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- Question 1 of 30
1. Question
Which of the following activities on the Internet applied by the GNIR?
I. Securities dealing, commodity futures trading, leveraged foreign exchange trading and related advisory businesses
II. The provision of trade-matching facilities on the Internet
III. The issuing of advertisements or other documents relating to securities, investment arrangements and investment advisory services
IV. The making of offers of securities and investment arrangements by way of an electronic prospectusCorrectThe GNIR applies to the following activities on the Internet:
(a) securities dealing, commodity futures trading, leveraged foreign exchange trading and related advisory businesses;
(b) the issuing of advertisements or other documents relating to securities, investment arrangements and investment advisory services; and
(c) the making of offers of securities and investment arrangements by way of an electronic prospectus.IncorrectThe GNIR applies to the following activities on the Internet:
(a) securities dealing, commodity futures trading, leveraged foreign exchange trading and related advisory businesses;
(b) the issuing of advertisements or other documents relating to securities, investment arrangements and investment advisory services; and
(c) the making of offers of securities and investment arrangements by way of an electronic prospectus. - Question 2 of 30
2. Question
Which of the following data protection principles must be compiled by data users?
I. Purpose and manner of collection of personal data
II. Use of personal data
III. Security of personal data
IV. Non-accessible personal dataCorrectData users must comply the data protection principles:
(a) Purpose and manner of collection of personal data
(b) Use of personal data
(c) Security of personal dataIncorrectData users must comply the data protection principles:
(a) Purpose and manner of collection of personal data
(b) Use of personal data
(c) Security of personal data - Question 3 of 30
3. Question
Having regard to the general concepts set out by the OECD, what are some of the ways a company may improve its governance?
I. Insider dealing
II. Adopting international accounting and auditing standards;
III. Installing strong protective structures for minority shareholders, creditors and other lenders; and
IV. Identifying and penalizing corporate wrongdoing.CorrectHaving regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) adopting international accounting and auditing standards;
(b) installing strong protective structures for minority shareholders, creditors and other lenders; and
(c) identifying and penalizing corporate wrongdoing.IncorrectHaving regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) adopting international accounting and auditing standards;
(b) installing strong protective structures for minority shareholders, creditors and other lenders; and
(c) identifying and penalizing corporate wrongdoing. - Question 4 of 30
4. Question
What are the general practical points relating to short selling on the SEHK?
I. It may be undertaken only in securities designated by the SEHK (“Designated Securities”), of which there is currently a large number
II. Exchange Participants must indicate short sell orders when inputting the orders to the trading system
III. Exchange Participants must make stock borrowing arrangements for settlement before the short sale
IV. Short sale cannot be made below the best current ask price (the tick rule). Details of and exceptions to the short-selling rules of the SEHK will not be discussed in this study manualCorrectGeneral practical points relating to short selling on the SEHK are:
(a) it may be undertaken only in securities designated by the SEHK (“Designated Securities”), of which there is currently a large number;
(b) Exchange Participants must indicate short sell orders when inputting the orders to the trading system;
(c) Exchange Participants must make stock borrowing arrangements for settlement before the short sale; and
(d) a short sale cannot be made below the best current ask price (the tick rule). Details of and exceptions to the short-selling rules of the SEHK will not be discussed in this study manual.IncorrectGeneral practical points relating to short selling on the SEHK are:
(a) it may be undertaken only in securities designated by the SEHK (“Designated Securities”), of which there is currently a large number;
(b) Exchange Participants must indicate short sell orders when inputting the orders to the trading system;
(c) Exchange Participants must make stock borrowing arrangements for settlement before the short sale; and
(d) a short sale cannot be made below the best current ask price (the tick rule). Details of and exceptions to the short-selling rules of the SEHK will not be discussed in this study manual. - Question 5 of 30
5. Question
What are the reporting requirements established by the Contract Limits Rules?
