CeMAP 1 Unit 2 Mock

Question 1

Under Financial Conduct Authority regulation, payment by way of fees for arranging a mortgage must be declared in the key facts illustration document (KFI) and also included in the:

A annual percentage rate calculation.
B initial disclosure document.
C monthly repayment calculation.
D offer of advance terms and conditions.

Answer 1

A Unit 2; 1.28.2

Question 2

In terms of ‘knowing your customer’, what is a market counterparty?

A. A corporate customer.
B. A private customer.
C. Where a customer is in the financial services business.
D. Where a firm acts on behalf of a private customer.

Answer 2

C Unit 2; 1.18. 1

Question 3

The Buckby Building Society is to launch a postal campaign, aimed at customers with significant amounts of money held on deposit, to draw their attention to the new Buckby European Equity Fund. Which warning must be included in the literature that will be sent to customers, in order to comply with FCA rules?

A At least 50% of the customer’s available funds should be retained on a deposit basis.
B Equity funds generally underperform in the early years because of the charges.
C Investments into the equity fund must be made for a minimum period of ten years.
D The equity-linked product does not have the capital security of the building society deposit.

Answer 3

D Unit 2; 1.14

Question 4

A £12,000 unit-linked single premium investment bond is cancelled by a customer within the cooling-off period. During this period, the stock market fell sharply and consequently, so did the value of the bond. What is the customer likely to receive?

A £12,000 less a market adjustment, if specified in the contract.
B £12,000 less a market adjustment, whether or not specified in the contract.
C 95% of the surrender value of the investment bond.
D The paid-up value of the investment bond.

Answer 4

A Unit 2; 1.26

Question 5

Under the Financial Services Authority regulations, what is the minimum number of years for which companies are required to retain records of individual employees’ training and competence?

A Three years.
B Four years.
C Five years.
D Six years.

Answer 5

A Unit 2; 1.16.2.4

Question 6

Which one of the following is most likely to be classified as an ‘approved’ person?
A A complaints manager.
B A compliance officer.
C A personnel manager.
D A training officer.

Answer 6

B Unit 2; 1.13. 2

Question 7

Ruth lost £60,000 when a UK investment firm became insolvent. What is the maximum amount that the Financial Services Compensation Scheme will pay her in compensation?
A. £42,000.
B. £48,000.
C. £54,000.
D. £60,000.

Answer 7

D Unit 2; 3.3

Question 8

Which one of the following facts must be included on all regulated Quotations as a result of the Consumer Credit Act?

A The annual percentage rate.
B The Bank of England base rate.
C The lender’s registered office address.
D The purpose of the loan.

Answer 8

A Unit 2; 5.1

Question 9

If the FCA discovers a contravention of its rules, one of the steps it may take is to vary a firm’s permissions. This means that:

A. the firm may have one of its regulated activities removed.
B. the firm will be required to sell assets to provide restitution.
C. the firm will be required to submit each sale to the FCA for approval.
D. the firm will need to seek authorization from a different regulator.

Answer 9

A Unit 2; 1.11. 1

Question 10

Insurance Life pic has set up an equity ISA for a new client. Why was it not necessary for the company to obtain evidence of identity for money laundering purposes?

A Investment amounts of less than £10,000 are exempt from money laundering identification requirements.
B Investments into equity ISAs are exempt from money laundering identification requirements.
C The client is only temporarily resident in the UK.
D The client was introduced by an intermediary who obtained the necessary evidence.

Answer 10

D Unit 2; 2.5

Question 11

In relation to how a firm deals with its regulator, which one of the following is not defined within the Principles of Business? A firm must:

A deal with its regulators in a co-operative way.
B deal with its regulators in an open way.
C disclose appropriate data to its regulator.
D disclose data on a regular basis to its regulator.

