This question assesses the understanding of exemptions from the licensing requirement for Type 5 regulated activity (advising on futures contracts) under the Securities and Futures Ordinance (SFO). Schedule 5 of the SFO provides specific carve-outs for certain professionals. One such exemption applies to certified public accountants, solicitors, and trust companies when they provide advice on futures contracts that is ‘wholly incidental’ to their primary professional practice. In this scenario, the accountant’s recommendation arises directly from his audit findings concerning the client’s business risks. The advice is not part of a separate advisory business but is an integral component of his professional service as an auditor. Therefore, it falls under the ‘wholly incidental’ exemption, and a Type 5 licence is not required for this specific act.

This question assesses understanding of a licensed corporation’s responsibilities when dealing in futures contracts for an intermediary client, as outlined in the Code of Conduct for Persons Licensed by or Registered with the SFC. A key principle is that the licensed corporation must ensure its client complies with the margin and variation adjustment requirements of the Hong Kong Futures Exchange (HKFE) as if the client were an exchange participant itself. This ‘look-through’ obligation extends to the intermediary’s own clients. The licensed corporation’s primary duty is to enforce the exchange’s rules upon its direct client, the intermediary. This involves making sure the intermediary has robust procedures to collect required margins from its end-clients. The licensed corporation’s relationship is with the intermediary, not the end-client, so direct intervention with the end-client is generally inappropriate. The failure to meet a margin call is primarily a breach of exchange rules and a risk management issue, not automatically an instance of unlawful dealing or gambling, which involves different considerations. The focus must be on upholding the integrity of the clearing and settlement system by enforcing the rules.

This question assesses understanding of the rules governing block trades under the Hong Kong Futures Exchange (HKFE). Block trades are large, privately negotiated transactions executed outside the central order book. Key regulations focus on ensuring market integrity. A fundamental principle is that the price of a block trade must be fair and reasonable, reflecting the prevailing market conditions at the time of execution. Executing a trade at a price that significantly deviates from the market without a valid commercial basis could be viewed as an abuse of the facility. Other critical rules include the requirement for prompt reporting; block trades must be reported to the Exchange’s system within a very short timeframe (e.g., within 5 minutes) after execution to ensure transparency. Furthermore, the block trade facility is specifically designed to accommodate large trades outside of normal trading hours, including the T+1 session. Finally, it is permissible for a participant to aggregate smaller orders from different clients to meet the minimum volume threshold required for a block trade, provided this is done in accordance with internal procedures and for the benefit of the clients.

The Securities and Futures (Client Securities) Rules establish a protective framework for client assets, but their application is strictly defined. For the rules to apply, three primary conditions must be met. First, the securities must be received or held within Hong Kong. This territorial scope means assets held overseas, even through the intermediary’s custodian, are not covered by these specific rules, though other regulations like the Code of Conduct mandate risk disclosures for such arrangements. Second, the type of security is critical; they must either be listed or traded on a recognised stock market (currently, The Stock Exchange of Hong Kong Limited) or be interests in a collective investment scheme authorised by the SFC. This excludes securities of private, unlisted companies. Third, the securities must be held by, or on behalf of, the intermediary or its associated entity. If a client holds assets directly in their own name with a third party, such as a transfer agent or in a personal safe deposit box, the intermediary does not have custody, and the rules do not apply to those assets.

This question assesses understanding of General Principle 6 of the SFC Code of Conduct, which addresses conflicts of interest, specifically the rules on order allocation. When a licensed corporation aggregates an order for its own account (proprietary or ‘house’ account) with orders for its clients and the total order is only partially executed, a clear conflict of interest arises. The Code of Conduct mandates that in such a scenario, priority must be given to satisfying the client orders. The firm cannot allocate any part of the execution to its own account until the clients’ orders have been filled to the fullest extent possible. Allocating on a pro-rata basis across all accounts, including the house account, is not compliant as it fails to give the required priority to clients. The principle is designed to ensure that clients are treated fairly and are not disadvantaged by the firm’s own trading activities.