I. 1000 SEHK stock futures contracts for any one contract month
II. 10000 Hang Seng China H-Financials Index futures contracts for all contract months combined
III. 500 Hang Seng Index futures contracts for any one contract month
IV. 2500 for any one contract month or series – Mini-Hang Seng Index futures and options contractsCorrectIn addition to position limits, the Contract Limits Rules establish certain reporting requirements, including:
(a) 1000 SEHK stock futures contracts for any one contract month;
(b) 500 Hang Seng Index futures contracts for any one contract month;
(c) 2500 for any one contract month or series – Mini-Hang Seng Index futures and options contractsIncorrectIn addition to position limits, the Contract Limits Rules establish certain reporting requirements, including:
(a) 1000 SEHK stock futures contracts for any one contract month;
(b) 500 Hang Seng Index futures contracts for any one contract month;
(c) 2500 for any one contract month or series – Mini-Hang Seng Index futures and options contracts - Question 6 of 30
6. Question
What are the purpose of Listing Rules?
I. To ensure the suitability of applicants for listing
II. The fair and orderly issue and marketing of securities
III. The provision of sufficient, material and timely information by issuers which might concern the investors and the public and affect the prices of listed securities
IV. To be independent from any issuer for whom it acts, and submit to the SEHK a declaration in the prescribed form regarding that independenceCorrectThe Listing Rules are intended to ensure:
(a) the suitability of applicants for listing;
(b) the fair and orderly issue and marketing of securities;
(c) the provision of sufficient, material and timely information by issuers which might concern the investors and the public and affect the prices of listed securitiesIncorrectThe Listing Rules are intended to ensure:
(a) the suitability of applicants for listing;
(b) the fair and orderly issue and marketing of securities;
(c) the provision of sufficient, material and timely information by issuers which might concern the investors and the public and affect the prices of listed securities - Question 7 of 30
7. Question
A sponsor is required (MBLR 3A.11; GLR 6A.11) to:
I. Be closely involved in the preparation of the new applicant’s listing documents;
II. Conduct reasonable due diligence inquiries to put itself in a position to be able to make the relevant declaration
III. To provide advice and guidance when requested by the listed issuer, who must consult with and, if necessary, seek advice from their compliance advisers on a timely basis in prescribed circumstances
IV. Use reasonable endeavours to address all matters raised by the SEHK in a timely mannerCorrectA sponsor is required (MBLR 3A.11; GLR 6A.11) to:
(a) be closely involved in the preparation of the new applicant’s listing documents;
(b) conduct reasonable due diligence inquiries to put itself in a position to be able to make the relevant declaration (see Note below);
(c) use reasonable endeavours to address all matters raised by the SEHK in a timely mannerIncorrectA sponsor is required (MBLR 3A.11; GLR 6A.11) to:
(a) be closely involved in the preparation of the new applicant’s listing documents;
(b) conduct reasonable due diligence inquiries to put itself in a position to be able to make the relevant declaration (see Note below);
(c) use reasonable endeavours to address all matters raised by the SEHK in a timely manner - Question 8 of 30
8. Question
What are the requirements when establishing an audit committee?
I. Comprising non-executive directors only
II. With a minimum of three members
III. With the majority being INEDs
IV. Chaired by a SFCCorrectEvery listed issuer must establish an audit committee (MBLR 3.21; GLR 5.28):
(a) comprising non-executive directors only;
(b) with a minimum of three members;
(c) with the majority being INEDsIncorrectEvery listed issuer must establish an audit committee (MBLR 3.21; GLR 5.28):
(a) comprising non-executive directors only;
(b) with a minimum of three members;
(c) with the majority being INEDs - Question 9 of 30
9. Question
The regulator must ensure that a licensed corporation has enough capital within the corporation:
I. To meet settlement or margin requirements in respect of dealing in securities or futures contracts
II. To support the level of its business activities
III. To be able to meet its liabilities as they fall due
IV. To provide a buffer in the event of sudden market changes, disruptions or loss of confidenceCorrectThe regulator must ensure that a licensed corporation has enough capital within the corporation:
(a) To support the level of its business activities;
(b) To be able to meet its liabilities as they fall due; and
(c) To provide a buffer in the event of sudden market changes, disruptions or loss of confidenceIncorrectThe regulator must ensure that a licensed corporation has enough capital within the corporation:
(a) To support the level of its business activities;
(b) To be able to meet its liabilities as they fall due; and
(c) To provide a buffer in the event of sudden market changes, disruptions or loss of confidence - Question 10 of 30
10. Question
A contract note shall include details of contracts for:
I. Dealings in securities, including securities borrowing and lending (“SBL”) transactions
II. Dealings in futures contracts
III. PI
IV. LFETCorrectA contract note shall include details of contracts for:
(a) dealings in securities, including securities borrowing and lending (“SBL”) transactions;
(b) dealings in futures contracts; and
(c) LFETIncorrectA contract note shall include details of contracts for:
(a) dealings in securities, including securities borrowing and lending (“SBL”) transactions;
(b) dealings in futures contracts; and
(c) LFET - Question 11 of 30
11. Question
What should be included in statements relating to margined transactions?
