HKSI Paper 15 & 16 (Sponsors Principals & Representatives) English Free Trial Set Two

In Hong Kong’s securities market, sponsors play a crucial role in the listing process. The Securities and Futures Ordinance (SFO) mandates sponsors to conduct due diligence on listing applicants. This involves thoroughly assessing the company’s financial health, business operations, and compliance with regulatory requirements. Sponsors are responsible for ensuring that all information disclosed in the listing documents is accurate, complete, and not misleading. This role is essential for maintaining market integrity and investor confidence. Option b is correct because it aligns with the core responsibility of sponsors as outlined in the regulatory framework.

Option a is incorrect because while sponsors may advise clients, their primary focus is on due diligence for listing applicants, not providing market trend advice to investors.

Option c is incorrect as executing trades falls under the responsibilities of licensed brokers or dealers, not sponsors.

Option d is incorrect because while sponsors may provide advice to listed companies, their main function is not to offer legal counsel. They are primarily concerned with ensuring compliance with listing rules and regulations rather than providing legal advice.

The sponsor regulatory regime imposes strict obligations on sponsors to conduct thorough due diligence on listing applicants. If a sponsor fails to fulfill these obligations, it can have serious consequences. According to the Securities and Futures Ordinance (SFO), the Securities and Futures Commission (SFC) has the authority to reject a listing application or even order the delisting of a company if there are material deficiencies in the listing documents. This is to safeguard the interests of investors and maintain the integrity of the market. Option c is correct because it reflects the potential repercussions for sponsors who fail to fulfill their due diligence obligations.

Option a is incorrect because while the SFC may impose fines for regulatory breaches, the primary consequence for inadequate due diligence is not solely financial penalties.

Option b is incorrect as license suspension is a severe penalty but may not necessarily be the immediate consequence for due diligence failures.

Option d is incorrect because while public apologies or statements of regret may be issued in certain circumstances, they are not the primary form of regulatory action for due diligence failures in the sponsor regime.

In this scenario, XYZ Securities, as the sponsor, has a legal obligation to report any discrepancies or material deficiencies found during the due diligence process to the Securities and Futures Commission (SFC). This is in accordance with the sponsor regulatory regime, which prioritizes the accuracy and completeness of information provided in listing documents. By reporting the discrepancies, XYZ Securities ensures transparency and regulatory compliance, thereby upholding market integrity and investor protection. Option b is correct because it aligns with the sponsor’s duty to disclose any material findings to the regulatory authority.

Option a is incorrect because proceeding with the listing application without addressing the discrepancies would violate the sponsor’s obligations and could lead to regulatory sanctions.

Option c is incorrect because while advising ABC Corporation to withdraw its application may be a prudent step in some cases, the sponsor still has a duty to report the findings to the SFC regardless of ABC Corporation’s decision.

Option d is incorrect because ignoring the discrepancies would be a breach of the sponsor’s due diligence responsibilities and could have serious consequences for both the sponsor and the listing applicant.

While both sponsors and underwriters play critical roles in securities offerings, they serve distinct functions. Sponsors are primarily responsible for ensuring compliance with listing rules and regulations, conducting due diligence on listing applicants, and guiding them through the listing process. Their focus is on regulatory compliance and integrity of the market. On the other hand, underwriters typically facilitate the offering by purchasing securities from the issuer and reselling them to investors. They may also provide advisory services and help determine the offering price. However, unlike sponsors, underwriters do not have the same regulatory obligations regarding due diligence and compliance. Option c is correct because it accurately describes the unique role of sponsors in ensuring regulatory adherence in the listing process.

Option c is incorrect because sponsors do not provide financial guarantees for the success of offerings; their role is to ensure regulatory compliance and integrity.

Option b is incorrect because while underwriters may conduct due diligence, it is sponsors who are specifically tasked with this responsibility in the context of the sponsor regime.

Option d is incorrect because advising companies on strategic decisions for market entry is not typically within the scope of underwriters’ responsibilities. They focus more on facilitating the offering process itself.

