HKSI Licensing Examination Paper 1 (Regulation) — All Questions

From an operations and internal-control perspective, client complaints should be:

• a.Handled informally with no records kept
• b.Logged, investigated, escalated where needed, and analysed for systemic issues✓
• c.Forwarded unread to the SFC
• d.Deleted from the firm's systems as soon as they are received, so that the existence of complaints cannot later be used against the firm by a regulator

Effective controls require complaints to be recorded, investigated and escalated, with root-cause analysis to identify systemic weaknesses. Proper complaint records also evidence the firm's handling to the SFC.

If a firm outsources a function such as IT or back-office processing, it:

• a.No longer bears any responsibility for that function
• b.Must outsource only to unlicensed providers
• c.May give the outsourced provider unrestricted, unmonitored access to all client data and client money, since responsibility has passed entirely to that provider
• d.Remains responsible for the outsourced activity and must exercise due diligence and ongoing oversight over the service provider✓

Under SFC guidance, outsourcing does not transfer regulatory responsibility. The firm must conduct due diligence on the service provider, retain oversight, protect client data and ensure the SFC's access and the firm's obligations are preserved.

Trading errors should be:

• a.Netted off secretly against client profits
• b.Left uncorrected in whichever account they first appear, on the basis that formally recording mistakes only draws unwelcome attention from compliance and auditors
• c.Hidden within client accounts
• d.Recorded in a designated error account and reviewed by management to detect patterns and abuse✓

A designated error account, with management review of errors, is a standard control. It ensures errors are transparently recorded and corrected, prevents concealment in client accounts, and helps detect misconduct or recurring weaknesses.

A licensed corporation must ensure that its licensed representatives are:

• a.Supervised only during their first week
• b.Paid strictly on commission with no supervision of any kind, since the prospect of earning commission is by itself a sufficient substitute for management oversight
• c.Properly supervised by responsible officers and adequately trained for the activities they perform✓
• d.Left entirely unsupervised once licensed

General Principle 9 and the Internal Control Guidelines require adequate supervision of representatives by responsible officers, along with appropriate training and monitoring, so that staff conduct meets regulatory standards.

Facilitation payments or bribes offered or accepted by staff to secure business:

• a.Are prohibited and may constitute offences under the Prevention of Bribery Ordinance, and must be controlled by firm policy✓
• b.Are permitted under Hong Kong law provided they are recorded as a marketing expense in the firm's accounts and disclosed to the external auditor at year end
• c.Are a normal cost of doing business
• d.Are acceptable if they are small

Offering or accepting bribes or secret advantages to secure business can constitute offences under the Prevention of Bribery Ordinance. Firms must have anti-bribery policies and controls, and such payments are never permissible merely because they are recorded.

To reconstruct how a client order was handled, a firm should maintain:

• a.A single monthly summary of net profit and loss, from which the details of any individual client's order can supposedly be inferred if ever required
• b.Only the total daily commission figure
• c.No records at all, to reduce storage costs
• d.An audit trail recording the receipt, transmission, execution and allocation of orders, with time stamps✓

A complete order audit trail — capturing time of receipt, transmission, execution and allocation — is required so that the handling of any order can be reconstructed for supervision, dispute resolution and regulatory inspection.

An effective compliance culture encourages staff to:

• a.Stay silent about suspected misconduct
• b.Report only to the outside media
• c.Report suspected breaches internally through proper channels without fear of reprisal✓
• d.Resolve any suspected misconduct privately with the colleague involved and keep management and compliance entirely uninformed, to preserve team morale

A sound compliance culture and the Internal Control Guidelines support internal escalation of concerns through proper whistleblowing channels, protected from retaliation, so misconduct can be identified and addressed early.

The 'fit and proper' requirement for licensees:

• a.Applies only at the moment of first licensing
• b.Is a continuing requirement — licensees must remain fit and proper, and the firm must report matters affecting this to the SFC✓
• c.Concerns only the firm's profitability
• d.Is assessed once, at licensing, and can never afterwards be affected by anything the licensee does, including a subsequent criminal conviction for dishonesty

Fitness and properness is a continuing requirement. Licensees must remain fit and proper throughout, and firms must notify the SFC of matters (such as disciplinary action, convictions or financial difficulty) that may bear on it.

