HKSI Paper 1 Licensing, registration and subsidiary legislation question: Type 9 manager dealing for its own funds

HKSI Paper 1Licensing, registration and subsidiary legislation

Lion Rock Asset Management Ltd is licensed for Type 9 only. It manages two SFC-authorised unit trusts; its dealers place the funds' orders with brokers and its analysts research listed companies for its portfolio managers. Does it need any further licence?

A Yes, Type 1, because its dealers place orders in listed securities with outside brokers
B No, because the dealing and advising are done solely for its own management of the funds
C Yes, Type 4, because its analysts form views on specific listed securities in writing
D Yes, Types 1 and 4, because the incidental exemption covers only individual client accounts

Show the answer and explanation

Answer: B. No, because the dealing and advising are done solely for its own management of the funds

The SFC Licensing Handbook (July 2025) para 1.3.6 explains that a Type 9 licensee need not be licensed for Types 1, 2, 4 or 5 where those activities are carried out solely for the purposes of its asset management business. For Types 4 and 5 the managed portfolio must be a collective investment scheme, and both unit trusts are. Placing orders for funds it manages and producing research for its own portfolio managers is the typical case the exemption covers. Neither Type 1 nor Type 4 is needed, and the exemption is not limited to individual accounts; for advising it in fact requires a CIS. Source: SFO (Cap. 571) Sch. 5 Pt 2 (definitions of dealing in securities and advising on securities); SFC Licensing Handbook (July 2025) para 1.3.6 (as at October 2026).

Common mistake

Candidates think a fund manager that sends orders to brokers is 'dealing' and needs Type 1. Dealing solely for portfolios it manages is covered by the Type 9 incidental exemption.

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Related HKSI Paper 1 questions

Lion Rock Asset Management Ltd, licensed for Type 9 only, is approached by the trustee of a pension plan managed by another firm to execute that manager's Hong Kong equity orders as the trustee's agent, for a fee per trade. What is the licensing position?Harbourview Securities Ltd is licensed for Type 1 regulated activity only. When taking orders by phone, its representatives tell clients which Hong Kong stocks look like good buys, for brokerage only and purely to support dealing. What is the licensing position for this advice?Kowloon Pearl Securities Ltd, licensed for Type 1, launches a discretionary portfolio service for its retail clients, marketed as a separate product, with an annual fee of 1% of assets under management on top of brokerage. What should the firm do?

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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.