Free HKSI LE Practice Questions

Question 1

Under Hong Kong's financial regulatory framework, which authority oversees the banking sector?

Accepted Answer

Hong Kong Monetary Authority (HKMA) — Per the IFEC description of HK's financial structure, four regulators each oversee a sector: HKMA (banking), IA (insurance), MPFA (MPF) and SFC (securities and futures). HKMA is the authority responsible for banks and deposit-taking companies. SFC handles securities and futures; IA handles insurance; MPFA handles MPF schemes.

Question 2

Per the IFEC regulatory functions matrix, what is HKMA's core regulatory responsibility in the banking sector?

Accepted Answer

Regulates and supervises banks and deposit-taking companies — The IFEC regulatory matrix explicitly states HKMA 'Regulates and supervises banks and deposit-taking companies' — covering both categories. Option A is too narrow; option C is the SFC's mandate; option D is the MPFA's mandate.

Question 3

Which of the following statements about the definition of 'debenture' under section 2 of the Companies Ordinance (Cap.622) is INCORRECT?

Accepted Answer

Debenture is limited to debt securities that constitute a charge on the company's assets — Section 2 defines 'debenture' to include debenture stocks, bonds and any other debt securities, regardless of whether they constitute a charge on the company's assets. Hence D is incorrect; the definition is not limited to charged debt securities.

Question 4

Under section 2 of the Companies Ordinance, which description of 'accounting transaction' is most accurate?

Accepted Answer

A transaction required by section 373 to be entered in the company's accounting records, excluding transactions arising from payment of fees required under any Ordinance — Section 2 defines 'accounting transaction' as a transaction required by section 373 to be entered in the accounting records, excluding transactions arising from payment of fees required under any Ordinance. This reflects how HK's legal system uses precise statutory definitions to delineate the scope of corporate record-keeping obligations.

Question 5

Under Part XIVA of the Securities and Futures Ordinance, what is one statutory characteristic of 'inside information' in relation to a corporation?

Accepted Answer

Information not generally known to persons who customarily deal in the listed securities of the corporation, but which would likely have a material price effect if generally known — Section 307A of the SFO defines 'inside information' as information not generally known to persons who customarily deal in the corporation's listed securities. It must also be reasonably likely to have a material effect on the price of those securities if generally known.

Question 6

Under section 307D of Part XIVA, when is a listed corporation NOT regarded as having failed to take reasonable precautions to preserve the confidentiality of inside information?

Accepted Answer

Because the corporation, in the ordinary course of business, disclosed the information to a person who requires it — Section 307D provides that disclosure in the ordinary course of business to persons who require the information does not amount to a failure to take reasonable precautions. Mass public disclosure (e.g. website or all-shareholder email) would constitute formal publication, not a confidentiality exception.

Question 7

Some shareholders of a sub-fund of XYZ OFC apply to the Court of First Instance for relief on the ground that the company's affairs have been conducted in an unfairly prejudicial manner. Under section 213(5), the Court may make which of the following orders?

Accepted Answer

Direct that the investments attributable to a portion of a sub-fund be realised, that any liabilities attributable to that portion be discharged, and that the remaining funds be distributed to shareholders in accordance with the OFC rules — Section 213(5) empowers the Court of First Instance to direct realisation of investments attributable to a portion of a sub-fund and, after discharging attributable liabilities, distribution of the remaining funds to shareholders under the OFC rules. The other options are not remedies authorised under that subsection.

Question 8

Regarding incorporation of an OFC and submission of incorporation documents, which of the following statements is correct?

Accepted Answer

Incorporation documents must be delivered in the manner prescribed by the OFC rules — Section 112C provides that documents required for OFC incorporation must be delivered in the manner prescribed by the OFC rules. There is no requirement that they be lodged with the Court by a director or pre-approved by the Secretary.

Question 9

Under the Code's (September 2023 version) recordkeeping requirements for share transfers, the 'description of the transfer' must include which of the following?

Accepted Answer

Stock name and stock code, quantity transferred by the licensed/registered person, transaction quantity, share transfer date, transaction price per share and transaction date — The Code expressly requires the transfer description to cover stock name and code, quantity transferred, transaction quantity, transfer date, transaction price per share and transaction date. All six data items are required to ensure transfer records are complete and traceable.

Question 10

ABC Securities Ltd, a licensed corporation, is designing its internal control framework. Under the Code's requirements on staff appointment and supervision, which of the following practices complies with the Code?