According to the SFC’s Management, Supervision and Internal Control Guidelines (ICG) and specific circulars on algorithmic trading, a licensed corporation bears the primary responsibility for ensuring its trading systems do not compromise market integrity. Statement I is correct as implementing automated pre-trade controls, such as price collars and maximum order size limits, is a fundamental requirement to prevent erroneous orders from reaching the market. Statement II is correct because technology alone is insufficient; the guidelines require that competent personnel, with the necessary authority, must actively monitor the algorithmic trading system in real-time to intervene if necessary. Statement IV is correct as the SFC expects rigorous testing, including stress testing under various market scenarios, to be conducted before deploying an algorithm and on an ongoing basis to ensure its stability and reliability. Statement III is incorrect because while the exchange has its own market surveillance functions, the licensed corporation cannot delegate its responsibility. The firm is directly accountable for the orders generated by its systems. Therefore, statements I, II and IV are correct.

Statement I is correct. Under section 298 of the Securities and Futures Ordinance (SFO), a person who discloses, circulates, or disseminates information that is likely to induce the sale or purchase of securities, and is reckless as to whether that information is false or misleading as to a material fact, commits market misconduct. David’s circulation of an unverified report falls under this provision.

Statement II is correct. Under section 299 of the SFO, a person who enters into two or more transactions in securities of a corporation that by themselves are likely to have the effect of maintaining or stabilizing the price of the securities, with the intention of inducing another person to subscribe for, sell or purchase securities of the corporation, commits stock market manipulation. Eva’s actions fit this description.

Statement III is correct. Under section 297 of the SFO, it is market misconduct for a person to disclose information to the effect that the price of securities will be affected by a prohibited transaction, if that person or an associate has entered into the prohibited transaction or will receive a benefit from the disclosure. Frank’s disclosure about the impact of his firm’s illegal short selling (a prohibited transaction) is a direct example of this offence.

Statement IV is incorrect. The offence of disclosing false or misleading information inducing transactions under section 298 of the SFO does not require the prosecution to prove that the person who disseminated the information made a direct financial profit. The key elements are the act of dissemination and the mental state (in this case, recklessness), not the outcome of personal gain for the perpetrator. Therefore, statements I, II and III are correct.

Under the Securities and Futures Ordinance (SFO), a corporation seeking to conduct regulated activities must be licensed by the SFC. Statement I is correct because a licensed corporation is required to have at least two Responsible Officers (ROs) for each regulated activity it intends to carry on. While the same individual can be an RO for multiple activities if competent, the requirement of having at least two ROs applies to each activity individually. Statement II is correct as any individual performing a regulated function for a licensed corporation, such as executing client orders, must be licensed as a Licensed Representative accredited to that corporation. Statement III is incorrect; the SFC is the primary regulator for licensed corporations. The Hong Kong Monetary Authority (HKMA) acts as the front-line supervisor for Authorised Financial Institutions that are registered with the SFC as ‘registered institutions’, not for licensed corporations. Statement IV is correct because the SFC’s Fit and Proper Guidelines explicitly state that in assessing a person’s fitness and properness, it will consider factors including their financial status, reputation, character, reliability, and competence, which encompasses their educational qualifications and relevant industry experience. Therefore, statements I, II and IV are correct.

This question assesses understanding of the specific rules governing block trades on the Hong Kong Futures Exchange (HKFE). Statement I is incorrect because the execution price of a block trade is explicitly excluded from the calculation of the day-high, day-low, last traded price, and settlement prices to prevent large, off-market transactions from distorting key market data. Statement II is correct; the quantity (volume) of a block trade is included in the total traded volume for the contract, ensuring market transparency regarding overall activity. Statement III is correct; the HKFE has the authority to require a special block trade margin as a risk management measure, particularly if the executed price is not deemed fair and reasonable or deviates significantly from the prevailing market price. Statement IV is incorrect; HKFE rules mandate that a block trade negotiated between two participants must be entered into HKATS separately by both the buying and selling participants to ensure mutual confirmation and accuracy. One party cannot enter the trade on behalf of both. Therefore, statements II and III are correct.