Answer 11

D Unit 2; 1.4

Question 12

Fiona has received an initial disclosure document (IDD) and a personalised key facts illustration (KFI) containing more elements than usual relating to the specific nature of the product and its additional risks. What type of mortgage product must she be arranging?

A A cash-back mortgage.
B A further advance.
C A lifetime mortgage.
D A re-mortgage.

Answer 12

C Unit 2; 1.28.1

Question 13

Under know your customer rules, why does an adviser need to establish a ‘risk profile’?

A In order to match appropriate insurance solutions.
B In order to match appropriate investment solutions.
C To establish premium sustainability levels.
D To identify affordability levels.

Answer 13

B Unit 2; 1.21

Question 14

Gareth is a sole trader. He has been told he needs FCA approval under the category of governing functions. This is specifically because he:

A. acts as his own finance director.
B. employs his wife in the business.
C. is a pension transfer specialist.
D. trades throughout the EU.

Answer 14

B Unit 2; 1.13. 1

Question 15

The Financial Services Compensation Scheme will pay out compensation to customers who have:
A been mis-sold a mortgage endowment policy.
B been mis-sold a personal pension plan.
C lost money through the insolvency of an authorized firm.
D lost money through the mismanagement of an investment fund.

Answer 15

C Unit 2; 3.3

Question 16

Employees should receive regular training about what is expected of them under money laundering rules so that they:

A are aware of the consequences to themselves if they fail to comply.
B can assess their firm’s compliance with the sourcebook.
C can caution as appropriate any suspect individuals.
D can complete the Money Laundering Report.

Answer 16

A Unit 2; 2. 8

Question 17

An authorised firm’s senior management must ensure that their organization is protected from use by money launderers by doing all of the following except:

A alerting those under suspicion of money laundering.
B appointing a Money Laundering Reporting Officer.
C providing regular training for staff.
D reporting suspicious transactions.

Answer 17

A Unit 2; 2. 4.2

Question 18

If a customer requests to see information held about him in your organization’s files how long do you have to respond to that request under the Data Protection Act ?
A 14 days.
B 28 days.
C 31 days.
D 40 days.

Answer 18

D Unit 2; 4.1.2

Question 19

What is the FCAs most severe disciplinary power?

A Financial penalties.
B Private warning.
C Public censure.
D Withdrawal of authorization.

Answer 19

D Unit 2; 1.11. 1

Question 20

The Financial Services Authority has identified four types of risks faced by financial services consumers. From which one does the FCA not protect customers?
A Bad faith risk.
B Performance risk.
C Prudential risk.
D Unsuitability risk.

Answer 20

B Unit 2; 1.10

Question 21

The Haddon Bank currently has mortgage loans secured on residential property, totalling £10m. What minimum level of ‘own funds’ must be retained to satisfy solvency ratio requirements?

A £80,000.
B £160,000.
C £400,000.
D £800,000.

Answer 21

C Unit 2; 1.9.1

Question 22

What is the minimum period for which customer records in respect of pension contracts must be kept?
A Three years.
B Six years.
C Ten years.
D Indefinitely.

Answer 22

B Unit 2; 1.21

Question 23

Which one of the following roles in a regulated firm would be classified by the FCA as a ‘significant management function’?
A. Caroline, who is a corporate finance adviser.
B. Howard, who is in charge of the pensions underwriting department.
C. Jim, who is the appointed actuary.
D. Valerie, who is in charge of all internal audits.

Answer 23

B Unit 2; 1.13.4

Question 24

When an adviser conducts a fact-find prior to offering investment advice, the fact-find will normally include all of the following except:

A a summary of normal expenditure on holidays and luxuries.
B details of other advisers consulted.
C their attitudes and investment objectives.
D their occupation.

Answer 24

B Unit 2; 1.21

Question 25

. If a company fails to comply with an enforcement notice under the Data Protection Act 1998, what is the maximum fine that can be imposed, without referring the case to the Crown Court?

A £5,000.
B £25,000.
C £100,000.
D Unlimited.

