paper 1-60 mc's

7/28/2019 Paper 1-60 MC's

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HKSI – Paper 1 (Multiple Choices)

1 What triggered the appointment of the Securities Review Committee ('the DavisonCommittee')?

A. The market crash of 1974

B. The market crash of 1987

C. The burst of the Internet Bubble in the early 2000's

D. The set-back of the emerging markets in early 1995

2 Which of the following is NOT CORRECT in respect to the responsibilities of HKMA&SFC in dealing with registration of the securities trading activities of the banks?

A.The HKMA receives and vets applications and recommends that applicants should beregistered

B. The HKMA will apply all the criteria that SFC normally uses except the capitalrequirements, where it will be satisfied using its own criteria

C. HKMA requires all the banks to satisfy the SFC's Financial Resources Requirements

D. SFC supervises and monitors the Fitness and Properness of all the SFC registeredpersons of the banks

3 Which department of the SFC sets continuous professional training requirements?

A. The Intermediairies Supervision Department

B. The Enforcement DepartmentC. The Investor Education Department

D. The Licensing Department

4 Regarding to the circumstances the SFC can disclose confidential information to thirdparties, which of the followings is NOT CORRECT?

A. It is in the Public interest or in the interest of the investing public

B. The recipient must belong to a restricted group of persons, including certaingovernment officials, departments, statutory and regulatory bodies

C. The recipients may be the overseas authorities and financial regulators

D. The recipients may be the Consumers Council and the Personal Data (Privacy)Department

5 Which of the following does not fall within the SFC's definition of 'Professional Investor'?

A. An insurance company

B. A high net worth corporation having a total assets of more than HK$40 million

C. A widow who used to be a housewife, wants to invest the HK$10 million worth of estate received after the death of her husband

D. An account executive working for a stock broking company

6 The following are the equitable remedies EXCEPT

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A. A court order

B. Imprisonment

C. Injunction

D. Rectification

7 The following are the divisions of civil law EXCEPT

A. The case law

B. The law of tort

C. The law of property

D. The commercial law

8 Which of the following statements about the subsidiary legislation of the SFO is NOT

CORRECT?A. The SFC is empowered to make rules under powers given to it in the SFO by LegCo

B. Subsidiary legislation is enacted by someone to whom the power to make law or ruleshas been delegated by the primary lawmaker

C. Breaching the subsidiary legislation is not a criminal offense

D. Subsidiary legislation is usually formed after the main body of the ordinance beingformed

9 The following statement about arbitrations correct EXCEPT

A. Arbitrations a process of resolving a dispute which uses one or more neutral third

partiesB. The decision is accepted as legally binding the parties who are engaged in dispute

C. Arbitration is much cheaper than taking the dispute case to the court

D. Arbitration is a very expensive because it involves too many parties taking parts in thenegotiation process

10 Which of the following pairs of pairs has the lowest level of fiduciary/fiduciary relationship?

A. Doctor and patient

B. Bank and client

C. Broker and its counter-party brokerD. Accountant and client

11 The Memorandum and Articles of Association must specify the following items EXCEPT

A. The domicile

B. The share capital

C. The share capital must be in Hong Kong dollar currency

D. The registration address must be in Hong Kong

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12 A compulsory winding up

A. Is ordered by the court which will appoint a liquidator

B. Is started by the members

C. Is started by the creditors

D. Is faster and more convenient as it is started by the court

13 What are the new features of the new SFC licensing regime?

I. Single license

II. 8 types of regulated activities

III. Continuous professional training requirement

IV. The banks dealing with securities will be supervised by the HKMA

V. The banks dealing with securities do not need to fulfill the SFC's FRRA. I, II & III

B. I, II, III & IV

C. I, III & V

D. I, III, IV & V

14 Cold calling to the following persons are allowed with the exception of

A. A medical doctor

B. A stock broker

C. A professional accountantD. A financial derivatives engineer

15 What are the four divisions of the SFC?

I. The Enforcement Division

II. The Intermediaries & Investment Products Division

III. The Licensing Division

IV. The Corporate Finance Division

V. The Supervision of Markets Division

A. I, II, III & IV

B. I, II, IV & VC. I, II, III & V

D. I, III, IV & V

16 Which of the following statement is correct?

A. The Financial Secretary appoints the Chairman of the SFC

B. The Chief Executive of the HKSAR appoints the Chairman of the SFC and theChairman of the SFC appoints the other executive directors

C. The Chief Executive of the HKSAR appoints all the directors of the SFC

D. The SFC is a government functioning unit supervised by the Financial Secretary

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17 Which of the following statement is correct?

