Chapter 10 Qs

Question 1

Which of the following key stakeholder groups might not be essential in embedding an ethical culture at sector and firm level?
A. Clients
B. Employees
C. Regulators 
D. Media

Answer 1

D. Media

Ethical culture should be universally embedded throughout a firm by all ‘Stakeholders’. Stakeholders are those that are affected by the firm, e.g. employees and clients, or those that affect the firm e.g. regulators. It would not normally include the media.

Question 2

A materiality assessment involves standing back from a firm and seeing it as how others might see it. With which of the following is a materiality assessment most closely associated?
A. Ethics codes
B. Fair treatment of customers
C. Corporate social responsibility
D. Fit and proper requirements

Answer 2

C. Corporate social responsibility

Corporate social responsibility is about firms engaging with their ’Stakeholders’ on important issues. A materiality assessment is about looking at the important issues within a firm, identifying its stakeholders and considering how these issues will affect its stakeholders. This involves standing back from a firm to see how others might see it.

Question 3

The values and behaviour of the board and senior management is sometimes referred to as:
A. top down direction
B. tone from the top
C. top code of conduct
D. top down communication

Answer 3

B. tone from the top

The board and senior management demonstrating and modelling the firm’s ethical values and behaviours is referred to as ‘tone from the top’.

Question 4

Which of the following consequences of trying to embed ethics into an organisation should be encouraged?
A. Superficial ethical behaviour being viewed as a marketing ploy
B. Inconsistent ethical behaviour resulting in cynicism
C. Senior management ‘walking the talk’ to reinforce the ethics of the business
D. Not addressing behaviours that could underpin an organisation

Answer 4

C. Senior management ‘walking the talk’ to reinforce the ethics of the business

Leadership is an important part of the ethical framework of a company, and senior management ‘walking the talk’ demonstrates and reinforces the ethics of the business. It sets the ‘tone from the top’.

Question 5

According to the regulator, good management information (MI) should display what a manager can directly influence or something that they can escalate to someone who can take the necessary action. Which of the regulator’s principles of good management information (MI) does this statement relate to?
A. Accuracy
B. Timeliness 
C. Relevance 
D. Consistency

Answer 5

C. Relevance

The regulator has four principles for good MI. ‘Relevance’ is the principle that applies to providing MI that a manager can influence or escalate to someone who can take necessary action. The other three principles are those in answers a), b) and d), but these are not relevant to the question.

Question 6

The first of twelve steps to take in designing and implementing a CSR programme is to?
A. Understand the level of resources you have available
B. Identify all your stakeholders
C. Have someone check your CSR programme is working as well as you would expect
D. Implement improvements and monitor progress

Answer 6

B. Identify all your stakeholders

The first step for a firm designing and implementing a corporate social responsibility programme is to identify its stakeholders. Answer a) is step 7, answer c) is step 11 and answer d) is step 9.

Question 7

How is the concept of ‘ethics’ summarised?
A. The application of ethical values to business decisions
B. Social and individual morals
C. Attitudes normally relating to contentious issues
D. A society’s culture

Answer 7

A. The application of ethical values to business decisions

The concept of ethics in business is summarised as ‘The application of ethical values to business decisions’.

Question 8

Ethics is at the forefront of which of the following two FCA Principles for Businesses?
A. Market conduct and conflicts of interest
B. Conflicts of interest and customers’ interests
C. Financial prudence and clients’ assets
D. Integrity and market conduct

Answer 8

D. Integrity and market conduct

There are 11 FCA Principles for Business (PRIN). The PRIN are the obligations required of all authorised firms. Ethics is at the forefront of Principle No.1 Integrity and No 5 Market Conduct. Ethics is part of Principles No. 6 Customers’ Interests and No. 8 Conflicts of Interest and is reflected in all the other principles.

Question 9

SJP 18/19 - The FCAs Statements of Principle and Code of Practice for Approved Persons (APER), expects financial advisers to:

A) Not terminate a contract and replace it with one providing similar benefits
B) Act with integrity at all times
C) Take additional qualifications at least once every two years to maintain professional knowledge
D) Always consider complaint outcomes rather than ethical outcomes

Answer 9

B) Act with integrity at all times (10.1)

Question 10

• Nigel is a financial adviser within a large bank and is advising Robert on retirement and investment planning. Robert has disclosed to Nigel that his net profit last year was £7,500, but, as a self-employed landscape gardeners he regularly accepts cash payments for work completed and does not declare this additional income to HMRC. Considering solely the ethical requirements of the FCAs statements of principles and code of practice for Approved Persons (APER), what action should Nigel take if any with regard to Roberts additional income?

A) He needs to not take any action as Robert is contributing less than £7,500 per annum to his pension
B) Report his concert to the banks money laundering reporting officer
C) Report his additional income to the pension provider immediately
D) Report this matter to HMRC

Answer 10

B) Report his concert to the banks money laundering reporting officer (10.2)