A licensed corporation must notify the SFC of significant changes such as:

• a.Only those changes that the firm itself considers, in its own commercial judgement, to be interesting enough to be worth the SFC's attention
• b.Changes in responsible officers, substantial shareholders, business address, or cessation of a regulated activity, within the prescribed time✓
• c.Nothing, until the next licence renewal
• d.Only changes to its corporate logo

The SFO and its subsidiary rules require prompt notification to the SFC of specified changes — for example in responsible officers, directors, substantial shareholders, business particulars, or cessation of a regulated activity — within the prescribed periods.

Ongoing transaction monitoring is important because it can reveal:

• a.The client's favourite colour
• b.The firm's marketing budget
• c.Nothing of regulatory value
• d.Activity inconsistent with the client's known profile, which may indicate money laundering, fraud or unsuitable dealing✓

Transaction monitoring compares actual activity against the client's expected profile. Anomalies can flag possible money laundering, fraud, unauthorised or unsuitable dealing, triggering review and, where suspicion arises, a report to the JFIU.

Which of the following is a source of law in Hong Kong?

• a.Legislation (Ordinances), the common law and rules of equity✓
• b.Decrees of a foreign monarch
• c.Only unwritten local custom
• d.The internal staff manuals of individual securities firms, which under the Basic Law rank equally with Ordinances passed by the Legislative Council

Hong Kong's sources of law include legislation (Ordinances and subsidiary legislation), the common law and rules of equity, the Basic Law, and applicable customary and international law. The common-law system was preserved under Article 8 of the Basic Law.

For a legally binding contract to exist under Hong Kong law, there must generally be:

• a.A written document in every case
• b.A payment of at least ten thousand Hong Kong dollars, this being the minimum monetary value below which the courts will not recognise any agreement as a contract
• c.Offer, acceptance, consideration and an intention to create legal relations✓
• d.Prior approval by the SFC

A binding contract at common law generally requires offer, acceptance, consideration and an intention to create legal relations (with capacity and legality). Many contracts need not be in writing, though some (e.g. certain land contracts) do.

A false statement of fact that induces another person to enter into a contract may amount to:

• a.A valid contractual term guaranteeing a profit
• b.An automatic criminal offence in every case
• c.A misrepresentation, potentially entitling the innocent party to rescind the contract and/or claim damages✓
• d.A harmless sales technique that Hong Kong contract law disregards entirely, provided the statement was made orally rather than being written down

A misrepresentation is a false statement of fact that induces the other party to contract. Depending on whether it is fraudulent, negligent or innocent, remedies may include rescission and/or damages. It is not automatically a crime.

An agent binds the principal to a contract with a third party where the agent acts within their:

• a.Complete absence of any authority whatsoever, since under Hong Kong agency law a principal is bound by literally every act any person purports to do in the principal's name
• b.Actual or apparent (ostensible) authority✓
• c.Personal interest
• d.Own name only, without reference to the principal

A principal is bound by acts of an agent done within the agent's actual authority (express or implied) or apparent (ostensible) authority. Without any authority, the principal is generally not bound unless it ratifies the act.

An agent owes the principal duties including:

• a.A duty to compete with the principal
• b.An unrestricted right to delegate the entire agency to any stranger and to retain personally any bribe or secret commission received from the third party
• c.Duties to act in good faith, avoid conflicts of interest, and account to the principal✓
• d.A duty to keep secret profits made from the agency

An agent owes fiduciary duties to the principal: to act in good faith and in the principal's interests, avoid unauthorised conflicts, not make secret profits or take bribes, and to account. These duties are central to the intermediary-client relationship.

Under the principle in Salomon v Salomon, an incorporated company is:

• a.Incapable of owning property in its own name
• b.Merely a convenient name for its shareholders, so that the company's debts are always, and automatically, the personal debts of each individual member
• c.Identical in law to its majority shareholder
• d.A separate legal person, distinct from its members and directors✓

The principle of separate legal personality (Salomon v Salomon) means a company is a legal person distinct from its members and directors. It can own property, contract, sue and be sued in its own name, and its debts are its own.

In a company limited by shares, a member's liability for the company's debts is generally limited to:

• a.Their entire personal wealth
• b.The company's total outstanding debts
• c.Any amount unpaid on their shares✓
• d.Whatever sum the company's creditors later choose to demand from the member personally, without any statutory ceiling on that amount

In a company limited by shares, a member's liability is limited to any amount remaining unpaid on the shares they hold. Once shares are fully paid, the member has no further liability for the company's debts.

