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In whose name the registration of client securities and securities collateral should be done?
I. An asset manager
II. The client on whose behalf the client securities or securities collateral has been received.
III. An associated entity of the intermediary.
IV. In the case of securities collateral only, the intermediary itself.
If registered, it must be done in the name of:
(a) the client on whose behalf the client securities or securities collateral has been received;
(b) an associated entity of the intermediary; or
(c) additionally, in the case of securities collateral only, the intermediary itself.
If registered, it must be done in the name of:
(a) the client on whose behalf the client securities or securities collateral has been received;
(b) an associated entity of the intermediary; or
(c) additionally, in the case of securities collateral only, the intermediary itself.
Which of the following is not allowed by Client Securities Rules to intermediaries?
I. Transfer client securities or securities collateral to an account of the intermediary, its associated entity or any entity which has a controlling entity relationship with the intermediary or is linked to the associated entity by a controlling entity relationship.
II. Make any such transfer to any officer or employee of these entities unless that officer or employee is the client.
III. Deal with the client securities or securities collateral in any manner that is unconscionable.
IV. Transfer to relatives of these entities.
The Client Securities Rules do not allow the use of the standing authority by the intermediary or its associated entity to:
(a) transfer client securities or securities collateral to an account of the intermediary, its associated entity or any entity which has a controlling entity relationship with the intermediary or is linked to the associated entity by a controlling entity relationship, unless that account is one mentioned in section 2.5 above;
(b) make any such transfer to any officer or employee of these entities unless that officer or employee is the client; or
(c) deal with the client securities or securities collateral in any manner that is unconscionable. (For clarification, “unconscionable” refers to something contrary to a sense of justice, decency or reasonableness.)
The Client Securities Rules do not allow the use of the standing authority by the intermediary or its associated entity to:
(a) transfer client securities or securities collateral to an account of the intermediary, its associated entity or any entity which has a controlling entity relationship with the intermediary or is linked to the associated entity by a controlling entity relationship, unless that account is one mentioned in section 2.5 above;
(b) make any such transfer to any officer or employee of these entities unless that officer or employee is the client; or
(c) deal with the client securities or securities collateral in any manner that is unconscionable. (For clarification, “unconscionable” refers to something contrary to a sense of justice, decency or reasonableness.)
With which of the following the Client Money Rules do not apply to client money of a licensed corporation?
I. Is received or held outside Hong Kong by the licensed corporation or its associated entity while it remains inside Hong Kong.
II. Has at any time been received or held in Hong Kong by the licensed corporation or its associated entity, once that money has been transferred outside Hong Kong in accordance with the Client Money Rules.
III. Is held in a bank account by the client in his own name.
IV. The licensed corporation in the course of conducting a RA.
The Client Money Rules do not apply to client money of a licensed corporation that:
(a) is received or held outside Hong Kong by the licensed corporation or its associated entity while it remains outside Hong Kong;
(b) has at any time been received or held in Hong Kong by the licensed corporation or its associated entity, once that money has been transferred outside Hong Kong in accordance with the Client Money Rules; or
(c) is held in a bank account by the client in his own name.
The Client Money Rules do not apply to client money of a licensed corporation that:
(a) is received or held outside Hong Kong by the licensed corporation or its associated entity while it remains outside Hong Kong;
(b) has at any time been received or held in Hong Kong by the licensed corporation or its associated entity, once that money has been transferred outside Hong Kong in accordance with the Client Money Rules; or
(c) is held in a bank account by the client in his own name.
What are the conditions when SFC can approve a licensed corporation as an approved introducing agent?
I. Receiving from a client offers for dealings in securities and passing on the offers in the name of the client to an exchange participant, or another licensed dealer.
II. Introducing a client who wishes to trade in securities to an exchange participant, or another licensed dealer.
III. Does not handle client assets and incurs no legal liability in respect of the introduced business except for its own negligence, wilful default or fraud.
IV. Approved introducing agents form a sub-set of dealers in securities.
The SFC may approve a licensed corporation as an approved introducing agent if it can satisfy the SFC that it only conducts the business of:
(a) receiving from a client offers for dealings in securities and passing on the offers in the name of the client to an exchange participant, or another licensed dealer; or
(b) introducing a client who wishes to trade in securities to an exchange participant, or another licensed dealer; and
(c) does not handle client assets and incurs no legal liability in respect of the introduced business except for its own negligence, wilful default or fraud.
The SFC may approve a licensed corporation as an approved introducing agent if it can satisfy the SFC that it only conducts the business of:
(a) receiving from a client offers for dealings in securities and passing on the offers in the name of the client to an exchange participant, or another licensed dealer; or
(b) introducing a client who wishes to trade in securities to an exchange participant, or another licensed dealer; and
(c) does not handle client assets and incurs no legal liability in respect of the introduced business except for its own negligence, wilful default or fraud.