I. The opening and closing balances of the account and all movements in balance during the day
II. The quantity and market price and value of each description of security provided by or on behalf of the client in relation to each margined transaction and details of all movements of any such security during that day
III. Details of each margined transaction that is closed during that day, including an indication where the closure was initiated by the intermediary
IV. Details of all movements of client securities and collateral during that day, etc.CorrectStatements relating to margined transactions must also include:
(a) the opening and closing balances of the account and all movements in balance during the day;
(b) the quantity and market price and value of each description of security provided by or on behalf of the client in relation to each margined transaction and details of all movements of any such security during that day;
(c) details of each margined transaction that is closed during that day, including an indication where the closure was initiated by the intermediaryIncorrectStatements relating to margined transactions must also include:
(a) the opening and closing balances of the account and all movements in balance during the day;
(b) the quantity and market price and value of each description of security provided by or on behalf of the client in relation to each margined transaction and details of all movements of any such security during that day;
(c) details of each margined transaction that is closed during that day, including an indication where the closure was initiated by the intermediary - Question 12 of 30
12. Question
8.6 A person deals in securities if he makes or offers to make an agreement, or induces or attempts to induce another person to enter into an agreement:
I. A recognized stock exchange, clearing house and authorized ATS;
II. person dealing in securities as defined above through a licensed securities dealer or registered institution
III. For acquiring, disposing of, subscribing for or underwriting securities; or
IV. For the purpose of making profits from securities.CorrectA person deals in securities if he makes or offers to make an agreement, or induces or attempts to induce another person to enter into an agreement:
(a) for acquiring, disposing of, subscribing for or underwriting securities; or
(b) for the purpose of making profits from securities.IncorrectA person deals in securities if he makes or offers to make an agreement, or induces or attempts to induce another person to enter into an agreement:
(a) for acquiring, disposing of, subscribing for or underwriting securities; or
(b) for the purpose of making profits from securities. - Question 13 of 30
13. Question
A person deals in futures contracts if he:
I. Makes or offers to make an agreement with another person to enter into, acquire or dispose of a futures contract
II. Persons engaged in the above acts only on markets referred to in specified sections of the Commodity Exchanges (Prohibition) Ordinance
III. Persons who are members of a commodity exchange in operation on 20 June 1973, and only perform the above acts on such an exchange
IV. Induces or attempts to induce another person to enter into, acquire or dispose of a futures contractCorrectA person deals in futures contracts if he:
(a) makes or offers to make an agreement with another person to enter into, acquire or dispose of a futures contract; and
(b) induces or attempts to induce another person to enter into, acquire or dispose of a futures contract.IncorrectA person deals in futures contracts if he:
(a) makes or offers to make an agreement with another person to enter into, acquire or dispose of a futures contract; and
(b) induces or attempts to induce another person to enter into, acquire or dispose of a futures contract. - Question 14 of 30
14. Question
SMF is defined in Schedule 5, SFO as the provision of financial accommodation in order to facilitate:
I. The acquisition of securities listed on any stock market, whether in Hong Kong or elsewhere
II. For underwriting, sub-underwriting and acquisition under a prospectus
III. (where applicable) the continued holding of such securities
IV. Acquisitions or holdings of securities by its clientsCorrectSMF is defined in Schedule 5, SFO as the provision of financial accommodation in order to facilitate:
(a) the acquisition of securities listed on any stock market, whether in Hong Kong or elsewhere; and
(b) (where applicable) the continued holding of such securitiesIncorrectSMF is defined in Schedule 5, SFO as the provision of financial accommodation in order to facilitate:
(a) the acquisition of securities listed on any stock market, whether in Hong Kong or elsewhere; and
(b) (where applicable) the continued holding of such securities - Question 15 of 30
15. Question
What are terms and conditions of the margin account that a licensee should ensure that the client understands?
