HKSI Licensing Examination Paper 1 (Regulation)

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Sample HKSI Licensing Examination Paper 1 (Regulation) questions

A few real questions from the bank, each with the correct answer and a written explanation. Every question is free — no signup to start.

1. Regulatory Overview

   1. Which body is the statutory regulator of Hong Kong's securities and futures markets?

   • a.The Financial Services and the Treasury Bureau
   • b.The Securities and Futures Commission (SFC)Correct
   • c.Hong Kong Exchanges and Clearing Limited (HKEX)
   • d.The Hong Kong Monetary Authority (HKMA)

   Why: The SFC is the independent statutory body established under Part II of the SFO to regulate Hong Kong's securities and futures markets. The HKMA regulates banks, HKEX operates the exchanges and clearing houses, and the FSTB is a government policy bureau.

2. Regulatory Overview

   2. Which of the following is a regulatory objective of the SFC under the SFO?

   • a.To maintain the fairness, efficiency, transparency and orderliness of the securities and futures industryCorrect
   • b.To set interest rates for the banking sector
   • c.To manage the Exchange Fund
   • d.To guarantee that ordinary investors always earn a positive return on any listed securities bought through a Hong Kong intermediary

   Why: SFO s.4 sets out the SFC's regulatory objectives: maintaining fair, efficient, transparent and orderly markets, protecting the investing public, minimising financial crime and reducing systemic risk. It does not guarantee profits, set interest rates, or manage the Exchange Fund (an HKMA function).

3. Regulatory Overview

   3. What is the principal role of Hong Kong Exchanges and Clearing Limited (HKEX)?

   • a.It licenses individual securities dealers
   • b.It operates the Stock Exchange of Hong Kong and the Hong Kong Futures Exchange and their clearing housesCorrect
   • c.It administers the Investor Compensation Fund
   • d.It investigates and prosecutes insider dealing and other market misconduct in the Hong Kong criminal courts on its own authority

   Why: HKEX is the recognised exchange controller that owns and operates SEHK and HKFE together with the clearing houses (HKSCC, SEOCH, HKCC). Licensing is done by the SFC, criminal prosecution by the courts, and the Investor Compensation Fund is administered by the SFC under Part XII of the SFO.

4. Regulatory Overview

   4. A Hong Kong bank that carries on regulated activities does so as a 'registered institution'. Which regulator is its front-line supervisor for that securities business?

   • a.The Investor Compensation Company
   • b.The Stock Exchange of Hong Kong
   • c.The Hong Kong Monetary Authority (HKMA)Correct
   • d.The Companies Registry

   Why: Banks that carry on regulated activities are registered institutions, and the HKMA is their front-line regulator under a memorandum of understanding with the SFC. SFC conduct standards such as the Code of Conduct still apply to their securities business.

5. HK Law and the Companies Ordinance

   5. Hong Kong's legal system is based principally on:

   • a.The civil-law codified system of Mainland China
   • b.Purely customary Chinese law
   • c.The common law, preserved under the Basic Law after 1997Correct
   • d.Religious law

   Why: Under Article 8 of the Basic Law, the common law, rules of equity, ordinances and customary law previously in force are maintained. Hong Kong retains a common-law system separate from the Mainland's civil-law system.

6. HK Law and the Companies Ordinance

   6. Under Hong Kong company law, a document offering a company's shares to the public must generally:

   • a.Be exempt from any content requirement if the company is private
   • b.Be published only in a single newspaper
   • c.Be approved personally by the Financial Secretary
   • d.Be registered as a prospectus complying with statutory content requirementsCorrect

   Why: A public offer of shares requires a registered prospectus meeting the statutory content and registration requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance. A private company is prohibited by its constitution from offering shares to the public.