What is the minimum CPT hour for every individual licensee?
The SFC requires every individual licensee to undertake a minimum of five CPT hours every calendar year for each RA, with proportional hours for those who obtained their licences during the year.
The SFC requires every individual licensee to undertake a minimum of five CPT hours every calendar year for each RA, with proportional hours for those who obtained their licences during the year.
Which of the following is/are examples of fiduciary relationships?
I. Stockbroker and sub-broker
II. Principal and agent
III. Solicitor and client
IV. Trustee and client.
A fiduciary is a person who owes another person duties of good faith, trust, confidence, honesty and care. A fiduciary relationship is one in which one person has a duty to act for the benefit of the other on matters within the scope of their relationship. Examples of fiduciary relationships are those of stockbroker and client, principal and agent, solicitor and client, and trustee and beneficiary.
A fiduciary is a person who owes another person duties of good faith, trust, confidence, honesty and care. A fiduciary relationship is one in which one person has a duty to act for the benefit of the other on matters within the scope of their relationship. Examples of fiduciary relationships are those of stockbroker and client, principal and agent, solicitor and client, and trustee and beneficiary.
What are the general duties of SFC?
I. Help maintain Hong Kong’s position as an international financial centre.
II. Facilitate innovation in financial products.
III. Avoid restrictions on general public.
IV. Use its powers efficiently.
The SFC has general duties as stated in:
(a) help maintain Hong Kong’s position as an international financial centre;
(b) facilitate innovation in financial products;
(c) avoid restrictions on competition;
(d) act in a transparent manner; and
(e) use its resources efficiently.
The SFC has general duties as stated in:
(a) help maintain Hong Kong’s position as an international financial centre;
(b) facilitate innovation in financial products;
(c) avoid restrictions on competition;
(d) act in a transparent manner; and
(e) use its resources efficiently.
What are the exceptions to the resolutions in annual general meeting?
I. The removal of auditors before the expiration of their term of office.
II. The removal of chairman before his term expires.
III. The removal of a director before his term expires.
IV. The removal of shareholders.
NCO, resolutions may be passed by circularisation and signed by all members except for:
(a) the removal of auditors before the expiration of their term of office; or
(b) the removal of a director before his term expires.
These must be put to members at a general meeting as ordinary resolutions.
NCO, resolutions may be passed by circularisation and signed by all members except for:
(a) the removal of auditors before the expiration of their term of office; or
(b) the removal of a director before his term expires.
These must be put to members at a general meeting as ordinary resolutions.
How interests of minority shareholders protected?
I. A special resolution is required for certain matters.
II. Court sanction is required where the decision of the company will directly affect creditors.
III. Members with 10% of the paid-up capital which carries voting rights may request the directors to call a meeting; if the directors will not, the members may do so.
IV. 50 members or 5% of the holders of the issued shares may ask the Financial Secretary to appoint an investigator into the company’s affairs.
To ensure that this principle is not abused, certain safeguards are provided under the NCO to protect the interests of minority shareholders:
(a) As seen in section 3.17 above, a special resolution is required for certain matters.
(b) Court sanction is required where the decision of the company will directly affect creditors.
(c) Dissenting members may appeal to the court to have certain resolutions cancelled.
(d) Members with 5% of the paid-up capital which carries voting rights may request the directors to call a meeting; if the directors will not, the members may do so.
(e) 100 members or 10% of the holders of the issued shares may ask the Financial Secretary to appoint an investigator into the company’s affairs.
(f) A member may apply to the court for an order if he considers that the affairs of the company are being conducted in a manner prejudicial to the interests of the members generally or of some part of the members.
(g) A member may petition for a winding up.
To ensure that this principle is not abused, certain safeguards are provided under the NCO to protect the interests of minority shareholders:
(a) As seen in section 3.17 above, a special resolution is required for certain matters.
(b) Court sanction is required where the decision of the company will directly affect creditors.
(c) Dissenting members may appeal to the court to have certain resolutions cancelled.
(d) Members with 5% of the paid-up capital which carries voting rights may request the directors to call a meeting; if the directors will not, the members may do so.
(e) 100 members or 10% of the holders of the issued shares may ask the Financial Secretary to appoint an investigator into the company’s affairs.
(f) A member may apply to the court for an order if he considers that the affairs of the company are being conducted in a manner prejudicial to the interests of the members generally or of some part of the members.
(g) A member may petition for a winding up.
What are the fiduciary duties of directors?
