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HKSI Paper 1 (Fundamentals of Securities and Futures Regulation) Free Trial Set Two
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Last updated on: 19-May-23
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Question 1 of 30
1. Question
Which statement(s) is/are correct regarding issued capital?
I. Issued capital – the nominal value of all the shares issued
II. Issued capital – the amount actually paid by the members in respect of the shares issued
III. Issued capital – the outstanding unpaid amount due from members in respect of calls made by the company on shares issued
IV. Issued capital – the unpaid amount that has yet to be called by the company on shares issuedCorrect
issued capital – the nominal value of all the shares issued
Incorrect
issued capital – the nominal value of all the shares issued
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Question 2 of 30
2. Question
Which are included in the business of an annual general meeting?
I. The election of managers to replace retiring ones
II. The appointment of auditors
III. The consideration of the annual accounts
IV. The declaration of dividendsCorrect
The business of an annual general meeting includes the consideration of the annual accounts, the declaration of dividends, the election of directors to replace retiring ones, and the appointment of auditors.
Incorrect
The business of an annual general meeting includes the consideration of the annual accounts, the declaration of dividends, the election of directors to replace retiring ones, and the appointment of auditors.
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Question 3 of 30
3. Question
Which statements are correct regarding to a compulsory winding- up?
I. A compulsory winding-up is ordered by the court, which will appoint a liquidator;
II. If the members declare that the company can meet its debts within one year, there will be a members’ compulsory winding- up
III. A voluntary winding-up is started by the members.
IV. If the members declare that the company can’t meet its debts within one year it will be a creditors’ compulsory winding-up with a committee of inspection that will supervise the process.Correct
A compulsory winding-up is ordered by the court, which will appoint a liquidator; a voluntary winding-up is started by the members. If the members declare that the company can meet its debts within one year, there will be a members’ voluntary winding-up; if not, it will be a creditors’ voluntary winding-up with a committee of inspection that will supervise the process.
Incorrect
A compulsory winding-up is ordered by the court, which will appoint a liquidator; a voluntary winding-up is started by the members. If the members declare that the company can meet its debts within one year, there will be a members’ voluntary winding-up; if not, it will be a creditors’ voluntary winding-up with a committee of inspection that will supervise the process.
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Question 4 of 30
4. Question
Which of the following does NOT define what a private company is?
I. Limit its members to 50
II. Offer shares to the public
III. Restrict their transfer
IV. Limits capital expenditure to its shareholdersCorrect
A private company must limit its members to 50, may not offer shares to the public and must restrict their transfer
Incorrect
A private company must limit its members to 50, may not offer shares to the public and must restrict their transfer
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Question 5 of 30
5. Question
What will occur if a members’ voluntary liquidation cannot be achieved?
I. It it will by way of a creditors’ voluntary liquidation
II. It it will by way of a company’s voluntary liquidation
III. It it will by way of a shareholders’ voluntary liquidation
IV. It it will by way of a auditors’ voluntary liquidationCorrect
If a members’ voluntary liquidation cannot be achieved, then the liquidation will be by way of a creditors’ voluntary liquidation, which requires the setting up of a committee of inspection to supervise the process.
Incorrect
If a members’ voluntary liquidation cannot be achieved, then the liquidation will be by way of a creditors’ voluntary liquidation, which requires the setting up of a committee of inspection to supervise the process.
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Question 6 of 30
6. Question
Which of the following can become intermediaries?
I. Corporations
II. Institutions
III. Companies
IV. OrdinancesCorrect
Only corporations may become intermediaries.
Incorrect
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Question 7 of 30
7. Question
Under s. 116B, CO, resolutions may be passed by circularization and signed by all members except for which of the following personnel(s)?
I. the removal of auditors before the expiration of their term of office
II. the removal of a director before his term expires
III. the removal of auditors after the expiration of their term of office
IV. the removal of a director after his term expiresCorrect
Under s. 116B, CO, resolutions may be passed by circularization and signed by all members except for:
(a) the removal of auditors before the expiration of their term of office (s. 131, CO); or
(b) the removal of a director before his term expires (s. 157B, CO).
These must be put to members at a general meeting as ordinary resolutions.Incorrect
Under s. 116B, CO, resolutions may be passed by circularization and signed by all members except for:
(a) the removal of auditors before the expiration of their term of office (s. 131, CO); or
(b) the removal of a director before his term expires (s. 157B, CO).
These must be put to members at a general meeting as ordinary resolutions. -
Question 8 of 30
8. Question
The court will not generally interfere in internal management matters or where the company can deal with the matter by calling a meeting. This is the principle(s) known as?
I. Majority power
II. Majority shares
III. Majority strength
IV. Majority investmentCorrect
The court will not generally interfere in internal management matters or where the company can deal with the matter by calling a meeting. This is the principle of majority power.
