Practice and exam technique

HKSI Paper 1 practice questions: Topic 9, market misconduct

Compiled by the Sitonce editorial team from the HKSI and SFC sources listed belowUpdated 11 August 20269 min readFacts verified 5 September 2026

The short answer

Topic 9 is the six statutory market misconduct conducts, their consequences, unsolicited calls and improper trading practices. We estimate about 3 of 60 questions. Most wrong options are a neighbouring conduct or a sanction attributed to the wrong body.

Topic 9 is small and candidates enjoy it, which is a problem. The material is memorable because the conduct is vivid, and vividness makes people feel they know it. Then the question asks them to separate false trading from price rigging, or churning from bucketing, and the vividness stops helping.

Six worked questions below. The distinctions matter more here than anywhere else on the paper.

The six conducts, and what separates them

Conduct	The essence of it	Confused with
False trading	Creating a false or misleading appearance of active trading, or of the market for or price of securities	Price rigging
Price rigging	Wash sales and artificial transactions whose effect is on the price	False trading
Stock market manipulation	A series of transactions intended to induce others to deal	False trading
Disclosure of information about prohibited transactions	Putting out information about a transaction that is itself market misconduct, for gain	Disclosure of false information
Disclosure of false or misleading information inducing transactions	Putting out false or misleading material information to induce dealing	Disclosure about prohibited transactions
Insider dealing	Dealing, counselling or procuring while connected and in possession of relevant information not generally known	Nothing, but it is over-selected as a guess

That last row is worth a warning. Insider dealing is the conduct everyone has heard of, so it becomes the default guess on any question with a whiff of wrongdoing. It appears as a distractor far more often than it appears as an answer.

Two regimes, one set of behaviours

The same six conducts appear both as civil market misconduct before the Market Misconduct Tribunal and as criminal offences before the courts. The SFC chooses a route and cannot pursue both for the same conduct. Know the two routes and what each can order, and a whole class of questions becomes straightforward.

Our estimate puts Topic 9 at about 3 of 60 questions, which is the split our question bank is built to. Scaled from its five second-level syllabus headings. HKSI does not publish a per-topic count.

Six practice questions

Question 1 - identifying the conduct

A trader controls two accounts at different brokers. Over several days he places matching buy and sell orders in a thinly traded stock through both accounts, so that the reported turnover in the stock rises sharply. He does not intend to change his overall position. Which conduct does this most closely describe?

Insider dealing
False trading
Disclosure of false or misleading information inducing transactions
Front running

Answer: B. The behaviour creates a false or misleading appearance of active trading, which is the essence of false trading. Option A is the reflex guess, and nothing in the facts involves relevant information about a corporation that is not generally known. Option C is the neighbour that trips careful candidates, but no information has been published; the deception is carried out through the trading itself rather than through a statement. Option D is an improper trading practice and a Code matter, not one of the six statutory conducts, which is a distinction worth being able to make instantly.

Question 2 - what is inside the statutory list

Which of the following is NOT one of the six statutory market misconduct conducts under the Ordinance?

Price rigging
Stock market manipulation
Churning a client's account to generate commission
Insider dealing

Answer: C. Churning is an improper trading practice and a breach of the Code of Conduct, dealt with through the SFC's disciplinary powers rather than through the market misconduct regimes. The other three are statutory conducts. The value of this question is in the boundary it draws: candidates who file every piece of misconduct in the same mental folder will pick a statutory conduct here and lose the mark, and the same confusion costs them on questions about which body imposes which sanction.

Question 3 - what the Tribunal can order

Which of the following may the Market Misconduct Tribunal order against a person it finds to have engaged in market misconduct?

A term of imprisonment
A cold shoulder order restraining the person from dealing in securities for a period
Revocation of the person's SFC licence
A criminal fine

Answer: B. The Tribunal makes civil orders, including cold shoulder orders, disqualification orders and cease and desist orders, together with orders to pay amounts gained or losses avoided. Options A and D confuse a tribunal with a criminal court, and only a court following a criminal conviction can impose those. Option C attributes an SFC disciplinary power to the Tribunal: revoking or suspending a licence sits with the regulator under the disciplinary Part of the Ordinance, not with the Tribunal.

Question 4 - breaching a Tribunal order

A person subject to a cold shoulder order made by the Market Misconduct Tribunal deals in securities during the period covered by the order, without leave. What follows?

Nothing, because the Tribunal has no power to enforce its own orders
The breach is itself a criminal offence
The order is automatically extended for a further period
The SFC must bring fresh Tribunal proceedings in respect of the original misconduct

Answer: B. Breaching a cold shoulder, disqualification or cease and desist order is a criminal matter in its own right, so the civil route can still end in a criminal conviction through a different door. Option A reads a civil tribunal as toothless, which is the misconception the question exists to correct. Option C invents an automatic extension mechanism. Option D misapplies the bar on pursuing both regimes for the same conduct: the breach is new conduct and is prosecuted as such.

