英文證券卷六 HKSI Paper 6 第一章

The demands for employment is not a function satisfied solely by the financial market, thus it is not a primary function for the financial markets in Hong Kong.

The regulation of the asset management industry needs to cover not only products and services but also intermediaries and investors.

A Sovereign Fund doesn’t meet the established criteria to be considered a CIS.

Providing loans and collecting interest is money lending and is a regulated financial intermediary activity.

Typical service providers include:
(a) fund houses; (b) fund management companies; (c.) stockbrokers

Typical service providers include:
(d) banks; (e.) trustees; (f) custodians; (g) financial planners

In financial markets, providers of financial products and services include principals and intermediaries. Fund managers, stockbrokers, and independent financial advisers are all intermediaries. Auditors are professionals supporting financial markets.

Financial intermediaries must be compensated to be classified as providers of financial transactions and services. Establishing a tutorial company offers educational services, not financial ones. Managing assets without compensation doesn’t fall under financial services. Therefore, signing a rental agreement for a bank, which is not a financial contract but a real estate contract, is not considered a financial intermediary service. However, loaning money to others and charging interest for the principal is a financial service that involves compensation for a financial transaction.

Investors vary from individuals with limited wealth at their disposal to very large institutions handling over hundred millions of Hong Kong dollars, and include:
(a) private banking clients or high net worth individuals; (b) retail clients; and (c.) institutions.

Investors vary from individuals with limited wealth at their disposal to very large institutions handling over hundred millions of Hong Kong dollars, and include:
(a) private banking clients or high net worth individuals; (b) retail clients; and (c.) institutions.

Frequent Intervention is not an objective of financial regulators in Hong Kong. Providing Investment advice is not a job that regulators will do, it’s the job of intermediaries.

The common objectives of the Hong Kong financial regulators include:
i) Maintaining Hong Kong’s position as a leading financial center through necessary supervision;
ii) Applying financial regulations of an acceptable international standard;
iii) Striving to be market-friendly, open, and approachable, but also fair and effective;
iv) Ensuring that the legal framework of financial regulation is certain, adequate, and fairly enforced;
v) Encouraging the installation of a sound technical infrastructure interlinking with settlement and clearing systems globally;
vi) Promoting confidence in the financial markets, internationally and locally.
Facilitating innovation in financial products is a general responsibility of the Securities and Futures Commission.

SFO treats all investors fairly and equally. Regulators should be transparent to promote public’s understanding of the industry including its operation and functioning.

As the persons involved in the management, operation and holding of the assets under management are often not located in Hong Kong, this poses certain issues for the SFC in carrying out the regulatory mandate given to it by the SFO.

The MPFA is responsible for:
(a) registering mandatory provident fund schemes;
(b) approving pooled investment funds;
(c) approving trustees and overseeing the activities of such approved trustees;
(d) handling complaints related to MPF products and trustees, and referring them to the SFC and other regulators when necessary.

The SFC was created by law under the Securities and Futures Commission Ordinance (now repealed and subsumed in the SFO). It is independent, meaning that it is not part of the
Government machinery of the Civil Service or the ministerial system. Nevertheless, it reports to and is accountable to the Government as described in section 2 above. It is considered the securities and futures market prime regulator.

Under the SFO and the Banking Ordinance, AFIs, which are regulated by the HKMA and include banks, have to be registered with the SFC as registered institutions if they wish to carry out an SFC-RA.

The broad points stated by the Securities Review Committee under Ian Hay Davison were
the need for:
(e) checks and balances on the system, with the exchanges being supervised by a
commission independent of the Government, with the Government only to intervene if
and when the Commission failed to regulate properly

The principal regulator of the securities industry in Hong Kong is the SFC, which assumes responsibility for front-line regulation and discipline of participants trading on the securities and futures exchanges and also of other securities intermediaries.