The primary objective of the sponsor regulatory regime in Hong Kong is to maintain the quality and integrity of the listing market. Sponsors are entrusted with the responsibility of conducting due diligence on listing applicants to ensure that all information provided in the listing documents is accurate, complete, and not misleading. By upholding stringent standards for listing, the regulatory regime aims to safeguard investor interests, promote market confidence, and maintain Hong Kong’s reputation as an international financial center. Option c is correct because it captures the overarching goal of the sponsor regime in enhancing market quality and integrity.

Option a is incorrect because the sponsor regime does not aim to minimize competition among listed companies; rather, it seeks to ensure fair competition based on transparent and accurate information.

Option b is incorrect because while the sponsor regime emphasizes regulatory compliance, its primary goal is not to streamline the listing process but rather to ensure the quality and integrity of listings.

Option d is incorrect because while sponsor firms may seek profits, maximizing profits is not the primary objective of the sponsor regulatory regime. Compliance and market integrity take precedence over profit maximization.

In this scenario, ABC Securities is faced with a conflict of interest between its role as a potential sponsor for DEF Corporation and its advisory engagement with DEF Corporation’s competitor. According to regulatory standards, it is essential for ABC Securities to disclose this conflict of interest to both DEF Corporation and its competitor. Transparency regarding conflicts of interest is crucial for maintaining trust and integrity in the securities market. By disclosing the conflict, all parties involved can assess the situation objectively and make informed decisions. Option c is correct because it aligns with ethical principles and regulatory requirements regarding conflict of interest disclosure.

Option a is incorrect because outright declining DEF Corporation’s request without disclosing the conflict of interest may not address the ethical concerns associated with the situation.

Option b is incorrect because proceeding with DEF Corporation’s request without disclosing the conflict of interest would violate ethical standards and could lead to regulatory repercussions.

Option c is incorrect because advising DEF Corporation to withdraw its listing application may not necessarily address the conflict of interest issue and could potentially harm DEF Corporation’s interests unfairly.

The Securities and Futures Commission (SFC) is the regulatory authority responsible for overseeing the compliance of sponsors with the sponsor regulatory regime in Hong Kong. The SFC has the authority to enforce regulatory standards, conduct investigations, and impose sanctions on sponsors for non-compliance with the sponsor regime. It plays a crucial role in maintaining the integrity and effectiveness of the securities market by ensuring that sponsors fulfill their obligations in the listing process. Option b is correct because it accurately identifies the regulatory body with oversight authority over sponsors in Hong Kong.

Option a is incorrect because while the Hong Kong Stock Exchange plays a role in the listing process, it does not have regulatory authority over sponsors.

Option c is incorrect because the Financial Services and the Treasury Bureau is primarily responsible for policy formulation and administration rather than regulatory enforcement.

Option d is incorrect because the Independent Commission Against Corruption (ICAC) focuses on combating corruption and has no jurisdiction over securities regulation or sponsor compliance.

The sponsor regime in Hong Kong’s securities market plays a crucial role in promoting transparency and integrity in the listing process. Sponsors are tasked with conducting due diligence on listing applicants to ensure the accuracy, completeness, and reliability of information disclosed in listing documents. By upholding stringent standards for disclosure and compliance, the sponsor regime enhances investor confidence, fosters market transparency, and maintains the integrity of Hong Kong’s securities market. Option b is correct because it captures the essential function of the sponsor regime in safeguarding the integrity of the listing process.

Option b is incorrect because while the sponsor regime contributes to market fairness, its primary objective is to ensure regulatory compliance and integrity rather than directly influencing competition among listed companies.

Option c is incorrect because while sponsor firms may seek profitability, the primary focus of the sponsor regime is not to guarantee profits but rather to ensure regulatory compliance and market integrity.

Option d is incorrect because while the sponsor regime sets regulatory requirements for listing, its primary purpose is not to simplify these requirements but rather to ensure their rigorous implementation for investor protection and market integrity.

One of the primary reasons for Hong Kong’s attractiveness as a primary capital market destination on the global stage is its access to a large pool of international investors and capital. Hong Kong serves as a gateway to mainland China and Asia, attracting investors from around the world seeking exposure to these markets. The city’s strategic location, well-developed financial infrastructure, and strong regulatory framework make it an appealing choice for companies looking to raise capital globally. Option c is correct because it accurately identifies one of the key factors contributing to Hong Kong’s prominence as a primary capital market.

