HKSI Paper 1 Business conduct and client relations question: Keeping client identity records offshore

HKSI Paper 1Business conduct and client relations

Shouson Hill Securities Ltd is a Hong Kong subsidiary of a Singapore group. To save costs, it keeps its paragraph 5.4 client identity records for HKFE futures orders only on a Singapore server. Which ONE of the following statements is INCORRECT?

A Paragraph 5.4 applies to futures contracts traded on HKFE as well as to SEHK securities
B The firm must give the SFC access to these records on request
C Keeping the records only in Singapore is acceptable if they can be produced quickly
D The records cover the identity of the originator and the ultimate beneficiary of each order

Show the answer and explanation

Answer: C. Keeping the records only in Singapore is acceptable if they can be produced quickly

Paragraph 5.4(b) requires a licensed or registered person to keep in Hong Kong a record of the details in paragraph 5.4(a), namely the identity, address and contact details of the originator and the ultimate beneficiary and the instruction given, and to give the Commission access on request. Keeping them only overseas breaches this, whatever the retrieval time. Paragraph 5.4(e) applies the rule to securities or futures contracts listed or traded on a recognized stock market or recognized futures market, and to derivatives written over them, so HKFE futures are covered. The Code does not require lodging the records with HKFE before each order. So the statement that overseas storage is acceptable is incorrect. Source: SFC Code of Conduct (33rd edn, Jan 2026) para 5.4(b) and (e) (as at October 2026).

Common mistake

Candidates focus on whether the SFC can get the records quickly. The Code's test is location: the records must be kept in Hong Kong.

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Related HKSI Paper 1 questions

Mrs Cheung asks Lockhart Road Securities Ltd to buy US-listed shares for her. The firm will hold them through its New York sub-custodian, not in Hong Kong. What must it do under paragraph 11.1 of the Code of Conduct?Ocean Pearl Ltd, a company incorporated in the British Virgin Islands, opens an account with Hollywood Road Capital Ltd to trade SEHK-listed shares. Mr Ho, 'just a director', phones in its orders. Which of the following statements are CORRECT under paragraph 5.4?Peel Street Securities Ltd executes SEHK trades for the Harbour Growth Fund, a unit trust managed with full discretion by Kam Tin Investment Management Ltd. Mr Lau, the largest unitholder, overrides Kam Tin and directs a purchase through Peel Street. Under paragraph 5.4, whose details must Peel Street record?

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Original study material mapped to the public HKSI Paper 1 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.