Except in relation to the management of business risk, and the enforcement of their own listing, trading, clearing and settlement rules, HKEX, the exchanges and the clearing houses are not responsible for front-line prudential and conduct regulation of market participants, which is carried out by the SFC.

The Securities Commission option is wrong, the correct name is Securities and Futures Commission.

An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This basically means that regulation is weighted towards the areas that pose the greatest risk to the markets and the participants.

The regulatory approach adopted by the SFC is a risk-based one, meaning that regulation is weighted towards the areas where the SFC perceives the highest risk to lie.

An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This basically means that regulation is weighted towards the areas that pose the greatest risk to the markets and the participants.

The principal functions of the SFC are to:
(a) Ensure fairness, efficiency, and transparency in the market.
(b) Oversee recognised exchange, clearing houses, exchange controllers and investor compensation companies or persons carrying on regulated activities, and registered institutions.
(C) Promote, encourage and enforce the proper conduct, competence and integrity of persons carrying on regulated activities;
(d) Maintain and promote confidence in the industry;
(e) Collaborate with other regulators;
(f) Secure appropriate degree of protection for the investing public;
(g) Promote, encourage and enforce internal control and risk management systems by persons carrying on regulated activities; and
(h) Suppress illegal, dishonourable and improper practices in the industry.
Therefore, II and III are correct.

The SFC was established under the SFO. It is an independent body and is not part of the government machinery or the ministerial system. However, it reports to and is accountable to the Financial Secretary, who is part of the government. Therefore, options I and II are correct. The SFC is indeed responsible for the licensing of intermediaries, so option III is incorrect.

The regulatory objectives of the SFC are to:
a) maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the market;
b) promote public’s understanding of the industry including its operation and functioning;
c) provide protection to the investing public;
d) minimise crime and misconduct in the market;
e) reduce systemic risks in the industry; and
f) assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the industry.
So I, III are correct.

The regulatory objectives of the SFC are to:
a) maintain and promote the fairness, efficiency, competitiveness, transparency, and orderliness of the market;
b) promote public understanding of the industry, including its operation and functioning;
c) provide protection to the investing public;
d) minimise crime and misconduct in the market;
e) reduce systemic risks in the industry; and
f) assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps concerning the industry.
So I, IV are correct.

Except in relation to the management of business risk, and the enforcement of their own listing, trading, clearing and settlement rules, HKEX, the exchanges and the clearing houses are not responsible for front-line prudential and conduct regulation of market participants, which is carried out by the SFC.

The regulatory objectives of the SFC are to:
a) maintain and promote the fairness, efficiency, competitiveness, transparency, and orderliness of the market;
b) promote public understanding of the industry;
c) provide protection to the investing public;
d) minimise crime and misconduct in the market;
e) reduce systemic risks in the industry; and
f) assist the Financial Secretary in maintaining the financial stability of Hong Kong.
So B is correct.

The SFO provides that it may not delegate certain functions of the SFC to others.They are detailed in Schedule 2, Part 2, SFO. They include powers:
(a) to make subsidiary legislation;
(b) to establish committees under s. 8, SFO;
(c) to withdraw exchange companies;
(d) to appoint external investigators; and
(e) to institute proceedings in the MMT under s. 252(1) of the SFO.

The principal functions of the SFC are to:
(a) Ensure fairness, efficiency, and transparency in the market.
(b) Oversee recognised exchange, clearing houses, exchange controllers and investor compensation companies or persons carrying on regulated activities, and registered institutions.
(C) Promote, encourage and enforce the proper conduct, competence and integrity of persons carrying on regulated activities;
(d) Maintain and promote confidence in the industry;
(e) Collaborate with other regulators;
(f) Secure appropriate degree of protection for the investing public;
(g) Promote, encourage and enforce internal control and risk management systems by persons carrying on regulated activities; and
(h) Suppress illegal, dishonourable and improper practices in the industry.
Therefore, I and II are correct.