A private company under the Companies Ordinance (Cap 622) is one whose articles:

• a.Impose no restrictions of any kind on share transfers, membership or public offers, these being the defining features that distinguish a private company from a public one
• b.Restrict the right to transfer shares, limit the number of members to 50, and prohibit invitations to the public to subscribe for its shares✓
• c.Allow unlimited members and free public offers of shares
• d.Require it to list on HKEX

Under the Companies Ordinance (Cap 622), a private company is defined by articles that restrict share transfers, limit members to 50 (excluding employees), and prohibit invitations to the public to subscribe for its shares or debentures.

A company comes into legal existence in Hong Kong when:

• a.It first opens a bank account and receives its initial deposit of share capital, regardless of whether any documents have been registered with the Companies Registry
• b.The SFC grants it a licence
• c.The Companies Registry issues a certificate of incorporation following registration of the required documents✓
• d.Its founders shake hands on the venture

A company is incorporated, and becomes a body corporate with separate legal personality, when the Companies Registry issues its certificate of incorporation after the required incorporation documents (including the articles) are registered.

Under the Companies Ordinance (Cap 622), a company's constitution consists of:

• a.A memorandum and articles, both still mandatory as separate documents
• b.The articles of association, the memorandum of association having been abolished for companies formed under the Ordinance✓
• c.An oral understanding among the founders that need not be recorded in any registered document, since the Ordinance dispensed with the requirement for a written constitution altogether
• d.A prospectus

The Companies Ordinance (Cap 622) abolished the memorandum of association for companies formed under it. The company's constitution is now contained in its articles of association, which must be registered.

A significant change introduced by the Companies Ordinance (Cap 622) was the adoption of:

• a.A mandatory 'no-par-value' regime, so that shares no longer have a nominal or par value✓
• b.A fixed par value of HK$1 for all shares
• c.Compulsory bearer shares
• d.A rule that every company must issue its shares at exactly the same price as every other Hong Kong company, so that share prices across the market are standardised

The Companies Ordinance (Cap 622) introduced a mandatory no-par-value regime for shares. Shares of Hong Kong companies no longer have a nominal or par value, and concepts such as share premium were correspondingly reformed.

A director of a Hong Kong company owes duties including:

• a.No duties at all, once appointed
• b.A duty to accept any bribe offered to them
• c.Fiduciary duties to act in good faith in the company's interests and for proper purposes, and a duty of reasonable care, skill and diligence✓
• d.A duty to act only in their own personal interest

Directors owe fiduciary duties (to act in good faith in the company's interests, for proper purposes, and to avoid conflicts and secret profits) and a duty of care, skill and diligence, the latter codified in section 465 of the Companies Ordinance.

The Companies Ordinance duty of care, skill and diligence (section 465) is measured by:

• a.A purely subjective test only
• b.Whatever the director personally feels is fair
• c.The single lowest standard of competence found anywhere among the company's directors, which is then applied uniformly to excuse the conduct of the entire board
• d.Both an objective standard (that of a reasonably diligent person) and a subjective standard reflecting the director's own knowledge, skill and experience✓

Section 465 sets a mixed standard: the care, skill and diligence expected of a reasonably diligent person with both the general knowledge and experience reasonably expected (objective) and the actual knowledge, skill and experience the director has (subjective).

Every Hong Kong company must have a company secretary who:

• a.Must be a Hong Kong resident individual, or a body corporate with a registered office or place of business in Hong Kong✓
• b.Must also be the company's sole director
• c.May be a non-resident individual with no Hong Kong connection
• d.Need not exist at all, because the Companies Ordinance treats the appointment of a company secretary as purely optional for private companies of every size

Under the Companies Ordinance, every company must appoint a company secretary who, if an individual, must ordinarily reside in Hong Kong, or if a body corporate, must have its registered office or a place of business in Hong Kong. A sole director of a private company cannot also be its secretary.

Under the Companies Ordinance, a private company must have:

• a.At least one director who is a natural person✓
• b.No directors at all
• c.Only corporate directors
• d.A minimum of five directors, each of whom must personally hold at least ten per cent of the company's issued share capital before they can be validly appointed

The Companies Ordinance requires every private company to have at least one director who is a natural person, ensuring that ultimate human responsibility for the company's management can always be identified.

