Practice and exam technique

HKSI Paper 1 practice questions: Topic 1, regulatory overview

Compiled by the Sitonce editorial team from the HKSI and SFC sources listed belowUpdated 11 August 20268 min readFacts verified 5 September 2026

The short answer

Topic 1 is who does what in Hong Kong finance, and we estimate it at about 2 of 60 questions. Almost every wrong option is another body doing the wrong job. Six worked questions below, each with a named reason for all three distractors.

Topic 1 is the cheapest topic on the paper to get right and one of the most commonly dropped. It is not conceptual. It is a map of institutions, and either you have learned the map or you are guessing between four acronyms that all sound official.

Six questions follow, written in the style of the paper. They are new items, not our bank, but they use the same distractor logic.

What does Topic 1 cover?

Syllabus title: Regulatory overview of the Hong Kong financial industry
Second-level headings: 5
Our estimate of questions: About 2 of 60
Headings: Financial products and services; regulatory authorities; the SFC; HKEX; participants and intermediaries
Dominant distractor pattern: Wrong body
Difficulty: Low, if you build the map. High if you rely on recognition.

That question estimate is ours, derived by scaling each topic's count of second-level syllabus headings to 60 questions. HKSI does not publish a blueprint, so treat it as a study-time guide.

Six practice questions

Question 1 - regulatory authorities

Which of the following is a subsidiary of the Securities and Futures Commission?

The Investor Compensation Company
The Financial Reporting Council
Hong Kong Securities Clearing Company
The Insurance Authority

Answer: A. The Investor Compensation Company administers the Investor Compensation Fund and sits under the SFC, as does the Investor and Financial Education Council. Option B overstates the SFC's perimeter: the Financial Reporting Council is an independent statutory regulator of auditors of listed entities and sits alongside the SFC, not under it. Option C attributes an SFC-side function to the exchange group, since Hong Kong Securities Clearing Company is part of HKEX. Option D is a plain wrong-body distractor, the Insurance Authority being a separate statutory regulator with its own perimeter.

Question 2 - market infrastructure

A retail investor buys shares in a company listed on the Stock Exchange of Hong Kong. Which entity clears and settles that transaction?

Hong Kong Securities Clearing Company
HKFE Clearing Corporation
The SEHK Options Clearing House
OTC Clearing Hong Kong

Answer: A. Hong Kong Securities Clearing Company operates the central clearing and settlement system for the cash securities market. Option B is the futures clearer, which handles contracts traded on the Hong Kong Futures Exchange rather than shares. Option C is the closest neighbour and the most attractive wrong answer, because the products it clears are also SEHK products, but they are stock options rather than shares. Option D clears over-the-counter derivatives, which are neither exchange-traded nor cash equities.

Question 3 - participants and intermediaries

A bank incorporated in Hong Kong and supervised by the Monetary Authority wishes to begin dealing in securities for its customers. Which statement is correct?

Its banking licence already permits it to deal in securities
It must apply to the SFC to be licensed as a licensed corporation
It registers with the SFC as a registered institution, with the Monetary Authority remaining its front-line supervisor
It must establish a separately licensed subsidiary before it can deal in securities

Answer: C. Authorised institutions take the registration route rather than the licensing route, and the division of labour is that the Monetary Authority supervises them day to day while the SFC sets conduct standards and can discipline them. Option A reads a banking licence as universal, which it is not. Option B confuses licensing with registration, and licensed corporation is the non-bank route. Option D describes a structure a group might genuinely choose for commercial reasons and presents it as a legal requirement, which is an invented rule.

Question 4 - the review route

A responsible officer is notified that the SFC has decided to suspend their approval. They wish to challenge the decision. Which body reviews specified decisions of the SFC?

The Market Misconduct Tribunal
The Securities and Futures Appeals Tribunal
The Takeovers and Mergers Panel
The Court of Final Appeal

Answer: B. The Securities and Futures Appeals Tribunal is the statutory body that reviews specified SFC decisions, including licensing and disciplinary decisions. Option A conflates the two tribunals: the Market Misconduct Tribunal hears market misconduct proceedings and has nothing to do with reviewing SFC decisions. Option C is the body that deals with rulings under the Takeovers Code. Option D skips the statutory review route entirely and reaches for a court, which is the error of assuming that any dispute with a regulator starts in litigation.

Question 5 - HKEX

Hong Kong Exchanges and Clearing Limited operates the Hong Kong markets and is itself a company whose shares are listed on the Stock Exchange. Who acts as its listing regulator in that capacity?