To advertise oneself as operating a regulated activity is the same as operating a regulated activity. Conducting a regulated activity without licence or registration is against the SFO.

Sanction-based regulations and Income-based regulations do not exist in Hong Kong.
Merit-based regulations are to screen out undesirable players and undesirable offerings. Investors cannot invest in these undesirable offerings, so their interests are protected.
Disclosure-based regulations require investment instruments to disclose their strengths and weaknesses maximally so that investors can make an informed decision.

An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This basically means that regulation is weighted towards the areas that pose the greatest risk to the markets and the participants.

Except in relation to the management of business risk, and the enforcement of their own
listing, trading, clearing and settlement rules, HKEX, the exchanges and the clearing houses
are not responsible for front-line prudential and conduct regulation of market participants,
which is carried out by the SFC.

The regulatory objectives of the SFC are to:
a) maintain and promote the fairness, efficiency, competitiveness, transparency, and orderliness of the market;
b) promote public understanding of the industry, including its operation and functioning;
c) provide protection to the investing public;
d) minimise crime and misconduct in the market;
e) reduce systemic risks in the industry; and
f) assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps concerning the industry.
So II, III are correct.

Disclosure requiremetns are in place to enhance transperancy

Decisions made by the regulators can be overturned or overruled.

The SFC adopts a“risk-based”approach towards regulations. This basically means that regulation is weighted towards the areas that pose the greatest risk to the markets and the participants.

An expression used by the SFC to explain its approach to regulation is that it is “risk-based”. This basically means that regulation is weighted towards the areas that pose the greatest risk to the markets and the participants.

The SFC seeks to work in partnership with the industry it regulates, encouraging a two-way dialogue that fosters a forum for an exchange of views and that encourages a strong regulator/regulate relationship.

Many AFIs participate in the fund management industry as distributors of CISs products. Accordingly, the HKMA, in its capacity as the banking regulatory authority, is concerned with the asset management industry insofar as it affects AFIs engaged in the regulated activity of asset management, i.e. registered institutions.

The MPFA is the primary regulator for the MPF system under the MPFSO, and is responsible for the overall management and administration of the MPF system, including the registration and regulation of the various schemes established under the ordinance.

The MPFA is responsible for registering and overseeing MPF Schemes and monitoring compliance with the MPFSO. The SFC is responsible for approving the fund managers of MPF scheme investment products and authorising MPF products and related marketing materials.

Some responsibilities of the MPFA interlink with the specific duties of the SFC, including:
(a) authorising MPF products and related marketing materials
(b) registering and approving investment managers engaged in the investment management of MPF products.

However,The MPFA, not the SFC, handles the registration and oversight of MPF schemes.

One of the responsibilities of the MPFA is to approve trustees and regulate the affairs and activities of such approved trustees.

It is not an obligation on the MPFA’s part to ensure that the schemes are operated to maximise the capital or income growth specified in the objectives of the schemes.

It is not an obligation on the MPFA’s part to ensure that the schemes are operated to maximise the capital or income growth specified in the objectives of the schemes, or to advise on, or ensure, the employers’ and scheme members’ choice of the best schemes/funds to achieve their objectives.

The Insurance Authority has the following major duties and powers:
(a) the authorization and regulation of insurers;
(b) the regulation of insurance agents, who must be appointed by an insurer and registered with the Insurance Agents Registration Board, established by The Hong Kong Federation of Insurers. The agents are not directly authorised or supervised by the Insurance Authority. Supervision is by the appointing insurers, who are required to comply with the Code of Practice for the Administration of Insurance Agents issued by The Hong Kong Federation of Insurers and approved by the Insurance Authority;
(c) the regulation of insurance brokers, who may obtain authorization from the Insurance Authority or from one of two bodies approved by the Insurance Authority, the Hong Kong
Confederation of Insurance Brokers and the Professional Insurance Brokers Association. These bodies are charged with the responsibility of ensuring that their members comply with the statutory requirements and that the interests of policy holders are properly protected; they also handle complaints; and
(d) the promotion of self-regulation by the industry and the maintenance of close contact with the industry through a consultative process.

