You are on page 1of 10

2CEXAM Mock Question

Licensing Examination Paper 2

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

B II, III, IV Section 1

C I, III, IV QID 1034

D I, II, III, IV Ans A Hot

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

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.
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

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.1


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.
4 Hong Kong Financial Regulatory Regime is Topic 1

A Compliant with US Standards Chapter 1

B Compliant with PRC Standards Section 1

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.
5 The principal regulator of the securities industry in Hong Kong is the Topic 1

A HKMA Chapter 1

B Financial Secretary Section 2

C SFC QID 781

D HKEX Ans C Hot

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

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.2


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.
8 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 2

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.
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

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.
10 The SFC is a/an _______ in Hong Kong. Topic 1

A Governmental Department Chapter 1

B Regulator Section 2

C Operator QID 782

D Legislative Body Ans B Hot

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

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.3


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 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 2

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.
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

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 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

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.4


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 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 4

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
16 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 4

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

A Auditor Chapter 1

B Fund Manager Section 4

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.
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

B II, III, IV Section 6

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.5


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 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 6

C Operating ATS QID 790

D Advising on trusts Ans D Hot

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

B Securities “Introducing Agents” Section 7

C Underwriters QID 792

D Institutional Investors Ans D Hot

Exp Institutional investors are actors but not providers.


22 Which of the following are major providers of securities investment and advisory service in Hong Kong? Topic 1
I. An intermediary trading securities on the Stock Exchange of Hong Kong Limited (SEHK)
II. An intermediary acting on behalf of a foreign intermediary
III. An underwriter
IV. Insurance companies
A I, II, III Chapter 1

B II, III, IV Section 7

C I, III, IV QID 791

D I,II,III,IV Ans A Hot

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).

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.6


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 Please rank the importance of the following in descending order Topic 1

A Ordinances>Rules>Codes Chapter 2

B Ordinances>Codes>Rules Section

C Rules>Ordinances>Codes QID 794

D Codes>Rules>Ordinances Ans A Hot

Exp Ordinances are statutory, rules and guidelines are enforced.


Codes do not have the force of law in Hong Kong but only in other countries.
24 The Securities and Futures Ordinance (SFO) is the principal legislative document governing which Topic 1
markets in Hong Kong?
A Hong Kong Securities Industry Markets Chapter 2

B Hong Kong Securities Markets Section 1

C Hong Kong Financial Markets QID 1035

D Hong Kong Financial Industry's Intermediaries Market Ans B Hot

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

B Auditors of the licensed corporation Section 1

C Associated entities of the licensed corporation QID 744

D Controlling shareholder of the licensed corporation Ans C Hot

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.7


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.
27 The rules issued by the SFC, such as Client Securities Rules, are Topic 1

A Subsidiary legislation with the force of law Chapter 2

B Code of conduct Section 2

C Major legislation QID 847

D Guidelines without the force of law Ans A Hot

Exp These are some of the Major Subsidiary Legislation:


1.1 Securities and Futures (Financial Resources) Rules
1.2 Securities and Futures (Client Securities) Rules
1.3 Securities and Futures (Client Money) Rules
1.4 Securities and Futures (Keeping of Records) Rules
1.5 Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules
1.6 Securities and Futures (Accounts and Audit) Rules,
plus many others.
28 Which of the following are the power that the Securities and Futures Ordinance (SFO) empowers the SFC Topic 1
with?
I.The power to introduce subsidiary legislation.
II.The power to issue codes and guidelines.
III.The power to amend the Securities and Futures Ordinance.
IV.The power to revoke the Securities and Futures Ordinance.
A I, II Chapter 2

B I, III Section 2

C II, IV QID 1036

D I, II, III Ans A Hot

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

A Civil Law Conditions Chapter 2

B Criminal Law Conditions Section 3

C Subsidiary Law Conditions QID 1038

D Full Legal Status Ans A Hot

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.8


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.
30 Failing to follow SFC-issued codes, guidelines and guidance notes may result in which of the following? Topic 1
I.Reflect adversely on the fitness and properness of licensed or registered persons to continue to be so
licensed or registered.
II.Imprisonment.
III.Civil consequences.
IV.A higher tax bracket.
A I, II Chapter 2

B I, III Section 3

C II, III, IV QID 1037

D II, IV Ans B Hot

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

C II, III, IV QID 190

D I, II, III, IV Ans D Hot

Exp The SFO grants the SFC powers to make detailed


rules relating to:
(a) their financial resources;
(b) the handling of client money and other client assets;
© the keeping of accounts and records; and
(d) auditing matters.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.9


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 Codes and guidelines issued by the SFC which apply to licensed or registered persons in the Asset Topic 1
Management Industries includes
I. The Conduct Guidelines of Intermediaries
II. The Code of Conduct
III. The Internal Control Guidelines (ICG)
IV. The Prevention of Money Laundering and Terrorist Financing Guidance Note (“MLGN”)
A I, II, III, IV Chapter 2

B I, II Section 3

C I, II, III QID 415

D II, III, IV Ans D Hot

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

C the Employment Ordinance QID 179

D SFO Ans D Hot

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

D II, III, IV Ans D Hot

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.

Website: www.2cexam.com Phone: 21109644 Wechat:hk2cexam P.10


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.

You might also like