I. They should exercise their powers as a group.
II. Act bona fide for the benefit of the company.
III. Exercise their powers for their proper purpose.
IV. Not allow any conflict of interest between their duties as directors and their personal interests.
The directors have a fiduciary relationship with the company. They must act with the utmost good faith towards their principal, i.e. the company; and:
(a) act bona fide for the benefit of the company;
(b) exercise their powers for their proper purpose; and
(c) not allow any conflict of interest between their duties as directors and their personal interests.
The directors have a fiduciary relationship with the company. They must act with the utmost good faith towards their principal, i.e. the company; and:
(a) act bona fide for the benefit of the company;
(b) exercise their powers for their proper purpose; and
(c) not allow any conflict of interest between their duties as directors and their personal interests.
How should a licensed or registered person should ensure adequate testing of the algorithmic trading system?
I. The system and trading algorithms will operate as designed.
II. The client understands and is able to comply with applicable regulatory requirements.
III. Foreseeable extreme market circumstances and the characteristics of different trading sessions have been taken into consideration in their design and development.
IV. The operation of a fair and orderly market would not be interfered with.
Testing
A licensed or registered person should ensure adequate testing of the algorithmic trading system and trading algorithms it uses or provides to clients for use, and any subsequent developments and modifications before deployment to ensure that:
(a) the system and trading algorithms will operate as designed;
(b) foreseeable extreme market circumstances and the characteristics of different trading sessions have been taken into consideration in their design and development; and
(c) the operation of a fair and orderly market would not be interfered with.
Testing
A licensed or registered person should ensure adequate testing of the algorithmic trading system and trading algorithms it uses or provides to clients for use, and any subsequent developments and modifications before deployment to ensure that:
(a) the system and trading algorithms will operate as designed;
(b) foreseeable extreme market circumstances and the characteristics of different trading sessions have been taken into consideration in their design and development; and
(c) the operation of a fair and orderly market would not be interfered with.
What are the criteria set by SFC for determining that the advertisements are not targeted at Hong Kong residents?
I. Whether the materials are targeted using “push” technology (the technology spams, broadcasts or directs information) at Hong Kong residents.
II. The broadcast includes a prominent disclaimer that the products or services are not available to Hong Kong residents, or lists the countries where they are available (which should exclude Hong Kong).
III. Whether the materials are presented in a way that indicates that the advertisements are so aimed.
IV. Reasonable steps are taken to ensure that the products or services are not provided to Hong Kong residents, such as by checks on telephone numbers, addresses or the use of blockage devices.
Advertisements will not be considered to be targeted at Hong Kong residents provided that:
(a) the broadcast includes a prominent disclaimer that the products or services are not available to Hong Kong residents, or lists the countries where they are available (which should exclude Hong Kong); and
(b) reasonable steps are taken to ensure that the products or services are not provided to Hong Kong residents, such as by checks on telephone numbers, addresses or the use of blockage devices.
Advertisements will not be considered to be targeted at Hong Kong residents provided that:
(a) the broadcast includes a prominent disclaimer that the products or services are not available to Hong Kong residents, or lists the countries where they are available (which should exclude Hong Kong); and
(b) reasonable steps are taken to ensure that the products or services are not provided to Hong Kong residents, such as by checks on telephone numbers, addresses or the use of blockage devices.
What security control an ALP system should have to restrict the level of visibility of trading information that is available to the staff?
I. Restricting the access of staff members to trading information in the ALP only to the extent necessary to enable the ALP to operate satisfactorily and efficiently.
II. Keeping the SEHK informed as to the identity of each such staff members being permitted to access to the ALP and the information he/she has access and the basis for permission to such access.
III. Maintaining a log that records the details of accesses by staff members.
IV. Having measures in place to ensure that any person responsible for originating proprietary orders in the ALP should have access to all trading and transaction information in the ALP.
An ALP system should have security control to restrict the level of visibility of trading information that is available to the staff of the ALP operators, including:
(a) restricting the access of staff members to trading information in the ALP only to the extent necessary to enable the ALP to operate satisfactorily and efficiently;
(b) keeping the SFC informed as to the identity of each such staff members being permitted to access to the ALP and the information he/she has access and the basis for permission to such access;
(c) maintaining a log that records the details of accesses by staff members; and
(d) having measures in place to ensure that any person responsible for originating proprietary orders in the ALP does not have access to any trading and transaction information in the ALP.
An ALP system should have security control to restrict the level of visibility of trading information that is available to the staff of the ALP operators, including:
(a) restricting the access of staff members to trading information in the ALP only to the extent necessary to enable the ALP to operate satisfactorily and efficiently;
(b) keeping the SFC informed as to the identity of each such staff members being permitted to access to the ALP and the information he/she has access and the basis for permission to such access;
(c) maintaining a log that records the details of accesses by staff members; and
(d) having measures in place to ensure that any person responsible for originating proprietary orders in the ALP does not have access to any trading and transaction information in the ALP.