Insurance Brokers should apply for a licence with the Insurance Authority.

The IA has powers in relation to the insurance industry similar to those possessed by other financial regulators in Hong Kong.

Corporate governance has been defined in various ways. It can be seen as primarily concerned with the proper relationship between a company’s management, its board and its shareholders, and possibly also its stakeholders (i.e. groups who have a stake in the healthy existence of a corporation, such as employees, creditors and customers). The governance issue is therefore also concerned with the system by which companies are directed and controlled.
The activities of intermediaries frequently concern listed corporations. Accordingly, in addition to considering their own regulatory and corporate governance position, intermediaries need to be aware of the wider impact of corporate governance on their clients and the market. It is now generally accepted that investors attach considerable importance to corporate governance when assessing the value of a stock, and that markets which exhibit a higher degree of good corporate governance are regarded as more competitive in the international arena.

Corporate governance has been defined in various ways. It can be seen as primarily concerned with the proper relationship between a company’s management, its board and its shareholders, and possibly also its stakeholders (i.e. groups who have a stake in the healthy existence of a corporation, such as employees, creditors and customers).

A key objective of good governance in any company is to avoid management taking improper advantage of its position to benefit itself in preference to the legitimate interests of thecompany.
Good Corporate governance are not required to be responsible for the interest of Former Employees.

Corporate governance has been defined in various ways. It can be seen as primarily concerned with the proper relationship between a company’s management, its board and its shareholders, and possibly also its stakeholders (i.e. groups who have a stake in the healthy existence of a corporation, such as employees, creditors and customers).

A good corporate-governance is not related to former employees.

Certain jurisdictions are deemed to have rules governing the operations of CISs which are comparable with those in Hong Kong; schemes domiciled in such jurisdictions are RJSs.
In order to facilitate compliance with applicable legal and regulatory requirements (in Hong Kong and, where applicable, in overseas jurisdictions), there is a growing tendency, particularly among larger asset managers, to adopt a detailed compliance manual which sets out the asset manager’s policies and procedures in relation to matters of regulatory concern.

In order to facilitate compliance with applicable legal and regulatory requirements (in Hong Kong and, where applicable, in overseas jurisdictions), there is a growing tendency to adopt a detailed compliance manual which sets out the securities dealer’s or adviser’s policies and procedures in relation to matters of regulatory concern. In many cases, a dedicated compliance officer is engaged to oversee adherence to the manual, maintain close contact with the regulators and keep abreast of regulatory developments affecting the securities dealer’s or adviser’s business.

In order to facilitate compliance with applicable legal and regulatory requirements (in Hong Kong and, where applicable, in overseas jurisdictions), there is a growing tendency, particularly among larger asset managers, to adopt a detailed compliance manual which sets out the asset manager’s policies and procedures in relation to matters of regulatory concern. In many cases, a dedicated compliance officer is appointed who oversees adherence to the manual and also maintains close contact with the regulators and keeps abreast of regulatory developments affecting the asset manager’s business.

The issuer must satisfy at least one of the following quantitative tests: profit test; market capitalisation/revenue/cash flow test; market capitalisation/revenue test.
The issuer must have a market capitalisation of at least HK$4 billion at the time of listing, and revenue of at least HK$500 million for the most recent audited financial year.

A key objective of good governance in any corporate business is to avoid management taking improper advantage of its position to benefit itself in preference to the legitimate interests of the company.

Having regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) installing appropriate checks and balances, such as separating the functions of Chairman and chief executive officer; appointment of independent non-executive directors; establishment of independent audit committees; setting up committees to control the remuneration and benefits of directors and senior management;

It’s not required to protect the interests of the management.