This question assesses the understanding of specific client protection measures outlined in the Code of Conduct for Persons Licensed by or Registered with the SFC, particularly concerning the management of discretionary accounts. According to paragraph 7.1(c) of the Code of Conduct, a licensed or registered person must notify a client in writing if the net equity in their discretionary account falls by more than 50% in any period of three or fewer consecutive trading days. In the scenario, the account’s net equity dropped from HK$10 million to HK$4.5 million in two days, which is a 55% decrease, thereby triggering this notification requirement. This rule is a critical safeguard. Following such a drop, paragraph 7.1(d) stipulates that no new trades may be initiated (except to close existing positions) without the client’s prior written approval. While certain suitability requirements and other obligations may be exempted for Corporate Professional Investors upon meeting specific criteria and providing consent, fundamental conduct requirements such as the notification of a significant loss in a discretionary account are generally applicable unless explicitly and properly waived. The scenario does not state any such waiver is in place, so the default regulatory obligation applies. The other options are incorrect because closing out existing positions is explicitly permitted after the loss, the PI status does not automatically nullify this fundamental notification duty, and the rules on day trades are a separate matter not directly triggered by the equity drop.

This question assesses understanding of the obligations of a licensed or registered person under the SFC Code of Conduct when a client exercises their right during a cooling-off period. The Code stipulates that upon receiving a client’s instruction to cancel a transaction under a cooling-off mechanism, the firm must act promptly. The client is entitled to a full refund of the amount recovered from the product issuer. This refund must include any sales commission or benefits the firm received. However, the firm is permitted to deduct a reasonable handling charge, provided two key conditions are met: 1) the charge was clearly disclosed to the client at or prior to the point of sale, and 2) the charge does not contain any profit margin for the firm. Therefore, refunding the principal amount less a pre-disclosed, reasonable handling fee is the correct procedure. Refunding the full amount without the disclosed fee would be incorrect if a valid charge exists. Deducting the initial sales commission from the client’s refund is a direct violation of the Code, as the refund from the issuer is meant to be passed on in full. Similarly, basing the refund on the current market value is inappropriate, as the cooling-off mechanism is designed to unwind the original transaction, not to execute a market sale.

Statement I is correct. According to HKCC Rules, Participants intending to use either Exchange Fund Bills/Notes or U.S. Treasuries to cover margin calls must notify HKCC of their intention in writing by 11:00 a.m. Statement II is incorrect. The HKCC Rules explicitly state that if a direct transfer from a client fails, the HKCC Participant remains fully liable to HKCC for the margin call and may be placed in default. The Participant is not absolved of liability. Statement III is correct. The value of both Exchange Fund Bills/Notes and U.S. Treasuries accepted as margin cover is calculated after deducting a specified percentage haircut to account for potential market volatility. Statement IV is incorrect. There is a key distinction in the transfer process: Exchange Fund Bills/Notes must be transferred to HKCC’s account with the Hong Kong Monetary Authority (HKMA), whereas U.S. Treasuries are delivered to HKCC’s account with an approved bank or depository. Therefore, statements I and III are correct.

To answer this question correctly, one must understand the fundamental structural differences between the financial regulatory systems of the United States and Hong Kong, particularly concerning securities and derivatives. The United States operates under a ‘twin peaks’ or specialized regulatory model at the federal level. In this system, distinct agencies have jurisdiction over different parts of the financial market. The Securities and Exchange Commission (SEC) is the primary regulator for the securities markets, while the Commodity Futures Trading Commission (CFTC) is the primary regulator for the futures and swaps markets. In contrast, Hong Kong employs an integrated or consolidated regulatory model. The Securities and Futures Commission (SFC) is the single, principal regulator responsible for overseeing both the securities and the futures markets. This structural difference is a key distinction for any firm operating across both jurisdictions. Other aspects, such as client money protection and clearing house structures, have their own detailed rules in each location, but the overarching regulatory agency structure is a defining characteristic.

