HKSI LE Paper 3 key terms

The Securities and Futures Commission, the statutory body that regulates Hong Kong's securities and futures markets, licenses intermediaries and individuals, investigates misconduct, and enforces the Securities and Futures Ordinance.

Hong Kong's principal statute governing securities and futures markets; it sets out licensing requirements, conduct rules, market misconduct offences, SFC investigation powers, and disciplinary sanctions.

A fund maintained by the SFC and administered by the Investor Compensation Company that pays limited compensation to investors who suffer losses from the default of a licensed intermediary in specified exchange-traded products.

The assessment the SFC applies to licensees and applicants, covering financial soundness, competence, integrity, reputation, and reliability, and used both at application and on an ongoing basis.

A company granted SFC approval to carry on one or more regulated activities; it must maintain capital, keep proper records, supervise staff, and comply with conduct requirements at all times.

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

A licensed representative approved by the SFC to supervise a regulated activity; at least two must be appointed for each regulated activity a firm conducts, with at least one available at all times.

One of the activities listed in the Securities and Futures Ordinance, such as dealing in securities, advising on securities, asset management, or providing automated trading services, which requires an SFC licence when carried on as a business.

The licence category for dealing in securities, covering buying and selling securities for clients or the firm's own account, including margin financing and securities custody incidental to dealing.

The licence category for asset management, covering discretionary management of securities or futures portfolios for clients under a mandate, including managing collective investment schemes.

The requirement that a licensed intermediary, when soliciting or recommending a product, ensure the recommendation is reasonably suitable for the client given the client's circumstances, financial situation, investment experience, and objectives.

The process of collecting and verifying a client's identity, financial position, investment experience, objectives, and risk tolerance before providing services, forming the basis for suitability and anti-money laundering controls.

Assessing a client's risk tolerance through a documented questionnaire or interview and assigning a risk category, which is then compared with the risk rating of any recommended product.

The intermediary's documented assessment of a product's features, risks, liquidity, and target investors before it is recommended, so that the firm understands what it is selling to clients.

Rules requiring client assets to be held in segregated accounts, properly recorded, and protected from commingling with the firm's own assets, with regular reconciliation and client disclosure.

Requirements that client money be paid into a designated trust or segregated account, kept separate from the intermediary's money, and accounted for promptly, with limited permitted withdrawals.

A category of statutory wrongs under the Securities and Futures Ordinance including insider dealing, false trading, price rigging, disclosure of false or misleading information, and stock market manipulation.

Dealing in securities while in possession of inside information known to be price sensitive and not generally available, or passing such information to another person to trade, subject to statutory defences.

Specific information about a corporation or its securities that is not generally known to the market and would, if generally known, be likely to materially affect the price of the securities.

Entering into or facilitating transactions that create a false or misleading appearance of active trading in securities or of the market price, without a genuine change in beneficial ownership.

Manipulating the price of securities through fictitious transactions or devices that stabilise, depress, or raise the price, creating an artificial market level rather than genuine supply and demand.

Entering into transactions or using devices that maintain, increase, reduce, or stabilise the price of securities in a way that harms or misleads other market participants.

A civil tribunal chaired by a judge that hears SFC proceedings on market misconduct, determines whether misconduct occurred, and may impose disqualification, cold shoulder orders, or other sanctions.

A sanction of the Market Misconduct Tribunal barring a person from dealing in securities or futures in Hong Kong for a stated period, typically up to five years.

A court or tribunal order preventing a person from being a director, liquidator, receiver, or manager of a listed company or licensed entity for a specified period.

The Hong Kong exchange operated by HKEX that lists and trades securities, sets listing rules, and admits exchange participants who may trade on its market.

A firm admitted by the Stock Exchange or Futures Exchange to trade on that market, meeting membership, capital, and systems requirements and subject to exchange trading rules.

Hong Kong Futures Exchange, the exchange operated by HKEX on which futures and options contracts are traded by exchange participants under its rules.

The primary listing segment of the Stock Exchange for established companies meeting higher profit, revenue, or market capitalisation thresholds and ongoing listing obligations.

The Growth Enterprise Market, a listing segment of the Stock Exchange for smaller or newer companies with lower entry thresholds and additional risk disclosure requirements.

A licensed firm appointed by a listing applicant to conduct due diligence, prepare the listing application, and confirm the accuracy of the prospectus to the Stock Exchange.

The offering document for a securities issue that must contain the information investors reasonably need, be registered with the Registrar of Companies, and comply with statutory content and liability rules.

The statutory regime governing public offers and invitations to subscribe for or purchase securities, including prospectus registration, exemptions, and restrictions on unregistered offerings.

The Stock Exchange's rules governing eligibility, disclosure, corporate governance, and continuing obligations of listed issuers, enforced by the Exchange and the SFC.

The statutory duty of a listed corporation to disclose inside information to the market as soon as reasonably practicable after it comes to the corporation's knowledge.

The anti-money laundering process of identifying and verifying customers and beneficial owners, understanding the business relationship, and conducting ongoing monitoring proportionate to assessed risk.

The natural person who ultimately owns or controls a customer or the person on whose behalf a transaction is conducted, including through ownership thresholds or control arrangements.

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

Additional identification, verification, source-of-funds, and monitoring measures applied to higher-risk relationships such as politically exposed persons, correspondent banks, or unusual cross-border transactions.

A report made to the Joint Financial Intelligence Unit when a person knows or suspects that property is linked to crime proceeds or terrorist financing, with tipping-off restrictions attached.

Disclosing to a suspect that a suspicious transaction report has been or may be made, which is itself a criminal offence and can prejudice the investigation.