Accepted Answer

Ensure persons appointed to conduct client business are qualified to act in such capacity and possess relevant professional knowledge, and diligently supervise persons employed or appointed — The Code requires the licensed/registered person to ensure those appointed to conduct client business are qualified to act in that capacity with relevant professional knowledge, and to diligently supervise persons employed or appointed. Supervision is an ongoing duty; outsourcing or once-a-year review is insufficient.

Question 11

XYZ Asset Management's COO is designing an information management system. Under the Internal Control Guidelines, which best reflects the requirement on information management reporting?

Accepted Answer

Information management reporting requirements are clearly defined to ensure the adequacy and timeliness of required internal and external reports, including those required by relevant regulatory and self-regulatory bodies — The Guidelines require information management reporting requirements to be clearly defined. This ensures adequacy and timeliness of internal and external reports, including those required by regulatory and self-regulatory bodies.

Question 12

Which of the following statements about the control techniques and procedures described in the Appendix to the Internal Control Guidelines is correct?

Accepted Answer

Each licensed or registered person must carefully consider the specific nature and particular needs of its business when designing and implementing an internal control system; the techniques and procedures in the Appendix relate to Operational Controls and Risk Management in Parts VII and VIII — The Guidelines emphasise that each licensed or registered person must carefully consider the specific nature and particular needs of its business. The Appendix's control techniques and procedures relate to Operational Controls and Risk Management in Parts VII and VIII of the Guidelines.

Question 13

Which of the following statements regarding HKEx-EPS submission requirements for issuers is CORRECT?

Accepted Answer

Submission is via HKEx-EPS or such other means as the Exchange may from time to time prescribe, not later than 30 minutes before the earlier of the morning trading session or pre-opening session on the next business day — The rule permits submission via HKEx-EPS or such other means as the Exchange prescribes from time to time. The deadline is 30 minutes before the earlier of the morning trading session or pre-opening session on the next business day.

Question 14

An overseas issuer without a WVR structure seeks a secondary listing on the Exchange. Under Rule 19C.05A, which qualification must the issuer satisfy?

Accepted Answer

A track record of good regulatory compliance of at least 5 full financial years on a Qualifying Exchange or Recognised Stock Exchange (Criteria A), or satisfy Criteria B — Rule 19C.05A requires the overseas issuer to satisfy Criteria A (including at least 5 full financial years of good regulatory compliance on a Qualifying Exchange or Recognised Stock Exchange) or Criteria B. This safeguards Hong Kong market quality by ensuring sufficient regulatory history.

Question 15

For an issuer listed by way of depositary receipts, who is the 'listed issuer' under the Listing Rules?

Accepted Answer

The company whose shares are represented by the listed depositary receipts — The Listing Rules expressly state that, in the case of depositary receipts, the listed issuer is the company whose shares are represented by the listed depositary receipts, not the depositary. The depositary issues the depositary receipts but is not itself the listed issuer.

Question 16

Company X is a Hong Kong listed company whose shares trade on the Exchange in depositary receipt form. Ms Y holds some of the depositary receipts. Under Chapter 19B-related provisions of the Listing Rules, which statement is correct?

Accepted Answer

In the Listing Rules, 'shares' or 'securities' include depositary receipts, and 'shareholder' includes the holder of depositary receipts — The Listing Rules expressly provide that 'shares' or 'securities' shall include depositary receipts, and 'shareholder' or 'member of the issuer' shall include the holder of depositary receipts. Ms Y is therefore treated as a shareholder of Company X with rights relating to the underlying securities.

Question 17

Under section 284 of the Securities and Futures Ordinance, what is the legal consequence when a person is identified as having engaged in market misconduct by reference to certain conduct?

Accepted Answer

The person is regarded as having contravened the provisions of Part XIII by reason of the conduct — Section 284 deems such a person to have contravened the relevant provisions of the Part. This deeming provision is the bridge enabling further civil consequences such as damages claims.

Question 18

A is determined by the MMT under section 252(3)(b) to have engaged in insider dealing. Investor B then brings a civil action under section 281 for pecuniary loss. Under section 281, what is the evidential status of the MMT determination in that action?

Accepted Answer

So long as the determination is still subsisting, it is admissible in evidence to prove the relevant matters — Section 281 makes an MMT determination under s.252(3)(b) admissible in civil actions so long as it subsists. This greatly assists civil claimants who would otherwise have to re-prove the market misconduct.

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