A Hong Kong company must maintain:

• a.No fixed address of any kind
• b.A registered office located in whichever jurisdiction offers the company the lowest tax rate at any given time, which it may relocate abroad without informing the Companies Registry
• c.An office only outside Hong Kong
• d.A registered office in Hong Kong to which communications and notices may be sent✓

Every Hong Kong company must have a registered office in Hong Kong to which communications and notices may be addressed, and must notify the Companies Registry of the address and any change to it.

Compared with ordinary shares, preference shares typically:

• a.Rank behind ordinary shares for dividends
• b.Carry a preferential (often fixed) dividend and priority over ordinary shares in a winding up, usually with limited voting rights✓
• c.Give the holder an absolute legal guarantee of a dividend every year and full repayment of capital ahead of all the company's secured and unsecured creditors on a winding up
• d.Always carry enhanced voting rights

Preference shares usually carry a preferential (often fixed) dividend and priority over ordinary shares as to dividends and return of capital in a winding up, typically with restricted voting rights. They still rank behind the company's creditors.

A charge created by a company over its assets to secure a debenture generally must be:

• a.Kept secret from the company's creditors
• b.Registered with the Companies Registry within the statutory period, or it may be void against a liquidator and creditors✓
• c.Approved by the SFC
• d.Registered only if the lender specifically asks, since an unregistered charge is fully effective against a later liquidator and all other creditors of the company in any event

Registrable charges created by a company must be registered with the Companies Registry within the statutory period (generally one month). Failure to register can render the charge void against a liquidator and the company's creditors.

Legal title to registered shares in a Hong Kong company generally passes when:

• a.The SFC records the transfer
• b.The buyer merely pays for the shares
• c.The buyer verbally agrees to purchase them, with no need for any instrument of transfer or any change to the company's register of members at all
• d.A proper instrument of transfer is executed and the transferee is entered in the register of members✓

For registered shares, legal title passes on execution of a proper instrument of transfer and registration of the transferee in the company's register of members. The register is the record of legal ownership of the shares.

Companies in Hong Kong are generally required to:

• a.Hold annual general meetings (unless dispensed with as permitted) and file annual returns with the Companies Registry✓
• b.Submit their accounts to the SFC for approval before those accounts may be shown to the company's own members at any general meeting
• c.File returns only in years in which they are profitable
• d.Never report to their members

Companies must generally hold an annual general meeting (subject to permitted dispensations, for example by written resolution or single-member companies) and file annual returns and financial statements as required under the Companies Ordinance.

A minority shareholder who is unfairly prejudiced by the way the company's affairs are conducted may:

• a.Do nothing, as the law provides no remedy
• b.Only sell the shares at whatever price is offered
• c.Petition the court for relief on the ground of unfair prejudice under the Companies Ordinance✓
• d.Automatically take personal control of the company's board and management, displacing the majority shareholders, simply by lodging a complaint with the Companies Registry

The Companies Ordinance provides a statutory unfair-prejudice remedy: a member may petition the court where the company's affairs are conducted in a manner unfairly prejudicial to members. The court has wide discretion, for example to order a buy-out of the minority's shares.

A company may be wound up:

• a.Compulsorily by order of the court, or voluntarily (by its members or its creditors)✓
• b.Exclusively by a unanimous resolution of every single creditor, employee and shareholder acting together, since no other route to winding up a company exists in Hong Kong law
• c.Only by the SFC
• d.Only if it is solvent

Winding up may be compulsory (by court order, for example where the company is insolvent or it is just and equitable) or voluntary (members' voluntary winding up where solvent, or creditors' voluntary winding up where insolvent).

In a winding up, the general order of distribution is that:

• a.Ordinary shareholders are paid first
• b.All claimants share equally regardless of their status
• c.Ordinary shareholders are paid in full before any creditor receives anything, on the principle that the owners of the company always have the strongest claim on its assets
• d.Secured creditors and preferential debts are paid ahead of unsecured creditors, with shareholders ranking last✓

On a winding up, secured creditors realise their security, then preferential debts and unsecured creditors are paid in the statutory order, and shareholders rank last, receiving only any surplus after all creditors have been satisfied.

