HKSI Paper 1 Market misconduct and improper trading practices question: Working on Greenfield's unannounced agreement to sell a hotel to Pacific Crown Ltd

HKSI Paper 1Market misconduct and improper trading practices

Fiona Lai works for Greenfield Ventures Ltd, a private company. Working on Greenfield's unannounced agreement to sell a hotel to Pacific Crown Ltd, a listed company, at a bargain price, she buys Pacific Crown shares. How does Part XIII treat her?

A As not connected, since she is neither an employee nor a shareholder of Pacific Crown or its group
B As connected, since her access comes from a transaction between her employer and Pacific Crown
C As connected only if Greenfield holds 5% or more of the voting shares in Pacific Crown
D As not connected, but liable as a tippee of Pacific Crown's own directors and employees

Show the answer and explanation

Answer: B. As connected, since her access comes from a transaction between her employer and Pacific Crown

Section 247(1)(c) of the SFO treats an individual as connected with a corporation if his position may reasonably be expected to give him access to its inside information because of a business relationship between his employer and that corporation. Section 247(1)(d) also covers a person connected with one corporation who has inside information about another relating to a transaction involving both. Fiona's access comes from Greenfield's deal with Pacific Crown, so she is connected and her purchase is insider dealing under s.270(1)(a). Connection is not limited to employees and shareholders of the listed company itself, and the 5% substantial-shareholder test in s.247(3) is a separate route. She did not receive the information from Pacific Crown's staff. Source: SFO (Cap. 571) s.247(1)(c), (d); s.270(1)(a) (as at October 2026). Source: SFO (Cap. 571) s.247(1)(c), (d), (3); s.270(1)(a) (as at October 2026).

Common mistake

Candidates look only for a job or shareholding in the listed company. Staff of the other side of a deal are connected too.

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Related HKSI Paper 1 questions

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