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Type 1 Securities Sales Representative Examination study materials
Type 1 Securities Sales Representative Examination study resources

Type 1 Securities Sales Representative Examination: Regulatory framework and licensing regime for securities dealing

Type 1 Securities Sales Representative Examination · Work through your exam, one topic at a time.

All guide sections

Regulatory framework and licensing regime for securities dealing

What this domain tests

Questions here check whether you can map a real business activity onto the ten regulated activities in the Securities and Futures Ordinance (Cap. 571) (SFO), then say who must be licensed, what a responsible officer (RO) must satisfy, and how banks differ from securities firms.

Core framework

  • The SFC is the statutory regulator. Licensed corporations (LCs) are licensed by the SFC; banks acting in Type 1 or Type 2 business are registered institutions (RIs), registered with the SFC and supervised front-line by the HKMA.
  • Type 1 (dealing in securities) covers executing and arranging transactions, including marketing and client solicitation for a dealing business. It does not cover advising (Type 4), corporate finance advice (Type 6) or discretionary management (Type 9).
  • A firm needs a corporate licence plus licensed representatives for individuals. It must have at least two approved ROs, with at least one available at all times to supervise the regulated activity; at least one RO must be an executive director.
  • RO competence: relevant industry experience (broadly three years in the previous six) plus the HKSI Licensing Examination papers specified for that activity, and the s.129 fit-and-proper tests (financial soundness, education/experience, competence, reputation, no relevant convictions).

Worked example

A start-up wants to (i) market a private fund to clients, (ii) recommend which share class to buy, and (iii) manage a discretionary portfolio. Marketing and arranging subscriptions = Type 1. Recommending a share class = Type 4. Discretionary management = Type 9. Filing only a Type 1 application leaves two activities unlicensed; each needs its own approved RO coverage.

Traps that cost marks

Assuming one licence authorises everything; forgetting that "arranging" is dealing; treating an RO appointment as an internal promotion rather than an SFC approval; and assuming SFC product authorisation is an endorsement of the product.