HKSI LE Paper 15 key terms

Authorisation from the Securities and Futures Commission to carry on dealing in securities as a regulated activity, subject to fit-and-proper tests, capital and competence requirements.

Any of the activities listed in Schedule 5 to the Securities and Futures Ordinance, such as dealing in securities, advising on securities, asset management or providing automated trading services, which requires a licence or registration when carried on in Hong Kong.

The Securities and Futures Ordinance (Cap. 571), the core Hong Kong statute covering market misconduct, licensing, offers of investments, disclosure of interests and enforcement powers of the SFC.

The Securities and Futures Commission, Hong Kong's statutory regulator of securities, futures and asset management markets, responsible for licensing intermediaries, supervising listed-company disclosures and investigating market misconduct.

Hong Kong Exchanges and Clearing Limited, the listed holding company that owns and operates the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange and the clearing houses.

The Stock Exchange of Hong Kong Limited, a wholly owned subsidiary of HKEX that operates the cash equity market, admits issuers to listing and publishes the Listing Rules.

The Hong Kong Futures Exchange Limited, the HKEX subsidiary that operates the futures and options market for index, stock, currency and commodity derivatives.

The Central Clearing and Settlement System, HKEX's electronic book-entry system that holds securities in fungible form, settles trades on a delivery-versus-payment basis and records investor holdings through broker participants.

The mutual market access scheme linking Hong Kong with Shanghai and Shenzhen exchanges, allowing eligible investors to trade eligible A-shares and Hong Kong shares through local brokers and clearing houses.

The Main Board and GEM rulebooks issued by SEHK setting eligibility, disclosure, corporate governance and continuing obligations for issuers, backed by SFC oversight.

A licensed intermediary appointed by a listing applicant to conduct due diligence, advise on listing suitability and confirm the accuracy of the prospectus to SEHK and the SFC.

The disclosure document for a public offer of shares or debentures, which must comply with the Companies Ordinance and SFO prospectus regime and be registered before issue.

A transaction between a listed issuer and a connected person, such as a director, chief executive or substantial shareholder, which requires reporting, independent shareholder approval or an announcement under the Listing Rules.

Specific information about a listed issuer that is not generally known but would, if known, materially affect its share price; the issuer must disclose it as soon as reasonably practicable under Part XIVA of the SFO.

Prohibited conduct under the SFO including insider dealing, false trading, price rigging, disclosure of false or misleading information and market manipulation, enforced by the SFC and the Market Misconduct Tribunal.

The SFC's assessment of an applicant's or licensee's financial soundness, competence, integrity, compliance record and business conduct, applied at licensing and reviewed on an ongoing basis.

The duty to ensure a recommendation or solicitation is reasonably suitable for the client given their financial situation, investment experience and objectives, taking into account concentration and risk tolerance.

The onboarding and ongoing process of collecting and verifying a client's identity, financial profile, investment objectives and risk appetite so that advice and product recommendations are appropriate.

A client falling within the SFO definition, such as an institutional investor or an individual with a portfolio of at least HK$8 million, to whom reduced conduct requirements may apply.

A written statement that must be provided to clients before trading derivatives or other high-risk products, explaining leverage, margin calls, potential loss of the entire investment and product-specific risks.

The AML/CFT process of identifying and verifying customers and beneficial owners, understanding the purpose of the relationship and conducting ongoing monitoring and, where needed, enhanced measures for higher-risk clients.

The natural person who ultimately owns or controls a customer or the funds involved, generally identified by thresholds such as 25% ownership, or the person on whose behalf a transaction is conducted.

A confidential report filed with the Joint Financial Intelligence Unit when an institution knows or suspects that property represents proceeds of crime or is linked to terrorist financing.

The framework of laws, rules and controls, including the AMLO and SFC guidelines, designed to prevent the laundering of criminal proceeds through financial institutions and designated non-financial businesses.

An individual entrusted with prominent public functions, or a close associate or family member, who presents higher money-laundering risk and therefore triggers enhanced due diligence and senior management approval.

A share or comparable ownership interest in a company, carrying rights to dividends, voting and residual assets, and typically traded on an exchange such as SEHK.

The most common class of equity, normally carrying one vote per share, a dividend declared by the board and a residual claim on assets after creditors and preferred holders are paid.

A share class that usually ranks ahead of ordinary shares for dividends and liquidation proceeds, often with a fixed dividend rate and limited or no voting rights.

An offer of new shares to existing shareholders in proportion to their holdings, usually at a discount, with the rights tradable or renounceable during a set period.

The sale of new or existing shares to selected investors, often institutions, rather than to the public, subject to Listing Rules limits, pricing rules and shareholder mandate requirements.

An event initiated by a listed issuer that affects its securities, such as a dividend, bonus issue, rights issue, share split or merger, requiring notification and sometimes shareholder approval.

The date from which a buyer of shares no longer acquires the right to the most recently declared dividend, determined by the exchange's settlement cycle.

A debt instrument in which the issuer promises to pay interest, usually at a fixed coupon, and repay principal on a maturity date, ranking ahead of equity in liquidation.

A debt security with no fixed maturity date that pays coupons indefinitely and may be callable by the issuer, often ranking as additional tier-one capital for banks.

An independent agency's opinion on an issuer's or debt issue's ability to meet obligations, expressed on a letter scale and used by investors to gauge default risk.

The annualised return on a bond held to maturity, accounting for purchase price, coupon payments and redemption value, assuming all payments are made on schedule.

An arrangement pooling investors' contributions for collective management under a single investment strategy, typically authorised by the SFC before it may be marketed to the Hong Kong public.

A collective investment scheme that meets the SFC's authorisation requirements, including management company, custodian and disclosure standards, and may then be offered to the retail public in Hong Kong.

A standardised agreement traded on an exchange to buy or sell an underlying asset at a set price on a future date, settled through daily margin and cleared by a central counterparty.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified strike price before or on expiry, in return for a premium.

A listed instrument issued by a third party giving the holder the right to buy or sell an underlying security at a set price, with terms such as strike, ratio and expiry set at issue.

An investment whose return is linked to the performance of underlying assets or indices, often combining a bond with derivatives and exposing investors to issuer credit and market risk.

Collateral deposited with a broker or clearing house to cover potential losses on a derivative position, adjusted daily through mark-to-market and subject to calls when the balance falls short.

The discretionary or advisory management of client portfolios, typically under a Type 9 SFC licence, involving asset allocation, security selection and ongoing monitoring against agreed objectives.

A client's stated financial goal, such as capital growth, income or capital preservation, together with the time horizon and risk tolerance that shape the portfolio recommendation.

A measure of a bond's sensitivity to interest-rate changes, expressed in years, where a higher duration means a larger percentage price move for a given change in yields.

A company incorporated in Hong Kong that holds an SFC licence for one or more regulated activities and must meet capital, management and compliance obligations on an ongoing basis.

The standards expected of intermediaries under the SFC's Code of Conduct, covering fairness, integrity, client assets, conflicts of interest, order handling and record keeping.

The process of transferring securities against payment after a trade, on a T+2 cycle for Hong Kong cash equities and completed through CCASS between broker participants.

The primary listing tier of SEHK for established issuers meeting profit, market capitalisation or cash-flow tests, alongside the separate GEM tier for smaller growth companies.

An offer of securities to the public that requires an SFC-registered prospectus or an available exemption, with the SFO and Companies Ordinance governing content and liability.