HKSI Paper 1 Business operations and practices question: Staff dealing by a research analyst

HKSI Paper 1Business operations and practices

Ms Ho joins Victoria Peak Securities Ltd, an SEHK participant, as a research analyst. She holds Hong Kong shares at another broker and wants to keep trading there. Which arrangement fits the Internal Control Guidelines?

A She discloses her holdings once a year and may keep trading at the outside broker if she sends the firm copies of her contract notes
B She need disclose only holdings worth more than HK$1 million, and may trade anywhere provided she pre-clears each order
C She discloses her holdings only on joining, because later trading is covered by the firm's Chinese wall and needs no reporting
D She discloses her holdings on joining and at least semi-annually, and trades SEHK products through a staff account at the firm

Show the answer and explanation

Answer: D. She discloses her holdings on joining and at least semi-annually, and trades SEHK products through a staff account at the firm

The Appendix to the Internal Control Guidelines (Operational Controls, para 4) suggests that staff disclose holdings and trading interests on joining and regularly afterwards, at least semi-annually. Staff of a firm that is, or whose group member is, an exchange participant should trade through staff accounts in products traded on that exchange, and staff transactions should be recorded and monitored by independent senior management. Annual disclosure is too infrequent. There is no HK$1 million threshold in the guidance. A Chinese wall controls information flow; it does not replace staff dealing disclosure. Source: SFC Internal Control Guidelines (April 2003), Part VII and Appendix A para 4 (as at October 2026).

Common mistake

Assuming an outside account is fine if statements are copied. For an exchange participant the guidance is to trade through staff accounts at the firm.

Practise more Paper 1 Business operations and practices questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Study note: Business operations and practices HKSI Paper 1 practice questions & mock exams

Related HKSI Paper 1 questions

Lam Kee Securities Ltd is a licensed corporation with six staff. Its senior dealer also arranges settlement of his own trades and posts them to the accounting records, as the firm cannot afford a separate team. How will the SFC approach this?Golden Bauhinia Brokerage Ltd wants an internal audit review of its settlement process. Its proposal is that Mr Tse, head of settlements, does the review, reports to himself and sends the board a summary. Which of the following statements are CORRECT?Mrs Cheung complains in writing that her account executive, Mr Ng, placed trades without her instructions. Mr Ng's team head offers to investigate personally because he supervises Mr Ng. Under the Internal Control Guidelines, how should the firm handle the complaint?

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

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.