Option a is incorrect because while regulatory requirements exist, Hong Kong’s regulatory framework is known for being robust yet efficient, attracting companies seeking listing opportunities.

Option b is incorrect because political stability and economic resilience are typically viewed as strengths of Hong Kong, enhancing its attractiveness as a financial hub rather than detracting from it.

Option d is incorrect because Hong Kong’s capital markets are known for their liquidity and robust trading volumes, particularly in comparison to many other markets in the region. This liquidity contributes to the attractiveness of Hong Kong as a primary capital market.

In Hong Kong’s primary capital market, IPO sponsors play a critical role in conducting due diligence on behalf of listing applicants. Sponsors are responsible for ensuring that the company seeking to go public meets the regulatory requirements and standards set by the Hong Kong Stock Exchange (HKEX). This includes verifying the accuracy and completeness of the information provided in the listing documents, assessing the company’s financial health, and evaluating its suitability for listing. Option b is correct because it accurately describes the primary role of IPO sponsors in conducting due diligence to ensure regulatory compliance.

Option a is incorrect because IPO sponsors do not provide financial guarantees for the success of offerings; their role is focused on regulatory compliance and due diligence.

Option c is incorrect because facilitating trading activities in the secondary market is not within the scope of IPO sponsors’ responsibilities. This task falls under the purview of licensed brokers and dealers.

Option d is incorrect because while sponsors may provide advice, their primary focus is on due diligence for listing applicants, not providing market trend advice to investors.

A successful Initial Public Offering (IPO) typically increases the company’s equity capital and reduces its reliance on debt financing. By issuing shares to the public, the company raises funds directly from investors, thereby increasing its equity base. This infusion of equity capital can be used to finance growth initiatives, repay debt, or strengthen the company’s financial position. Additionally, reducing debt financing can improve the company’s creditworthiness and reduce its overall financial risk. Option a is correct because it accurately describes the impact of a successful IPO on a company’s capital structure.

Option b is incorrect because a successful IPO typically does not decrease a company’s liquidity or increase financial leverage; instead, it often enhances liquidity and reduces leverage by providing additional equity capital.

Option c is incorrect because a successful IPO usually increases the company’s market capitalization and can enhance shareholder value, rather than decreasing market capitalization or diluting shareholder value.

Option d is incorrect because while IPO proceeds can potentially be used for dividend payouts or retained earnings, the primary impact of a successful IPO is on the company’s equity capital structure, not on dividend policies or retained earnings.

In this scenario, the IPO sponsor plays a crucial role in ensuring compliance with regulatory requirements and standards throughout the listing process. The sponsor conducts due diligence on behalf of the company to verify the accuracy and completeness of the information disclosed in the listing documents. This includes assessing the company’s financial performance, corporate governance practices, and adherence to regulatory guidelines. By ensuring regulatory compliance, the sponsor helps to uphold market integrity and investor confidence in the IPO. Option d is correct because it accurately describes the primary responsibility of the IPO sponsor in this scenario.

Option a is incorrect because while sponsors may provide advice, their primary focus is on due diligence for regulatory compliance rather than post-IPO marketing strategies.

Option b is incorrect because due diligence conducted by sponsors is typically on behalf of the listing applicant, not potential investors.

Option c is incorrect because while sponsors may provide input on pricing considerations, their primary role is to ensure regulatory compliance rather than determining the offering price.

According to the Securities and Futures Ordinance (SFO) and the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (SFC), sponsors are required to diligently assess any material information related to the listed company they are administering. This includes evaluating significant changes in the company’s business strategy and understanding their potential impact on financial performance and compliance. Consulting with relevant regulatory authorities is essential to ensure compliance with regulations and to provide accurate guidance to the company’s management.

Option A: Advising the company’s management to proceed without proper evaluation and consultation could lead to regulatory non-compliance and potential risks to shareholders. It’s crucial to assess the implications thoroughly before any decisions are made.

Option C: Postponing the decision without proper evaluation doesn’t address the immediate need for understanding the implications of the proposed change. Delays could impact the company’s performance and compliance.

Option D: Ignoring the proposed change contradicts the responsibilities of a sponsor in corporate administration. Sponsors are obligated to actively engage with the listed company and address significant matters affecting its operations and compliance.