Senior management must provide the leadership and drive to promote, encourage and enforce, if necessary, good compliance practices. It must establish:
(a) good line and reporting structures;
(b) clearly defined functions and responsibilities;
(c.) effective communications;
(d) appropriate transparency and disclosure practices.

A key objective of good governance in any corporate business is to avoid management taking improper advantage of its position to benefit itself in preference to the legitimate interests of the company. Having regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) installing appropriate checks and balances.
(b) increasing transparency and disclosure to shareholders, stakeholders and the public;
(c) installing strong protective structures for minority shareholders, creditors and other lenders.
(d) identifying and penalising corporate wrongdoing.

A key objective of good governance in any corporate business is to avoid management taking improper advantage of its position to benefit itself in preference to the legitimate interests of the company. Having regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) installing appropriate checks and balances.
(b) increasing transparency and disclosure to shareholders, stakeholders and the public;
(c) adopting international accounting and auditing standards;
(d) installing strong protective structures for minority shareholders, creditors and other lenders.

The Organisation for Economic Co-operation and Development offers the concept that companies can improve the level of corporate governance by the following methods:
I. Distinguish between the Chief Executive Officer and the Chairman
II. Enhance transparency disclosure to shareholders and stakeholders
III. Establish a compensation committee to monitor senior management compensation
IV. Establish a strong protection structure for minority shareholders, creditors, or other stakeholders
V. Establish an independent audit committee
VI. Identify business misconduct
VII. Adopt international accounting and auditing standards

The essence of corporate governance is to enhance transparency and check and balance. The powers of the management should be limited, therefore, installation of check and balances and limiting the management’s remuneration are good practices.

Having regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) installing appropriate checks and balances, such as separating the functions of the chairman and chief executive officer, appointment of independent non-executive directors, establishment of independent audit committees, and setting up committees to control the remuneration and benefits of directors and senior management;
(b) increasing transparency and disclosure to shareholders, stakeholders and the public;
(c.) adopting international accounting and auditing standards;
(d) installing strong protective structures for minority shareholders, creditors and other lenders.
(e) identifying and penalising corporate wrongdoing.

Good corporate governance should separate the functions of Chairman and CEO.

A key objective of good governance in any corporate business is to avoid management taking improper advantage of its position to benefit itself in preference to the legitimate interests of the company. Having regard to the general concepts set out by the OECD, some of the ways a company may improve its governance are as follows:
(a) installing appropriate checks and balances, such as separating the functions of Chairman and CEO; appointment of independent non-executive directors; establishment of independent audit committees; setting up committees to control the remuneration and benefits of directors and senior management.

Common consequences of deficit in corporate governance standards:
I. Insider trading and other forms of market misconduct
II. Misfeasance, fraud, and misconduct by directors, managers, and other staff causing losses to the company or shareholders
IV. The price of the connected transaction deviates from the market price, causing losses to the company and shareholders

In furtherance of these aims, the SFC conducts regular inspections of licensed corporations which may be conducted either on-site or via a request for information to be provided. The maintenance of proper documentation is critical in this regard.

Only authorised financial institutions and registered trust companies that meet the specified
criteria are eligible to act as custodians, provided in each case they have a sufficient presence and control in Hong Kong. The specified criteria are primarily concerned with the financial standing of the entity, such as the amount of paid-up share capital and its net assets.

