operating profitable exchanges in Hong Kong and
reducing trading hours are all actions. They are action verbs but not objective description. Objectives can
only be objective description, therefore, these phrases can never be objectives and primary objective of
Hong Kong financial regulators. Objectives are status that financial regulators hope for, enhancing
confidence is an objective description that financial regulators hope for.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
12 Which of the following are not common objectives of financial regulators in Hong Kong? Topic 1
I. Promote intervention to enhance international and local market confidence.
II. Provide investment advice to retail investors
III. Encourage the installation of a sound technical infrastructure for the functioning of the financial
markets
IV. Ensure that the legal framework of financial regulation is certain, adequate and fairly enforced
A I, II Chapter 1

B I, III Section 7

C II, III QID 903

D III, IV Ans A Hot

Exp Frequent Intervention is not an objective of financial regulators in Hong Kong. Providing Investment
advice is not a job that regulators will do, it's the job of intermediaries.
13 Which two of the following philosophies and systems of regulations are commonly used by financial Topic 1
regulators in Hong Kong?
I. Merit Based
II. Sanction Based
III. Disclosure Based
IV. Income Based
A I, II Chapter 1

B I, III Section 8

C II, IV QID 8

D III, IV Ans B Hot

Exp Sanction Based regulations and Income Based regulations do not exist in Hong Kong. Merit Based
regulations is to reduce access to unfavourable investment products or projects by investors. The interest
of investors are protected by doing so. Disclosure Based regulations require investment products and
projects disclose their strengths and weaknesses maximally, so that investors can make an informed
decision.
14 A disclosure based system principle is Topic 1

A Regulators disallowing investors to invest in malicious products. Chapter 1

B Intermediary disallowing investor to invest in malicious products. Section 8

C Issuers trying their best to disclose information to allow investors to make the right choice. QID 1657

D Intermediaries trying their best to disclose information to allow investors to make the right choice. Ans C Hot

Exp The principle of Disclosure based system is Issuers trying their best to disclose information to allow
investors to make the right choice.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
15 Which of the following regulatory philosophies does Hong Kong regulators employ when considering Topic 1
share offers and listing matters?
A A disclosure-based philosophy- it assumes that maximum Chapter 1
disclosure is required to protect investors, but there is an obligation on the part of the participants to take
responsibility for using the full information to make their own independent investment decisions.
B A risk-based philosophy- it is assumed that maximum disclosure is required to protect investors, but there Section 8
is an obligation on the part of the participants to take responsibility for using the full information to make
their own independent investment decisions.
C A merit-based philosophy- it is assumed that maximum disclosure is required to protect investors, but QID 9
there is an obligation on the part of the participants to take responsibility for using the full information to
make their own independent investment decisions.
D A merit-based philosophy - the regulatory approach is based Ans A Hot
on the idea of filtering undesirable players and undesirable
offerings.
Exp In Hong Kong, the new Companies Ordinance (“NCO”) is disclosure-based and has legal force. The idea is
simply that maximum disclosure is required to protect investors, but there is an obligation on the part of
the participants to take responsibility for using the full information to make their own independent
investment decisions.
16 What's the purposes of merit-based implementation in Hong Kong? Topic 1
I. To filter out unpopular investment products
II. To ensure the profits of investment products is protected
III. To ensure there is certain balance between risks and returns
IV. To prohibit foreign investment products from absorbing local funds.
A I, II Chapter 1

B I, III Section 9

C I, IV QID 2351

D II, III Ans B Hot

Exp Followings are purposes of the merit-based implementation in Hong Kong:


I. To filter out unpopular investment products
II. To ensure there is certain balance between risks and returns
17 A disclosure based system is in place to protect Topic 1

A Intermediaries Chapter 1

B Investors Section 9

C Issuer QID 1656

D Regulators Ans B Hot

Exp Disclosure based system is in place to protect Investors.


18 What approach does the SFC take to regulate market intermediaries? Topic 1

A A review results-oriented approach Chapter 1

B A risk-based approach Section 11

C A disclosure-based approach QID 783

D A regulations-based approach Ans B Hot

Exp An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This
basically means that regulation is weighted towards the areas that pose the greatest risk to the markets
and the participants.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
19 A risk-based regulatory system refers to a system in which: Topic 1

A The highest risk areas of the markets are given more regulatory attention. Chapter 1

B The lowest risk areas of the markets are given more regulatory attention. Section 11

C Regulations are focused on front-line operations of the markets. QID 784

D Regulations are focused on logistics operations of the markets. Ans A Hot

Exp An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This
basically means that regulation is weighted towards the areas that pose the greatest risk to the markets
and the participants.
20 Which of the following regulatory approaches adopted by the SFC is given more regulatory attention Topic 1
towards the areas where the SFC perceives the highest risks to lie?
A Disclosure-based Chapter 1

B Merit-based Section 11

C Risk-based QID 786

D Fact-based Ans C Hot

Exp An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This
basically means that regulation is weighted towards the areas that pose the greatest risk to the markets
and the participants.
21 Which of the following regulatory approach is adopted by the SFC? Topic 1