The Certificate of Incorporation is a foundational document that establishes the existence of a company. While it’s essential for legal purposes, it’s not typically included in the IPO preparation documents. The other options are commonly required:

Option A: A prospectus is a legal document that provides details about the offering to potential investors. It includes information about the company, its business, financials, and risks associated with investing.

Option B: Financial statements, including income statements, balance sheets, and cash flow statements, are crucial for investors to evaluate the financial health and performance of the company.

Option C: Management’s personal biographies are often included in IPO documents to provide investors with insights into the experience and qualifications of the company’s leadership team.

According to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (SFC), sponsors are prohibited from providing guarantees for the success of an IPO. Such guarantees can mislead investors and are not in line with the sponsor’s responsibilities. It’s essential for Mr. Wong to adhere to regulatory requirements and maintain integrity in the negotiation process.

Option A: Agreeing to the client’s request would violate regulatory standards and could lead to disciplinary action against Mr. Wong and the sponsoring firm. Providing guarantees for the success of an IPO is not permissible.

Option C: Providing a vague assurance may still imply a guarantee, which is against regulatory requirements. Sponsors should avoid any statements that could mislead investors or create false expectations.

Option D: Seeking guidance from regulatory authorities is a good practice in complex situations. However, the regulatory stance on providing guarantees for IPO success is clear, and Mr. Wong should already be aware of this prohibition.

According to the Corporate Governance Code and relevant regulations, having a diverse board with independent directors is essential for ensuring effective oversight and decision-making in listed companies. Independent directors bring impartial perspectives and help mitigate conflicts of interest. Therefore, Mr. Ho should recommend appointing independent directors to enhance governance and diversity within the board.

Option B: Maintaining the existing board structure without addressing the lack of diversity could lead to governance issues and potential conflicts of interest. It’s essential to consider regulatory guidelines and best practices for corporate governance.

Option C: Ignoring the lack of diversity contradicts the responsibilities of a sponsor in corporate administration. Sponsors are expected to identify and address governance issues that may impact the listed company and its stakeholders.

Option D: Increasing the number of family members on the board may exacerbate the lack of diversity and could raise concerns about nepotism and potential conflicts of interest. It’s important to prioritize the appointment of independent directors to enhance governance effectiveness.

According to regulatory requirements, sponsors are responsible for ensuring the accuracy and reliability of information disclosed in the IPO prospectus. Any discrepancies discovered during due diligence must be thoroughly investigated and rectified before proceeding with the IPO. Failing to address discrepancies could lead to regulatory scrutiny, investor distrust, and potential legal consequences.

Option A: Disclosing discrepancies in the IPO prospectus with a disclaimer may not suffice to address regulatory concerns and investor expectations. It’s crucial to investigate and rectify the discrepancies to ensure the accuracy of information provided to investors.

Option B: Proceeding with the IPO without addressing discrepancies violates regulatory standards and ethical principles. Sponsors are obligated to maintain integrity and transparency throughout the IPO process.

Option D: Ignoring discrepancies undermines the credibility of the IPO and exposes the sponsoring firm to regulatory sanctions. Sponsors should prioritize thorough due diligence and accuracy in financial disclosures to protect investor interests.

When recommending legal advisors for an IPO, it’s essential for Ms. Cheung to consider their experience and expertise in handling IPO processes. IPOs involve complex legal requirements and regulatory compliance, so selecting advisors with relevant experience can help ensure a smooth and successful IPO process. Reputation and fees are important factors to consider but should not outweigh the importance of expertise in IPOs.

Option A: Solely basing recommendations on reputation and fees may overlook the specific expertise required for IPO-related legal matters. Experience and expertise in IPOs are crucial considerations.

Option C: Recommending legal advisors based on discounted rates may compromise the quality and reliability of legal services. The priority should be on selecting advisors with the necessary skills and experience to support the IPO process effectively.

Option D: Selecting legal advisors affiliated with the sponsor’s firm may introduce conflicts of interest and compromise the independence of the advisory process. It’s important to prioritize the client’s interests and select advisors based on their qualifications and expertise.

