IIQE Paper 3 Quiz 8 English

Which of the following are the services available at the Hong Kong financial market?
I. Venture capital
II. Investment and portfolio management
III. Transferable interests in companies
IV. Investment banking

How to enhance the quality of the markets?
I. Encouraging the development of new products and services
II. Helping to improve the quality and skills of financial market professionals
III. Helping to create a knowledgeable investing public by means of investor education programmes
IV. Market participants to be represented on the exchanges and clearing houses

Which of the following correctly describe the purposed of the broad points stated by the Securities Review Committee under Ian Hay Davison?
I. Systemic stability
II. An orderly and smooth-functioning market, which is fair and free from manipulation and deception
III. Adequate investor protection
IV. Practitioner-based regulation – that is, operated by professionals with an industry or regulatory background;

Which of the following develops regulatory platforms to facilitate market growth and product innovation?
I. Corporate Finance Division
II. Enforcement Division
III. Policy, China and Investment Products Division
IV. Supervision of Markets Division

What are the functions of Licensing Department?
I. Licenses corporations and individuals seeking to conduct business in Hong Kong in the regulated activities for which a licence is required under the SFO
II. Issues codes and guidelines concerning the competence and suitability of corporations and individuals to remain licensed
III. Deals with issues relating to the continuing suitability of licensed corporations and individuals to be licensed
IV. Supervises the business conduct of licensed corporations and individual licensees on an ongoing basis, including the conduct of on-site inspection

Which of the following are the products and services provided by the intermediaries to principals and investors?
I. Securities dealers
II. Listing of shares
III. Leveraged foreign-exchange traders
IV. Financial advisers

Which of the following law defines offences against the community and how persons who may have committed such offences may be investigated, charged, tried and punished?
I. Common law
II. Criminal law
III. Civil law
IV, Contract law

What are the powers exercisable by members in a general meeting?
I. Removal of directors
II. Disposal of company assets
III. Disapproval of payments for loss of office
IV. Winding-up petitions under court order and voluntary winding-up

In general, directors may incur liabilities due to:
I. Breaches of fiduciary duties
II. Not allow any conflict of interest between their duties as directors and their personal interests
III. Failure to act with due care and skill
IV. Breaches of statutory duties

The corporate (including its officers e.g. directors, managers, etc.) and individual applicants for licensing or registration have to satisfy fitness and properness requirements stated in the Fit and Proper Guidelines. These relate to:
I. Financial status or solvency
II. Educational or other qualifications or experience (having regard to the nature of the functions to be performed)
III. Ability to carry on the regulated activity competently, honestly and fairly
IV. Has an interest of more than 10% of the nominal value of the issued share capital of the corporation

Who are exempted from requiring a licence to advise on securities and futures contracts generally?
I. Solicitors, counsel, professional accountants, trust companies and persons licensed to carry out asset management who give such advice wholly incidental to their professions
II. Financial journalists and broadcasters who give investment advice or issue analyses or reports on investments to the public on subscription or otherwise
III. Persons licensed to deal in securities and give such advice wholly incidental to the carrying on of such dealing activity
IV. A person acting as principal with certain types of PIs, or in the acquisition, disposal, subscription or underwriting of securities

An LFE contract is a contract or arrangement the effect of which is that one party agrees or undertakes to:
I. Make an adjustment between himself and another person according to whether a currency is worth more or less than another currency
II. Exchange transactions under the Money Changers Ordinance (Cap 34)
III. Pay an amount of money or to deliver a quantity of any commodity determined by reference to the change in the value of a currency in relation to another currency to another person
IV. Deliver to another person at an agreed future time an agreed amount of currency at an agreed consideration (Schedule 5, SFO)

Which of the following correctly describe asset management?
I. Real estate investment scheme management
II. Securities or futures contracts management
III. The property that is being managed under the scheme consists primarily of immovable property
IV The scheme is authorized under s. 104, SFO

“Credit ratings” is defined as “opinions, expressed using a defined ranking system, primarily regarding the creditworthiness of
I. Disseminating
II. Debt securities
III. Preferred securities
IV. An agreement to provide credit

What are the basic requirements that a licensee should consider as regards the principle of capabilities?
I. Staff who are fit and proper to carry out their designated responsibilities
II. Adequate and diligent supervision of the staff appointed to conduct its business
III. Satisfactory internal control procedures, financial resources and operational systems, procedures and technology which can reasonably be expected to protect from loss both its own operations and any third parties it transacts with
IV. Orders executed for clients should be promptly and fairly allocated to those clients

What are the requirements that are imposed by the Code of Conduct imposes on the establishment and operation of discretionary accounts?
I. Transaction execution must be consistent with best execution standards
II. The account should be designated as a discretionary account
III. Senior management should approve the opening of the account
IV. Internal control systems should be installed to ensure that the operation of the account is properly supervised

Which of the following refers to the possible differences between overseas laws and those of Hong Kong, where assets received or held overseas may not have protection under Hong Kong law?
I. Risk of trading Growth Enterprise Market (“GEM”) stocks
II. Risks attaching to client assets received or held outside Hong Kong
III. Risk of providing an authority to hold mail or to direct mail to third parties
IV. Risk of securities trading