Incorrect
The court will not generally interfere in internal management matters or where the company can deal with the matter by calling a meeting. This is the principle of majority power.
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Question 9 of 30
9. Question
A company may be wound up by the court if the court is of the opinion that it would be just and equitable to wind up the company. Which of the following is(are) example(s) of that?
I. The main object of the company has failed.
II. The company was formed for a fraudulent purpose.
III. The basis of mutual trust in the company no longer exists.
IV. The basis of understanding and confidence on which the company was formed no longer exists.Correct
A company may be wound up by the court if the court is of the opinion that it would be just and equitable to wind up the company. Examples are where:
(i) the main object of the company has failed;
(ii) the company was formed for a fraudulent purpose; or
(iii) the basis of mutual trust, understanding and confidence on which the company was formed no longer exists.Incorrect
A company may be wound up by the court if the court is of the opinion that it would be just and equitable to wind up the company. Examples are where:
(i) the main object of the company has failed;
(ii) the company was formed for a fraudulent purpose; or
(iii) the basis of mutual trust, understanding and confidence on which the company was formed no longer exists. -
Question 10 of 30
10. Question
The article of association contains provisions which are mainly concerned with?
I. the relationship between the company and outsiders
II. the relationship between private and public company
III. the relationship between employer and employees
IV. the relationship between the company and shareholdersCorrect
The article of association contains provisions which are mainly concerned with the relationship between the company and outsiders.
Incorrect
The article of association contains provisions which are mainly concerned with the relationship between the company and outsiders.
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Question 11 of 30
11. Question
Model articles of association are given in Table A, First Schedule, CO. They consist broadly of how many parts?
I. Four
II. Three
III. More than four
IV. Less than fourCorrect
Model articles of association are given in Table A, First Schedule, CO. They consist broadly of four parts.
Incorrect
Model articles of association are given in Table A, First Schedule, CO. They consist broadly of four parts.
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Question 12 of 30
12. Question
An ordinary or equity share is the basic unit of ownership of a company, what else is it called in the United States?
I. Ordinary share
II. Common share
III. Normal share
IV. Preference shareCorrect
An ordinary or equity share is the basic unit of ownership of a company (called a common share in the United States).
Incorrect
An ordinary or equity share is the basic unit of ownership of a company (called a common share in the United States).
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Question 13 of 30
13. Question
Judges are not politically appointed, and make their decisions on the basis what merits?
I. The Rule of Law
II. The Law of the book
III. Their own interpretation of the law
IV. The Law CouncilCorrect
Judges are not politically appointed, and make their decisions on the basis of their interpretation of the law.
Incorrect
Judges are not politically appointed, and make their decisions on the basis of their interpretation of the law.
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Question 14 of 30
14. Question
Which of the following is considered as objective(s) of regulators in the markets they supervise?
I. Promote a “true and fair” view of the company’s affairs
II. Encourage professional investors
III. Provide lucrative services
IV. Promote confidenceCorrect
An objective of regulators is to promote confidence in the markets they supervise.
Incorrect
An objective of regulators is to promote confidence in the markets they supervise.
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Question 15 of 30
15. Question
Insurance agents must register with the whom and comply with its code of practice?
I. Hong Kong Federation of Insurers
II. Hong Kong SAR
III. Hong Kong Confederation of Insurance Brokers
IV. Professional Insurance Brokers AssociationCorrect
Insurance agents must register with the Hong Kong Federation of Insurers and comply with its code of practice.
Incorrect
Insurance agents must register with the Hong Kong Federation of Insurers and comply with its code of practice.
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Question 16 of 30
16. Question
The SFC investigates alleged breaches of the SFC Code on things such as?
I. MPF Contracts
II. MPF Services
III. MPF Products
IV. MPF MarketsCorrect
The SFC investigates alleged breaches of the SFC Code on MPF Products and takes enforcement actions.
Incorrect
The SFC investigates alleged breaches of the SFC Code on MPF Products and takes enforcement actions.
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Question 17 of 30
17. Question
In the Licensing Department of the SFC, which of the following is NOT their function(s)?
I. deals with issues relating to the continuing suitability of licensed corporations and individuals to be licensed
II. supervises the business conduct of unlicensed corporations
III. supervises individual licensees on an ongoing basis, including the conduct of on-site inspection
IV. issues codes and guidelines concerning the competence and suitability of corporationsCorrect
Licensing Department:
(a) licenses corporations and individuals seeking to conduct business in Hong Kong in the regulated activities for which a licence is required under the SFO;
(b) issues codes and guidelines concerning the competence and suitability of corporations and individuals to remain licensed; and
(c) deals with issues relating to the continuing suitability of licensed corporations and individuals to be licensed.Incorrect
Licensing Department:
(a) licenses corporations and individuals seeking to conduct business in Hong Kong in the regulated activities for which a licence is required under the SFO;
(b) issues codes and guidelines concerning the competence and suitability of corporations and individuals to remain licensed; and
(c) deals with issues relating to the continuing suitability of licensed corporations and individuals to be licensed. -
Question 18 of 30
18. Question
To which overseas authority or regulator service(s) may the SFC provide information to?
