31(A) - (I) & (III) are the risk disclosure statements set out in Schedule 1 of the Code of Conduct. (II) is wrong as the true risk of holding assets outside assets is that such assets are not protected by the Client Securities Rules. (IV) is wrong as the true risk of margin trading is the financial leverage which may cause the margin collaterals to be liquidated by the intermediary.
32(B) - (I) is the Client Identity Rules. (III) is a standard know-your-client requirement. (II) is not chosen because it may not be a problem if the client's cash settlement is a small amount. (IV) is not chosen because obtaining the client's latest tax return is not specified by SFC's codes & guidelines. Intermediary has flexibility to evaluate the client's financial position by different means.
33(D) - All of them are requirements specified in the Fund Manager Code of Conduct.34(D) - (D) is wrong because the Code of Conduct allows the intermediary to set its own restrictions on staff dealings.
35(D) - (I) is wrong because complete reliance on internet for communication is too risky. When the server is out of order, clients should be allowed to contact the service provider by other means. (III) is wrong because shifting all responsibilities for errors and omissions to the client is unreasonable.
36(B) - Segregation of duties is a control requirement. (III) & (IV) are obviously not for this purpose.
37(D) - Receiving trade instructions from clients is definitely a front office function. Trade confirmations with clients may be performed by back office.
38(D) - The Code of Conduct does not encourage, but not strictly prohibit, taking client orders by mobile phone. Since mobile phone can't create central tape records, the dealer should record the order details in writing or on the office telephone recording system.
39(D) - (A) is wrong as the Guidance Note is not applicable to AFIs. (B) is wrong as the Guidance Note is not statutory and thus can't make offences or prescribe sanctions. (C) is wrong as the Guidance Note lets the licensed corporations decide whether trading for high risk clients.
40(D) - (I) is not chosen because it should not be an intermediary to check the credit worthiness of its counterparty's client. This should be done by its counterparty instead.
41(B) - (I) is wrong because senior management is ulitmately responsible for internal controls and can't delegate all of their supervisory functions to line management. (II) is wrong because the major focus of line staff (e.g. dealers) should be the regulated activities rather than compliance and audit.
42(D) - (I) doesn't make sense as it is not abnormal that a well-known very wealthy businessman trades through different accounts. (II), (III) & (IV) are all examples of suspicious transactions given by the Guidance Note.
43(D) - (I) is wrong as cash market means spot market. (III) is wrong as the definition of securities is set out in the SFO, which is not freely extended by SFC.
44(A) - (A) is wrong because a SEHK dealer must be registered as a trading (instead of clearing) participant.
45(D) - (II) is wrong because a speculator dealing for himself as principal (rather than as agent) is not subject to any licensing requirement.
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