Question 5 - improper trading practices

A dealer receives a large client order that is likely to move the price. Before executing it, the dealer buys the same security for their own account. What is this practice called?

Churning
Bucketing
Front running
Rat trading

Answer: C. Front running is dealing ahead of a client order in order to benefit from the price movement that the order is expected to cause. Option A is excessive trading in a client's account to generate commission. Option B is failing to execute a client order in the market and trading against it from the firm's own book instead. Option D is allocating profitable fills to one's own account after the event rather than dealing ahead. All four are improper practices, and the exam expects you to name them apart rather than merely disapprove of them.

Question 6 - unsolicited calls

Which statement about the restriction on unsolicited calls in the Ordinance is correct?

All cold calling by licensed persons is prohibited without exception
Unsolicited calls made to induce a person to deal are restricted, subject to exceptions for specified persons and specified products
The restriction applies only to calls made from outside Hong Kong
The restriction applies only to calls made to existing clients of the firm

Answer: B. The Ordinance restricts unsolicited calls made with a view to inducing dealing, and it carves out specified categories of person and product rather than imposing a blanket ban. Option A overstates the rule, and an absolute with no exceptions should always raise your suspicion on a regulatory paper. Option C invents a jurisdictional limit. Option D inverts the point of the protection, which is aimed at approaches to people who have not asked to be approached. For the current wording, check the text on e-Legislation rather than relying on a summary.

What the wrong options were testing

Pattern	Where it appeared	The defence
Insider dealing as the default guess	Question 1	Check for relevant information not generally known. No information, no insider dealing
Neighbouring conduct	Question 1	Ask where the deception sits: in the trading, or in a statement
Statutory conduct confused with Code breach	Questions 2 and 5	Keep two lists: the six conducts, and the improper practices
Tribunal confused with court	Question 3	The Tribunal cannot fine or imprison. A court can
Sanction attributed to the wrong body	Question 3	Licence revocation is the SFC. Cold shoulder is the Tribunal
Civil route read as toothless	Question 4	Breach of a Tribunal order is criminal
Rule overstated	Question 6	Absolutes are rare. Look for the carve-out

How to revise Topic 9

Two lists and one distinction. The first list is the six statutory conducts with a one-line description of each, learned in a fixed order so you can run through them. The second is the improper trading practices: churning, bucketing, front running, rat trading. Keep them apart in your notes, physically, because the exam relies on you mixing them.

The distinction is who can do what to you. The Tribunal makes civil orders. A criminal court convicts and sentences. The SFC disciplines licensees and can apply to the court for remedial orders. Three routes, three menus of outcome, and questions in this topic constantly offer you an item from the wrong menu.

Here is the opinion. Topic 9 is the most over-read topic on the paper relative to its size. It is around five questions and it attracts far more attention than that, because enforcement stories are interesting and reading about them feels like studying. Learn the boundaries, learn the menus, and stop.

The concession, and it is a real one. This topic contains the material our sources disagree about most, particularly on which provision does what for insider dealing and unsolicited calls. That is why you will not find a section number anywhere on this page. We cite by Part and by name, and where a precise provision matters we send you to the current text on e-Legislation. A provider quoting confident section numbers for these conducts is more confident than the sources justify.

There is more depth at Topic 9, market misconduct and at the six market misconduct offences.

Common questions

What are the six market misconduct conducts under the SFO?

False trading, price rigging, stock market manipulation, disclosure of information about prohibited transactions, disclosure of false or misleading information inducing transactions, and insider dealing. The same six behaviours appear both as civil market misconduct and as criminal offences.

Can the Market Misconduct Tribunal send someone to prison?

No. The Tribunal makes civil orders such as cold shoulder orders, disqualification orders and cease and desist orders, and can order payment of profits gained or losses avoided. Imprisonment follows a criminal conviction in the courts, under the criminal counterpart of the same conducts.

Is churning market misconduct?

No, it is an improper trading practice and a breach of the Code of Conduct, addressed through the SFC's disciplinary powers. Keeping the improper practices separate from the six statutory conducts is one of the most reliable ways to gain marks in this topic.

What is the difference between front running and rat trading?

Front running is dealing ahead of a client order to benefit from the price movement it is expected to cause. Rat trading is allocating profitable executions to one's own account after the fact. Both are improper practices, and the exam expects you to name them apart.

Are unsolicited calls banned in Hong Kong?

Not outright. The Ordinance restricts unsolicited calls made with a view to inducing dealing and carves out specified persons and products. Because the detail here is reported inconsistently in secondary sources, check the current text on e-Legislation before relying on any summary.