HKSI Paper 1 Market misconduct and improper trading practices question: Is a former director a connected person?

HKSI Paper 1Market misconduct and improper trading practices

Kenneth Ho resigned as an executive director of Sunfield Pharma Holdings Ltd, a listed company, on 1 March. On 20 June he buys Sunfield shares on unannounced clinical trial results he heard at a February board meeting. Is he a person connected with Sunfield?

A No, as a director's connection with the company ends on the day he resigns from the board
B Yes, as a former director stays connected for 12 months after leaving office
C Yes, as he was a director at some time within the 6 months before the dealing
D No, unless he still held 5% or more of Sunfield's shares on 20 June

Show the answer and explanation

Answer: C. Yes, as he was a director at some time within the 6 months before the dealing

Section 247(1)(e) of the SFO treats a person as connected with a corporation if, at any time within the 6 months before the insider dealing, he would have been connected under paragraphs (a) to (d), for example as a director. Kenneth left on 1 March and dealt on 20 June, less than 4 months later, so he is still connected and his purchase on unpublished trial results is insider dealing under s.270(1)(a). Connection does not end on resignation, the look-back period is 6 months rather than 12, and a 5% holding is a separate route to connection, not a condition. Source: SFO (Cap. 571) s.247(1)(a), (e); s.270(1)(a) (as at October 2026).

Common mistake

Assuming resignation cuts the link at once. The SFO looks back 6 months from the dealing.

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