According to the Securities and Futures Ordinance (SFO) and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), a sponsor principal may delegate certain responsibilities to qualified individuals within the sponsor’s organization. However, the sponsor principal remains ultimately responsible for the performance of those delegated tasks. This ensures accountability and oversight in the listing process. Option b) is incorrect as delegation is permissible under certain conditions. Option c) is incorrect as ultimate responsibility cannot be absolved through delegation. Option d) is incorrect as while qualifications and approvals are necessary, they are not the sole determinant for delegation.

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules) mandate sponsors to ensure that all information submitted to the SEHK is both accurate and complete. Sponsors are expected to undertake due diligence to verify the accuracy and completeness of information from all sources before making submissions. This includes information provided by the listed company and any third parties involved in the listing process. Option a) is incorrect as sponsors are responsible for both accuracy and completeness. Option c) is incorrect as sponsors have a duty to ensure the accuracy and completeness of all information submitted. Option d) is incorrect as sponsors are responsible for both accuracy and completeness, not just accuracy alone.

According to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), it is essential for sponsors to maintain independence and avoid conflicts of interest in their sponsorship activities. Disclosing any relationships that may compromise independence is crucial to maintaining the integrity of the listing process. By disclosing the relationship with his brother to the SEHK and seeking their approval, Mr. X demonstrates transparency and allows the relevant authorities to assess any potential conflicts of interest. Option b) is incorrect as resignation may not be necessary if the conflict can be managed appropriately. Option c) is incorrect as maintaining impartiality alone may not be sufficient to address the conflict. Option d) is incorrect as disclosure to the SEHK is necessary to ensure regulatory compliance and transparency.

According to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), sponsors are obligated to ensure the accuracy and completeness of all information submitted to the SEHK. In cases where discrepancies are identified, sponsors must notify the SEHK promptly and refrain from submitting potentially inaccurate information. This proactive approach helps maintain the integrity of the listing process and ensures compliance with regulatory requirements. Option a) is incorrect as sponsors are responsible for verifying the accuracy of the information provided. Option c) is incorrect as rectifying discrepancies internally may not be sufficient without notifying the SEHK. Option d) is incorrect as seeking guidance is advisable, but ultimately, the responsibility lies with the sponsor to ensure compliance.

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules) mandate sponsors to ensure the accuracy and completeness of all information provided in listing documents, including prospectuses. Mr. Chan’s duty as a sponsor principal is to safeguard the interests of investors by ensuring the integrity of the information disclosed. Therefore, he should withhold submission of the draft prospectus to the SEHK and collaborate with the company to rectify the misstatements before proceeding with the listing application. Option a) is incorrect as submitting a draft prospectus with known misstatements could violate regulatory requirements. Option b) is incorrect as sponsors should not alter listing documents without proper authorization from the listed company. Option d) is incorrect as sponsors have a responsibility to address all material misstatements, regardless of perceived significance.

Transparency and independence are crucial in sponsorship roles to maintain the integrity of the listing process. According to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), sponsors must disclose any relationships that may compromise their independence. By disclosing her relationship with her spouse to the SEHK and seeking their approval, Ms. Lin demonstrates transparency and allows the relevant authorities to assess any potential conflicts of interest. Option a) is incorrect as disclosure is necessary to ensure regulatory compliance and transparency. Option c) is incorrect as resignation may not be necessary if the conflict can be managed appropriately. Option d) is incorrect as disclosure to the SEHK is essential to address potential conflicts of interest related to sponsorship activities.

According to the Securities and Futures Ordinance, a contingent fee arrangement where the sponsor’s compensation is dependent on the successful outcome of the listing application poses the greatest risk to the sponsor’s independence. This is because the sponsor may be incentivized to prioritize completing the listing rather than objectively assessing the applicant’s suitability for listing. Contingent fees can potentially compromise the sponsor’s independence and objectivity, leading to conflicts of interest.

Option A) The sponsor receiving a fixed fee for its services is a common practice and does not inherently threaten independence, as long as the fee is reasonable and not contingent on the success of the listing application.

Option B) Reimbursing reasonable out-of-pocket expenses is a standard practice and does not compromise independence as long as the expenses are directly related to the listing process and are reasonable.

Option C) Hiring external experts to assist in due diligence is a prudent practice and can enhance the quality of the sponsor’s assessment, as long as the sponsor maintains control over the process and ensures the independence of the experts.