What are the requirements to be an applicant of Direct Clearing Participantship?
I. Obtain the agreement of its designated bank to comply with the requirement of HKSCC for CCASS security settlement purposes.
II. Be a licensed corporation for Type 8 RA.
III. Undertake to sign a participant agreement, pay admission fees and contributions to the guarantee fund and arrange indemnity insurance.
IV. Provide, if required, assurances on the performance of its obligations, including liabilities for defective securities deposited by it with the HKSCC.
Direct Clearing Participantship
A DCP can only clear its own trades. An applicant for a Direct Clearing Participantship must:
(a) be an Exchange Participant;
(b) be a licensed corporation for Type 1 RA;
(c) undertake to sign a participant agreement, pay admission fees and contributions to the guarantee fund and arrange indemnity insurance;
(d) provide, if required, assurances on the performance of its obligations, including liabilities for defective securities deposited by it with the HKSCC; and
(e) obtain the agreement of its designated bank to comply with the requirement of HKSCC for CCASS money settlement purposes.
Direct Clearing Participantship
A DCP can only clear its own trades. An applicant for a Direct Clearing Participantship must:
(a) be an Exchange Participant;
(b) be a licensed corporation for Type 1 RA;
(c) undertake to sign a participant agreement, pay admission fees and contributions to the guarantee fund and arrange indemnity insurance;
(d) provide, if required, assurances on the performance of its obligations, including liabilities for defective securities deposited by it with the HKSCC; and
(e) obtain the agreement of its designated bank to comply with the requirement of HKSCC for CCASS money settlement purposes.
Under which of the following circumstances intra day margin is collected?
I. If sudden fluctuations of the securities market are apparent in HKSCC’s review.
II. Where some other major markets remain open when the securities market operated by the SEHK is closed on public holidays.
III. When SEHK considers it appropriate under any other circumstances.
IV. When HKSCC considers it appropriate under any other circumstances.
Intra-day margin
In addition to day-end margin collected from CCASS Clearing Participants on a daily basis, HKSCC can also call for intra-day margin on unsettled stock positions from CCASS Clearing Participants under any of the following circumstances:
(a) if sudden fluctuations of the securities market are apparent in HKSCC’s review;
(b) where some other major markets remain open when the securities market operated by the SEHK is closed on public holidays; or
(c) when HKSCC considers it appropriate under any other circumstances.
Intra-day margin
In addition to day-end margin collected from CCASS Clearing Participants on a daily basis, HKSCC can also call for intra-day margin on unsettled stock positions from CCASS Clearing Participants under any of the following circumstances:
(a) if sudden fluctuations of the securities market are apparent in HKSCC’s review;
(b) where some other major markets remain open when the securities market operated by the SEHK is closed on public holidays; or
(c) when HKSCC considers it appropriate under any other circumstances.
What are the Capital and financial resources requirements of the person licensed for Type 8 RA and a person licensed for Type 1 RA?
I. A minimum paid-up share capital requirement of HK$20 million.
II. A minimum liquid capital requirement of HK$5 million, with the liquid capital greater than the required liquid capital at all times.
III. A requirement of applying haircut percentages as specified in the FRR on asset values of stocks held by the licensed persons as collateral against margin loans.
IV. The maximum liquid capital requirement is of HK$10 million.
Capital and financial resources requirements
A person licensed for Type 8 RA and a person licensed for Type 1 RA providing SMF (“licensed persons providing SMF”) are required to comply with the applicable requirements set out in the FRR, including:
(a) a minimum paid-up share capital requirement of HK$10 million;
(b) a minimum liquid capital requirement of HK$3 million, with the liquid capital greater than the required liquid capital (which must be calculated in accordance with the requirement of the FRR) at all times; and
(c) a requirement of applying haircut percentages as specified in the FRR on asset values of stocks held by the licensed persons as collateral against margin loans.
Capital and financial resources requirements
A person licensed for Type 8 RA and a person licensed for Type 1 RA providing SMF (“licensed persons providing SMF”) are required to comply with the applicable requirements set out in the FRR, including:
(a) a minimum paid-up share capital requirement of HK$10 million;
(b) a minimum liquid capital requirement of HK$3 million, with the liquid capital greater than the required liquid capital (which must be calculated in accordance with the requirement of the FRR) at all times; and
(c) a requirement of applying haircut percentages as specified in the FRR on asset values of stocks held by the licensed persons as collateral against margin loans.
Which of the following points should be kept mind for short selling on the SEHK?