I. Market Services
II. Financial Services
III. Trading Services
IV. Employee Securities ServicesCorrect
SFC may also provide information to an overseas authority or regulator (generally of financial services) who is subject to adequate secrecy provisions.
Incorrect
SFC may also provide information to an overseas authority or regulator (generally of financial services) who is subject to adequate secrecy provisions.
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Question 19 of 30
19. Question
A memorandum of understanding (“MOU”) has been signed between two regulators setting out their roles and responsibilities. Who are the two regulators?
I. the SFO
II. the SAR
III. the SFC
IV. the HKMACorrect
The HKMA and the SFC must work closely together in relation to any SFC-regulated activities that are carried out by registered institutions. To this end, a memorandum of understanding (“MOU”) has been signed between the two regulators, setting out their roles and responsibilities so as to minimize overlaps under the regulatory regime.
Incorrect
The HKMA and the SFC must work closely together in relation to any SFC-regulated activities that are carried out by registered institutions. To this end, a memorandum of understanding (“MOU”) has been signed between the two regulators, setting out their roles and responsibilities so as to minimize overlaps under the regulatory regime.
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Question 20 of 30
20. Question
The regulation of insurance brokers, who may obtain authorization from the Insurance Authority or from one of two bodies approved by the Insurance Authority which are?
I. the Hong Kong Confederation of Insurance Brokers
II. the Hong Kong Insurance Agency
III. the Professional Insurance Brokers Association
IV. the International Insurance AuthorityCorrect
the regulation of insurance brokers, who may obtain authorization from the Insurance Authority or from one of two bodies approved by the Insurance Authority, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.
Incorrect
the regulation of insurance brokers, who may obtain authorization from the Insurance Authority or from one of two bodies approved by the Insurance Authority, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.
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Question 21 of 30
21. Question
Insurance companies wishing to promote schemes will need to be authorized under?
I. Insurance Agents Registration Board
II. Professional Insurance Brokers Association
III. Insurance Authority
IV. Insurance Companies OrdinanceCorrect
The Insurance Authority is represented on this committee, as insurance companies wishing to promote these schemes will need to be authorized under the Insurance Companies Ordinance.
Incorrect
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Question 22 of 30
22. Question
The first step in regulating intermediaries is a satisfactory and sufficient licensing regime. In discussing the fitness and properness of licensed corporations, the first criterion is their financial status. The regulator must ensure that a licensed corporation has enough capital within the corporation to do which of the following?
I. to support the level of its business activities
II. to be able to meet its liabilities as they fall due
III. to provide a buffer in the event of sudden market changes
IV. to provide substantial market information prior to any actions takenCorrect
the first step in regulating intermediaries is a satisfactory and sufficient licensing regime. In discussing the fitness and properness of licensed corporations, the first criterion is their financial status. The regulator must ensure that a licensed corporation has enough capital within the corporation (or available to it from external sources):
(a) to support the level of its business activities;
(b) to be able to meet its liabilities as they fall due; and
(c) to provide a buffer in the event of sudden market changes, disruptions or loss of confidence.Incorrect
the first step in regulating intermediaries is a satisfactory and sufficient licensing regime. In discussing the fitness and properness of licensed corporations, the first criterion is their financial status. The regulator must ensure that a licensed corporation has enough capital within the corporation (or available to it from external sources):
(a) to support the level of its business activities;
(b) to be able to meet its liabilities as they fall due; and
(c) to provide a buffer in the event of sudden market changes, disruptions or loss of confidence. -
Question 23 of 30
23. Question
Intermediaries in the securities and futures industry are NOT called upon to handle which of the following?
I. Client assets
II. Client money
III. Client money in a fiduciary capacity
IV. Client liabilitiesCorrect
Intermediaries in the securities and futures industry are called upon to handle client assets, including money, in a fiduciary capacity.
Incorrect
Intermediaries in the securities and futures industry are called upon to handle client assets, including money, in a fiduciary capacity.
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Question 24 of 30
24. Question
The assets to which the Client Securities Rules apply are limited to client securities or securities collateral of an intermediary that are?