A. A registered institution has to submit audited accounts and auditors' report to the SFC

B. A registered institution is required to have at least 2 executive officers supervisingeach regulated activity

C. A registered institution is required to register its Type 9 regulated activities to the SFC

D. The branches of the registered institution are regulated and supervised by the SFC

18 What should a licensed corporation do if it fails to meet its capital requirements?

A. Notify the respective exchange(s) and the SFC immediately

B. Notify the Respective exchange(s) immediately and cease all the dealing activities

C. Notify the SFC within 24 hours and continue the business until the end of the tradingday

D. Notify the SFC as soon as reasonably practicable and cease carrying out any regulatedactivities for which it is licensed

19 An associated entity of an intermediary is defined as a company which

A. Controls more than 10% of the intermediary

B. Receives or holds in Hong Kong client assets of the intermediary

C. Finances the intermediary via holding a subordinated debenture

D. Is controlled by the same board of directors of the intermediary

20 The SFC may appoint an auditor to examine and audit a licensed corporation if I. the licensed corporation failed to submit annual return required by the Inland Revenue

Department

II. the licensed corporation failed to submit annual accounts and reports to the SFC

III. the SFC received complaint about the improper dealings conducted by the licensedcorporation

IV. the licensed corporation failed to account for the assets belonged to its clients

A. I & II

B. II & III

C. I, II & IV

D. II & IV

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21 Which of the following are true about the Securities and Futures Appeals Tribunal?

I. It is chaired by the chairman of the SFC

II. It is an independent body not controlled by the SFC

III. It hears appeals from the persons dissatisfied with the decisions of the SFC

IV. It is part of the checks and balances on the powers of the SFC

A. I, II & III

B. I, III & IV

C. II, III & IV

D. I, II, III & IV

22 Which of the following statements is not correct?

A. A listed company has the power to investigate the ultimate beneficiary owner of itsshares

B. The Financial Secretary may appoint inspectors to investigate the ownership orcontrol of a listed corporation

C. The SFC has the power to investigate the buying and selling parties of any listedstocks on the SEHK

D. Any person holding more than 10% of the listed company can request the listedcompany to investigate the short positions of the relevant stock

23 What is the status of an executive director of a licensed corporation?

A. He/She must be a licensed representativeB. He/she must be a responsible officer

C. He/she must be approved by the SFC

D. All of the above

24 To whom in an intermediary would the character test be applied?

I. Directors

II. Substantial shareholders

III. Chief financial officer

IV. Supervisors

V. Managers

A. I, II, III & IV

B. I, III, IV & V

C. II, III, IV & V

D. I, II, III, IV & V

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25 Which of the following statements about the financial status of an individual licensee iswrong?

A. He/she must have a positive equity status

B. He/she should not be an undischarged bankrupt

C. He/she should not have been a substantial shareholder of an insolvent corporation

D. He/she should not have been involved in the management of a licensed corporationwhich failed to meet all obligations to clients

26 The followings are some of the points which must be considered by a licensed corporation inreviewing its balance sheet from the point of view of the Financial Resources Requirements.Which of the following statements is NOT CORRECT?

A. Transactions should be calculated on trade dates and not settlement dates

B. In compiling the balance sheet, the licensed corporation should adjust all theoff-balance items such the underwriting commitments, into the appropriateaccounting entries, so as to reflect the accurate financial status of the company

C. The balance sheet must be prepared using General Accepted Accounting Principles

D. The substance of the transaction must be reflected in the balance sheet

27 The following are the reasons why capital requirement is important for a licensedcorporation, EXCEPT

A. To support the level of its business activities

B. To be able to meet its liabilities as they fall due

C. To provide buffer in the event that there is a sudden run against itD. To accommodations to its clients

28 Which of the following statements about contract note is true EXCEPT

A. The contract must be sent out on the day that the trade was done

B. The intermediary must state whether it acted as an agent or a principal

C. The contact note must indicate whether the deal was done on cash or margin

D. The contract note must indicate the settlement date of the transaction

29 The general principles of the Code of Conduct include the following, EXCEPT

A. Integrity

B. Diligence

C. Capability

D. Responsibilities of senior management

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30 Which of the following is the least appropriate to ask when a licensed representative tries toknow the client?

A. The house that the client is living in is rented or owned by the client. If the house isowned by the client, how much the house is being mortgaged.