Answer 25

A Unit 2; 4. 1.3

Question 26

A key function of the initial disclosure document is to explain:

A the adviser’s status under the Financial Services Act.
B the area from where a potential client can obtain advice.
C the Financial Services Act.
D the individual contracts that the adviser is licensed to sell.

Answer 26

A Unit 2; 1.19

Question 27

In relation to money laundering, how is ‘property’ defined under the European Directive 1991?

A. Assets held in cash within the European Union only.
B. Assets of every kind including legal papers giving title to such assets.
C. Physical assets with a freehold title deed only.
D. Physical assets with a leasehold title deed only.

Answer 27

B Unit 2; 2.3

Question 28

Under the ‘know your customer requirements’, advisers should:

A assume that a private customer fully understands the risks involved.
B explain the potential product risks to an execution-only client but not be concerned with ‘best execution’.
C offer exactly the same duty of care and advice to all customers.
D provide the highest level of advice and duty of care to clients categorised as private customers.

Answer 28

D Unit 2; 1.18.1

Question 29

What is the main reason why an authorised firm’s senior management must requisition an annual report from its Money Laundering Reporting Officer?

A. In order to monitor activities and increase deficiencies.
B. In order to review activities and strengthen controls.
C. So that they can be compliant with the Financial Services Act.
D. So that they can be compliant with the Proceeds of Crime Act.

Answer 29

B Unit 2; 2.7

Question 30

Which compliance health warning must appear on all advertising material containing details of past investment performance? Past performance:

A. is not necessarily a guide to future performance.
B. is not necessarily better than future performance.
C. is only a general guide to the future.
D. of five years or more is a reasonable guide to the future.

Answer 30

A Unit 2; 1.14

Question 31

The Financial Ombudsman Service deals with unresolved complaints in respect of:
A general insurance brokers.
B interest rates.
C investment advice.
D investment performance.

Answer 31

C Unit 2; 3.2

Question 32

Which one of the following accurately relates to the advice that must be given by independent intermediaries?
A A suitable product from an appropriate provider.
B A suitable product from the host employer.
C The cheapest product from any provider.
D The cheapest product from the host employer.

Answer 32

A Unit 2; 1.17

Question 33

Tony has been successful in his training as an authorised adviser. What happens next?

A He will be required to take further examinations.
B He will have to complete a number of hours’ continuing professional development.
C His continued competence will be monitored.
D His line manager will draw up a development plan.

Answer 33

C Unit 2; 1.16 2.3

Question 34

Which one of the following statements would be the correct definition of the solvency margin required of a life assurance company?

A. The excess of the company’s assets over its mathematical provisions.
B. The excess of the company’s assets over the projected mortality rate.
C. The excess of the company’s mathematical provisions over its assets.
D. The excess of the company’s mathematical provisions over the projected mortality rate.

Answer 34

A Unit 2; 1.9.3

Question 35

Which statement best describes the relationship between the ‘fit and proper’ test and authorised persons?

A. A ‘Fit and proper’ test is recommended by the FSA for anyone applying for a controlled function.
B. A satisfactory ‘fit and proper’ test is necessary before an individual can fulfil a role in a controlled function.
C. The ‘fit and proper’ test is mainly designed to establish the creditworthiness of an authorised person.
D. The ‘fit and proper’ test relates solely to previous business activity in a controlled function.

Answer 35

B Unit 2; 1.7

Question 36

Mandy, a financial adviser, has completed a report form and submitted it to her company’s Money Laundering Reporting Officer. Under what circumstances would she take this action?
A Only when she believes a colleague may be supporting money laundering.
B Only when she knows for certain that a client is involved in money laundering activity.
C When she knows or suspects that a client is involved in money laundering activity.
D When the value of the transaction exceeds €15,000.