The main performance requirements that MPF intermediaries should meet are that they must:
when advising clients on the selection of constituent funds, consider, where practicable, the client’s interests, financial situation, risk preference, investment knowledge, experience and objectives

In general, the duties of responsible officers and executive officers who actively participate in, or supervise, the intermediary’s business may include:
(a) ensuring the intermediary has developed policies appropriate for its business;
(b) establishing appropriate standards of business conduct and procedures, and ensuring
proper compliance by staff at all times;
(c.) establishing adequate internal controls and suitable risk management systems and ensuring they are strictly complied with;
(d) employing only staff who meet the licensing requirements of the SFC, and ensuring that they are sufficiently competent and experienced to perform their work;
(e.) ensuring the intermediary complies with the capital and financial reporting requirements of the SFC, exchange and clearing house;
(f) ensuring the intermediary and its staff comply at all times with the applicable laws, the rules, regulations, guidelines and codes of the SFC, the exchange and clearing house, and the professional bodies of which it is a member;
(g) properly managing the risks associated with the business of the intermediary, including
performing periodic evaluation of its risk management processes;
(h) establishing procedures to ensure that proper dealing practices are observed at all times – in particular, that clients’ interest are protected;
(i) ensuring that the intermediary’s systems, procedures and practices can facilitate compliance with the standards and requirements set out in the relevant laws, the rules, codes and guidelines of the SFC, exchanges and clearing houses;

Code of Conduct for Licensed Insurance Agent (‘Agents Code’) is applicable to
I. Licensed Insurance Agents
II. Licensed Insurance Agencies
III. Licensed Technical Representatives engaged by Licensed Insurance agencies

Treasury securities are issued by the government, and are not being traded on the SEHK

The SFO is the principal legislative document governing the securities market in Hong Kong.

The principal ordinances applicable to the asset management industry are the SFO, the Mandatory Provident Fund Schemes Ordinance (“MPFSO”), the Occupational Retirement
Schemes Ordinance (“ORSO”), the Insurance Ordinance and, to a lesser extent, the Banking Ordinance, the Employment Ordinance, the Inland Revenue Ordinance and the Trustee
Ordinance.

According to Schedule 1, SFO, a futures contract means:
(a) a contract or an option on a contract made under the rules or conventions of a futures market.
(b) That one party agrees to deliver to the other party at an agreed future time an agreed property, or an agreed quantity of a property, at an agreed price.

Margin financing is not an activity directly related with asset management, so regulations and guidelines associated with asset management will not cover those kinds of transactions.

Regulated activities 4, 6 or 9 will be permitted if wholly incidental to Type 1.

According to Schedule 1, SFO, a futures contract means:
(a) That one party agrees to deliver to the other party at an agreed future time an agreed property, or an agreed quantity of a property, at an agreed price and;
(b) That the parties will make an adjustment between them at an agreed future time according to whether at that time an agreed property is worth more or less, or an index or other factor stands at a higher or lower level, than a value or level agreed at the time of making of the contract.

As long as its wholly incidental to his/her professional capacity, solicitors are not require to apply for a licence for conducting Type 4,5,6,9 activities.

Any activities that are not conducted on behalf of others cannot be a regulated activity.

If the conductino of Type 9 Activity is wholly incidental to its Type 1 Activity, its not illegal. They are persons specifically excluded from the definition of securities or futures contracts management

Provide futures dealing advice to clients and charge separately is not a type 5 regulated activity that is wholly incidental to type 2 regulated activity. Therefore, registration or licence for type 5 regulated activity is required.

Accountants manage securities and futures portfolios for their friends and charge “tips”. Since it’s not wholly incidental to professional activities of accountants, it’s not excluded. As for trading companies managing securities and futures portfolios for their 60%-owned subsidiaries, since the subsidiaries are not wholly-owned, it’s not excluded. Since both are not excluded, they are asset management activities.

Option I did not specify that the accountant is working in his professional capacity, therefore should not be exempted.
This is defined as managing a portfolio of securities or futures contracts for another person by a person other than certain excluded persons. Persons specifically excluded from the definition of securities or futures contracts management include the following:
(a) corporations that carry on securities or futures contracts management solely for their
wholly owned subsidiaries, their holding companies which hold all their issued shares,
or other wholly owned subsidiaries of the latter;
€ solicitors, counsel (barristers), professional accountants and trustees who provide securities or futures contracts management services wholly incidental to their professional practices.