I. It may be undertaken only in securities designated by the SEHK, of which there is currently a small number.
II. Exchange Participants must indicate short sell orders when inputting the orders to the trading system.
III. Exchange Participants must make stock borrowing arrangements for settlement before the short sale.
IV. A short sale cannot be made above the best current ask price (the tick rule).
General practical points relating to short selling on the SEHK are:
(a) it may be undertaken only in securities designated by the SEHK, of which there is currently a large number;
(b) Exchange Participants must indicate short sell orders when inputting the orders to the trading system;
(c) Exchange Participants must make stock borrowing arrangements for settlement before the short sale; and
(d) a short sale cannot be made below the best current ask price (the tick rule). Details of and exceptions to the short-selling rules of the SEHK will not be discussed in this study manual.
General practical points relating to short selling on the SEHK are:
(a) it may be undertaken only in securities designated by the SEHK, of which there is currently a large number;
(b) Exchange Participants must indicate short sell orders when inputting the orders to the trading system;
(c) Exchange Participants must make stock borrowing arrangements for settlement before the short sale; and
(d) a short sale cannot be made below the best current ask price (the tick rule). Details of and exceptions to the short-selling rules of the SEHK will not be discussed in this study manual.
How many recommendations has been published by Financial Action Task Force (“FATF”)?
The FATF has published 40 recommendations and nine special recommendations for dealing with money laundering, which have been adopted by the members and subsequently expanded in the area of terrorist financing.
The FATF has published 40 recommendations and nine special recommendations for dealing with money laundering, which have been adopted by the members and subsequently expanded in the area of terrorist financing.
Which of the following are examples of Settlement/custody/transfers-related suspicious transactions provided by GAML?
I. Large or unusual settlements in cash or bearer form, or dealings only in cash or cash equivalents.
II. Frequent transactions in small amounts, purchased in cash and then sold in one transaction with proceeds paid to a third party.
III. Frequent fund transfers or cheque payments to or from unverified third parties or those difficult to verify.
IV. The opening of multiple accounts with the same beneficial owners or controlling parties which are unusual.
Examples of suspicious transactions
GAML provides a list of situations that might give rise to suspicion of money laundering activity, including those set out below. The list is not exhaustive and licensed corporations need to be alert to their responsibilities under applicable legislation and regulations.
(a) Customer-related
(i) customer requests for investment management services where the sources of their funds are unclear or inconsistent with the customer’s financial background; and
(ii) the opening of multiple accounts with the same beneficial owners or controlling parties which are unusual.
(b) Trading-related
(i) buying and selling activities which are unusual or have no obvious purpose; and
(ii) frequent transactions in small amounts, purchased in cash and then sold in one transaction with proceeds paid to a third party.
(c) Settlement/custody/transfers-related
(i) large or unusual settlements in cash or bearer form, or dealings only in cash or cash equivalents;
(ii) holding of idle funds by a client, which are not used to trade, with the licensed corporation; and
(iii) frequent fund transfers or cheque payments to or from unverified third parties or those difficult to verify.
(d) Those involving employees
(i) changes in the life-style of an employee without reasonable cause, e.g. high spending or not taking holidays;
(ii) unusual or unexpected increase in the sales performance of an employee; and
(iii) the use of forwarding addresses for clients, such as those of staff or persons connected with staff.
Examples of suspicious transactions
GAML provides a list of situations that might give rise to suspicion of money laundering activity, including those set out below. The list is not exhaustive and licensed corporations need to be alert to their responsibilities under applicable legislation and regulations.
(a) Customer-related
(i) customer requests for investment management services where the sources of their funds are unclear or inconsistent with the customer’s financial background; and
(ii) the opening of multiple accounts with the same beneficial owners or controlling parties which are unusual.
(b) Trading-related
(i) buying and selling activities which are unusual or have no obvious purpose; and
(ii) frequent transactions in small amounts, purchased in cash and then sold in one transaction with proceeds paid to a third party.
(c) Settlement/custody/transfers-related
(i) large or unusual settlements in cash or bearer form, or dealings only in cash or cash equivalents;
(ii) holding of idle funds by a client, which are not used to trade, with the licensed corporation; and
(iii) frequent fund transfers or cheque payments to or from unverified third parties or those difficult to verify.
(d) Those involving employees
(i) changes in the life-style of an employee without reasonable cause, e.g. high spending or not taking holidays;
(ii) unusual or unexpected increase in the sales performance of an employee; and
(iii) the use of forwarding addresses for clients, such as those of staff or persons connected with staff.
What are the characteristics of Hong Kong listed companies?
I. The issue and marketing of securities is conducted in a fair and orderly manner and investors are given sufficient information to enable them to make a properly informed assessment of an issuer and the securities for which listing is sought.
