HKSI Paper 2 (Regulation of Securities) English Free Trial
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HKSI Paper 2 English Full Access
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Question 1 of 10
1. Question
Which among the following are examples of monthly returns for a licensed corporation in accordance with FRR?
I. An analysis of client assets.
II. An analysis of clientele.
III. An analysis of margin clients.
IV. An RLC computation.
Correct
A licensed corporation must submit monthly returns in accordance with the FRR within three weeks after the month’s end. Examples of items to be included in the monthly returns are:
(a) a liquid capital computation;
(b) an RLC computation;
(c) a summary of bank loans, advances, credit facilities and other forms of financial accommodation available to it;
(d) an analysis of margin clients;
(e) an analysis of collateral received from margin clients; and
(f) an analysis of client assets.
Incorrect
A licensed corporation must submit monthly returns in accordance with the FRR within three weeks after the month’s end. Examples of items to be included in the monthly returns are:
(a) a liquid capital computation;
(b) an RLC computation;
(c) a summary of bank loans, advances, credit facilities and other forms of financial accommodation available to it;
(d) an analysis of margin clients;
(e) an analysis of collateral received from margin clients; and
(f) an analysis of client assets.
Question 2 of 10
2. Question
Which among the following can receive or hold in Hong Kong client assets of an intermediary?
I. An excluded person
II. An associated entity of the intermediary
III. The intermediary
IV. Registered Institution
Correct
No person may receive or hold in Hong Kong client assets of an intermediary unless the person is:
(a) the intermediary;
(b) an associated entity of the intermediary; or
(c) an excluded person
Incorrect
No person may receive or hold in Hong Kong client assets of an intermediary unless the person is:
(a) the intermediary;
(b) an associated entity of the intermediary; or
(c) an excluded person
Question 3 of 10
3. Question
Which among the following should an intermediary should maintain who provides financial accommodation to its clients for purchasing securities?
I. All securities and client collateral.
II. Particulars of each financial security.
III. Margin policy and lending policy.
IV. Particulars of each client.
Correct
An intermediary which provides to its clients financial accommodation for purchasing securities must keep sufficient records to show:
(a) its margin policy and lending policy;
(b) all securities and client collateral and with whom and on whose behalf such securities and collateral are deposited; and
(c) particulars of each client.
Incorrect
An intermediary which provides to its clients financial accommodation for purchasing securities must keep sufficient records to show:
(a) its margin policy and lending policy;
(b) all securities and client collateral and with whom and on whose behalf such securities and collateral are deposited; and
(c) particulars of each client.
Question 4 of 10
4. Question
Which among the following are the documents that must be submitted by a licensed corporation for each financial year?
I. Quarterly and half-yearly returns.
II. A set of accounts prepared in accordance with generally accepted accounting principles
III. A business and risk management questionnaire.
IV. Annual returns.
Correct
The documents that must be submitted by a licensed corporation for each financial year, include:
(a) a set of accounts prepared in accordance with generally accepted accounting principles;
(b) annual returns;
(c) a business and risk management questionnaire.
Incorrect
The documents that must be submitted by a licensed corporation for each financial year, include:
(a) a set of accounts prepared in accordance with generally accepted accounting principles;
(b) annual returns;
(c) a business and risk management questionnaire.
Question 5 of 10
5. Question
Which among the following describes the roles and responsibilities of a responsible officer?
I. A registered institution must have at least two executive officers.
II. At least one of the responsible officers must be an executive director.
III. Every licensed corporation must have at least three responsible officers approved by the SFC.
IV. Every executive director of a licensed corporation is required to obtain the approval of the SFC as a responsible officer.
Correct
Every licensed corporation must have at least two responsible officers approved by the Securities and Futures Commission (“SFC”). A responsible officer is one who actively participates in, or supervises, the regulated activities (“RAs”) of a licensed corporation. Every executive director of a licensed corporation is required to obtain the approval of the SFC as a responsible officer. At least one of the responsible officers must be an executive director. A registered institution must have at least two executive officers.
Incorrect
Every licensed corporation must have at least two responsible officers approved by the Securities and Futures Commission (“SFC”). A responsible officer is one who actively participates in, or supervises, the regulated activities (“RAs”) of a licensed corporation. Every executive director of a licensed corporation is required to obtain the approval of the SFC as a responsible officer. At least one of the responsible officers must be an executive director. A registered institution must have at least two executive officers.
Question 6 of 10
6. Question
Which among the following is true for handling the client orders?
I. The licensed or registered person must give priority to the orders of clients in any subsequent allocation if all the orders cannot be filled.
II. The SFC expects that, in allocating orders to several clients which cannot be satisfied completely, the licensed or registered person will avoid giving unfair preference to any one client.
III. The Code of Conduct requires a licensed or registered person to handle client orders fairly and in which they are received.
IV. The licensed or registered person must give priority to the orders of clients in a subsequent allocation if all the orders are necessary to be filled for a single client.
Correct
The Code of Conduct requires a licensed or registered person to handle client orders fairly and in which they are received. They should have priority over orders for the account of the licensed or registered person or for that of any employee or agent of the licensed or registered person. Where a licensed or registered person has aggregated orders for several clients or orders for a client with orders for its own account, it must give priority to the orders of clients in any subsequent allocation if all the orders cannot be filled. In practice, the SFC would expect that, in allocating orders to several clients which cannot be fully satisfied, the licensed or registered person will avoid giving unfair preference to any one client.