Securities are defined in Schedule 1, SFO, to cover a wide range of instruments. Option III (Investment linked Insurance Scheme) is not covered by this definition.

Securities are defined in Schedule 1, SFO, to cover a wide range of instruments, including:
(a) shares, stocks, debentures, loan stocks, funds, bonds or notes;
(d) interests in CISs;
(f) interests, rights or property which are prescribed by the Financial Secretary under s. 392, SFO as securities.

The Financial Secretary shall amend by the Gazette what is a regulated activity.

Securities are defined in Schedule 1, SFO, to cover a wide range of instruments. Options I, III and IV are not covered by this definition.

The Financial Secretary may prescribe new financial arrangements as CISs and new financial products as securities or futures contracts by issuing a notice in the Gazette, as per the powers granted under sections 392 and 393 of the SFO. This enables the inclusion of new products in the regulatory framework as appropriate.

Powers are given to the Financial Secretary to prescribe, by notice in the Gazette:
(a) new financial products as being (or not being) securities or futures contracts, and new financial arrangements as CISs, thus capturing new products in the regulatory net as appropriate (ss. 392 and 393, SFO)

Options and their warrants are normally considered as derivatives. So futures options do not belong to securities.

A security is a tradable financial asset. The term commonly refers to any form of financial instrument including stocks, bonds and warrants.

Interests, rights or property which are prescribed by the Financial Secretary under s. 392, SFO as securities.

The Insurance Authority is concerned with the regulation of insurance companies and insurance intermediaries.

The definition of asset management speaking of managing
“securities”, is specifically includes interests in any CIS; but does not include any interest in a CIS that is:
(a) a registered Mandatory Provident Fund scheme under the MPFSO or its constituent fund;
(b) an occupational retirement scheme under the ORSO; or
© a contract of insurance in relation to any class of insurance business under the Insurance Ordinance.

According to Schedule 1, SFO, a futures contract means:
(a) a contract or an option on a contract made under the rules or conventions of a futures market; also
A person deals in futures contracts if he:
(a) makes or offers to make an agreement with another person to enter into, acquire or dispose of a futures contract; and
(b) induces or attempts to induce another person to enter into, acquire or dispose of a futures contract.
In such contracts, one party agrees to deliver to the other party at an agreed future time an agreed property, or an agreed quantity of a property, at an agreed price.

According to the SFO, the definition of Futures contracts are contracts made under the rules or conventions of a futures market.

According to the Securities and Futures Ordinance, a futures contract is that:
I. can be either cash settlement or
physical delivery
II. In Hong Kong, futures contracts refer to contracts established according to rules or practices of futures market.
III. One party agrees to deliver to the other party at an agreed future time an agreed property, or an agreed quantity of a property, at an agreed price.

According to Schedule 1, SFO, a futures contract means:
(a) a contract or an option on a contract made under the rules or conventions of a futures market.
A person deals in futures contracts if he:
(a) makes or offers to make an agreement with another person to enter into, acquire or dispose of a futures contract; and
(b) induces or attempts to induce another person to enter into, acquire or dispose of a futures contract.
Contracts determine:
(i) that one party agrees to deliver to the other party at an agreed future time an agreed property, or an agreed quantity of a property, at an agreed price; or
(ii) that the parties will make an adjustment between them at an agreed future time according to whether at that time an agreed property is worth more or less, or an index or other factor stands at a higher or lower level, than a value or level agreed at the time of making of the contract.

Option II and III are incorrect since CIS are indeed considered an asset management activity by the SFO, but they are not the ONLY form of asset management recognized by the SFO.

The key elements of what constitutes a CIS are:
(a) an arrangement in respect of a property under which the management of the property is not subject to the day-to-day control of the scheme’s participants, and either:
(i) the property is managed as a whole by or for the person operating the arrangement; or
(ii) the participants’ contributions and accruing profits or income are pooled; and
(b) the purpose of the arrangement is to enable the participants to receive profits, income or other payments or returns from the property or dealings relating to it.

