Professional Documents
Culture Documents
16-Sep-19
19:42:07
1 Globalisation and advances in technology have enabled investors to Topic 1
I. Participate in different markets
II. Arbitrage between markets
III. Arbitrage between products
IV. Increase investment returns by diversifying
A I, II, III Chapter 1
Exp Globalisation and advances in technology have enabled investors to move rapidly from one market to
another, arbitraging between markets, products and transactions.
2 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
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.
3 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
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.
Exp Hong Kong Financial Regulatory Regime is able to address new and complex financial products.
5 The principal regulator of the securities industry in Hong Kong is the Topic 1
A HKMA Chapter 1
Exp The SFC was created by law under the Securities and Futures Commission Ordinance (now repealed and
subsumed in the SFO). It is independent, meaning that it is not part of the Government machinery of the
Civil Service or the ministerial system. Nevertheless, it reports to and is accountable to the Government as
described in section 2 above.
6 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 2
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.
7 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 2
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.
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.
9 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 2
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.
10 The SFC is a/an _______ in Hong Kong. Topic 1
B Regulator Section 2
Exp The SFC was created by law under the Securities and Futures Commission Ordinance (now repealed and
subsumed in the SFO). It is independent, meaning that it is not part of the
Government machinery of the Civil Service or the ministerial system. Nevertheless, it reports to and is
accountable to the Government as described in section 2 above. It is considered the securities and futures
market prime regulator.
11 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 2
C Disclosure-Based QID 10
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.
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.
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 2
C II, IV QID 8
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 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 3
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
B I, II Section 4
A Auditor Chapter 1
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.
18 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
Exp All of these services are provided by Hong Kong financial companies.
Exp This service is not provided by any Hong Kong financial actor.
20 Which of the following is a financial service provided by a financial intermediary? Topic 1
A Mr. Chan invests a lot of capital to set up 2CEXAM tutorial company. Chapter 1
B Mr. Chan manages a lot of assets for his friend with terminal illness for free, which includes the Section 6
management of investment on securities and futures.
C Mr. Chan provides a loan to his sister in law and charges interests that's far lower than the benchmark QID 4
lending rate at banks.
D Mr. Chan who signs a rental agreement on behalf of British Construction Bank. Ans C Hot
Exp Financial Intermediaries must be compensated in a financial transaction to be view as providing financial
services. Setting up a tutorial company is not providing financial services to a third party because it is not
a financial transaction. Managing assets for free is not a financial service since it is not compensated.
Signing a rental agreement on behalf of a bank is not a financial service because rental agreement itself is
not a financial instrument. Providing loans to others with interest is a form of financial service since it is a
service in exchange for compensation in a financial transaction.
21 Which of the following individuals/institutions is NOT a provider of securities investment and advisory Topic 1
services in Hong Kong?
A Fund Managers Chapter 1
Exp To conclude this initial definition section, the categories of persons conducting Type 1 regulated activity
include:
(a) a participant of the SEHK, whether it engages in activities on the SEHK or outside it;
(b) another securities dealer carrying out dealing in securities in Hong Kong;
(c.) a licensed representative of the above;
(d) an AFI registered with the SFC for this activity (and its staff who deal with the public and are on a
register maintained by the HKMA as engaged in such activity);
(e.) a portfolio manager who is licensed (as a securities dealer) for Type 1 regulated activity; and
(f) a securities introducing agent (see section 8.13 below).
A Ordinances>Rules>Codes Chapter 2
B Ordinances>Codes>Rules Section
Exp The SFO is the principal legislative document governing the securities market in Hong Kong.
25 What are the powers of the Financial Secretary in relation to securities and CISs? Topic 1
A The Financial Secretary may, by notice under the SFO, declare Chapter 2
an arrangement other than those specifically defined in the
SFO as a security or a CIS.
B The Financial Secretary may, without notice under the SFO, declare an arrangement other than those Section 1
specifically defined in the
SFO as a security or a CIS.
C The Financial Secretary have no powers over the administration in relation to securities and CIS. QID 221
D The Financial Security may, by notice under the SFO, declare Ans A Hot
an arrangement in the SFO as a Security or a CIS.
