Decoding Five HKSI: Supranational Bodies, Client Communications, and Privacy in Practice

Introduction

If you’re studying for HKSI qualifications, you’ll often face questions that require applying real-world regulatory concepts to concise scenarios. Below is a guided walk-through of five representative题目讲解 (question explanations) that touch on supranational organizations, client communications, issuers of non-listed structured products, data privacy, and professional investor thresholds. The aim is to help you see how HKSI concepts connect, not just memorize answers.

1) Which item is NOT a supranational organization or multilateral institution?

• Options: A) People’s Bank of China, B) IMF, C) BIS, D) World Bank
• Answer: A
• Why it matters: Supranational or multilateral institutions typically include bodies like the IMF, the International Settlement Bank (BIS), the World Bank, OECD, and the WTO. They are not national-level institutions.
• Explanation in brief:
  • IMF, BIS, World Bank, OECD, and WTO are examples of supranational/multilateral entities.
  • The People’s Bank of China is a national central bank, not a supra-national organization. So, option A is correct as the item that does not belong.
• Takeaway: Distinguish between national authorities (like a country’s central bank) and international/norm-setting bodies when answering regulatory questions.

2) Client visits by a broker to a client’s customers: which statements are correct?

• Scenario: Mr. Wang visits Mr. Fan, a client of another intermediary, to develop business.
• Options: A) Only II and III; B) Only I, II, IV; C) Only II, III, IV; D) All
• Answer: A (Only II and III)
• Key points:
  • Statement I is incorrect: even if the client is a professional investor, the visit can still be categorized as an uninvited (unsolicited) visit; such uninvited visits can be treated differently depending on the context.
  • Statement II is correct: if the client had previously held the securities of a listed company, continuing to sell that security to them may be permissible under certain conditions, but it depends on the regulatory framework in place.
  • Statement III is correct: in-person visits and telephone conversations are not considered “approved communications” in this context.
  • Statement IV is incorrect: sending mass SMS communications can be treated as an approved form of communication when the content is directed at multiple recipients with clear disclosure of purpose and recipient categories.
• Takeaway: Be mindful of distinctions between invited/approved communications and unsolicited visits, and how professional investor status can affect permissible communications under HKSI-like standards.

3) About issuers of non-listed structured investment products (non-listed structured products): which statement is correct?

• Options: A) Must be a Hong Kong-incorporated entity; B) Issuer may not be independent of the trustee; C) Issuer may not be independent of the product counterparty; D) Issuer can be a Special Purpose Vehicle (SPV)
• Answer: D
• Key points:
  • The issuer of non-listed structured products need not be a Hong Kong-incorporated entity; rather, it must be established in Hong Kong or another jurisdiction accepted by the SFC.
  • The issuer must be a legal entity in the appropriate jurisdiction and is often an SPV in order to ring-fence assets and liabilities.
  • The correct statement is that the issuer can be a Special Purpose Vehicle (SPV).
• Takeaway: In structuring non-listed structured products, SPVs are commonly used as issuers, and the governing jurisdiction matters for regulatory acceptance.

4) Privacy principles under the Personal Data (Privacy) Ordinance: which practices do not comply with the “data principles”?

• Options: A) (1)(2)(3); B) (1)(2)(4); C) (1)(3)(4); D) (2)(3)(4)
• Answer: D
• Correct interpretation of the options:
  • (1) The collection is reasonable and fair—this is compliant.
  • (2) Data can be transferred to other classes of data recipients if the purpose is disclosed and the recipients and purposes are specified; this must be done with proper notice and rights to access or correct data.
  • (3) Retention should be accurate and up-to-date; the retention period should be no longer than necessary for the use of the data.
  • (4) Personal data should not be used for new purposes without consent.
• Why D is correct: Statements 2, 3, and 4 as worded include elements that would require clarification or correction to meet the Ordinance. For instance, data transfers require notice and purpose disclosure; retention should be kept up-to-date and limited to necessity; and new purposes require consent or a legally compliant basis.
• Takeaway: Master the core data principles—fair collection, purpose limitation, accuracy and up-to-date data, retention limitation, and consent for new purposes.

5) A and B funds: who qualifies as a professional investor?

• Scenario: A fund (A) has 9 million HKD in assets; B fund has 30 million HKD; B wholly owns A. Statements: I) A is a professional investor; II) A is not a professional investor; III) B is a professional investor; IV) B is not a professional investor.
• Options: A) I & IV; B) II; C) I & III; D) III
• Answer: C (I & III)
• Key rules (illustrative thresholds):
  • A fund (or its entities) can qualify as a professional investor if it meets thresholds such as assets under management or total assets, or is a professional investment vehicle under the regulator’s definitions.
  • If B wholly owns A, and A qualifies as a professional investor, B can also qualify due to its control and investment activity.
• Takeaway: When evaluating professional investor status, consider the asset thresholds and control relationships; ownership can propagate professional-investor status up the chain when the underlying entity meets the criteria.

Quick takeaways for HKSI exam prep

• Know the difference between supranational/multilateral organizations and national authorities.
• Understand the regulatory framework for client communications, including what constitutes approved communications vs. unsolicited visits.
• Be familiar with issuer structures for non-listed products, particularly SPVs and jurisdictional requirements.
• Master the Personal Data (Privacy) Ordinance principles: collection, transfer with notice, accuracy, retention, and purpose limitation.
• Memorize investor-category thresholds and how control relationships (parent-subsidiary) impact professional investor status.

If you found this walk-through helpful, be sure to follow HKSIYES for more exam-focused explanations, practice questions, and strategic study tips to boost your HKSI readiness.