B. The monthly salary of the client

C. How much experience the client has

D. How often does the client go for vacation each year

31 Which of the following about discretionary account is correct?

A. A discretionary account should not be operated by the employee of the licensedcorporation

B. A discretionary account should be renewed annuallyC. A discretionary account should be approved by the SFC

D. The owner of the discretionary account should not intervene the operations of theaccount after the confirmation

32 Which of the following statements is NOT CORRECT?

A. Fund managers cannot accept rebates from the brokers except with the consent of theirclients

B. Fund managers can accept non-monetary rebates anytime from the brokers as long asthe brokerage rates charged to the managed funds are not in excess of standard levels

C. Soft dollar rebates include computer and information services equipment installed at

the fund managers' officeD. The clients of the fund managers have the first priority to accept rebates from thebrokers

33 Which of the following risk disclosure statements NOT required by the SFC?

A. Risk of trading futures and options

B. Risk of attaching to clients assets received or held outside Hong Kong

C. Risk of providing an authority to hold mail or to direct mail to third parties

D. Risk of trading securities listed outside Hong Kong

34 The employee of an intermediary cannot deal though another intermediary provided thatA. He has obtained approval from his employer

B. He has obtained clearance from the compliance officer that the intended transactiondoes not create any conflict of interest

C. He does not deal with price-sensitive information

D. The intended transaction is not front-running

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35 Which of the following is NOT the responsibility of the Compliance Department?

A. Staff dealings

B. Commission remuneration of the sales executives

C. Treatment of complaints

D. Licensing matters of the intermediary

36 Amongst the following actions, which action is most effective in building Chinese Walls?

A. To install a high quality sound insulation system between departments

B. The department heads should be of different persons

C. The corporate finance department be located far away from the brokerage division

D. Through intensive staff training, company policies and close supervision

37 What should be included in the client agreement for a Collective Investment Scheme?

A. A client agreement form and a risk disclosure statement

B. An authorized offering document and a client agreement form

C. A client agreement form, a discretionary account agreement and a risk disclosurestatement

D. An authorized offering document and an application form

38 Which of the following is NOT one of the eight key areas of Management, Supervision andInternal Control Guideline ('ICG')?

A. Segregation of duties and functionsB. External audit

C. Operation control

D. Information management

39 Which of the following is NOT the feature of good management and supervision assuggested by the SFC?

A. Regular and effective communications by management reports

B. Clear definition of authorization limits

C.Use of competent and experienced staffsD. Effective motivation and delegation

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40 Which of the following are the objectives of information management?

I. Integrity

II. Security

III. Availability

IV. Completeness

A. I, II & IV

B. I, III & IV

C. II, III & IV

D. I, II, III & IV

41 Which of the following is NOT the guideline for Internal Audit as suggested by the SFC?A. Timely reporting with findings, recommendations and risks highlighted

B. The internal auditor should be free of management responsibilities

C. The internal auditor should be technical competent and experienced

D. Direct line of communication to management

42 Specify 2 elements of a good procedure for dealing with client orders.

I. Time stamping

II. Appropriate advice

III. Fair and timely allocation

IV.Client orders should take priority over those for the intermediary and its staffsregardless of prices

A. I & II

B. I & III

C. II & III

D. III & IV

43 The following are the stages of money laundering EXCEPT

A. Integration

B. Placement

C. ConsolidationD. Layering

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44 Price rigging may include which of the following action(s)?

I. Use wash trade to raise the stock price.

II. Use fictitious transactions to lower the stock price.

III. Make transactions over the Counter

IV. Trade in Hong Kong and overseas markets

A. I, II & III

B. I, II & IV

C. II, III & IV

D. I, III & IV

45 Which of the following are 'Securities' as defined in the Securities and Futures

Ordinance?I. Loan stocks

II. Negotiated certificate of deposit

III. Preferred stocks

IV. Collective investment schemes

V. Unit trusts

A. I, II, III & IV

B. I, III, IV & V

C. II, III, IV & V

D. All of the above


A. AMS/3 is the third generation trading system used by the SEHK and the HKFE

B. AMS/3 system architecture allows for a direct interface between brokers' ownsystem and AMS/3

C. HKATS is an electronic screen based trading system used for trading HKFEproducts as well as SEHK traded options

D. Options clearing is conducted through the Traded Options System

47 From 3:59 p.m. onwards, the AMS/3 records the nominal prices of a security every 15seconds. The following 5 nominal prices recorded for a particular security: $2.025,$2.0225, $2.05, $2.0275 and $2.0275. What would be closing price as announced bythe SEHK?