A Merit-Based, meaning that the regulations are designed to diminish and eliminate unfavourable Chapter 1
investment products or schemes.
B Disclosure-based, meaning that regulations are geared towards enhancing market transparency. Section 11

C Risk-Based, meaning that regulations are weighted towards the areas where the SFC perceives the highest QID 787
risk to lie.
D Free-Based, meaning that the regulations are designed to provide the greatest freedom to investors Ans C Hot
investing in Hong Kong.
Exp An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This
basically means that regulation is weighted towards the areas that pose the greatest risk to the markets
and the participants.
22 Which system or philosophy of regulations is adopted by the SFC to regulate securities and futures Topic 1
markets?
A Merit Based Chapter 1

B Sanction-Based Section 11

C Disclosure-Based QID 10

D Risk-Based Ans D Hot

Exp SFC adopts a“risk-based”approach towards regulations. This basically means that regulation is weighted
towards the areas that pose the greatest risk to the markets and the participants.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
23 The SFC regime adopts which of the following regulatory approaches? Topic 1

A A disclosure-based approach Chapter 1

B A transparency-oriented approach Section 11

C A risk-based approach QID 785

D A fact-oriented approach Ans C Hot

Exp An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This
basically means that regulation is weighted towards the areas that pose the greatest risk to the markets
and the participants.
24 Under what circumstance can the Government intervene in the securities market in Hong Kong? Topic 1

A The Government can intervene if the Securities Chapter 1


and Futures Commission (SFC) has failed to regulate the securities markets.
B The Government can intervene if there are volatile fluctuations in the securities markets. Section 16

C The Government can intervene if and when there are substantial losses in Mandatory Provident Funds in QID 11
the securities markets.
D The Government can intervene when the Hong Ans A Hot
Kong Monetary Authority (HKMA) failed to regulate the securities markets.
Exp The broad points stated by the Securities Review Committee under Ian Hay Davison were the need for: (e)
checks and balances on the system, with the exchanges being supervised by a
commission independent of the Government, with the Government only to intervene if and when the
Commission failed to regulate properly.
25 Which of the following is an accurate description of Hong Kong's financial regulatory structure? Topic 1

A Led by the Financial Secretary, the Financial Secretary has effective overall authority over the regulatory Chapter 1
bodies.
B The regulatory body has a system of checks and balances to ensure the interests of the stakeholders are Section 16
not violated.
C The regulatory body will hire government employees as short-term contract staff to meet regulatory needs. QID 172

D The regulatory body has full discretion in determining all administrative matters. Ans B Hot

Exp The broad points stated by the Securities Review Committee under Ian Hay Davison were
the need for:
(e) checks and balances on the system, with the exchanges being supervised by a
commission independent of the Government, with the Government only to intervene if
and when the Commission failed to regulate properly

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
26 Which of the following statements regarding the development of the securities and futures markets in Topic 1
Hong Kong after 1980 are true?
I. The number of exchanges decreased
II. The government imposed direct control on the industries
III. Suggested by the Davison Committee, there is only one regulator for the Securities and Banking
Industry.
IV. A consolidation of a number of ordinances regulating the securities and futures industries.
A I, II Chapter 1

B II, III Section 17

C I, IV QID 12

D II, III, IV Ans C Hot

Exp The structure recommended by the Securities Review Committee under Ian Hay Davison has functioned
since 1989 and remains basically unchanged. The current SFO is largely a consolidation of ten diverse
ordinances regulating the securities, futures and leveraged foreign exchange industries.
27 Which of the following entities can require the SFC to provide him with information on the principles, Topic 1
practices and policy it is applying in order to meet its objectives and perform its functions?
A Chief Executive of HKSAR Chapter 2

B Financial Secretary Section 2

C Chairman of the HKMA QID 17

D Chairman of the SFC Ans B Hot

Exp The Financial Secretary can require the SFC to provide him with information on the principles, practices
and policy it is applying in order to meet its objectives and perform its functions.
28 Which of the following statements regarding the Chief Executive of Hong Kong SAR are correct? Topic 1
I. The Chief Executive of the Hong Kong SAR appoints the Chairman, Deputy Chairman of the SFC.
II. The Chief Executive of the Hong Kong SAR may give written instructions to the SFC on how to meet its
objectives
III. The Chief Executive of HKSAR is also the chairman of the Exchange Fund and responsible for the
operations of the Exchange Fund.
IV. The SFC should report all financial matters to the Chief Executive of the HKSAR
A I, II Chapter 2

B II, III Section 2

C I, IV QID 15

D II, IV Ans A Hot

Exp The Chief Executive of the HKSAR appoints the Chairman, Deputy Chairman (optional), the Chief
Executive Officer (“CEO”) and directors (both executive and non-executive) of
the SFC. He may remove any member of the Commission and also determines their terms and conditions
of office (Schedule 2, SFO). The Chief Executive of the HKSAR may give written directions to the SFC
regarding how it should seek to meet its objectives and how it should perform its functions (s. 11, SFO).