This question tests the understanding of Section 280 of the Securities and Futures Ordinance (SFO), which deals with the validity of transactions connected to market misconduct. According to SFO Part XIII, a transaction is not void or voidable by reason only that it was entered into in connection with, or as a result of, market misconduct. This principle is crucial for ensuring the certainty and finality of transactions in the financial markets and protecting the integrity of the clearing and settlement systems.

Statement I is correct. The purchase of Innovate Corp shares by the fund remains a legally binding and enforceable contract, despite being executed during a period of price rigging by third parties. The market misconduct does not invalidate the transaction itself.

Statement II is incorrect. The fund manager does not have the right to void the transaction. The SFO explicitly prevents transactions from being voidable solely on the grounds of being linked to market misconduct. The right to rescind an agreement is available in other specific circumstances, such as those resulting from an unsolicited call (s. 175, SFO), but not for market misconduct.

Statement III is correct. While the transaction itself is valid, the SFO provides a civil remedy for victims of market misconduct. Under Section 281 of the SFO, a person who has suffered a pecuniary loss as a result of market misconduct can bring a civil action to seek compensation from the person who perpetrated the misconduct.

Statement IV is incorrect. The liability for the loss rests with the individuals who committed the price rigging, not necessarily the innocent counterparty who sold the shares to the fund. The SFC’s enforcement action would be directed at the perpetrators of the misconduct, and any compensation would be sought from them through civil proceedings, not by compelling an unrelated, innocent counterparty. Therefore, statements I and III are correct.

The Securities and Futures (Keeping of Records) Rules and the Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules are foundational for ensuring transparency and accountability in financial intermediaries. However, the SFC’s enforcement approach is pragmatic. The rules are not designed to be punitive for minor, unintentional administrative errors, especially when a firm has robust internal controls to detect and rectify such issues promptly. The key consideration for regulatory action is the nature of the non-compliance. A breach is more likely to attract penalties if it is found to be deliberate, intended to mislead or defraud a client or the market, or if it arises from a systemic failure of controls for which there is no reasonable excuse. In a situation involving a simple human error that is quickly identified and corrected without causing any client detriment, it demonstrates that the firm’s systems are working. This would be considered a reasonable excuse, and regulatory penalties would be highly unlikely. The focus is on the intent and the reasonableness of the firm’s conduct, not on achieving absolute perfection free of any minor operational mistakes.

Statement I is incorrect. According to the rules governing the HKFE Clearing Corporation Limited (HKCC), an applicant for HKCC participantship must first be registered as an HKFE Participant. The two applications cannot be processed in parallel, and HKCC participantship is contingent upon successful HKFE registration. Statement II is incorrect. The ‘Trader’ category of HKFE participantship has a specific condition that the ownership of its share and loan capital, and its management and control, must be effectively vested in one individual. A structure with three equal, unrelated owners would not meet this requirement. Statement III is correct. The ‘Futures Commission Merchant’ (FCM) is the appropriate category for a firm that intends to trade for the accounts of other persons, including retail clients. This category allows the firm to carry trading accounts for its clients. Statement IV is correct. This statement accurately describes the function and a key limitation of the ‘Broker’ category. A Broker can act as an agent for another HKFE Participant to conclude trades but is explicitly prohibited from carrying a trading account for that participant. Therefore, statements III and IV are correct.