A. $2.0275

B. $2.05

C. $2.025

D. $2.0305

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A. Short selling adds to the liquidity and trading volume of the market

B. The exchange participant must indicate short sell orders to the SEHK when inputtingthe order

C. A Securities Borrowing and Lending Agreement must have been signed before shortselling

D. The exchange participant must follow the tick rule, which means that the a short salecannot be made one spread below the best current ask price

49 Which of the following situation is excepted from the definition of securities marginfinancing as defined by the SFC?

A. The provision of financial accommodation for underwritingB. The provision of financial accommodation for the acquisition of securities listed on the

SEHK

C. The provision of financial accommodation for the acquisition of securities listed onoverseas exchanges

D. The provision of financial accommodation for the continued holding of securities

50 The following are the participants of the Hong Kong Securities Clearing CorporationLimited EXCEPT

A. SEHK Options Clearing House Limited

B. CustodiansC. Investors

D. HKFE Clearing Corporation Limited

51 Which of the following persons are required to apply for a license for advising in securitiesand futures contract?

A. A financial journalist who works part-time writing investment analysis report for abrokerage house in Hong Kong

B. A person licensed to deal in securities

C. A professional accountant

D. A corporation giving advice solely to their group companies

52 The Listing Rules are intended to ensure

I. The fair and orderly issue and marketing of securities

II. The fair and equal treatment of shareholders

III. The suitability of applicants for listing

IV. The provision of sufficient, material and timely information for investors

A. I, II & III

B. I, II & IV

C. II, III & IVD. All of the above

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53 A derivative warrant

A. Is issued by a third party who is related to the issuer of the underlying shares

B. Gives the holder the right to purchase or to sell a specified quantity of shares atmarket price

C. Listed on the SEHK, can be American or European style

D. Listed on the SEHK, is traded through the ' HKATS' and settled through the 'TOPS'

54 Notifiable transactions include the following EXCEPT

A. Very substantial acquisitions

B. Discloeable transactions

C. Share repurchasesD. Connected transactions

55 Which division of the SFC is responsible for the administration of the Codes on Takeoversand Mergers and Share Repurchase?

A. The Corporate Finance Division

B. The Enforcement Division

C. The Intermediaries and Investment Products Division

D. The Supervision of Markets Division

56 When is mandatory offer required?

I. Any person acquires, whether by a series of transactions over a period of time or not,30% or more of the voting rights of a company

II. A person holding 36% of the listed company and he purchased another 3% within 12months

III. A person holding 49.9% of the listed company and he purchased another 0.5%

IV. A person holding 36% of the listed company and his 36 years old son who is notconnected to the company, purchased 3% of the company in the market

A. I, II & III

B. I, II & IV

C. II, III & IV

D. I, III & IV

57 One of the conditions for the creeper effect to come in is

A. Shareholding between 50% and 75%

B. Shareholding between 35% and 50%

C. Shareholding above 50%

D. Shareholding between 30% and 50%

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58 Which of the following actions fall within the definition of market misconduct in theSFO?

I. Price ramping

II. Spreading of market rumour

III. Disclosure of information about prohibited transactions

IV. Insider trading

A. I & IV

B. I, II & III

C. I, III & IV

D. II, III & IV

59 Which of the following information is NOT likely to be relevant information relating toinsider dealing under the SFO?

A. Government tax reduction

B. Corporate re-structuring

C. The listed company is intending to merge the marketing department and the publicrelations department

D. A third party approached the listed to acquire the company, but the chance of success is very low

60 Who administers the Personal Data (Privacy) Ordinance?

A. The ICAC

B. The Privacy Commissioner for Personal Data

C. The Police Commissioner

D. The Consumer Council

*** End of Paper ***

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Answers

1. B 2. C 3. D 4. D 5. C

6. B 7. A 8. C 9. D 10. C

11. C 12. A 13. C 14. A 15. B

16. C 17. B 18. D 19. B 20. D

21. C 22. A 23. D 24. D 25. A

26. B 27. D 28. A 29. A 30. D

31. B 32. B 33. D 34. A 35. B

36. D 37. D 38. B 39. D 40. D

41. B 42. B 43. C 44. B 45. B

46. A 47. B 48. D 49. A 50. D

51. A 52. D 53. C 54. C 55. A

56. A 57. D 58. C 59. C 60. B

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