HKSI Paper 15 & 16 (Sponsors Principals & Representatives) English Free Trial Set Two
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HKSI Paper 15 & 16 English Free Trial
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Question 1 of 10
1. Question
Regarding financial advisers, which of the following is true?
I. Their role is very similar to that of the sponsor.
II. Unlike sponsors, they are licensed for type 4 regulated activity.
III. Financial advisers, like sponsors, are governed by the CFA Code.
IV. The CFA code requires a financial adviser to advise a listing applicant to cooperate fully with the sponsor in discharging its duties.
Correct
The role of a financial adviser is distinct from that of the sponsor. While financial advisers must be licensed by or registered with the Securities and Futures Commission (“SFC”) for Type 6 regulated activity (advising on corporate finance) and are also governed by the Corporate Finance Adviser Code of Conduct (“CFA Code”), they are not subject to the same level of responsibilities and obligations as sponsors.
The CFA Code requires a financial adviser appointed to advise a listing applicant to cooperate fully with, and not unreasonably or adversely to affect, the sponsor in discharging its duties. In particular, it should not impede or restrict the sponsor’s access to communicating with the listing applicant.
Incorrect
The role of a financial adviser is distinct from that of the sponsor. While financial advisers must be licensed by or registered with the Securities and Futures Commission (“SFC”) for Type 6 regulated activity (advising on corporate finance) and are also governed by the Corporate Finance Adviser Code of Conduct (“CFA Code”), they are not subject to the same level of responsibilities and obligations as sponsors.
The CFA Code requires a financial adviser appointed to advise a listing applicant to cooperate fully with, and not unreasonably or adversely to affect, the sponsor in discharging its duties. In particular, it should not impede or restrict the sponsor’s access to communicating with the listing applicant.
Question 2 of 10
2. Question
Which of the following is an attribute required of sponsors by the CFA code?
I. Maintenance of Chinese walls
II. The need for partiality
III. The ability to uphold strong conflict of interest
IV. A high standard of integrity and fair dealing
Correct
The Corporate Finance Adviser Code of Conduct (“CFA Code”) requires a sponsor to be honest and of good repute, and to maintain a high standard of integrity and fair dealing. Other and more specific requirements pertain to the maintenance of Chinese walls, the need to avoid or deal with conflicts of interest, the need for impartiality, the proper handling of benefits, and so on.
Incorrect
The Corporate Finance Adviser Code of Conduct (“CFA Code”) requires a sponsor to be honest and of good repute, and to maintain a high standard of integrity and fair dealing. Other and more specific requirements pertain to the maintenance of Chinese walls, the need to avoid or deal with conflicts of interest, the need for impartiality, the proper handling of benefits, and so on.
Question 3 of 10
3. Question
A sponsor’s fulfilment of its regulatory obligations will contribute to the following excluding?
I. Market confidence
II. Investor protection
III. Continued success of the Hong Kong IPO market
IV. An efficient regulatory approval process
Correct
The sponsor’s fulfilment of its regulatory obligations will contribute to market confidence, an efficient regulatory approval process, investor protection, and the continued success of Hong Kong’s IPO market.
Incorrect
The sponsor’s fulfilment of its regulatory obligations will contribute to market confidence, an efficient regulatory approval process, investor protection, and the continued success of Hong Kong’s IPO market.
Question 4 of 10
4. Question
The following statements are true about placing except:
I. In placing, subscriptions are obtained mainly from persons approved by the issuer or intermediary.
II. A new applicant seeking a listing on the Main Board must be allowed to be listed by way of placing.
III. New applicants seeking a listing on GEM are permitted to list by way of placing.
IV. Public demand for securities is a prerequisite for listing new applicants by way of placing on both GEM and Main Board.
Correct
A placing is the obtaining of subscriptions for or sale of securities by an issuer or intermediary, mainly from or to persons selected or approved by the issuer or intermediary.
A new applicant seeking a listing on the Main Board may not be allowed to be listed by way of placing only if there is likely to be a significant public demand for the securities. Slightly different requirements apply to new applicants seeking a listing on GEM. They are permitted to list by way of placing only without needing to consider whether there may be a public demand for the securities. Listing by way of placing only is frequently the method used by new applicants seeking to list on the GEM.
Incorrect
A placing is the obtaining of subscriptions for or sale of securities by an issuer or intermediary, mainly from or to persons selected or approved by the issuer or intermediary.
A new applicant seeking a listing on the Main Board may not be allowed to be listed by way of placing only if there is likely to be a significant public demand for the securities. Slightly different requirements apply to new applicants seeking a listing on GEM. They are permitted to list by way of placing only without needing to consider whether there may be a public demand for the securities. Listing by way of placing only is frequently the method used by new applicants seeking to list on the GEM.
Question 5 of 10
5. Question
About the Offering Mechanism, which of the following statements is false?
I. The sponsor solely recommends the offer price to the issuer, at the end of the public offer.
II. In Hong Kong, the typical initial public offer is 20%.
III. The demand generated by all categories, is considered prior to the recommendation of the final offer price.
IV. Publication of the pre-deal research reports play a role in determining the price range.
Correct
Fixed- price IPOs are rare nowadays and accordingly the offering mechanism normally starts with a price range, which is used by the book-runner(s) to canvass demand from institutions in what is known as a book-building process, typically lasting for around two weeks. The price range itself is determined through feedback from institutions following the publication of pre-deal research reports and a process known as pre-deal investor education (“PDIE”) or pre-marketing; through which institutional investors provide early feedback to the book-runners and other underwriters on the relative attractiveness and valuation of the issuer in an IPO.