I. The permitted loan limit and lending ratio, and whether there are different lending ratios for different types of securities
II. The margin call procedures, e.g. when a margin call will be made, the consequences of failing to meet a call
III. What notice, if any, the securities margin financier will give to the client before selling client securities collaterals to cover a margin deficiency
IV. Certain changes to relevant haircut percentagesCorrectA licensee should ensure that the client understands the terms and conditions of the margin account, such as:
(a) the permitted loan limit and lending ratio, and whether there are different lending ratios for different types of securities;
(b) the margin call procedures, e.g. when a margin call will be made, the consequences of failing to meet a call; and
(c) what notice, if any, the securities margin financier will give to the client before selling client securities collaterals to cover a margin deficiency.IncorrectA licensee should ensure that the client understands the terms and conditions of the margin account, such as:
(a) the permitted loan limit and lending ratio, and whether there are different lending ratios for different types of securities;
(b) the margin call procedures, e.g. when a margin call will be made, the consequences of failing to meet a call; and
(c) what notice, if any, the securities margin financier will give to the client before selling client securities collaterals to cover a margin deficiency. - Question 16 of 30
16. Question
Which of the following are the general principles on which the Code of Conduct is based?
I. Honesty and fairness
II. Diligence
III. Bonds
IV. CapabilitiesCorrectGeneral principles on which the Code of Conduct is based are:
(a) honesty and fairness;
(b) diligence;
(c) capabilitiesIncorrectGeneral principles on which the Code of Conduct is based are:
(a) honesty and fairness;
(b) diligence;
(c) capabilities - Question 17 of 30
17. Question
In which situations does the orders executed for clients should be promptly and fairly allocated to those clients?
I. Prompt execution
II. Best execution
III. Prompt and fair allocation
IV. Advice to clients with due skill, care and diligenceCorrect“Prompt and fair allocation” – orders executed for clients should be promptly and fairly allocated to those clients
Incorrect“Prompt and fair allocation” – orders executed for clients should be promptly and fairly allocated to those clients
- Question 18 of 30
18. Question
The Code of Conduct imposes the following requirements on the establishment and operation of discretionary accounts:
I. The account should be designated as a discretionary account
II. Senior management should approve the opening of the account
III. Clear information about which company the individual contact is acting for where a financial services group is concerned
IV. Internal control systems should be installed to ensure that the operation of the account is properly supervised.CorrectThe Code of Conduct imposes the following requirements on the establishment and operation of discretionary accounts:
(a) the account should be designated as a discretionary account;
(b) senior management should approve the opening of the account; and
(c) internal control systems should be installed to ensure that the operation of the account is properly supervised.IncorrectThe Code of Conduct imposes the following requirements on the establishment and operation of discretionary accounts:
(a) the account should be designated as a discretionary account;
(b) senior management should approve the opening of the account; and
(c) internal control systems should be installed to ensure that the operation of the account is properly supervised. - Question 19 of 30
19. Question
Which of the following refers to the high volatility of GEM stocks, their shorter track record and the need to seek professional advice?
I. Risk of trading Growth Enterprise Market (“GEM”) stocks
II. Risk of providing an authority to re-pledge clients’ securities collateral
III. Risks attaching to client assets received or held outside Hong Kong
IV. Risk of providing an authority to hold mail or to direct mail to third partiesCorrectRisk of trading Growth Enterprise Market (“GEM”) stocks refers to the high volatility of GEM stocks, their shorter track record and the need to seek professional advice.
