Introduction
If you're preparing for HKSI exams, you’ll encounter scenario-based questions that test your grasp of real-world regulatory expectations. Rather than cramming answers, it's more effective to root your study in the actual rules and their practical applications. In this post, we walk through five representative questions, explain what each item tests, and share takeaways you can apply to both exams and everyday compliance practice.
Question 1: Internal monitoring program requirements
What this tests: The expectations around how a broker-dealer should monitor and document activity.
Correct option: D
Why D is not a requirement (and what is): The item suggests keeping telephone recordings for 1 month, which is inconsistent with the common standard in such controls. The provided explanation indicates that telephone recordings must be retained for at least 6 months. This aligns with the principle that surveillance and trade reconstruction rely on longer retention when monitoring trading activity.
Takeaway for HKSI study and practice:
- Retention periods for surveillance records (including phone recordings) matter. Know the typical minimum durations (e.g., 6 months in this context).
- Internal monitoring programs should cover time-stamped orders, KYC compliance, and consistent trade documentation—these are foundational expectations.
Question 2: Listing content (which statement is incorrect)
What this tests: Understanding the various routes to a listing and when each is applicable.
Correct option: D
Why D is incorrect: The statement asserts that “rights issues (供股) are a pre-listing method used by new issuers,” which is not accurate. Rights issues are commonly associated with post-listing actions (i.e., after the issuer has already listed). The provided explanation notes that rights issues are a post-listing issuance method.
Takeaway for HKSI study and practice:
- Distinguish pre-listing vs. post-listing methods and the regulatory nuances behind each route.
- Be precise about terminology such as public offerings, placings, and rights issues when tackling listing-related questions.
Question 3: Examples of suspicious transactions
What this tests: Recognizing patterns that regulators might flag as suspicious activity.
Correct option: D
Why: The walkthrough shows that simply opening multiple bank accounts (I) or frequent trading without profit (II) is not, by itself, conclusive evidence of suspicious activity. In contrast, III (frequent small cash trades) and IV (cash-only trading) are more consistent with behaviors regulators monitor for layering, obfuscation, or cash-based schemes.
Takeaway:
- Do not rely on profit/loss alone to judge suspicious activity.
- Look for unusual patterns such as multiple accounts, consistent cash usage, and inconsistent funding sources.
Question 4: About market participants and trading in HKEX
What this tests: The regulatory status and qualifications of people/organizations that can participate in trading.
Correct option: B
Why: The explanation notes common pitfalls: (A) is incorrect since a participant cannot be an individual; (C) and (D) are incorrect in the described context. Specifically, B states that a participant must have at least one executive director registered as a responsible person, which is the correct form of accountability in many regulatory settings.
Takeaway:
- Understand the founding eligibility and governance expectations for market participants.
- Distinguish between corporate and individual eligibility in the context of exchange participation.
Question 5: “Licensed body” vs. “Registered institution” in HK
What this tests: The regulatory scope and oversight for different types of financial entities.
Correct option: C
Why: The provided explanation indicates that, for the registered institution, it is not accurate to claim it is exempt from all SFC rules/guidance. The other options are ruled out in the explanation for being incorrect in this scenario.
Takeaway:
- Differentiate between licenced and registered entities and their respective regulatory oversight. In this context, registered institutions are still under regulatory rules, and the breadth of frontline regulation may involve SFC oversight rather than exclusively other bodies.
Final thoughts and HKSI study tips
- Focusing on the regulatory rationale behind each option helps you apply these questions to real-world compliance scenarios.
- Build a checklist for each topic area: internal controls and retention, listing methodologies, detection of suspicious activity, participant qualifications, and regulatory oversight roles.
- Practice with explanations: use official keys and reasonings to anchor your understanding rather than memorize outcomes alone.
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