A prospectus that contains an untrue statement may expose those responsible to:

• a.No consequences at all
• b.Only a reduction in the share price
• c.A purely internal reprimand from the company's own board, which under Hong Kong law is the only sanction available for misstatements in a prospectus offered to the public
• d.Civil liability to compensate investors and potential criminal liability under the prospectus provisions✓

Under the prospectus regime in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), those responsible for a prospectus containing an untrue statement may face civil liability to compensate investors and criminal liability, subject to statutory defences.

A key difference between a general partnership and an incorporated company is that:

• a.A company's members are always personally liable for all of its debts
• b.A partnership can freely issue shares to the public
• c.A partnership has separate legal personality distinct from its partners
• d.A company is a separate legal person with (usually) limited liability, whereas a general partnership is not separate from its partners, who bear unlimited personal liability✓

An incorporated company has separate legal personality and its members usually enjoy limited liability. A general partnership is not a separate legal person; the partners are personally and (as between themselves and third parties) jointly liable for the firm's debts without limit.

Part XIII of the SFO defines a number of distinct forms of 'market misconduct'. How many forms are there?

• a.Nine
• b.Three
• c.Four
• d.Six✓

Part XIII of the SFO sets out six forms of market misconduct: insider dealing, false trading, price rigging, stock market manipulation, disclosure of information about prohibited transactions, and disclosure of false or misleading information inducing transactions. Each has a mirror criminal offence in Part XIV.

Which of the following is NOT one of the forms of market misconduct under Part XIII of the SFO?

• a.Stock market manipulation
• b.Price rigging
• c.False trading (a false or misleading appearance of active trading)
• d.Failing to file an annual return with the Companies Registry✓

The six forms of market misconduct are insider dealing, false trading, price rigging, stock market manipulation, disclosure of information about prohibited transactions, and disclosure of false or misleading information inducing transactions (SFO Part XIII/XIV). Filing an annual return is a company-law obligation, not market misconduct.

The Market Misconduct Tribunal (MMT) is a CIVIL body. On what standard of proof does it decide whether market misconduct has occurred?

• a.To an absolute certainty
• b.The balance of probabilities✓
• c.Whichever standard the SFC selects for the case
• d.Beyond reasonable doubt

Because MMT proceedings under Part XIII of the SFO are civil, the tribunal decides on the balance of probabilities. The criminal 'beyond reasonable doubt' standard applies only to the parallel Part XIV criminal prosecutions in the courts.

How is the Market Misconduct Tribunal constituted?

• a.By a jury of twelve investors
• b.By the full board of HKEX
• c.By a chairman who is a judge, sitting with two other members✓
• d.By the Chief Executive of the SFC sitting alone, without any judicial member

The MMT is chaired by a judge (or former judge) of the Court of First Instance, sitting with two other members drawn from outside the Government. This judicial chairmanship reflects its civil, quasi-judicial character under Part XIII of the SFO.

Which of the following can the Market Misconduct Tribunal NOT do when it finds a person has engaged in market misconduct?

• a.Disqualify the person from being a company director
• b.Order the person to disgorge profits made
• c.Sentence the person to imprisonment✓
• d.Make a cold-shoulder order

The MMT is a civil tribunal. It can order disgorgement, disqualification, cold-shoulder and cease-and-desist orders and costs, but it cannot impose imprisonment or a criminal fine. A custodial sentence is only available on criminal conviction under Part XIV of the SFO.

What is the effect of a 'cold-shoulder order' made by the Market Misconduct Tribunal?

• a.It sends the case to the police for a criminal record
• b.It deprives the person of access to Hong Kong's market facilities for a specified period✓
• c.It automatically cancels the listing of any company the person controls and bars re-listing
• d.It freezes all of the person's personal bank accounts permanently

A cold-shoulder order bars the person, for a period of up to five years, from directly or indirectly acquiring, disposing of or dealing in securities through Hong Kong's market facilities. It is one of the civil sanctions available to the MMT under Part XIII of the SFO.

A person convicted of a market-misconduct offence on indictment under Part XIV of the SFO faces a maximum term of imprisonment of:

• a.10 years✓
• b.5 years
• c.2 years
• d.6 months

On indictment, the criminal market-misconduct offences in Part XIV of the SFO carry a maximum of 10 years' imprisonment and a fine of up to HK$10 million. These criminal penalties are only available through prosecution in the courts, not the civil MMT.

