HKSI Paper 1 The Securities and Futures Ordinance (Cap. 571) question: Are private company shares securities?

HKSI Paper 1The Securities and Futures Ordinance (Cap. 571)

Mr Lau owns 30% of Lau Kee Holdings Ltd, a private company within the meaning of section 11 of Cap. 622, and plans to sell his shares to a friend. Are they 'securities' under the SFO?

A No, because shares or debentures of a private company within section 11 of Cap. 622 are excluded
B Yes, because the definition covers the shares of any body, incorporated or not, without exception
C Yes, because shares become securities whenever they are sold for value to someone outside the family
D No, because only shares listed on a recognised stock market fall within the definition of securities

Show the answer and explanation

Answer: A. No, because shares or debentures of a private company within section 11 of Cap. 622 are excluded

Paragraph (a) of the definition of 'securities' in section 1 of Part 1 of Schedule 1 covers shares, stocks, debentures and similar instruments of any body. The definition then lists exclusions, and exclusion (i) removes shares or debentures of a company that is a private company within section 11 of the Companies Ordinance (Cap. 622). Mr Lau's shares fall within that exclusion. The wide wording of paragraph (a) is cut back by the exclusions, so 'without exception' is wrong. Who buys the shares does not change what they are. Listing is not a requirement: unlisted shares of a public company are still securities. Source: SFO (Cap. 571) Sch. 1 Pt 1 s.1, definition of 'securities', para (a) and exclusion (i) (as at October 2026).

Common mistake

Candidates read paragraph (a) and stop. The exclusions at the end of the definition take private company shares out.

Practise more Paper 1 The Securities and Futures Ordinance (Cap. 571) questions

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

Start practising →

Study note: The Securities and Futures Ordinance (Cap. 571)HKSI Paper 1 practice questions & mock exams

Related HKSI Paper 1 questions

Harbourfront Group's treasury company pools money contributed by bona fide employees of group companies, and by their spouses, and manages it as one fund, paying them returns without giving them day-to-day control. How is this treated under Schedule 1 to the SFO?Sai Kung Orchard Partners invites the public to contribute to a scheme that buys and runs fruit farms as one business, sharing the profits with contributors. Contributors vote quarterly and may give directions but do not run the farms day to day. Is this a collective investment scheme under the SFO?Tsing Yi Logistics Ltd issues bonds to raise capital for a new warehouse. Holders may convert them into its shares at a fixed price. How are the bonds classified under the SFO?

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.