The Stock Exchange of Hong Kong, in the ordinary way
The Securities and Futures Commission
The Financial Reporting Council
No one, because HKEX is exempt from the Listing Rules

Answer: B. The SFC takes the front-line listing regulator role for HKEX as a listed issuer, because an exchange administering the Listing Rules against its own parent is exactly the conflict the arrangement is designed to remove. Option A overlooks that conflict, which is the whole point of the question. Option C picks the audit regulator, which regulates auditors of listed entities rather than the issuers themselves. Option D assumes an exemption, and HKEX complies with the Listing Rules like any other issuer.

Question 6 - the examination and the licence

A candidate passes the Licensing Examination administered by the HKSI Institute. What does passing give them?

A licence to carry on regulated activity
Registration with the Monetary Authority
Evidence towards the competence requirement that forms part of the SFC's fit and proper assessment
Automatic membership of the Securities and Futures Commission

Answer: C. The HKSI Institute is a professional body that sets and administers the examination. Passing it evidences industry knowledge, which is one element of the assessment the SFC makes when deciding whether an applicant is fit and proper. Option A confuses the examiner with the licensor, which is the most common misconception on this heading. Option B sends you to the banking supervisor, which has no role in licensing individuals for regulated activity. Option D treats a statutory regulator as a membership organisation, which it is not.

What every wrong option was testing

Question	Wrong option	Misconception
1	Financial Reporting Council	SFC perimeter overstated
1	Hong Kong Securities Clearing Company	SFC function attributed to the exchange
2	HKFE Clearing Corporation, SEOCH	Neighbouring clearing house picked
3	Licensed corporation	Licence and registration confused
3	Separate subsidiary required	Invented rule
4	Market Misconduct Tribunal	Tribunals conflated
4	Court of Final Appeal	Statutory review route missed
5	SEHK regulates its own parent	Conflict overlooked
6	A licence	Examiner confused with licensor

Look at the middle column. Nine wrong options, and eight of them are a real institution doing a real job in the wrong place. That is Topic 1 in a sentence.

How should you revise Topic 1?

Build one sheet, three columns: the body, what it does, and the body it is most often confused with. Do not write paragraphs. This is a lookup table and it should look like one.

The four clearing houses, and which market each one serves.
The Market Misconduct Tribunal against the Securities and Futures Appeals Tribunal. Different work, similar names, and both appear as distractors for the other.
The Investor Compensation Company against the Investor and Financial Education Council. Same parent, entirely different jobs.
The SFC against the Monetary Authority for a bank doing regulated activity, and the SFC against the Financial Reporting Council for auditors of listed entities.
The HKSI Institute against the SFC. Examiner, not licensor.

An hour on that sheet is worth more than a day of reading, and we would say the same to anyone. Topic 1 is the one place on this paper where rote learning is straightforwardly the right strategy, and candidates resist it because it feels unintellectual.

The concession is that Topic 1 is small. Our estimate puts it at around 5 questions, so perfect knowledge of the institutional map buys you a handful of marks, not a pass. Get it quickly, get it early, then spend your time on Topic 3 and the conduct topics where the real weight sits. The topic explainer is at Topic 1, regulatory overview.

Common questions

How many Paper 1 questions come from Topic 1?

HKSI does not publish a per-topic breakdown. Our estimate, scaling the topic's five second-level syllabus headings to 60 questions, puts it at around five. Treat that as a guide to how much study time it deserves rather than a fact about the paper.

Which regulators do I need to know for HKSI Paper 1?

The SFC, the Hong Kong Monetary Authority, the Insurance Authority, the Mandatory Provident Fund Schemes Authority and the Financial Reporting Council, plus the Financial Services and the Treasury Bureau as the policy bureau. Know what each supervises and where the boundaries fall.

What is the difference between a licensed corporation and a registered institution?

A licensed corporation is the non-bank route: it applies to the SFC for a licence. A registered institution is an authorised institution, typically a bank, that registers with the SFC for regulated activity while the Monetary Authority remains its front-line supervisor.

Does passing the HKSI examination make me licensed?

No. The HKSI Institute administers the examination; the SFC grants licences. Passing evidences the industry knowledge element of the SFC's fit and proper assessment, and you still need an application, a sponsoring firm for a representative licence, and the rest of the assessment.

Which clearing house should I associate with which market?

Hong Kong Securities Clearing Company for cash securities, HKFE Clearing Corporation for futures and options traded on the futures exchange, the SEHK Options Clearing House for stock options traded on the Stock Exchange, and OTC Clearing Hong Kong for over-the-counter derivatives.