The independence of a sponsor when assessing commercial arrangements is crucial to maintaining the integrity of the listing process. Maintaining documentation of all communication and decisions helps demonstrate transparency and accountability, thereby safeguarding against potential conflicts of interest or undue influence.

Option A) Seeking approval from the applicant’s management for all decisions compromises independence as it may subject the sponsor to undue influence from the applicant.

Option C) Utilizing internal staff exclusively for due diligence may not necessarily ensure independence if the staff members have conflicts of interest or lack relevant expertise. It’s important for sponsors to have the flexibility to engage external experts when necessary, provided they maintain control over the process.

Option D) Accepting gifts from the listing applicant undermines independence and raises ethical concerns, as it may create a perception of bias or favoritism. Sponsors should refrain from accepting any form of gifts or favors from listing applicants to maintain impartiality.

Accepting the listing applicant’s offer to cover due diligence expenses introduces a potential conflict of interest and compromises Mr. Wong’s independence as a sponsor. Even though the offer may seem convenient, it could create a perception of bias or influence in favor of the applicant.

Option B) Accepting the offer to reduce costs may seem beneficial, but it undermines Mr. Wong’s independence and raises ethical concerns about impartiality.

Option C) Negotiating for a reduced fee instead of accepting expenses may still create a conflict of interest, as it involves financial arrangements directly with the listing applicant. It’s preferable for sponsors to maintain independence by covering their own expenses.

Option D) Consulting with the Securities and Futures Commission (SFC) for guidance may be appropriate in complex situations, but in this case, declining the offer independently is the most straightforward and ethical course of action to preserve independence.

According to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the sponsor is obligated to involve the listing applicant in the due diligence process actively. This involvement ensures transparency and accuracy in the disclosure of information. It helps in identifying any discrepancies or issues that may need to be addressed before the listing process proceeds. Therefore, option (d) is the correct answer.

Option (a) is incorrect because providing the listing applicant with a comprehensive due diligence report for review and approval may not be sufficient to ensure the accuracy of information. The listing applicant’s active participation is crucial.

Option (c) is incorrect because limiting the involvement of the listing applicant to only superficial matters undermines the due diligence process’s effectiveness. It may lead to oversight of critical details.

Option (b) is incorrect because withholding critical information from the listing applicant violates the principle of transparency and may result in legal and regulatory repercussions. It is essential to disclose all material information to ensure compliance with regulations and protect the interests of investors.

According to the Securities and Futures Ordinance, sponsors are obligated to act honestly, fairly, and in the best interests of investors. Therefore, when faced with a conflict of interest situation, the sponsor must prioritize resolving it in a manner that upholds fairness and protects investors’ interests. Option (c) is the correct answer as it aligns with the sponsor’s obligations under the ordinance.

Option (a) is incorrect because prioritizing the sponsor’s profits over investors’ interests would be unethical and could lead to regulatory sanctions.

Option (b) is incorrect because ignoring the conflict of interest to maintain a good relationship with the listing applicant undermines the sponsor’s integrity and may result in legal consequences.

Option (d) is incorrect because seeking legal advice without disclosing the conflict of interest does not address the underlying ethical obligation of the sponsor to act in the best interests of investors. Transparency and fair dealing are essential in such situations.

Management Discussion and Analysis (MD&A) is a crucial component of a company’s financial reporting. Its primary purpose is to offer management’s perspective on the company’s financial performance, risks, and future prospects. It provides insights beyond the numbers presented in the financial statements, helping investors understand the factors influencing the company’s financial condition. Option (b) is the correct answer as it accurately reflects the purpose of MD&A.

Option (a) is incorrect because while MD&A may provide some analysis of the financial statements, its primary focus is on providing management’s insights rather than a detailed breakdown of financial statements.

Option (c) is incorrect because MD&A should present a balanced view of the company’s financial performance, including both positive and negative aspects. Highlighting only the positive aspects may mislead investors and violate regulatory requirements.

Option (d) is incorrect because MD&A is not merely a compliance exercise. It is intended to provide meaningful information to investors to help them make informed decisions. Compliance with regulatory requirements is essential, but MD&A should go beyond mere compliance to provide valuable insights.