Introduction If you’re preparing for the HKSI exams, you’ll encounter scenarios that test not just memorization but your ability to apply regulatory concepts to real-world cases. Below, we walk through five representative questions that touch on share registry duties, forward rate agreements, disclosure obligations, the regulatory framework’s committees, and settlement mechanics. Instead of simply memorizing answers, we’ll highlight how to reason through each scenario so you can tackle similar questions with confidence.
Question 1: Who is responsible for appointing the share transfer registration office? Options:
- A. Listed company
- B. The Stock Exchange
- C. Central Clearing and Settlement System (CCASS)
- D. The Securities and Futures Commission (SFC)
What this tests: Understanding of corporate actions and the function of the share registry in maintaining the shareholder register.
Answer: A Explanation: The share transfer registration office is appointed by the listed company to maintain and preserve its shareholder register. This relationship ensures that the company’s ownership records are kept by the entity best positioned to manage its equity holders.
Question 2: Through a forward rate agreement, the borrower can Options:
- A. Lock in the return on borrowing.
- B. Lock in the cost of borrowing.
- C. Choose whether to exercise the agreement to achieve returns above market.
- D. Lock in the amount lent by investors.
What this tests: Comprehension of forward rate agreements (FRAs) as instruments to lock borrowing costs, not returns or lending amounts.
Answer: B Explanation: A forward rate agreement is a contract in which the two parties agree, at a future date, to borrow/lend at a specified rate for a specified period. The borrower effectively locks in the borrowing cost via the FRA.
Question 3: Mr Li is an analyst for a licensed company in Hong Kong. He also holds units in a collective investment scheme issued by another licensed firm and has a HKD 1 million loan from a licensed firm. If his report covers the involved companies, does he need to disclose conflicts of interest? Options:
- A. Yes, because there is a potential conflict of interest
- B. Yes, but only disclose the collective investment scheme investment
- C. Yes, but only disclose the loan
- D. No, disclosure is not required
What this tests: Regulatory guidance on disclosure of personal/family financial interests and professional relationships in research to avoid improper influence. The nuance here is that not all financial interests trigger disclosure.
Answer: D Explanation: The rule distinguishes between financial interests that require disclosure and typical financing relationships like loans or holdings in a collective investment scheme, unless they meet specific criteria. In this scenario, the stated financial interests (a loan and investments in a collective investment scheme) do not by themselves mandate disclosure under the cited guidance, so option D is correct.
Question 4: Which statement about the HKSFC’s functional departments and committees is correct? Options:
- A. The SFC Advisory Committee is independent of the SFC and has supervisory powers over it.
- B. The SFC Product Advisory Committee is independent of the SFC and provides opinions on product policy matters, with no actual enforcement power.
- C. The SFC Appeals Tribunal accepts appeals related to equity takeover matters.
- D. Intermediaries cannot use the Review by Procedure Committee to appeal a licensing decision.
What this tests: Understanding of the independence and powers of SFC committees and tribunals, and where authority lies for different types of appeals.
Answer: D Explanation: Statement A is incorrect as the Advisory Committee is not independent and does not have supervisory powers over the SFC. Statement B is incorrect because the Product Advisory Committee is not independent and does have some enforcement relevance. Statement C is incorrect because takeover-related matters have a dedicated committee for handling such appeals. Statement D is correct: if an intermediary disagrees with a licensing decision, it cannot use the Review by Procedure Committee for such appeals; these matters are handled by the appropriate licensing/appeals pathways.
Question 5: If a broker has insufficient shares to settle on the settlement date, on what day does the Hong Kong Clearing Centre (CCASS) force-buy to cover the shortfall, creating a closing out (forced buy-in)? Options:
- A. T+0
- B. T+1
- C. T+2
- D. T+3
What this tests: Knowledge of the CCASS settlement calendar and the timing of forced buy-ins to close a short position.
Answer: D Explanation: If a CCASS participant lacks enough shares in its CCASS stock account by the end of T+2, CCASS will force-buy the required shares on T+3 to close out the short. Participants must bear the cost and any penalties for the forced buy-in. Note that T+2 is the normal settlement day; T+3 is the forced buy-in day.
Key takeaways
- Share transfer registries are appointed by the listed company, not by the exchange or regulators.
- FRAs help borrowers lock in costs, not returns or lender amounts.
- Disclosure requirements hinge on the nature of financial interests; not all loans or fund investments trigger disclosure.
- SFC committees have defined roles and powers; some processes involve specific tribunals rather than general oversight.
- CCASS has a clear timeline for settlement and forced buy-ins, with T+3 marking the forced action for shortfalls on T+2.
If you found this breakdown helpful, follow HKSIYES for more practical explanations and exam-focused discussions on HKSI topics. Stay tuned for more insights, tips, and real-world applications to help you ace your HKSI journey.