HKSI LE Paper 2 key terms

Dealing in securities, meaning buying, selling, subscribing for or underwriting securities, or making an offer to do so, carried on as a business in Hong Kong.

Dealing in futures contracts, covering the buying and selling of futures contracts or making an offer to do so, carried on as a business in Hong Kong.

Advising on securities, meaning giving advice on acquiring, disposing of, subscribing for or issuing securities, where the advice is given as a business and is not incidental to other services.

Advising on corporate finance, covering advice on matters such as takeovers, mergers, share offers and listing-related transactions, given to issuers or their shareholders as a business.

Asset management, meaning managing a portfolio of securities or futures contracts for another person under a discretionary mandate, whether or not the assets are held in custody.

A company granted a licence by the SFC to carry on one or more regulated activities, subject to conditions and to the fit and proper test applied to the firm and its officers.

An individual licensed to carry on a regulated activity on behalf of a licensed corporation, having met competence, examination and fit and proper requirements.

An approved individual within a licensed corporation who supervises the conduct of a regulated activity, generally requiring relevant industry experience and active involvement in the business.

The assessment of honesty, integrity, competence, financial soundness and reputation applied by the SFC when granting or reviewing licences for firms and individuals.

A senior individual designated by a licensed corporation as responsible for a core function such as risk management, compliance or operations, forming part of the firm's governance map.

A licensed corporate finance firm appointed to prepare an issuer for listing and to conduct due diligence on the issuer on behalf of the listing applicant and the exchange.

A firm or individual giving advice to listed issuers, directors or shareholders on transactions such as takeovers, disposals, share issues and connected transactions.

A transaction between a listed issuer and a connected person, such as a director, substantial shareholder or their associate, which triggers disclosure, independent advice and shareholder approval requirements.

An adviser independent of the parties to a transaction who gives an opinion to independent shareholders on whether the terms are fair and reasonable, commonly required for connected transactions.

A waiver from the obligation to make a general offer, granted by the Takeovers Panel where independent shareholders approve the transaction and the waiver is permitted under the Takeovers Code.

Specific information about a listed issuer that is not generally known, relates to the issuer or its securities, and would likely affect the price of its securities if known.

Prohibited conduct under the Securities and Futures Ordinance, including insider dealing, false trading, price rigging, disclosure of false or misleading information and other manipulative practices.

A tribunal chaired by a judge that hears SFC proceedings alleging market misconduct, applying the civil standard of proof and able to impose sanctions such as disqualification and cold shoulder orders.

The duty to ensure that a recommendation or solicitation for a financial product is reasonable in all the circumstances, taking into account the client's knowledge, investment experience, risk tolerance and financial situation.

The process of collecting and verifying a client's identity, investment objectives, financial circumstances and risk profile before providing services or recommendations.

The assessment a firm performs on a product's structure, risks, liquidity, fees and underlying assets before it may be recommended or sold to clients.

A product whose terms, features or risks are not readily understandable to a retail investor, such as certain structured products, triggering enhanced disclosure and suitability requirements.

A written statement, acknowledged by the client, explaining the nature and risks of a product or of trading in futures or securities on margin.

A written contract between a licensed firm and its client setting out the services, fees, risks, governing law and other key terms before services are provided.

An arrangement under which a client authorises an asset manager to buy and sell investments in the client's account without obtaining prior consent for each transaction.

The firm or individual responsible for making investment decisions for a fund or managed portfolio, subject to the fund's investment objectives, restrictions and applicable licensing rules.

A collective investment scheme approved by the SFC for retail offering in Hong Kong, meeting requirements on structure, disclosure, custody and ongoing reporting.

The prospectus or explanatory memorandum for a fund or securities offer that discloses investment objectives, risks, fees, parties and redemption terms to prospective investors.

The prospectus or equivalent document issued in connection with a listing that must contain accurate and material information enabling investors to make an informed assessment.

The investigative process by which a sponsor, adviser or underwriter verifies an issuer's business, financials, legal position and management before an offering or listing.

The requirement for substantial shareholders, directors and chief executives of listed companies to notify the exchange of their interests and changes in holdings in the company's securities.

Policies and procedures such as customer due diligence, record keeping, monitoring and suspicious transaction reporting that licensed firms must maintain to prevent money laundering and terrorist financing.

A restriction or requirement attached to a licence, such as limiting the activities a firm may conduct, requiring client asset segregation, or prohibiting holding client assets.

The person within a licensed firm responsible for monitoring adherence to regulatory requirements, internal policies and codes of conduct, and for reporting breaches to senior management.

The SFC's published standards for licensed persons covering honesty, fair dealing, client asset protection, conflicts of interest, order handling and communications with clients.

The practice of holding client money and securities separately from the firm's own assets, in designated accounts, so that client property is protected on insolvency.

A framework requiring firms to identify, avoid, manage or disclose situations where the firm's or an employee's interests may conflict with those of a client.

Trading by staff in investments for their own account, which firms must monitor and restrict to prevent front running, misuse of information and conflicts with client orders.