IncorrectRisk of trading Growth Enterprise Market (“GEM”) stocks refers to the high volatility of GEM stocks, their shorter track record and the need to seek professional advice.
- Question 20 of 30
20. Question
Which of the following sales related information needs to be disclosed to a client other than a PI prior to or at the point of sale?
I. The capacity (principal or agent) in which a licensed or registered person is acting
II. Any affiliation of the licensed or registered person with the product issuer
III. Disclosure of monetary and non-monetary benefits
IV. Any terms and conditions in generic terms under which the client may receive a discount of fees and charges from a licensed or registered personCorrectThe following sales related information needs to be disclosed to a client other than a PI prior to or at the point of sale:
(a) the capacity (principal or agent) in which a licensed or registered person is acting;
(b) any affiliation of the licensed or registered person with the product issuer;
(c) disclosure of monetary and non-monetary benefits (as discussed in section 2.30 above); and
(d) any terms and conditions in generic terms under which the client may receive a discount of fees and charges from a licensed or registered person.IncorrectThe following sales related information needs to be disclosed to a client other than a PI prior to or at the point of sale:
(a) the capacity (principal or agent) in which a licensed or registered person is acting;
(b) any affiliation of the licensed or registered person with the product issuer;
(c) disclosure of monetary and non-monetary benefits (as discussed in section 2.30 above); and
(d) any terms and conditions in generic terms under which the client may receive a discount of fees and charges from a licensed or registered person. - Question 21 of 30
21. Question
In what circumstances will the voluntary winding-up be started?
I. When the company was formed for a fraudulent purpose
II. When the period fixed for the company’s duration as stated in its articles of association comes to an end.
III. By the passing of a special resolution for winding up
IV. By the passing of a special resolution that it is advisable to wind up the company as it cannot continue because of its liabilities.CorrectA voluntary winding-up is started:
(a) when the period fixed for the company’s duration as stated in its articles of association comes to an end;
(b) by the passing of a special resolution for winding up;
(c) by the passing of a special resolution that it is advisable to wind up the company as it cannot continue because of its liabilities.IncorrectA voluntary winding-up is started:
(a) when the period fixed for the company’s duration as stated in its articles of association comes to an end;
(b) by the passing of a special resolution for winding up;
(c) by the passing of a special resolution that it is advisable to wind up the company as it cannot continue because of its liabilities. - Question 22 of 30
22. Question
Which of the following are the extensive powers of an auditor appointed by the SFC?
I. Receives or holds in Hong Kong client assets of the intermediary
II. Account to him as a client for any client assets held
III. Question on oath or otherwise officers, employees, agents and auditors of the target entities
IV. Require all these plus recognized exchange companies, clearing houses and any persons holding client assets on behalf of the entities, to produce recordsCorrectAn auditor so appointed by the SFC has extensive powers to:
(a) question on oath or otherwise officers, employees, agents and auditors of the target entities;
(b) require all these plus recognized exchange companies, clearing houses and any persons holding client assets on behalf of the entities, to produce records; and
(c) exercise the above powers in relation to any other business carried on by the entities or a related corporation if this is relevant to the audit of the entities.IncorrectAn auditor so appointed by the SFC has extensive powers to:
(a) question on oath or otherwise officers, employees, agents and auditors of the target entities;
(b) require all these plus recognized exchange companies, clearing houses and any persons holding client assets on behalf of the entities, to produce records; and
(c) exercise the above powers in relation to any other business carried on by the entities or a related corporation if this is relevant to the audit of the entities. - Question 23 of 30
23. Question
What are the aspects being administered and enforced by the Registrar of the Companies?
