HKSI Paper 1 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Securities and Futures Ordinance

The main Hong Kong statute (Cap. 571) regulating securities, futures, and leveraged foreign exchange markets, establishing the SFC, and creating offences such as insider dealing and unlicensed dealing.

SFC regulatory objectives

Maintain market fairness, efficiency, and transparency; protect investors; reduce systemic risk; and promote Hong Kong as an international financial centre, as set out in the SFO.

HKEX role

Hong Kong Exchanges and Clearing Limited operates the SEHK and HKFE, acts as the front-line regulator of listed companies, and is itself regulated by the SFC.

HKMA securities role

The Hong Kong Monetary Authority supervises registered institutions (banks) conducting regulated activities under the SFO, acting as the SFC's front-line supervisory partner.

Market Misconduct Tribunal

A civil tribunal chaired by a High Court judge that hears SFC proceedings for insider dealing, false trading, price rigging, and related market misconduct, and can impose civil sanctions.

SFC disciplinary fines

The SFC may fine a licensed corporation up to HK$10 million or three times the profit gained or loss avoided, whichever is greater, in addition to reprimands and licence suspension.

Regulated activities

Ten categories of activity under the SFO, including dealing in securities, dealing in futures, asset management, and providing credit rating services, each requiring a licence.

Responsible Officer

An individual approved by the SFC to supervise a regulated activity; a licensed corporation must have at least two ROs, with at least one executive director available at all times.

Fit and proper test

The SFC's assessment of an applicant's financial status, education, experience, criminal record, and disciplinary history before granting or renewing a licence.

Suitability obligation

A recommendation must be reasonably suitable for the client given the client's financial situation, investment experience, and investment objectives, and must be documented.

Client money segregation

Client money must be held in designated accounts separate from the firm's own assets, reconciled regularly, and protected against misappropriation under the Client Money Rules.

Know Your Client

The process of collecting and verifying a client's identity, address, financial situation, investment experience, and objectives before providing services.

Professional Investor regime

A classification allowing reduced protections for clients meeting specified asset or portfolio thresholds, while the intermediary must still assess suitability and document the classification.

Insider dealing

Dealing in securities while in possession of inside information that is not generally available, or counselling or procuring another person to deal.

Inside information

Information about a listed issuer that is not generally available and would, if available, be likely to materially affect the price of its securities.

Listing Rules

Rules made by the SEHK and approved by the SFC governing admission, continuing obligations, and delisting of issuers on the Main Board and GEM.

Collective investment scheme

An arrangement where participants lack day-to-day control, property is managed as a whole, and profits or income are pooled or shared, as defined in the SFO.

SFC authorisation of CIS

Offers of collective investment schemes to the Hong Kong public generally require SFC authorisation unless an exemption, such as an offer to professional investors, applies.

AMLO

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), which imposes customer due diligence and record-keeping requirements on financial institutions.

Customer due diligence

Identifying and verifying the customer and beneficial owner, understanding the purpose of the relationship, and conducting ongoing monitoring under the AMLO.

Enhanced due diligence

Additional measures required for politically exposed persons and other high-risk customers, including establishing source of wealth and funds and obtaining senior management approval.

Suspicious transaction report

A report filed with the Joint Financial Intelligence Unit when a financial institution knows or suspects that property is connected to money laundering or terrorist financing.

Tipping off

Disclosing to a customer that a suspicious transaction report has been filed or that an investigation is underway, which is a criminal offence.

Joint Financial Intelligence Unit

A multi-agency body that receives and analyses suspicious transaction reports and refers cases to law enforcement agencies for investigation.

Beneficial owner

The natural person who ultimately owns or controls a customer, such as a person holding more than 25% of shares or voting rights in a company.

Politically exposed person

An individual entrusted with prominent public functions, including foreign, domestic, and international organisation PEPs, who requires enhanced due diligence.

Risk-based approach

Assessing the money laundering and terrorist financing risks of customers, products, and channels, and applying proportionate measures in response.

Money Laundering Reporting Officer

A designated person within a licensed corporation responsible for receiving internal suspicious transaction reports and deciding whether to file with the JFIU.

Record-keeping under AMLO

Customer due diligence and transaction records must be retained for at least five years after the end of the business relationship or the transaction.

Sanctions screening

Checking customers and transactions against lists issued under the United Nations Sanctions Ordinance and other relevant authorities to prevent prohibited dealings.

Senior management accountability

The SFC may hold senior managers responsible for AML/CFT failures in their areas of responsibility, including through disqualification and fines.

Ongoing monitoring

Scrutiny of transactions to ensure consistency with the customer's business and risk profile, with regular updating of customer due diligence information.