英文證券卷六 HKSI Paper 6 第一章

The demands for employment is not a function satisfied by financial market alone, thus is not a primary reason for the existence of 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 a loan and charging interest is a financial actitiy that is subjected to supervision by the financial regulators.

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

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

The definition of asset management is to manage securities and futures portfolio or real estate investment trust for others. Auditors do not manage asset; they merely audit as their primary business. Fund managers manage Collective Investment Schemes; that is managing portfolios of securities and futures or real estate trust for a group of people. Therefore they are service providers in the asset management industry. Stockbrokers buy and sell Collective Investments Schemes on behalf of clients and may also manage securities portfolio for clients. Therefore they are service providers in the asset management industry. Independent Financial Advisers (IFA) provides advice on buying and selling Collective Investment Schemes. Therefore they are service providers of the asset management industry.

Financial Intermediaries must be compensated in a financial transaction to be view as providing financial services. Setting up a tutorial company is not providing financial services to a third party because it is not a financial transaction. Managing assets for free is not a financial service since it is not compensated. Signing a rental agreement on behalf of a bank is not a financial service because rental agreement itself is not a financial instrument. Providing loans to others with interest is a form of financial service since it is a service in exchange for compensation in 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.

SFO treats all investors fairly and equally. Regulators should be transparent and its power should be in check.

Encouraging the development of new products, operating profitable exchanges in Hong Kong and reducing trading hours are all actions. They are action verbs but not objective description. Objectives can only be objective description, therefore, these phrases can never be objectives and primary objective of Hong Kong financial regulators. Objectives are status that financial regulators hope for, enhancing confidence is an objective description that financial regulators hope for.

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 has responsibility for: (a) registering mandatory provident fund (“MPF”) schemes; (b) approving pooled investment funds; (f) approving trustees and regulating the affairs and activities of such approved trustees; (g) dealing with complaints about MPF products and approved trustees, and referring them to the SFC and other regulators for action where 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.

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

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 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.

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

The functions and powers of the SFC are wide and are set out in s. 5, SFO. The principal functions are to:
(b) supervise, monitor and regulate the activities of:
(i) recognised exchange, clearing houses, exchange controllers and investor compensation companies or persons carrying on regulated activities; and
(ii) registered institutions that are regulated or to be regulated by the SFC under any relevant provisions.

The functions and powers of the SFC are wide and are set out in s. 5, SFO. The principal functions are to:
(c) promote, encourage and enforce the proper conduct, competence and integrity of persons carrying on regulated activities;
(g) promote, encourage and enforce internal control and risk management systems by persons carrying on regulated activities, including registered institutions in the case of any regulated activities they conduct.

The objectives of the SFC in relation to the securities and futures industry, as stated in s. 4, SFO, are to:
(d) minimise crime and misconduct in the market.

The objectives of the SFC in relation to the securities and futures industry, as stated in s. 4, SFO, are to:
(b) promote public’s understanding of the industry including its operation and functioning;
(d) minimise crime and misconduct in the market.

The objectives of the SFC in relation to the securities and futures industry, as stated in s. 4, SFO, are to:
(b) promote public’s understanding of the industry including its operation and functioning;
(d) minimise crime and misconduct in the market

The objectives of the SFC in relation to the securities and futures industry, as stated in s. 4, SFO, are to:
(c) provide protection to the investing public;
(f) assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the industry.

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’s operations are subject to both internal control processes and, externally, judicial review and the scrutiny of the Process Review Panel, a panel established by the Government. The decisions of the SFC are also subject to an appeal process.
As regards the SFC’s treatment of breaches, the SFC has indicated that it will adopt a pragmatic approach and take all relevant factors into account, for example, the size of the business or the use of any management and supervisory measures to compensate for the apparent failure to meet any specified requirement.
The SFC has adopted the following as a statement of its mission: “To strengthen and protect the integrity and soundness of the Hong Kong securities and futures markets for the benefit of investors and the industry”.

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.

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.
In seeking the right balance, the SFC consults both industry practitioners and the public on proposed regulatory developments.
Rather than implement detailed standards, the SFC focuses on a higher-level articulation of what the SFC expects registered and licensed persons to do. This allows standards to be maintained for a variety of scenarios in a fast-changing marketplace, and enables businesses to decide how best to secure compliance with regulations having regard to their particular business context.

In addition, 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 suspend exchange companies;
(d) to appoint external investigators; and
(e.) to intervene in the business operations of licensed corporations.

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.

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.

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.

Sanction Based regulations and Income Based regulations do not exist in Hong Kong. Merit Based regulations is to reduce access to unfavourable investment products or projects by investors. The interest of investors are protected by doing so. Disclosure Based regulations require investment products and projects 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.

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.