II. Investors are kept fully informed by listed issuers, and any information which might reasonably be expected to have a material effect on market activity in, and the prices of, listed securities is not disclosed.
III. All holders of listed securities are treated fairly and equally.
IV. Directors of a listed issuer act in the interests of its shareholders as a whole, particularly where the public represents majority of the shareholders.
Characteristics of Hong Kong listed companies
The Listing Rules reflect currently acceptable standards in the marketplace and aim to ensure and maintain investors’ confidence in the market, in particular, that:
(a) applicants are suitable for listing;
(b) the issue and marketing of securities is conducted in a fair and orderly manner and investors are given sufficient information to enable them to make a properly informed assessment of an issuer and the securities for which listing is sought;
(c) investors are kept fully informed by listed issuers, and any information which might reasonably be expected to have a material effect on market activity in, and the prices of, listed securities is disclosed immediately;
(d) all holders of listed securities are treated fairly and equally; and
(e) directors of a listed issuer act in the interests of its shareholders as a whole, particularly where the public represents only a minority of the shareholders.
Characteristics of Hong Kong listed companies
The Listing Rules reflect currently acceptable standards in the marketplace and aim to ensure and maintain investors’ confidence in the market, in particular, that:
(a) applicants are suitable for listing;
(b) the issue and marketing of securities is conducted in a fair and orderly manner and investors are given sufficient information to enable them to make a properly informed assessment of an issuer and the securities for which listing is sought;
(c) investors are kept fully informed by listed issuers, and any information which might reasonably be expected to have a material effect on market activity in, and the prices of, listed securities is disclosed immediately;
(d) all holders of listed securities are treated fairly and equally; and
(e) directors of a listed issuer act in the interests of its shareholders as a whole, particularly where the public represents only a minority of the shareholders.
How the Code of Conduct deals with the conflicts?
I. The avoidance of conflicts in connection with the handling of client orders.
II. The actions required of a licensed or registered person where there are actual or potential conflicts which cannot be avoided.
III. Potential conflict issues arising in connection with a licensed or registered person’s rebates and soft dollar practices.
IV. Potential conflicts arising in connection with the preparation and issue of margin reports.
There are various ways such conflicts may arise and the Code of Conduct deals with them as follows:
(a) the avoidance of conflicts in connection with the handling of client orders;
(b) the actions required of a licensed or registered person where there are actual or potential conflicts which cannot be avoided;
(c) potential conflict issues arising in connection with a licensed or registered person’s rebates and soft dollar practices; and
(d) potential conflicts arising in connection with the preparation and issue of research reports. These are reviewed in the following sections
There are various ways such conflicts may arise and the Code of Conduct deals with them as follows:
(a) the avoidance of conflicts in connection with the handling of client orders;
(b) the actions required of a licensed or registered person where there are actual or potential conflicts which cannot be avoided;
(c) potential conflict issues arising in connection with a licensed or registered person’s rebates and soft dollar practices; and
(d) potential conflicts arising in connection with the preparation and issue of research reports. These are reviewed in the following sections
What matters the policy should specify if employees are permitted to deal or trade?
I. That employees should identify all related accounts and report them to senior management.
II. That if employees are allowed to deal in securities through other licensed or registered persons, the licensed or registered person (principal) and the employees should arrange for duplicate trade confirmations and statements of account to be provided to the senior management of the licensed or registered person.
III. That any transactions covered by this section should be recorded along with other transactions and identified in the licensed or registered person’s records.
IV. That transactions on employees’ and related accounts should be reported to and actively monitored by licensed or registered person, who should ensure that there are no irregularities and that the transactions are not prejudicial to the interests of clients.
A licensed or registered person must have a written policy issued to employees specifying whether or not they can deal or trade for their own accounts in securities or futures contracts. If employees are permitted to deal or trade, the policy should specify the following matters:
(a) the conditions on which employees may do so;
(b) that employees should identify all related accounts and report them to senior management (“related accounts” refers to accounts of minor children and accounts in which employees have a beneficial interest.);
(c) that employees should generally be required to deal through the licensed or registered person or its affiliates;
(d) that if employees are allowed to deal in securities through other licensed or registered persons, the licensed or registered person (principal) and the employees should arrange for duplicate trade confirmations and statements of account to be provided to the senior management of the licensed or registered person (principal);
(e) that any transactions covered by this section should be separately recorded and identified in the licensed or registered person’s records;
(f) that transactions on employees’ and related accounts should be reported to and actively monitored by senior management, who should ensure that there are no irregularities and that the transactions are not prejudicial to the interests of clients; and
(g) that a licensed or registered person should not knowingly have another licensed or registered person’s employee as a client without the written consent of that employee’s principal.