In Hong Kong, the typical initial size of the public offer is 10%, with the remaining 90% set aside for institutional investors.
At the end of the public offer, the sponsor(s), global coordinator(s) and book-runner(s) will consider both the demand generated by all categories of investors, as well as the quality of the book of demand compiled from institutions, to recommend a final offer price to the issuer.
Incorrect
Fixed- price IPOs are rare nowadays and accordingly the offering mechanism normally starts with a price range, which is used by the book-runner(s) to canvass demand from institutions in what is known as a book-building process, typically lasting for around two weeks. The price range itself is determined through feedback from institutions following the publication of pre-deal research reports and a process known as pre-deal investor education (“PDIE”) or pre-marketing; through which institutional investors provide early feedback to the book-runners and other underwriters on the relative attractiveness and valuation of the issuer in an IPO.
In Hong Kong, the typical initial size of the public offer is 10%, with the remaining 90% set aside for institutional investors.
At the end of the public offer, the sponsor(s), global coordinator(s) and book-runner(s) will consider both the demand generated by all categories of investors, as well as the quality of the book of demand compiled from institutions, to recommend a final offer price to the issuer.
Question 6 of 10
6. Question
Regarding engagement letters, which of the following is true?
I. It is drafted before the sponsor accepts the spoormation about the remuneration of the sponsor.
III. It contains information about the duration of the assignment and other terms of engagement.
IV. The terms are solely determined by the sponsor.
Correct
Once the sponsor has vetted the proposed new mandate and has made the decision to accept the sponsor role, it is good practice and a requirement to document the terms of its engagement, including its remuneration and the duration of the assignment. This typically takes the form of an engagement letter, which is negotiated between the parties.
Incorrect
Once the sponsor has vetted the proposed new mandate and has made the decision to accept the sponsor role, it is good practice and a requirement to document the terms of its engagement, including its remuneration and the duration of the assignment. This typically takes the form of an engagement letter, which is negotiated between the parties.
Question 7 of 10
7. Question
Which of the following statements is false?
I. Sponsors may act as compliance advisers to newly listed issuers.
II. The SFC cannot exercise its disciplinary powers when sponsors fail to fulfill their duties.
III. Disclosure at the time of an IPO sets the background against which future disclosure is made by a listed company.
IV. The net result of a good sponsors work is that only suitable candidates make it to listing application.
Correct
1. Sponsors may also act as compliance advisers to newly listed issuers.
2. The SFC can exercise its disciplinary powers when sponsors fail to fulfil their duties.
3. Disclosure at the time of an IPO sets the background against which future disclosure is made by a listed company.
4. The net result of good sponsor work should be that only candidates suitable for listing reach the stage of making a listing application.
Incorrect
1. Sponsors may also act as compliance advisers to newly listed issuers.
2. The SFC can exercise its disciplinary powers when sponsors fail to fulfil their duties.
3. Disclosure at the time of an IPO sets the background against which future disclosure is made by a listed company.
4. The net result of good sponsor work should be that only candidates suitable for listing reach the stage of making a listing application.
Question 8 of 10
8. Question
According to the SFC, the senior management of a licensed corporation will include:
I. Directors
II. Compliance advisers
III. Managers-in-charge of core functions
IV. Responsible officers
Correct
The SFC has made it clear in its Circular on 16 December 2016 that the senior management of a licensed corporation will include directors, responsible officers, and a new designation referred to as “Managers-In-Charge of Core Functions” (“MICs”).
Incorrect
The SFC has made it clear in its Circular on 16 December 2016 that the senior management of a licensed corporation will include directors, responsible officers, and a new designation referred to as “Managers-In-Charge of Core Functions” (“MICs”).
Question 9 of 10
9. Question
Which of the following is important in the preparation for an IPO?
I. Commercial due diligence
II. Documentation and verification
III. Financial and documentary due diligence
IV. Market stratification
Correct
Much of the time spent working on an IPO is devoted to preparation, including commercial, financial and documentary due diligence, documentation and verification, with the marketing process per se (except for early marketing to cornerstone investors, as explained above) usually lasting only a few weeks.
Incorrect
Much of the time spent working on an IPO is devoted to preparation, including commercial, financial and documentary due diligence, documentation and verification, with the marketing process per se (except for early marketing to cornerstone investors, as explained above) usually lasting only a few weeks.
Question 10 of 10
10. Question
Which of the following is included in records for each listing assignment?
I. The composition of the Transaction Team including any variations in the team composition
II. All significant matters arising in the course of the listing process, including internal discussions and actions taken, regardless of whether or not such matters are disclosed in the final listing document.
III. The involvement of senior management in considering the critical matters.
IV. The bases on which the sponsor has given opinions, assurances and conclusions to the listing applicant.
Correct
Records for each listing assignment should include the following:
(a) the composition of the Transaction Team including any variations in the team composition;
(b) the bases on which the sponsor has given opinions, assurances and conclusions to the listing applicant or has reached conclusions on key issues of regulatory concern.
(c) all significant matters arising in the course of the listing process, including internal discussions and actions taken, regardless of whether or not such matters are disclosed in the final listing document;
(d) the involvement of senior management in considering the critical matters mentioned.
Incorrect
Records for each listing assignment should include the following:
(a) the composition of the Transaction Team including any variations in the team composition;
(b) the bases on which the sponsor has given opinions, assurances and conclusions to the listing applicant or has reached conclusions on key issues of regulatory concern.
(c) all significant matters arising in the course of the listing process, including internal discussions and actions taken, regardless of whether or not such matters are disclosed in the final listing document;
(d) the involvement of senior management in considering the critical matters mentioned.
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