Introduction Understanding HKSI-style questions goes beyond memorizing answers. They test your grasp of regulatory mechanisms, financial metrics, and the fit-and-proper standards that underpin Hong Kong's financial markets. Below, we walk through five sample questions, connect them to real-world concepts, and highlight the key takeaways you can carry into your study sessions.
Question 1: What is the discount window arrangement?
- Scenario: Banking liquidity and repurchase options are discussed with the Hong Kong Monetary Authority (HKMA).
- Explanation: The discount window arrangement in many jurisdictions involves liquidity support; in the given options, the correct one is that banks sign a repurchase agreement with the HKMA, where the bank can sell certain high-quality assets (e.g., assets like foreign currency fund bonds) to the HKMA and commit to buying them back at a later date at a pre-agreed price. This is a classic repo (repurchase) transaction used to obtain liquidity. It is not direct equity injection or funds transfer to foreign exchange funds.
- Takeaway: Repo transactions are a common liquidity tool used by banks and central banks to manage short-term liquidity without altering ownership of assets long-term. For HKSI exams, recognise that a) liquidity facilities may be structured as repos, and b) the party buying assets with an obligation to resell them back is engaging in a repurchase agreement.
Question 2: Which statement(s) about audits under the Securities and Futures Ordinance (SFO) constitutes a crime?
- Scenario: A licensed company is under investigation; statements describe actions before or during auditing.
- Explanation: The core idea is intent and actions that impede or evade the audit process. In this case, deleting materials before audit (1) is not clearly crime-by-itself without linking to audit relevance; simplifying audit tasks (2) is not a crime if the purpose is not to evade or falsify. However, attempting to move audit targets out of Hong Kong to evade audits (3) or having already moved them (4) can amount to an offense if done to evade audit responsibilities. Therefore, the credible criminals are (3) and (4).
- Takeaway: When evaluating “criminal” actions in HKSI contexts, focus on intent to evade or mislead auditors and actions that undermine the audit process. This aligns with the SFO’s emphasis on honesty, transparency, and the integrity of financial reporting.
Question 3: When was Hong Kong’s first securities exchange established?
- Answer: 1891
- Explanation: Hong Kong’s securities market has roots in the mid-19th century, with the first formal exchange traces back to the Hong Kong Stock Brokers Association established in 1891, later renamed the Hong Kong Stock Exchange. This historical context helps you understand the evolution of HK’s capital markets and the regulatory framework that supports them today.
- Takeaway: A solid grasp of market history helps you contextualize current regulatory structures and licensing regimes in HKSI examinations.
Question 4: Computing net profit margin
- Scenario: Sales are $6,000,000; pretax profit is $800,000; tax is $200,000.
- Calculation: Net profit after tax = 800,000 − 200,000 = 600,000. Net profit margin = (600,000 / 6,000,000) × 100% = 10%.
- Answer: 10%
- Takeaway: Net profit margin measures profitability after all expenses, including taxes. Be comfortable with the order: gross profit (or operating) vs. net income after tax, and the formula for margin as (net income after tax) / sales.
Question 5: Conditions for obtaining a securities brokerage license
- Statement: The required conditions include good financial standing, good reputation, rich analytical experience and knowledge, and demonstrable competence.
- Correct Choice: I, II, IV (Agh as “III” is not required explicitly in this framing). In HKSI terms, licensees must meet fit-and-proper criteria, including financial soundness, integrity, and competence; extensive analytical experience is beneficial but not listed as an explicit mandatory criterion here.
- Takeaway: Licensing hinges on being a fit and proper person with sound finances, a solid reputation, and competence. Always verify the exact criteria used by the licensing authority in the current rules, but the core idea is fit, proper, and capable.
Conclusion These five questions illustrate how HKSI-style problems test your understanding of regulatory tools (like repo-based liquidity facilities), the ethics and legality surrounding audits, historical market foundations, basic financial metrics, and the licensing standards that govern market participants.
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