I. Are either listed or traded on a recognized stock market.
II. Are interests in a CIS authorized by the SFC.
III. Receiving or being held in Hong Kong by or on behalf of the intermediary.
IV. Do not apply to client securities of an intermediary that are in an account in the client’s name.Correct
The assets to which the Client Securities Rules apply are limited to client securities or securities collateral of an intermediary that is:
(a) are either listed or traded on a recognized stock market (i.e. a stock market operated by a recognized exchange company, currently only the SEHK); or are interests in a CIS authorized by the SFC under s. 104, SFO; and
(b) received or held in Hong Kong by or on behalf of the intermediary (in the course of conducting a regulated activity) or an associated entity of the intermediary in relation to such regulated activity, and further
(c) they do not apply to client securities of an intermediary that are in an account in a client’s name, set up by that client with persons other than the intermediary or its associated entity.Incorrect
The assets to which the Client Securities Rules apply are limited to client securities or securities collateral of an intermediary that is:
(a) are either listed or traded on a recognized stock market (i.e. a stock market operated by a recognized exchange company, currently only the SEHK); or are interests in a CIS authorized by the SFC under s. 104, SFO; and
(b) received or held in Hong Kong by or on behalf of the intermediary (in the course of conducting a regulated activity) or an associated entity of the intermediary in relation to such regulated activity, and further
(c) they do not apply to client securities of an intermediary that are in an account in a client’s name, set up by that client with persons other than the intermediary or its associated entity. -
Question 25 of 30
25. Question
SFC has made the Keeping of Records Rules, under s. 151, SFO, for intermediaries and their associated entities. The records should be sufficient to produce which of the following?
I. Liabilities
II. Assets
III. Financial statements with all liabilities
IV. Overseas accountsCorrect
SFC has made the Keeping of Records Rules, under s. 151, SFO, for intermediaries and their associated entities. The SFC has stated that the records which are required to be kept apply to regulated activities only. However, as the records should be sufficient to produce financial statements, they must show all liabilities.
Incorrect
SFC has made the Keeping of Records Rules, under s. 151, SFO, for intermediaries and their associated entities. The SFC has stated that the records which are required to be kept apply to regulated activities only. However, as the records should be sufficient to produce financial statements, they must show all liabilities.
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Question 26 of 30
26. Question
What is the Companies Ordinance (“CO”) in Hong Kong based on which has legal force?
I. merit-based
II. market-based
III. financial-based
IV. disclosure-basedCorrect
The philosophy and systems of regulation are sometimes described as being either “merit-based” or “disclosure-based”. These terms are usually used in considering share offers and listing matters. The systems in the United Kingdom and the United States are said to be disclosure-based. That is to say, the focus is on maximizing disclosure and provision of information regarding public offerings of securities. Disclosure can be mandatory or voluntary. In Hong Kong, the Companies Ordinance (“CO”) 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.
Incorrect
The philosophy and systems of regulation are sometimes described as being either “merit-based” or “disclosure-based”. These terms are usually used in considering share offers and listing matters. The systems in the United Kingdom and the United States are said to be disclosure-based. That is to say, the focus is on maximizing disclosure and provision of information regarding public offerings of securities. Disclosure can be mandatory or voluntary. In Hong Kong, the Companies Ordinance (“CO”) 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.
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Question 27 of 30
27. Question
The market crash of March 1973 activated a regulatory response, namely the enactment of the:
I. Financial Jurisdiction Ordinance and the Appropriation of Funds Ordinance
II. Secretary of Defence Ordinance
III. Securities Ordinance
IV. Protection of Investors OrdinanceCorrect
The next event was the market crash of March 1973, which also activated a regulatory response, namely the enactment of the Securities Ordinance and the Protection of Investors Ordinance on the advice of the Companies Law Revision Committee. A regulatory framework which included the Securities Commission (a Government body) and a Commissioner for Securities was created by the Securities Ordinance.
Incorrect
The next event was the market crash of March 1973, which also activated a regulatory response, namely the enactment of the Securities Ordinance and the Protection of Investors Ordinance on the advice of the Companies Law Revision Committee. A regulatory framework which included the Securities Commission (a Government body) and a Commissioner for Securities was created by the Securities Ordinance.
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Question 28 of 30
28. Question
Which Committee/Ordinance structure was recommended under Ian Hay Davison which has(have) functioned since 1989 and remains basically unchanged?
I. Protection of Investors Ordinance
II. Securities Review Committee
III. Securities Ordinance
IV. Companies Law Revision CommitteeCorrect
The structure recommended by the Securities Review Committee under Ian Hay Davison has functioned since 1989 and remains basically unchanged.
Incorrect
The structure recommended by the Securities Review Committee under Ian Hay Davison has functioned since 1989 and remains basically unchanged.
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Question 29 of 30
29. Question
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) are based on what?
I. substance based
II. risk based
III. disclosure based
IV. merit basedCorrect
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) are merit-based.
Incorrect
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) are merit-based.
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Question 30 of 30
30. Question
What information can the Financial Secretary require the SFC to provide him with in order to meet its objectives and perform its functions?
I. individual personnel
II. practical financial pensions
III. external company policies
IV. principles, practices and policyCorrect
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.
Incorrect
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.
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