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
29 Which of the entities is responsible for the appointment of the board of directors of the SFC? Topic 1

A Chief Executive of HKSAR Chapter 2

B Financial Secretary Section 2

C Chairman of the HKMA QID 13

D Chairman of the SFC Ans A Hot

Exp The Chief Executive of the HKSAR appoints the Chairman, Deputy Chairman (optional), the Chief
Executive Officer (“CEO”) and directors (both executive and non-executive) of
the SFC. He may remove any member of the Commission and also determines their terms and conditions
of office (Schedule 2, SFO).
30 The SFC should seek approval from the financial secretary regarding which of the following matters and Topic 1
documents﹖
I. Budget
II. Financial Statements
III. Annual Report
IV. Borrowing Demands
A I, II, III Chapter 2

B I, II, IV Section 2

C I, II, III, IV QID 16

D III, IV Ans A Hot

Exp The SFC must submit estimates of its income and expenditure for the coming financial year to the Chief
Executive of the HKSAR for approval, with the Financial Secretary tabling them in the Legislative Council
of the Hong Kong Special Administrative Region (“LegCo”). The SFC prepares both an
annual report and financial statements which are submitted to the Financial Secretary, who in turn tables
them in the LegCo.
31 Which of the following entities can give written directions to the SFC regarding how it should seek to meet Topic 1
its objectives and how it should perform its functions?
A Chief Executive of HKSAR Chapter 2

B Financial Secretary Section 2

C Chairman of the HKMA QID 14

D Chairman of the SFC Ans A Hot

Exp The Chief Executive of the HKSAR may give written directions to the SFC regarding how it should seek to
meet its objectives and how it should perform its functions (s. 11, SFO).
32 What kind of power does the Financial Secretary has? Topic 1

A Require the SFC to provide him with information on the principles, practices and policy it is applying in Chapter 2
order to meet its objectives and perform its functions.
B Give written directions to the SFC regarding how it should seek to meet its objectives and how it should Section 4
perform its functions.
C Hear appeals against the decisions made by the SFC relating to the licensing or registration of QID 731
intermediaries and certain other matters.
D Require the SFC to report to him directly on all administrative matters. Ans A Hot

Exp The Financial Secretary can require the SFC to provide him with information on the principles, practices
and policy it is applying in order to meet its objectives and perform its functions. The SFO states that the
SFC may advise the Financial Secretary on matters relating to the securities and futures industry and
provide him with information. The SFC prepares both an annual report and financial statements which are
submitted to the Financial Secretary, who in turn tables them in the LegCo.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
33 What's the relationship between the Financial Secretary and SFC? Topic 1

A The chair of the SFC is the Financial Secretary. Chapter 2

B The Financial Secretary can ask the SFC to provide its principles adopted to realize its goals and meet its Section 4
functions.
C The SFC can ask the Financial Secretary to provide financial advice. QID 2352

D The Financial Secretary is responsible for the audit business of the SFC. Ans B Hot

Exp The chair of the SFC is not the Financial Secretary. The Financial Secretary actually can ask the SFC to
provide its principles adopted to realize its goals and meet its functions. The SFC is not allowed to ask the
Financial Secretary to provide financial advice. The Financial Secretary is not responsible for the audit
business of the SFC.
34 Which of the following are the duties and power of the Financial Secretary? Topic 1
I. Attend all SFC meetings and committees
II. Appoint the chairman of the SFC
III. The Financial Secretary can require the SFC to provide him with information on the principles,
practices and policy it is applying in order to meet its objectives and perform its functions.
IV. The Executive Director of the SFC report to the Financial Secretary directly.
A I, II Chapter 2

B III, IV Section 4

C III QID 18

D II, III Ans C Hot

Exp The Financial Secretary can require the SFC to provide him with information on the principles, practices
and policy it is applying in order to meet its objectives and perform its functions.
35 Under the current ministerial system, the SFC has the closest regular contact in government with Topic 1

A Financial Secretary Chapter 2

B Chief Executive of HKSAR Section 5

C Vice Secretary for Financial Services and the Treasury QID 19

D The Permanent Secretary for Financial Services and the Treasury Ans D Hot

Exp Under Hong Kong's ministerial system, the SFC has the closest regular contact in Government with the
Secretary for Financial Services and the Treasury, and the Permanent Secretary for Financial Services and
the Treasury (Financial Services), who heads the Financial Services Branch of the Financial Services and
the Treasury Bureau and reports to the Secretary.
36 Which of the following entities is responsible for maintaining the currency stability and the stability of the Topic 1
banking system in Hong Kong?
A Exchange Fund Committee Chapter 2

B SFC Section 8

C HKMA QID 21

D Chief Executive of the HKSAR Ans C Hot

Exp The HKMA is required to maintain currency stability, ensure the safety and stability of the banking system,
and promote the efficiency, integrity and development of the financial system.

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Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.

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