What information should be included for the licensed or registered person to maintain transparency as well as to let them know about transactions on their accounts?
I. Adequate and relevant information about its business, including contact details, services provided, and the identity and status of employees and others acting on its behalf with whom the client will have contact
II. Clear information about which company the individual contact is acting for where a financial services group is concerned
III. Audited financial statements and information on corporate actions, which should be provided to the client upon request
IV. Transaction execution must be consistent with best execution standards

What are the requirements in relation to the receipt of soft dollars?
I. The rebates and their approximate values are disclosed to the client; such information must be provided to the client at least twice annually, or in each contract note.
II. Brokerage rates are not in excess of customary full-service brokerage rates
III. The client has consented in writing to the receipt of the goods or services; this may be provided for in the client agreement or other investment management agreement
IV. Disclosure is made to the client of the licensed or registered person’s soft-dollar practices and must include a description of the goods and services received; this must be provided to the client on at least an annual basis

Which of the following are the goods and services permitted by the SFC?
I. Computer hardware and software incidental to the above goods and services
II. Clearing and custodial services
III. Investment-related publications
IV. General administrative goods or services

Reporting lines and other firm-wide compliance procedures should be established that eliminate, avoid or manage actual or potential conflicts of interest. Which of the following are the procedures?
I. Not allowing an investment banking function to pre-approve research
II. Not directly linking an analyst’s remuneration to investment banking transactions
III. Not allowing research analysts to solicit investment banking business (i.e. analysts should not participate in sales pitches and deal roadshows)
IV. Should have a reasonable basis for his analyses and recommendations

What should be specified in the policy if employees are permitted to deal or trade?
I. The conditions on which employees may do so
II. That employees should identify all related accounts and report them to senior management (“related accounts” refers to accounts of minor children and all accounts in which employees have a beneficial interest.)
III. That employees should generally be required to deal through the licensed or registered person or its affiliates
IV. Any insolvency situations affecting it, its substantial shareholders or its directors

In what circumstances will a client be treated as a Category 2 PI under the SFC’s provisions?
I. Insurers authorized and regulated under the Insurance Companies Ordinance and their regulated overseas counterparts
II. Trustee companies responsible for total assets of not less than HK$40 million (or equivalent)
III. High net worth individuals (“HNWIs”) having a portfolio of not less than HK$8 million (or its equivalent)
IV. Corporations or partnerships having either a portfolio of not less than HK$ 8 million, or total assets of not less than HK$40 million (or their equivalents)

Which of the following are the non-applicable Code of Conduct requirements?
I. Establish a client’s financial situation, investment experience and investment objectives (except in relation to providing advice on corporate finance)
II. The unsolicited calls provisions of s. 174, SFO (see section 3 of Topic 9), i.e. they may be cold-called
III. Enter into a written client agreement
IV. Provide risk disclosure statements

Which of the following correctly describe the responsibilities of the senior management?
I. Establish and maintain an effective compliance function which is independent of all operational and business functions and reports directly to senior management
II. Ensure that compliance staff have the necessary skills, qualifications and experience
III. Establish and enforce policies and procedures to provide compliance staff with full access, as far as practicable, to all necessary records and documentation and to all areas of the business
IV. Establish proper complaints handling procedures, which should be in writing

What are the purpose of senior management establishing policies and procedures?
I. To establish precise terms and conditions for operating discretionary accounts (which should be communicated to the client) and to ensure that transactions are consistent with the information relating to the client
II. To ensure that any investment advice given for remuneration is supported by a contractual advisory agreement, and investment recommendations are made after thorough analysis, are suitable for the client and are properly documented
III. To minimize the potential for conflicts of interest and, where these may exist and cannot be reasonably avoided, the clients are fully informed of the circumstances and are treated fairly
IV. For the recording and immediate time stamping of records of orders for clients and other orders

What areas of an intermediary’s business should effective compliance procedures cover?
I. Legal and regulatory requirements
II. Record keeping
III. Business practices
IV. Fund raising

Which of the following is the danger that a client or counterparty may default on his obligations to the intermediary or be unable to perform his part of a contract?
I. Credit risk
II. Liquidity risk
III. Market risk
IV. Operational risk

The GAML specifies the need for awareness and vigilance and the setting up of a system to report suspicious transactions. It requires licensed corporations to:
I. Issue statements of policies and procedures to staff reflecting the provisions of the GAML
II. The opening of multiple accounts with the same beneficial owners or controlling parties which are unusual
III. Regularly review their anti-money laundering policies and procedures by their compliance and audit function
IV. Appoint a money laundering reporting officer as a central reference point for reporting suspicious transactions

Which of the following correctly describe customer risk?
I. Number of sales
II. Background or profile of the customer (e.g. a politically exposed person)
III. Unduly complex ownership structure without good reason
IV. Nature, scope and location of the customer’s business that generate the funds/assets, having regard to sensitive or high-risk activities