I. Trustee Ordinance
II. Limited Partnerships Ordinance
III. Dissolution Ordinance
IV. Money Lenders OrdinanceCorrectThe Registrar of Companies administers and enforces certain aspects of the:
(a) CO;
(b) Limited Partnerships Ordinance;
(c) Trustee Ordinance;
(d) Registered Trustees Incorporation Ordinance;
(e) Money Lenders OrdinanceIncorrectThe Registrar of Companies administers and enforces certain aspects of the:
(a) CO;
(b) Limited Partnerships Ordinance;
(c) Trustee Ordinance;
(d) Registered Trustees Incorporation Ordinance;
(e) Money Lenders Ordinance - Question 24 of 30
24. Question
As a Fund Manager, which of the following should he oblige in regards to gift and benefits?
I. Gifts received on special occasions are exempted
II. Have written policy guidelines, including monetary limits, about the acceptance by employees of gifts, rebates or other benefits from clients or business contacts
III. Maintain records of any benefits received above the specified limit
IV. Should not offer or accept inducements which are likely to cause significant conflict with its duties to clientsCorrectA Fund Manager should:
(a) not offer or accept inducements which are likely to cause significant conflict with its duties to clients;
(b) have written policy guidelines, including monetary limits, about the acceptance by employees of gifts, rebates or other benefits from clients or business contacts; and
(c) maintain records of any benefits received above the specified limit.IncorrectA Fund Manager should:
(a) not offer or accept inducements which are likely to cause significant conflict with its duties to clients;
(b) have written policy guidelines, including monetary limits, about the acceptance by employees of gifts, rebates or other benefits from clients or business contacts; and
(c) maintain records of any benefits received above the specified limit. - Question 25 of 30
25. Question
What is based on the objective of screening out undesirable players and undesirable offerings?
I. Financial regulation
II. Market regulation
III. Disclosure regulation
IV. Merit regulationCorrectMerit regulation is based on the objective of screening out undesirable players and undesirable offerings. In this way, the investor will not have the freedom to invest in a merit-regulated market in so-called undesirable offerings which may be promoted by undesirable persons, as the system bars them.
IncorrectMerit regulation is based on the objective of screening out undesirable players and undesirable offerings. In this way, the investor will not have the freedom to invest in a merit-regulated market in so-called undesirable offerings which may be promoted by undesirable persons, as the system bars them.
- Question 26 of 30
26. Question
Which of the following correctly describe Category 1 PIs?
I. high net worth individuals (“HNWIs”) having a portfolio of not less than HK$8 million (or its equivalent)
II. Authorized financial institutions (“AFIs”) and similar overseas institutions; also their wholly owned subsidiaries, holding companies and the wholly owned subsidiaries of the holding companies
III. Insurers authorized and regulated under the Insurance Companies Ordinance and their regulated overseas counterparts
IV. Intermediaries and similar investment service providers regulated overseas; also their wholly owned subsidiaries, holding companies (100% holding) and wholly owned subsidiaries of the holding companiesCorrectCategory 1 PIs include:
(a) Intermediaries and similar investment service providers regulated overseas; also their wholly owned subsidiaries, holding companies (100% holding) and wholly owned subsidiaries of the holding companies
(b) Authorized financial institutions (“AFIs”) and similar overseas institutions; also their wholly owned subsidiaries, holding companies and the wholly owned subsidiaries of the holding companies;
(c) insurers authorized and regulated under the Insurance Companies Ordinance and their regulated overseas counterparts;IncorrectCategory 1 PIs include:
(a) Intermediaries and similar investment service providers regulated overseas; also their wholly owned subsidiaries, holding companies (100% holding) and wholly owned subsidiaries of the holding companies
(b) Authorized financial institutions (“AFIs”) and similar overseas institutions; also their wholly owned subsidiaries, holding companies and the wholly owned subsidiaries of the holding companies;
(c) insurers authorized and regulated under the Insurance Companies Ordinance and their regulated overseas counterparts; - Question 27 of 30
27. Question
Which of the following are exemptions to the definition of LFET in Schedule 5?