Incorrect
The Code of Conduct requires a licensed or registered person to handle client orders fairly and in which they are received. They should have priority over orders for the account of the licensed or registered person or for that of any employee or agent of the licensed or registered person. Where a licensed or registered person has aggregated orders for several clients or orders for a client with orders for its own account, it must give priority to the orders of clients in any subsequent allocation if all the orders cannot be filled. In practice, the SFC would expect that, in allocating orders to several clients which cannot be fully satisfied, the licensed or registered person will avoid giving unfair preference to any one client.
Question 7 of 10
7. Question
Which among the following are the securities traded under the Pilot Programme?
I. They may include a number of exchange traded funds.
II. They are listed on the NASDAQ or the American Stock Exchange.
III. They are admitted to the SEHK for trading only.
IV. They have no public offerings in Hong Kong.
Correct
Securities traded under the Pilot Programme have the following characteristics:
(a) they are listed on the NASDAQ or the American Stock Exchange;
(b) they may include a number of exchange traded funds;
(c) they have no public offerings in Hong Kong;
(d) they are not regulated as listings on the SEHK’s Main Board or GEM; and
(e) they are admitted to the SEHK for trading only.
Incorrect
Securities traded under the Pilot Programme have the following characteristics:
(a) they are listed on the NASDAQ or the American Stock Exchange;
(b) they may include a number of exchange traded funds;
(c) they have no public offerings in Hong Kong;
(d) they are not regulated as listings on the SEHK’s Main Board or GEM; and
(e) they are admitted to the SEHK for trading only.
Question 8 of 10
8. Question
Which among the following are eligible securities for Northbound trading via Shenzhen Connect?
I. SSE listed A shares with a dual listing of H shares on the SEHK.
II. The SZSE Small/Mid Cap Innovation Index which have a market capitalisation of not less than RMB 10 billion.
III. All the SZSE-listed A shares which have corresponding H shares listed on SEHK.
IV. The SZSE Small/Mid Cap Innovation Index which have a market capitalisation of not less than RMB 6 billion.
Correct
Eligible securities for Northbound trading via Shenzhen Connect are:
(a) all the constituent stocks of the SZSE Component Index;
(b) the SZSE Small/Mid Cap Innovation Index which have a market capitalisation of not less than RMB 6 billion;
(c) all the SZSE-listed A shares which have corresponding H shares listed on SEHK; and
(d) stocks listed on ChiNext Board of SZSE – however, these are initially only open to institutional professional investors.
Incorrect
Eligible securities for Northbound trading via Shenzhen Connect are:
(a) all the constituent stocks of the SZSE Component Index;
(b) the SZSE Small/Mid Cap Innovation Index which have a market capitalisation of not less than RMB 6 billion;
(c) all the SZSE-listed A shares which have corresponding H shares listed on SEHK; and
(d) stocks listed on ChiNext Board of SZSE – however, these are initially only open to institutional professional investors.
Question 9 of 10
9. Question
What conditions must be met to become a market maker?
I. The SEHK may require the participant to demonstrate to its satisfaction that it is suitably qualified to make a market in the options contracts.
II. The SEHK may consider the financial standing, trading record, personnel, computer equipment and internal security procedures of the applicant.
III. A Trading Participant has the equipment and software which are required for connection to HKATS shall be specified by the SEHK from time to time.
IV. A Trading Participant may apply to the SEHK for permission to make a market in a particular option class.
Correct
A Trading Participant may apply to the SEHK for permission to make a market in a particular option class. Before such permission is granted, the SEHK may require the participant to demonstrate to its satisfaction that it is suitably qualified to make a market in the options contracts in respect of which it applies to be a market maker. The SEHK may consider the financial standing, trading record, personnel, computer equipment and internal security procedures of the applicant.
Incorrect
A Trading Participant may apply to the SEHK for permission to make a market in a particular option class. Before such permission is granted, the SEHK may require the participant to demonstrate to its satisfaction that it is suitably qualified to make a market in the options contracts in respect of which it applies to be a market maker. The SEHK may consider the financial standing, trading record, personnel, computer equipment and internal security procedures of the applicant.
Question 10 of 10
10. Question
Which among the following matters should licensed or registered persons keep in regard as per the SFC?
I. Valuations and exposures
II. Risk reduction techniques
III. Independent market risk management
IV. Outsourced expertise and resources
Correct
The SFC requires licensed or registered persons to have regard to the following matters:
(a) Framework of risk management
(b) Independent market risk management
(c) Independent credit risk management
(d) In-house expertise and resources
(e) Risk reduction techniques
(f) Valuations and exposures
(g) Systems
(h) Liquidity, funding arrangements and financial performance
Incorrect
The SFC requires licensed or registered persons to have regard to the following matters:
(a) Framework of risk management
(b) Independent market risk management
(c) Independent credit risk management
(d) In-house expertise and resources
(e) Risk reduction techniques
(f) Valuations and exposures
(g) Systems
(h) Liquidity, funding arrangements and financial performance
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