Mock paper #4

HKSI Licensing Examination Paper 1

A full paper drawn to the blueprint. Answers and worked explanations are at the back of this file.

Questions: 60
Time: 90minutes
Mark: 70%to pass
Paper: #4of 5

Single-user licence. You may print this file and write on it. You may not redistribute, resell or post it. © Sitonce 2026.

Before you start

Sit this the way you will sit the real one. A mock done in pieces over three evenings measures your notes, not your recall.

Questions

60

Minutes

90

Per question

90s

Started at

Set a timer for 90 minutes and do not stop it. Running over is the commonest way a prepared candidate fails, and the only place you can find that out safely is here.
Mark one answer for each question on the answer sheet.
Answer every question. There is no penalty for a wrong answer. A blank is a guaranteed zero and a guess is not.
Flag anything you are unsure of as you go. When you mark the paper, a question you flagged and got right is worth as much of your attention as one you got wrong - you do not yet know it, you guessed it.
When the timer runs out, turn to the Answers section at the back of this file. Mark the paper against the quick-reference key first, fill in the score table, and only then read the worked explanations.

What this paper covers

Area	Questions	Share
Topic 4 - Licensing and registration, and subsidiary legislation	14	23%
Topic 5 - Business conduct and client relations	11	18%
Topic 6 - Business operations and practices	10	17%
Topic 3 - Securities and Futures Ordinance	8	13%
Topic 7 - Participating in the Hong Kong exchanges	6	10%
Topic 8 - Accessing public capital	4	7%
Topic 9 - Market misconduct and improper trading practices	3	5%
Topic 1 - Regulatory overview of the Hong Kong financial industry	2	3%
Topic 2 - Principles of relevant Hong Kong law and the Companies Ordinance	2	3%
Total	60	100%

Answer sheet - paper #4

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Paper #4

60 questions. 90 minutes.

1

Within what time must a prescribed person clear a specified OTC derivative transaction with a designated central counterparty?

AWithin 5 business days after the transaction is entered into
BWithin 1 business day after the transaction is entered into
CBefore the close of the day the transaction is entered into
DWithin 2 business days after the transaction is entered into

2

A licensed corporation holds a long position in a listed stock suspended from trading for five trading days and listed on no other exchange. How must the position be valued for its liquid capital computation?

AAt nil, because the securities have been suspended for at least 3 trading days
BAt fair value determined in accordance with generally accepted accounting principles
CAt the last closing price recorded before the suspension of trading took effect
DAt the last closing price, reduced by the haircut percentage applicable to it

3

An offer under section 175 of the SFO is contained in a written document. What date must the document bear?

AA date not more than 7 days before the offer is communicated
BA date not more than 3 days before the offer is communicated
CThe date on which the securities were last valued
DThe same date as the date of communication

Worked explanations

The paper carries one for every question, at the back. These are the three above.

Q1 B Ch. 4: Topic 4 - Licensing and registration, and subsidiary legislation

Answer: B - Within 1 business day after the transaction is entered into

Because Where the clearing obligation applies, the transaction must be cleared with a designated central counterparty, directly or through a third party, within 1 business day after it is entered into. Cap. 571AN s.6

The duty applies even if a counterparty is outside Hong Kong or the transaction was entered into outside Hong Kong. Cap. 571AN s.7

Where the other options lead

A.Clearing window over-stated. Five business days appears in neither set of rules and would leave counterparty risk uncleared for a week.
C.Same day clearing assumed. The rules allow until the end of the next business day, not the close of the trade day itself.
D.Reporting deadline applied to clearing. Two business days is the reporting deadline under the reporting rules; clearing must be done within 1 business day.

Q2 A Ch. 4: Topic 4 - Licensing and registration, and subsidiary legislation

Answer: A - At nil, because the securities have been suspended for at least 3 trading days

Because Listed securities suspended from trading for at least 3 trading days, and not tradable on any other exchange on which they are listed, must be valued at nil for long positions. FRR s.9(5)

That rule displaces the general requirement to value open positions at market value. FRR s.9(3)

Where the other options lead

B.Fair value read as the fallback. Fair value stands in for market value only where no published market price exists; a suspension of three trading days triggers its own valuation rule.
C.Short position rule applied. The last closing price is the floor for a short position in suspended securities, precisely because a short position is a liability rather than an asset.
D.Haircut applied to a nil asset. A haircut reduces the value of a position that still counts; this one is written down to nil before any haircut could bite.

Q3 B Ch. 5: Topic 5 - Business conduct and client relations

Answer: B - A date not more than 3 days before the offer is communicated

Because A written document containing the offer must bear a date which is not more than 3 days before the date on which the offer is communicated. SFO s.175(1)

Where the other options lead

A.Wrong window. The window is 3 days; 7 days is the period that runs from awareness in the rescission rule in section 175(6).
C.Valuation date substituted. The requirement fixes the date the document itself bears, not any valuation date.
D.Same-day dating assumed. The provision allows a window of up to 3 days rather than demanding same-day dating.

Worked explanations

The paper carries one for every question, at the back. These are the three above.

Q1 B Ch. 4: Topic 4 - Licensing and registration, and subsidiary legislation

Answer: B - Within 1 business day after the transaction is entered into

Because Where the clearing obligation applies, the transaction must be cleared with a designated central counterparty, directly or through a third party, within 1 business day after it is entered into. Cap. 571AN s.6

The duty applies even if a counterparty is outside Hong Kong or the transaction was entered into outside Hong Kong. Cap. 571AN s.7

Where the other options lead

A.Clearing window over-stated. Five business days appears in neither set of rules and would leave counterparty risk uncleared for a week.
C.Same day clearing assumed. The rules allow until the end of the next business day, not the close of the trade day itself.
D.Reporting deadline applied to clearing. Two business days is the reporting deadline under the reporting rules; clearing must be done within 1 business day.

Q2 A Ch. 4: Topic 4 - Licensing and registration, and subsidiary legislation

Answer: A - At nil, because the securities have been suspended for at least 3 trading days

Because Listed securities suspended from trading for at least 3 trading days, and not tradable on any other exchange on which they are listed, must be valued at nil for long positions. FRR s.9(5)

That rule displaces the general requirement to value open positions at market value. FRR s.9(3)

Where the other options lead

B.Fair value read as the fallback. Fair value stands in for market value only where no published market price exists; a suspension of three trading days triggers its own valuation rule.
C.Short position rule applied. The last closing price is the floor for a short position in suspended securities, precisely because a short position is a liability rather than an asset.
D.Haircut applied to a nil asset. A haircut reduces the value of a position that still counts; this one is written down to nil before any haircut could bite.

Q3 B Ch. 5: Topic 5 - Business conduct and client relations

Answer: B - A date not more than 3 days before the offer is communicated

Because A written document containing the offer must bear a date which is not more than 3 days before the date on which the offer is communicated. SFO s.175(1)

Where the other options lead

A.Wrong window. The window is 3 days; 7 days is the period that runs from awareness in the rescission rule in section 175(6).
C.Valuation date substituted. The requirement fixes the date the document itself bears, not any valuation date.
D.Same-day dating assumed. The provision allows a window of up to 3 days rather than demanding same-day dating.

The rest of this mock paper comes with the course

HKSI LE Paper 1: the whole syllabus taught, the questions that test it, 5 timed mocks, and all 6 PDFs to print.