Under the Securities and Futures Ordinance (SFO), a fundamental and ongoing requirement for any individual to be licensed is that they must be, and remain, a ‘fit and proper’ person. The Fit and Proper Guidelines issued by the SFC provide detailed criteria for this assessment. These criteria are not limited to financial integrity or professional competence but also encompass a person’s character, reputation, reliability, and financial soundness. A criminal conviction, regardless of whether it is directly related to financial services, can cast doubt on an individual’s character and reliability. Therefore, any event that may negatively impact the SFC’s assessment of a licensed person’s fitness and properness constitutes a material change that must be reported. The Securities and Futures (Licensing and Registration) (Information) Rules stipulate that licensed persons must notify the SFC in writing of any significant changes to the information previously provided in their application, including any criminal proceedings. This notification must be made within a specified timeframe, typically 7 business days, of the event occurring.

According to Section 6 of the Securities and Futures (Contracts Limits and Reportable Positions) Rules, any person who holds or controls a reportable position is required to lodge a written notice with the Hong Kong Futures Exchange (HKFE). This notification must be made within one business day following the day on which the reportable position was first established. Furthermore, a report must be submitted for each subsequent day that the position continues to be held or controlled. The requirement is not for immediate, real-time reporting upon crossing the threshold, nor is it for reporting by the end of the same trading day. The rules provide a clear T+1 business day timeline for the initial report.

This question assesses the understanding of the ‘exit notice’ mechanism for ceasing the mandatory clearing obligation for OTC derivatives under Hong Kong regulations.

Statement I is correct. For a licensed corporation, the appropriate frontline regulator to notify is the Securities and Futures Commission (SFC). If the entity were an Authorized Financial Institution (AFI) or an Approved Money Broker (AMB), the notice would go to the Hong Kong Monetary Authority (HKMA).

Statement II is correct. The regulators have explicitly stated that the exit mechanism is designed for entities that have made a permanent or long-term change to their business model or trading profile, resulting in a sustained reduction in their positions. It is not intended for temporary fluctuations, and regulators will monitor for any abusive use of this provision.

Statement III is incorrect. The process is not automatic. A prescribed person must proactively submit a formal written ‘exit notice’ to their frontline regulator to be relieved of the clearing obligation. Simply falling below the threshold for the required period is a prerequisite, but it does not in itself constitute an exit.

Statement IV is incorrect. This statement conflates the requirements for the ‘exit notice’ with the separate exemption for transactions with an ‘exempt affiliate’. The exempt affiliate rules, which involve consolidated accounts and central risk management, apply to intra-group transactions and are distinct from the conditions required to exit the clearing obligation entirely due to a reduction in overall position size. Therefore, statements I and II are correct.

To answer this question correctly, one must understand the primary product specializations of major international futures exchanges. The CME Group, which includes the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME), is globally recognized as the foremost marketplace for a wide range of agricultural derivatives, including grains (corn, soybeans, wheat) and livestock (live cattle, lean hogs). The London Metal Exchange (LME) is the world’s leading centre for trading industrial metals such as copper, aluminium, and zinc. The Eurex Exchange, based in Europe, is a dominant player in financial derivatives, particularly European interest rate products (like Bund futures) and equity index futures (like the DAX and Euro Stoxx 50). The Australian Securities Exchange (ASX) primarily lists derivatives based on Australian financial instruments, indices, and commodities relevant to the local economy, such as wool and wheat.

This question assesses the understanding of capital requirements for a Type 5 licensed corporation under the Securities and Futures (Financial Resources) Rules (FRR).

Statement I is incorrect. While the general minimum paid-up share capital for Type 5 activity is HK$5 million, this requirement does not apply if the corporation is subject to a licensing condition that it shall not hold client assets. Since Future Vision Advisory Ltd. is explicitly prohibited from holding client assets, it is exempt from this specific paid-up share capital requirement.

Statement II is correct. According to the FRR, a licensed corporation conducting Type 5 regulated activity that does not hold any client assets is required to maintain a minimum liquid capital of HK$100,000.

Statement III is correct. If the firm’s licensing conditions were to be varied to permit the holding of client assets, it would fall under the ‘in any other case’ category for required liquid capital. This would raise its minimum required liquid capital from HK$100,000 to HK$3 million.

