HKSI LE Paper 1 (Dec 2006) - Q&A 16~30 (with explanations):
16(C) - Code of Conduct is simply providing the standards of good practices for intermediaries and their representatives to follow.
17(D) - Unlike (II), (III) & (IV), (I) appears not to be an effort with the intention to frustrate an audit.
18(C) - Part III of SFO clearly states that exchange companies (i.e. SEHK & HKFE) and clearing houses should be recognized by SFC. Official Receiver is not an institution specific to securities industry and thus not regulated by SFC. Listed companies are approved by SEHK instead of SFC.
19(A) - (I) refers to the EO for a licensed corporation, while (IV) refers to the EO for an associated entity. An EO is not necessarily a designated compliance officer. An EO is supervising regulated activities of a licensed corporation and its licensed representations, but "marketing executives" is not mentioned in SFO.
20(A) - Client Securities Rules ("CSR") could only cover securities received or held in HK (not overseas). (III) is wrong because CSR would not regulate securities neither handled by an intermediary nor its associated entity.
21(B) - The general rule under S&F (Keeping of Records) Rules is that records should be kept for at least 7 (instead of 10) years. Under S&F (Contract Notes, Statements of Account & Receipts) Rules, contract notes should be retained for at least 2 years (instead of 2 months). Under Code of Conduct, telephone recording of order instructions should be retained for at least 3 months (instead of 2 years).
22(A) - (II) is wrong because compliance staff is not subject to any particular qualification requirement. (IV) is obviously irrelevant.
23(A) - (III) is definitely correct as SFC emphasizes that clients must know they have the right to revoke the standing authority. (II) & (IV) are wrong because standing authority must be renewed for every 12 months and the renewal notice should be given to the cliennt 14 days prior to the expiry date. Though (I) is regarded as correct in the answer, I have reservation on the phrase "with the written consent of the client" - standing authority may be renewed by negative consent.
24(C) - (I) is wrong because records should be kept for at least 7 years. (IV) is wrong because telephone records should be kept for at least 3 months.
25(D) - By common sense all of those negative factors should be considered by SFC in judging a person's character and integrity.
26(C) - (III) is factually wrong - the benchmark of indirect "control" should be 35% of voting power.
27(D) - (III) is wrong because any exclusion of legal rights of the client should not appear in the client agreement.
28(D) - (I) is wrong because a fund manager is not only subject to FMCC, but also other codes and guidelines, like Code on Unit Trusts & Mutual Funds, Management Supervision & Internal Control Guidelines, etc.
29(B) - Responsibities of senior management should be more "high level". If only two options could be taken, (I) and (IV) are the best choices.
30(D) - Simply by memory, diligence and conflicts of interest are 2 of the 9 General Principles.
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