The key elements of what constitutes a CIS are:
(a) an arrangement in respect of a property under which the management of the property is not subject to the day-to-day control of the scheme’s participants, and either:
(i) the property is managed as a whole by or for the person operating the arrangement; or
(ii) the participants’ contributions and accruing profits or income are pooled; and
(b) the purpose of the arrangement is to enable the participants to receive profits, income or other payments or returns from the property or dealings relating to it.

The main elements of a collective investment scheme include
I. The property is primarily managed by the professionals who run the scheme
II. Participant’s contributions and accrued profits or gains are pooled
III. The purpose of the collective investment scheme is to earn profit income or other returns

Answer C is not a major element in the definition of a CIS since segregation is a particular subject of the operation and not a broad definition of the CISs as a whole.

The key elements of what constitutes a CIS are:
(a) an arrangement in respect of a property under which the management of the property is not subject to the day-to-day control of the scheme’s participants, and either:
(i) the participants’ contributions and accruing profits or income are pooled.

The key elements of what constitutes a CIS are:
(a) an arrangement in respect of a property under which the management of the property is not subject to the day-to-day control of the scheme’s participants, and either:
(i) the property is managed as a whole by or for the person operating the arrangement; or
(ii) the participants’ contributions and accruing profits or income are pooled; and
(b) the purpose of the arrangement is to enable the participants to receive profits, income or other payments or returns from the property or dealings relating to it.
They are not in any way the most direct way to invest.

Powers granted to the SFC include the power to authorise CISs and structured products for offer to the public as well as advertisements and other documents that contain an offer to the public.

The Financial Secretary may prescribe new financial arrangements as CISs and new financial products as securities or futures contracts by issuing a notice in the Gazette, as per the powers granted under sections 392 and 393 of the SFO. This enables the inclusion of new products in the regulatory framework as appropriate.

Exclusions from the definition of a CIS include:
(a) arrangements where the participants and the operator of the arrangement belong to the same group of companies;
(b) franchise arrangements; and
(c.)arrangements where a solicitor acting in his professional capacity holds money from clients during the course of his work.

The functions of the SFC in relation to asset management are two-pronged:
(a) it authorises CISs, including, for example, unit trusts, managed funds and retirement
schemes, and supervises the marketing of these CISs; and
(b) it licenses and supervises intermediaries engaged in asset management (Type 9 regulated activity) as well as others engaged in providing advisory services in the industry (Type 4 and Type 5 regulated activities); if they choose to be licensed as dealing in securities and/or futures contracts (Type 1 and/or Type 2 regulated activities), the respective regulatory regime will be applied to them.
The first of these functions is derived from Part IV, SFO and the second from Part V, SFO.

The powers assigned to the SFC include the power to authorise CISs and structured products for offer to the public as well as advertisements and other documents that contain an offer to the
public.

Section 104, SFO empowers the SFC to grant authorisation to CISs(commonly referred to as ‘mutual funds’ or ‘unit trusts.’), thereby enabling the CISs to be marketed to the public. However,the SFC does not directly manage these CISs. Additionally, Structured products are not CISs.

The functions of the SFC in relation to asset management are two-pronged:
(a) it authorises CISs, including, for example, unit trusts, managed funds and retirement schemes, and supervises the marketing of these CISs; and
(b) it licenses and supervises intermediaries engaged in asset management (Type 9 regulated activity) as well as others engaged in providing advisory services in the industry (Type 4 and Type 5 regulated activities); if they choose to be licensed as dealing in securities and/or futures contracts (Type 1 and/or Type 2 regulated activities), the respective regulatory regime will be applied to them.
The first of these functions is derived from Part IV, SFO and the second from Part V, SFO.

Powers granted to the SFC include the power to authorise CISs and structured products for offer to the public as well as advertisements and other documents that contain an offer to the public.