Statement IV is incorrect. The FRR makes a distinction in notification timelines. A licensed corporation must notify the SFC ‘as soon as reasonably practicable’ if it is unable to comply with the specified amounts of capital (such as liquid capital). The ‘within one business day’ notification requirement applies to other breaches of the FRR, not a capital shortfall. Therefore, statements II and III are correct.

According to the Securities and Futures (Client Money) Rules and the Code of Conduct, an intermediary providing margin facilities must issue a daily statement of account that includes specific details to keep the client fully informed of their financial position and risk exposure. Statement I is correct as the net equity as at the end of the day is a fundamental component. Statement II is also correct because the margin excess or shortfall is a critical piece of information for a margin client, indicating whether a margin call is imminent. Statement IV is correct; details of any transactions closed during the day, including the realised profit or loss, must be reported to the client. However, Statement III is incorrect. While an intermediary must assess a client’s risk profile, a detailed risk profile analysis is not a required component of the daily transactional statement. The daily statement focuses on account balances, positions, and margin status, not on a qualitative reassessment of the client’s risk tolerance. Therefore, statements I, II and IV are correct.

According to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (SFC), soft dollars received by a licensed person must be for goods and services that provide demonstrable benefit to its clients. Statement I, a subscription to a financial data terminal for market analysis and research, directly aids in investment decision-making for clients and is a permissible service. Statement III, a software for portfolio performance measurement, is also explicitly permitted as it helps in the analysis and valuation of client portfolios. Conversely, Statements II and IV represent general operating overheads of the asset management firm. Office rental costs (Statement II) and staff salaries (Statement IV) are fundamental business expenses and do not qualify as permissible soft dollar benefits, as they are not a direct service to the clients in the manner intended by the regulations. Therefore, statements I and III are correct.

The Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission outlines specific responsibilities for licensed corporations that are also exchange participants of the Hong Kong Futures Exchange (HKFE) when they operate omnibus accounts. An omnibus account holds assets for multiple underlying clients, managed by an intermediary client of the licensed corporation. The core principle is to ensure that the risks associated with this structure are properly managed and that regulatory standards are maintained down the client chain. The licensed corporation must treat its direct client (the intermediary) as a sophisticated entity responsible for its own compliance. A key requirement is to ensure this client adheres to the HKFE’s margin and variation adjustment rules as if it were an exchange participant itself. This effectively delegates the responsibility for margin collection from the end-clients to the intermediary, but the licensed corporation must have procedures to ensure this is happening. Furthermore, the licensed corporation must be satisfied that the client’s dealings are lawful and do not constitute illegal activities like wagering, and that the client enforces the margin requirements on its own underlying customers.

According to the HKFE Rules and the SFC’s Code of Conduct, the ‘know your client’ principle extends beyond simply identifying the direct client entity, especially for omnibus accounts. Statement I is correct because Rule 606 of the HKFE Rules explicitly grants the HKFE the authority to force an HKFE Participant to close out open contracts if they fail to provide, when requested, accurate details of the ultimate beneficiaries or those originating instructions. Statement II is also correct as HKFE Participants are required to have systems in place to obtain and produce such information for omnibus accounts, either by collecting it upfront or having a mechanism to retrieve it promptly upon request from the HKFE or the SFC. Statement III is incorrect because the KYC obligation is not met by merely identifying the omnibus account holder (the institutional client); it requires the ability to identify the ultimate beneficial owners who gain a commercial or economic benefit. Statement IV is incorrect because the HKFE has direct enforcement powers beyond just reporting to the SFC; it can impose a margin surcharge on the relevant contracts in addition to forcing a close-out. Therefore, statements I and II are correct.