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.

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.

Disclosure requiremetns are in place to enhance transperancy

Decisions made by the regulators can be overturned or overruled.

The SFC’s operations are subject to both internal control processes and, externally, judicial review and the scrutiny of the Process Review Panel, a panel established by the Government. The decisions of the SFC are also subject to an appeal process.
As regards the SFC’s treatment of breaches, the SFC has indicated that it will adopt a pragmatic approach and take all relevant factors into account, for example, the size of the business or the use of any management and supervisory measures to compensate for the apparent failure to meet any specified requirement.
The SFC has adopted the following as a statement of its mission: “To strengthen and protect the integrity and soundness of the Hong Kong securities and futures markets for the benefit of investors and the industry”.

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.

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 has responsibility for: (d) ongoing monitoring of compliance by MPF products with the Mandatory Provident
Fund Schemes Ordinance (“MPFSO”); (e) investigating alleged breaches of the provisions of the MPFSO;

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 has responsibility for: (f) approving MPF trustees and regulating the affairs and activities of such approved trustees.

Certain responsibilities of the MPFA interlink with the particular responsibilities of the SFC, which are:
(a) vetting and authorising MPF products and related marketing materials in accordance with the provisions of the SFC Code on MPF Products and the relevant ordinances (including the SFO);
(b) registering and approving investment managers and continued monitoring of their conduct in the investment management of MPF products

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.

The Insurance Authority has the following major duties and powers:
(d) the promotion of self-regulation by the industry and the maintenance of close contact with the industry through a consultative process.

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.

A good corporate-governance is not related to 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).

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).

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.

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;
(d) installing strong protective structures for minority shareholders, creditors and other lenders

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.

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

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.

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.

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

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

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.

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.

Certain responsibilities of the MPFA interlink with the particular responsibilities of the SFC, which are: (a) vetting and authorising MPF products and related marketing materials in accordance
with the provisions of the SFC Code on MPF Products and the relevant ordinances (including the SFO). This means the IA doesn’t regulate MPF products at all.

A principal intermediary must apply for the approval of either (i) a subsidiary intermediary or (ii) an individual, which will in each case be attached to the principal intermediary for the purpose
of carrying on activities regulated by the MPFSO and be appointed as a responsible officer.
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

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 issue of an advertisement, invitation or document authorised by the SFC under the provisions of the SFO will not constitute a regulated activity for the purposes of the MPFSO. However, where such an advertisement, invitation or document is issued but is not authorised by the SFO, an offence under the SFO is committed that is punishable by imprisonment and/or a fine whether or not the person in question is a registered MPF intermediary.

In general, the duties of responsible officers and executive officers who actively participate in, or supervise, the intermediary’s business may include:
(l) reporting to the SFC on discovery of any breaches of The Code of Conduct.

Treasury Bill are not being traded on the SEHK

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.

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

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.

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

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

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.

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.

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.

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.

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.

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.

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.

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

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)

According to the Securities and Futures Ordinance, futures options belongs to futures.

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 shall amend by the Gazette what is a regulated activity.

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

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

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)

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.

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 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.

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

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.

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).

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.

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.

There are only two circumstances in which a CIS may be offered or marketed to the public in Hong Kong: it must be either (i) structured as a company which is listed on the SEHK, or
(ii) authorised by the SFC. Notwithstanding the above, there are two classes of funds authorised by the SFC which do have certain linkage with the Insurance Authority: investment-linked assurance schemes and pooled retirement funds, both of which are marketed by the insurance industry. Authorisation of these has been delegated by the SFC to the Products Advisory Committee. The Insurance Authority is represented on this committee, as insurance companies wishing to promote these schemes will need to be authorised under the Insurance Ordinance.

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.

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.

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 functions of the SFC in relation to asset management are two-pronged:
(a) it authorises CISs, for example, unit trusts, managed funds and retirement schemes, and supervises the marketing of these CISs

There are only two circumstances in which a CIS may be offered or marketed to the public in Hong Kong: it must be either (i) structured as a company which is listed on the SEHK, or (ii) authorised by the SFC. The authorisation route is by far the most common approach taken.

The functions of the SFC in relation to asset management are two-pronged: One of those functions is to authorise CISs, including, for example, unit trusts, managed funds and retirement
schemes, and supervises the marketing of these CISs.

There are only two circumstances in which a CIS may be offered or marketed to the public in Hong Kong: it must be either (i) structured as a company which is listed on the SEHK, or (ii) authorised by the SFC. The authorisation route is by far the most common approach taken. So unauthorised CISs cannot be sold to the Hong Kong public.

The SFC may grant authorisation subject to “any other conditions it considers appropriate”. The SFC is also given the power to refuse to authorise applications and to withdraw authorisations.