I. Exchange transactions under the Money Changers Ordinance (Cap 34)
II. Transactions involving the act of trading in LFE contracts on a discretionary basis
III. Transactions executed on a stock exchange or a futures exchange by or through a person who is licensed for Type 1 and Type 2 regulated activities respectively or wholly incidental to such transactions
IV. Transactions by an AFI or a central bankCorrectThere are a large number of exemptions to the definition of LFET in Schedule 5, SFO. Examples include:
(a) transactions by an AFI or a central bank;
(b) exchange transactions under the Money Changers Ordinance (Cap 34); and
(c) transactions executed on a stock exchange or a futures exchange by or through a person who is licensed for Type 1 and Type 2 regulated activities respectively or wholly incidental to such transactions, etc.IncorrectThere are a large number of exemptions to the definition of LFET in Schedule 5, SFO. Examples include:
(a) transactions by an AFI or a central bank;
(b) exchange transactions under the Money Changers Ordinance (Cap 34); and
(c) transactions executed on a stock exchange or a futures exchange by or through a person who is licensed for Type 1 and Type 2 regulated activities respectively or wholly incidental to such transactions, etc. - Question 28 of 30
28. Question
What are the exclusions from the definition of a CIS?
I. Arrangements where the participants and the operator of the arrangement belong to the same group of companies
II. Arrangements where a solicitor acting in his professional capacity holds money from clients during the course of his work
III. To enable the participants to receive profits, income or other payments or returns from the property or dealings relating to it
IV. An arrangement in respect of a property under which the management of the property is not subject to the day-to-day control of the scheme’s participants, and eitherCorrectExclusions from the definition of a CIS include:
(a) arrangements where the participants and the operator of the arrangement belong to the same group of companies;
(b) franchise arrangements; and
(c) arrangements where a solicitor acting in his professional capacity holds money from clients during the course of his workIncorrectExclusions from the definition of a CIS include:
(a) arrangements where the participants and the operator of the arrangement belong to the same group of companies;
(b) franchise arrangements; and
(c) arrangements where a solicitor acting in his professional capacity holds money from clients during the course of his work - Question 29 of 30
29. Question
Which of the following is not allowed by the Client Securities Rules on the use of the standing authority by the intermediary or its associated entity?
I. The withdrawal of client securities to sell or settle a sale order on his behalf
II. To make any such transfer to any officer or employee of these entities unless that officer or employee is the client
III. To deal with the client securities or securities collateral in any manner that is unconscionable
IV. The disposal or initiation of the disposal of client securities and securities collateral, in settlement of a liability of the client to the intermediary, associated entity or a third personCorrectThe Client Securities Rules do not allow the use of the standing authority by the intermediary or its associated entity to:
(a) transfer client securities or securities collateral to an account of the intermediary, its associated entity or any entity which has a controlling entity relationship with the intermediary or is linked to the associated entity by a controlling entity relationship unless that account is one mentioned in section 3.9 above; or
(b) make any such transfer to any officer or employee of these entities unless that officer or employee is the client; or
(c) deal with the client securities or securities collateral in any manner that is unconscionable. (For clarification, “unconscionable” is something contrary to a sense of justice, decency or reasonableness.)IncorrectThe Client Securities Rules do not allow the use of the standing authority by the intermediary or its associated entity to:
(a) transfer client securities or securities collateral to an account of the intermediary, its associated entity or any entity which has a controlling entity relationship with the intermediary or is linked to the associated entity by a controlling entity relationship unless that account is one mentioned in section 3.9 above; or
(b) make any such transfer to any officer or employee of these entities unless that officer or employee is the client; or
(c) deal with the client securities or securities collateral in any manner that is unconscionable. (For clarification, “unconscionable” is something contrary to a sense of justice, decency or reasonableness.) - Question 30 of 30
30. Question
What are the requirements in relation to the receipt of soft dollars?
I. Transaction execution must be consistent with best execution standards
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. Brokerage rates are not in excess of customary full-service ratesCorrect2.40 The requirements in relation to the receipt of soft dollars are:
(a) transaction execution must be consistent with best execution standards;
(b) brokerage rates are not in excess of customary full-service brokerage rates;
(c) 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 agreementIncorrect2.40 The requirements in relation to the receipt of soft dollars are:
(a) transaction execution must be consistent with best execution standards;
(b) brokerage rates are not in excess of customary full-service brokerage rates;
(c) 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