HKSI LE Paper 1 Past Paper (1)

Recently Hong Kong Securities Institute (HKSI) has eventually released the past Q&A for certain papers of the Licensing Exam for Securities and Futures Intermediaries. Of course candidates are most concerned about Paper 1 because this paper is almost a must-take and its pass rate has been relatively lower.

You can download the only one past Q&A (Dec 2006) for Paper 1 (Fundamentals of Securities and Futures Regulation). While answers are provided at the end of the script, explanations are not. Let me try to provide my own explanations in this blog in 4 parts.

HKSI LE Paper 1 (Dec 2006) - Q&A 1~15 (with explanations):

1(A) - Serving public interest and helping another regulator are legitimate reasons for SFC to disclose confidential information, as permitted by the secrecy provisions of SFO (S.378). (II) is wrong as the disclosure is for private interest. (IV) is obviously nonsense - How come SFC work for a debt collection agency?

2(B) - Financing terrorist activities and international speculators attacking a currency are obviously the role of financial regulators in developed countries. Preventing the activities of (II) and (III) is against the principles of free economy.

3(C) - Provision of a loan is a financial service and thus should be regulated by a financial services regulator.

4(C) - Onsite visits are done by Intermediaries Supervision Department. Collective investment schemes are authorized by Policy, China & Investment Products Division. Licensing Department is responsible for reviewing annual returns submitted by licensed persons. I don't really agree that Licensing Department monitors CPT but I can't choose only (II). Given that (I) is definitely wrong, the best answer seems to be (II) & (IV).

5(A) - SFC has the legitimate powers to refer cases to CCB / ICAC and suspend licences for breach of codes & guidelines. It is not within the legal scope of SFC to seize and dispose an intermediary's property. (IV) is ridiculous - SFC can't exclude a person's right to appeal.

6(D) - This question is straighforward. All answers are correctly describing the nature of a company as a separate legal entity.

7(C) - In criminal law, the standard of proof should be "beyond reasonable doubt". "Balance of probabilities" is for civil law.

8(C) - This question tests only your memory - 18 months.

9(C) - Case law (common law) is derived from the doctrine of precedent. The principles of equity is for equity law.

10(B) - With independence of jurisprudence in Hong Kong, judges should not be politically appointed. Even the Chief Executive can't override the decision of the court in a case involving political matters.

11(C) - Such activity is obviously "boiler room operation" which makes use of slick, professional-sounding salespeople to "cold call" and use high pressure sales tactics to lure investors into lucrative-sounding investment opportunities. On the other hand, even the call is cold call, it may not be illegal if Bernard is an existing client.

12(C) - (A) refers to Type 7 regulated activity and (B) refers to Type 6. Both are subject to SFC's licensing regime. Registered institutions are registered with SFC. Trust companies are not deemed as carrying out any regulated activity.

13(B) - (I) and (II) are legitimate grounds to trigger an investigation by the Financial Secretary. (II) and (III) are unreasonable interventions of a company in a free economy.

14(A) - Each of (B), (C) and (D) seems to be too minor to trigger a special report.

15(C) - Licensed persons and professional investor are exempt from the prohibition on unsolicited calls.