A licensed or registered person must have a written policy issued to employees specifying whether or not they can deal or trade for their own accounts in securities or futures contracts. If employees are permitted to deal or trade, the policy should specify the following matters:
(a) the conditions on which employees may do so;
(b) that employees should identify all related accounts and report them to senior management (“related accounts” refers to accounts of minor children and accounts in which employees have a beneficial interest.);
(c) that employees should generally be required to deal through the licensed or registered person or its affiliates;
(d) that if employees are allowed to deal in securities through other licensed or registered persons, the licensed or registered person (principal) and the employees should arrange for duplicate trade confirmations and statements of account to be provided to the senior management of the licensed or registered person (principal);
(e) that any transactions covered by this section should be separately recorded and identified in the licensed or registered person’s records;
(f) that transactions on employees’ and related accounts should be reported to and actively monitored by senior management, who should ensure that there are no irregularities and that the transactions are not prejudicial to the interests of clients; and
(g) that a licensed or registered person should not knowingly have another licensed or registered person’s employee as a client without the written consent of that employee’s principal.
What percentage of shares of short selling security held by all investors can be short sold in Northbound trading links?
The number of shares that may be short sold may not exceed 1% on the number of shares of that short selling security held by all investors through the CCASS as at the commencement of that trading day and should not accumulate more than 5% in any period of ten consecutive trading days.
The number of shares that may be short sold may not exceed 1% on the number of shares of that short selling security held by all investors through the CCASS as at the commencement of that trading day and should not accumulate more than 5% in any period of ten consecutive trading days.
What rules must be applied to Primary Market Maker?
I. Provide continuous quotes for the assigned option series in an option class for which it is registered as a Primary Market Maker for such minimum number of options contracts and with such maximum bid and offer spread as may be specified in its appointment letter.
II. Primary Market Makers must respond to no less than a certain percentage of quote requests and provide continuous quotes for no less than a certain percentage of trading hours as may, in each case, be specified in its appointment letter.
III. Each Primary Market Maker must be available to respond to quote requests and provide continuous quotes on specific trading days during the period for which its permit is granted, unless specifically exempted by the SEHK.
IV. The SEHK may from time to time prescribe additional requirements, obligations, restrictions and conditions which must be complied with by a Primary Market Maker, by giving written notice to it to amend its appointment letter.
Primary Market Makers
The following rules apply to Primary Market Makers:
(a) Each Primary Market Maker must enter quotes into the HKATS on receipt of quote requests and to provide continuous quotes in accordance with the terms and conditions of its appointment letter.
(b) A Primary Market Maker must:
(i) on receipt of a quote request for an option series in an option class for which it is registered as a Primary Market Maker:
enter a quote into the HKATS for at least such minimum number of Traded Options contracts;
hold the quote for such minimum period of time; and
respond within such period of time after receipt of the quote request, as may be specified in its appointment letter; and
(ii) provide continuous quotes for the assigned option series in an option class for which it is registered as a Primary Market Maker for such minimum number of options contracts and with such maximum bid and offer spread as may be specified in its appointment letter.
(c) Primary Market Makers must respond to no less than a certain percentage of quote requests and provide continuous quotes for no less than a certain percentage of trading hours as may, in each case, be specified in its appointment letter.
(d) Each Primary Market Maker must be available to respond to quote requests and provide continuous quotes on all trading days during the period for which its permit is granted, unless specifically exempted by the SEHK.
(e) The SEHK may from time to time prescribe additional requirements, obligations, restrictions and conditions which must be complied with by a Primary Market Maker, by giving written notice to it to amend its appointment letter.
Primary Market Makers
The following rules apply to Primary Market Makers:
(a) Each Primary Market Maker must enter quotes into the HKATS on receipt of quote requests and to provide continuous quotes in accordance with the terms and conditions of its appointment letter.
(b) A Primary Market Maker must:
(i) on receipt of a quote request for an option series in an option class for which it is registered as a Primary Market Maker:
enter a quote into the HKATS for at least such minimum number of Traded Options contracts;
hold the quote for such minimum period of time; and
respond within such period of time after receipt of the quote request, as may be specified in its appointment letter; and
(ii) provide continuous quotes for the assigned option series in an option class for which it is registered as a Primary Market Maker for such minimum number of options contracts and with such maximum bid and offer spread as may be specified in its appointment letter.
(c) Primary Market Makers must respond to no less than a certain percentage of quote requests and provide continuous quotes for no less than a certain percentage of trading hours as may, in each case, be specified in its appointment letter.
(d) Each Primary Market Maker must be available to respond to quote requests and provide continuous quotes on all trading days during the period for which its permit is granted, unless specifically exempted by the SEHK.