Exp Powers are given to the Financial Secretary to prescribe, by notice in the Gazette:
(a) new financial products as being (or not being) securities or futures contracts, and new financial
arrangements as CISs, thus capturing new products in the regulatory net as appropriate (ss. 392 and 393,
SFO)
26 Which of the following individuals or entities should adhere to Securities and Futures (Accounts and Topic 1
Audit) Rules?
A Solicitors of the licensed corporation Chapter 2
Exp The SFC has made the Accounts and Audit Rules specifying the form and contents of financial statements
and other documents that licensed corporations and associated entities of intermediaries (both licensed
corporations and registered institutions) should prepare and the content of auditors' reports.
B I, III Section 2
Exp Part VII empowers the SFC to make subsidiary legislation (s. 168, SFO) and/or codes (s. 169, SFO).
29 The SFC-issued codes, guidelines and guidance notes are generally only subject to Topic 1
Exp Part XVI gathers together a number of provisions of common application as well as regulatory powers. It
includes miscellaneous provisions that do not fit elsewhere and additional ones which relate to the
increase in civil law applications.
B I, III Section 3
Exp The SFO also empowers the SFC to issue codes, guidelines and guidance notes. These do not have the
force of law and do not override the provisions of any applicable law. However, a
failure to follow the spirit of the codes, guidelines and guidance notes may reflect adversely on the fitness
and properness of licensed or registered persons to continue to be so licensed or
registered.
31 The SFC-issued codes, guidelines and guidance notes Topic 1
A Have the force of law and override the provisions of any other applicable law. Chapter 2
B Have the force of law but do not override the provisions of any other applicable law. Section 3
C Do not have the force of law and override the provisions of any other applicable law. QID 773
D Do not have the force of law and do not override the provisions of any other applicable law. Ans D Hot
Exp Codes and guidelines do not have the force of law and are not legally enforceable. However, the SFC is
able to penalise licensed or registered persons breaching the codes and guidelines by applying the
blanket principle that a breach of these may impugn the licensed or registered person's fitness and
properness to remain licensed or registered.
32 The SFO has provided powers for the SFC to make detailed rules relating to which of the following? Topic 1
I. Financial Resources
II. Handling of client money and other client assets
III. The keeping of accounts and records
IV. Auditing matters
A I, II, III Chapter 2
B I, II Section 3
B I, II Section 3
Exp Option I included in the question is not a real code, the other three do exist and apply to asset managers.
34 The principal ordinance applicable to the asset management industry is the Topic 1
A BO Chapter 2
B CISO Section 3
Exp The principal ordinances applicable to the asset management industry are the SFO, the Mandatory
Provident Fund Schemes Ordinance (“MPFSO”), the Occupational Retirement
Schemes Ordinance (“ORSO”), the Insurance Ordinance and, to a lesser extent, the Banking Ordinance,
the Employment Ordinance, the Inland Revenue Ordinance and the Trustee
Ordinance.
35 Under the provisions of the Securities and Futures Ordinance (SFO), which of the following statements Topic 1
relating to rules and codes of conduct are correct?
I. Failure by a licensed person to comply with a material provision of a code of conduct will of itself make
the person liable to judicial proceedings.
II. A code of conduct violation shall be admissible as evidence in court proceedings.
III. The Securities and Futures Commission (SFC) is empowered under the SFO to make rules or codes of
conduct.
IV. A breach of a provision in a code of conduct by a licensed person may cast doubts on his fitness and
properness to hold the licence.
A I, II Chapter 2
B III, IV Section 3
C I, III, IV QID 87
Exp The SFC may enquire into or investigate suspected breaches of the SFO and any subsidiary legislation,
codes and guidelines:
(c) Persons prejudiced by the perpetration of market misconduct may take civil action against the
wrongdoer through the courts to obtain redress. The SFO has provisions for the findings of the Market
Misconduct Tribunal to be admissible in evidence in private civil actions.
(d) Codes and guidelines do not have the force of law and are not legally enforceable. However, the SFC is
able to penalise licensed or registered persons breaching the codes and guidelines by applying the
blanket principle that a breach of these may impugn the licensed or registered person's fitness and
properness to remain licensed or registered.