For a single course of conduct, can the SFC pursue BOTH civil proceedings before the MMT and criminal prosecution under Part XIV?

• a.Yes, but only if the person consents
• b.Yes, the SFC is required to run the civil and criminal proceedings together in every market-misconduct case
• c.No, it must elect one route; a person is not to be dealt with under both regimes for the same conduct✓
• d.Only if HKEX approves both

The SFO's dual regime gives the SFC a choice of the civil (MMT) route or the criminal (Part XIV) route, but a person is not to be subjected to both for the same underlying conduct. This avoids double jeopardy while preserving flexibility in enforcement.

For the purposes of insider dealing, a 'connected person' of a listed corporation includes:

• a.A director, employee or substantial shareholder of the corporation or a related company✓
• b.Any member of the general public who happens to read the company's published news announcements
• c.Only holders of the company's debentures
• d.Only the chairman of the board

A connected person under the insider-dealing provisions includes directors, employees and substantial shareholders of the corporation (and of related corporations), and others who have access to relevant information through their professional or business relationship. This wide definition captures those with privileged access.

Under the insider-dealing provisions, a person is still treated as connected with a corporation for how long after ceasing to hold the connecting position?

• a.6 months✓
• b.There is no continuing period once the position ends
• c.10 years
• d.2 years

The SFO extends the definition so that a person remains a connected person for 6 months after they cease to be a director, employee or otherwise connected. This prevents insiders from escaping liability simply by resigning before dealing.

An insider passes specific price-sensitive, non-public information to a friend, who then trades on it. Under the SFO, the friend (the 'tippee'):

• a.Commits no wrong at all, because a tippee who is not connected with the company falls outside the rules
• b.Is liable only if they are a licensed person
• c.Is liable only in a foreign jurisdiction
• d.May be liable for insider dealing if they knew the information came from a connected person✓

Insider dealing under Part XIII/XIV of the SFO extends to a tippee who deals while knowing, or having reasonable cause to believe, that the relevant information came directly or indirectly from a connected person. The passing of the tip ('tipping') can itself also be caught.

A connected person who, without dealing personally, counsels or procures another person to deal in the corporation's securities while in possession of relevant information:

• a.Commits only a breach of the Listing Rules
• b.Is liable only if the other person makes a profit
• c.Still engages in insider dealing under the SFO✓
• d.Is not caught because they did not trade themselves

The insider-dealing provisions expressly capture a connected person who counsels or procures another to deal while knowing or having reasonable cause to believe that the other would deal on the relevant information. Personal trading is not required for liability under Part XIII/XIV of the SFO.

The statutory offence of insider dealing under the SFO concerns dealing in the securities of:

• a.Any private company in Hong Kong
• b.Only banks
• c.A listed corporation, or a corporation whose securities are listed on a recognised stock market✓
• d.Only companies that are incorporated outside Hong Kong and whose securities are not listed anywhere

Insider dealing is defined by reference to dealing in the listed securities of a corporation (or their derivatives). It concerns corporations whose securities are listed on a recognised stock market such as SEHK, not private companies with no listed securities (SFO Part XIII/XIV).

Which of the following is a recognised defence to an allegation of insider dealing under the SFO?

• a.That the person would have entered into the transaction regardless of the relevant information, and not for the purpose of using it to profit or avoid loss✓
• b.That the person has never been prosecuted before
• c.That the person only made a small profit
• d.That the person did not personally read any of the company's published announcements or circulars before deciding to place the relevant trade in the open market

The SFO provides specific statutory defences, including that the person was not dealing for the purpose of using the relevant information to make a profit or avoid a loss, or would have acted the same way without it. The size of any profit or a clean record is irrelevant.

'False trading' under the SFO is essentially conduct that:

• a.Creates a false or misleading appearance of active trading, or of the market for or price of securities✓
• b.Involves executing trades outside the official market trading hours, which the SFO treats as inherently improper
• c.Involves selling securities at a loss
• d.Involves failing to settle a trade on time

False trading (Part XIII/XIV of the SFO) is conduct that creates, or is likely to create, a false or misleading appearance of active trading in securities, or a false or misleading appearance with respect to the market for, or price of, securities. Wash sales and matched orders are classic examples.