The Securities and Futures Ordinance (SFO) provides a broad definition of a ‘futures contract’ in Schedule 1. Statement I is correct because a contract made under the rules or conventions of a recognised futures market (like the Hong Kong Futures Exchange) is explicitly defined as a futures contract. Statement II is also correct as it describes a contract for differences (CFD), where parties settle based on the movement of an underlying factor, which falls under the SFO’s definition. Statement III is correct because the SFO definition explicitly includes an option on another contract that is itself a futures contract. Statement IV is incorrect; the SFO specifically excludes certain contracts for the sale of a commodity or contracts for differences if they are entered into for commercial purposes and not for speculative purposes. Therefore, statements I, II and III are correct.

Statement I is correct because information about a potential takeover is specific, not generally known to the public, and would likely have a material effect on the price of the listed company’s shares, thus meeting the definition of ‘inside information’ under the Securities and Futures Ordinance (SFO). Statement II is correct as a director of a corporation is explicitly defined as a ‘person connected with the corporation’ and is generally prohibited from dealing while in possession of inside information. Statement III is correct because the SFO provides for specific defences against an insider dealing allegation. One such defence is that the dealing was carried out in performance of a contractual obligation that was entered into before the person came into possession of the inside information. The director’s action fits this scenario. Statement IV is incorrect because while the motive may be sympathetic, the SFO does not provide a general defence based on personal hardship or the purpose of the transaction. The availability of a defence is strictly determined by the prescribed statutory conditions, such as the pre-existing contract mentioned in statement III, not the underlying reason for that contract. Therefore, statements I, II and III are correct.

Statement I is correct. Section 65 of the Securities and Futures Ordinance (SFO) explicitly requires that HKEX must establish a risk management committee to manage risks associated with its activities. Statement II is incorrect. The responsibility for market surveillance and the operation of cash trading falls under the Markets Division, not the Clearing Division. The Clearing Division is responsible for post-trade activities like clearing, settlement, and custody services. Statement III is incorrect. While HKATS allows for remote access, it is currently permitted only for companies incorporated in specific jurisdictions, which include the United States, the United Kingdom, and Australia. Singapore is not on this list. Statement IV is correct. The Securities and Futures Commission (SFC) being a full member of the International Organization of Securities Commissions (IOSCO) and a signatory to its multilateral MOU signifies Hong Kong’s commitment to upholding international best practices and standards in its financial markets. Therefore, statements I and IV are correct.

Under Schedule 2 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), a Hong Kong incorporated licensed corporation must ensure its non-Hong Kong subsidiary undertakings have appropriate procedures to comply with AMLO requirements. Therefore, statement I is correct. The AMLO also establishes personal liability for senior management. An employee or manager who knowingly causes or permits the corporation to breach a specified provision commits a criminal offence, punishable by fines and imprisonment. Therefore, statement II is correct. The AMLO grants relevant authorities, such as the SFC, disciplinary powers for contraventions. These powers include ordering the licensed corporation to pay a penalty not exceeding the greater of HK$10 million or 3 times the amount of profit gained or costs avoided as a result of the breach. Therefore, statement III is correct. Statement IV is incorrect because persons affected by regulatory discipline imposed under the AMLO appeal to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Review Tribunal, not directly to the High Court. Therefore, statements I, II and III are correct.

This question tests the understanding of the Continuous Professional Training (CPT) requirements for licensed individuals under the Securities and Futures Commission (SFC). Statement I is correct as the SFC’s Guidelines on Continuous Professional Training stipulate that a licensed representative must complete a minimum of 5 CPT hours for each regulated activity they are licensed for in each calendar year. Statement II is also correct; the guidelines specify that CPT activities must be relevant to the functions to be performed by the licensed person, ensuring that the training enhances their competence in their specific role. Statement III is incorrect. There is no exemption for the first year of licensing. The CPT requirement applies from the date the license is granted, with the required hours calculated on a pro-rata basis for the first year. Statement IV is correct. While the individual is responsible for undertaking the training, the licensed corporation has an overarching responsibility under the Code of Conduct and the Fit and Proper Guidelines to ensure its representatives and responsible officers remain fit and proper, which includes complying with CPT requirements. Therefore, statements I, II and IV are correct.