Answer 36

C Unit 2; 2.7

Question 37

Individuals who are allowed to carry out ‘controlled functions’ in relation to a firm’s regulated activities are known as:

A. appointed persons.
B. appropriate persons.
C. approved persons.
D. authorised persons.

Answer 37

C Unit 2; 1.6

Question 38

Peter has almost completed his induction training with Haddon Bank, prior to taking up a position of trainee financial adviser. The FCA require that the training he receives is:
A. at least 50 hours per annum.
B. carried out only by authorised persons.
C. documented and retained for 12 months.
D. evaluated to check its success.

Answer 38

D Unit 2; 1.16 2

Question 39

The EU definition of market abuse can be divided into two areas known as:

A best execution and money laundering.
B insider dealing and market manipulation.
C market manipulation and money laundering.
D money laundering and insider dealing.

Answer 39

B Unit 2; 1.7

Question 40

Staff training on money laundering must cover all of the following requirements except how to:

A evidence client identity.
B identify potentially suspicious transactions.
C liaise with the National Criminal Intelligence Service.
D report suspicious transactions.

Answer 40

C Unit 2; 2.8

Question 41

A company representative can advise clients on:

A only those products offered by the companies to which he is tied. B only those products offered by the company to which he is tied.
C products from across the entire market.
D products offered by any authorised provider that has been selected by the client.

Answer 41

B Unit 2; 1.20 1

Question 42

Miranda is an approved person in a controlled function but is not in a position of significant influence. Which principle specifically applies to her role?

A She must ensure that the business of her firm is organised effectively
B She must exercise diligence in managing the business.
C She must observe proper standards of market conduct.
D She must take steps to ensure the business complies with the regulatory system.

Answer 42

C Unit 2; 1.4

Question 43

Before an employee carries out duties that fall under the FCA’s regulatory responsibility he should:

A be assessed as competent to undertake the role without supervision.
B be assessed on technical knowledge and its application.
C have completed the required number of hours’ continuing professional development.
D have successfully completed his probation period.

Answer 43

A Unit 2; 1.16.2.1

Question 44

There are three main areas of financial crime that the FCA seeks to control. Which one of the following is the exception?
A Criminal market conduct.
B Fraud and dishonesty.
C Mis-selling investments.
D Money laundering.

Answer 44

C Unit 2; 1.3

Question 45

Knowingly giving out false information to influence the price of shares for personal gain is known as:
A best execution.
B insider dealing.
C market manipulation.
D money laundering.

Answer 45

C Unit 2; 1.7

Question 46

Why might money laundering regulations create ‘financial exclusion’?

A. Because certain non-residents cannot be offered banking facilities.
B. Because customers want to know why they have been declined a financial product.
C. Because financial organisations are wary of opening bank accounts with cash deposits.
D. Because not everyone can provide the necessary identification.

Answer 46

D Unit 2; 2.5

Question 47

An independent financial adviser places an advertisement in a local newspaper. For how long must the adviser retain a copy of the advertisement?
A Three months.
B One year.
C Three years.
D Ten years.

Answer 47

B Unit 2; 1.15/3.21 MCOB

Question 48

Under the product disclosure rules, what is specifically required in respect of the illustration of projected cash-in values?

A Any guaranteed values offered by the provider.
B Projections based on the premiums to be paid.
C Projections for each of the first 10 years.
D The effect of any market value adjustments.

Answer 48

B Unit 2; 1.25

Question 49

What is the FCAs most severe disciplinary power?
A Financial penalties.
B Private warning.
C Public censure.
D Withdrawal of authorization.

Answer 49

D Unit 2; 1.11. 1

Question 50

Under the ‘know your customer requirements’, advisers should:

A assume that a private customer fully understands the risks involved.
B explain the potential product risks to an execution-only client but not be concerned with ‘best execution’.
C offer exactly the same duty of care and advice to all customers.
D provide the highest level of advice and duty of care to clients categorised as private customers.

Answer 50

D Unit 2; 1.18.1