(e) The SEHK may from time to time prescribe additional requirements, obligations, restrictions and conditions which must be complied with by a Primary Market Maker, by giving written notice to it to amend its appointment letter.
Which of the following is/are not techniques for liquidity risk?
The suggested techniques for liquidity risk include:
(a) using the factors affecting liquidity at the time and overall broad liquidity measures. The Securities and Futures (Financial Resources) Rules have established such liquidity measures based on concentrations of illiquid collateral and of receivables from individual clients of an intermediary;
(b) management setting and enforcing concentration limits for particular products, markets and business counterparties;
(c) measuring mismatches in the timing of receipts and payables, receipt and delivery of products and so on; and monitoring the levels of arrears and defaults; and
(d) management establishing default procedures to alert liquidity management staff to potential problems and to provide them with adequate time to take appropriate action to minimise the impact of client or counterparty liquidity problems.
The suggested techniques for liquidity risk include:
(a) using the factors affecting liquidity at the time and overall broad liquidity measures. The Securities and Futures (Financial Resources) Rules have established such liquidity measures based on concentrations of illiquid collateral and of receivables from individual clients of an intermediary;
(b) management setting and enforcing concentration limits for particular products, markets and business counterparties;
(c) measuring mismatches in the timing of receipts and payables, receipt and delivery of products and so on; and monitoring the levels of arrears and defaults; and
(d) management establishing default procedures to alert liquidity management staff to potential problems and to provide them with adequate time to take appropriate action to minimise the impact of client or counterparty liquidity problems.
The following are the main pieces of legislation in Hong Kong which specifically address money laundering except?
The four main pieces of legislation in Hong Kong which specifically address money laundering are: the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (“AMLO”), the Drug Trafficking (Recovery of Proceeds) Ordinance (“DTRPO”), the Organized and Serious Crimes Ordinance (“OSCO”) and the United Nations (Anti-Terrorism Measures) Ordinance (“UNATMO”). Each of these is reviewed below.
The four main pieces of legislation in Hong Kong which specifically address money laundering are: the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (“AMLO”), the Drug Trafficking (Recovery of Proceeds) Ordinance (“DTRPO”), the Organized and Serious Crimes Ordinance (“OSCO”) and the United Nations (Anti-Terrorism Measures) Ordinance (“UNATMO”). Each of these is reviewed below.
The following factors, among others, should be taken into account when determining the risk profile of customers except?
In determining the risk profile of customers, the following factors, among others, should be taken into account:
(a) Product/service risk.
(b) Delivery/distribution channel risk.
opening approach.
(c) Customer risk
(d) Country risk
In determining the risk profile of customers, the following factors, among others, should be taken into account:
(a) Product/service risk.
(b) Delivery/distribution channel risk.
opening approach.
(c) Customer risk
(d) Country risk
Staff should be aware of which of the following in regards to the money laundering issues?
Licensed corporations are required to give their staff appropriate training on money laundering issues, and on a frequency sufficient to maintain their knowledge and competence. Staff should be aware of:
(a) the obligations of both the licensed corporation and the individual, and the possible consequence of failing to comply with these obligations under applicable legislation;
(b) the policies and procedures of the licensed corporation relating to anti-money laundering, including the identification and reporting of suspicious transactions; and
(c) new and emerging ways that money laundering might be engaged in, to the extent such information is needed by the staff to carry out their roles.
Licensed corporations are required to give their staff appropriate training on money laundering issues, and on a frequency sufficient to maintain their knowledge and competence. Staff should be aware of:
(a) the obligations of both the licensed corporation and the individual, and the possible consequence of failing to comply with these obligations under applicable legislation;
(b) the policies and procedures of the licensed corporation relating to anti-money laundering, including the identification and reporting of suspicious transactions; and
(c) new and emerging ways that money laundering might be engaged in, to the extent such information is needed by the staff to carry out their roles.
Which of the following statements is not customer-related situations that might give rise to suspicion of money laundering activity?
Customer-related situations that might give rise to suspicion of money laundering activity include:
(i) customer requests for investment management services where the sources of their funds are unclear or inconsistent with the customer’s financial background; and
(ii) the opening of multiple accounts with the same beneficial owners or controlling parties which are unusual.
Customer-related situations that might give rise to suspicion of money laundering activity include:
(i) customer requests for investment management services where the sources of their funds are unclear or inconsistent with the customer’s financial background; and
(ii) the opening of multiple accounts with the same beneficial owners or controlling parties which are unusual.
Securities traded under the Pilot Programme have which of the following characteristics?
I. They are listed on the NASDAQ or the American Stock Exchange.
II. They are admitted to the SEHK for trading only.
III. They are not regulated as listings on the SEHK’s Main Board or GEN.
IV. They may include a number of exchange traded funds.
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.
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.
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