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UK Financial Regulation > Exam questions > Flashcards

Exam questions Flashcards

1
Q

who has overall responsibility for the UK’s financial system, including the institutional structure and the legislation that governs it (a)

A

HM treasury

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2
Q

what is the firm systematic framework (FSF) of the FCA (A)

A

it is preventative work through structured conduct assessment of firms

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3
Q

under the COBS rules, which one of the following rules would apply to eligible counterparties?

A Appropriateness
B Client categorisation
C Client agreements
D Distance communications

A

Client categorisation

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4
Q

Under the Proceeds of Crime Act if you made an illegal disclosure in respect of an investigation into money laundering, you would be guilty of which of the following offences?

A Assisting
B Concealing
C Tipping-off
D Possession

A

tipping-off

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5
Q

f an independent financial adviser (IFA) passes on the business of a client to a life assurance company, which of the following would be true? The life assurance company:

A Can rely on the information about the client provided by the IFA
B Is responsible for assessing the suitability of clients referred to them by an IFA
C Must assess appropriateness and the IFA must assess suitability
D Would only assess suitability for execution only trades

A

can rely on the information about the client provided by the IFA

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6
Q

who is the tax and chancery chamber of the upper tribunal operated by? (a)

A

a government department

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7
Q

what is churning (a)

A

overtrading of investments for commissions or fees

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8
Q

would the following be considered market abuse: a firm unintentionally submits incorrect trade details, which leads to a significant move in the market (a)

A

yes, market abuse does not need to prove intent

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9
Q

what is an RIS

A

regulatory information service, such as the LSE’s regulatory news service, is considered to be public information

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10
Q

what is a trustee

A

a person who takes responsibility for managing money or assets that have been set aside in a trust for the benefit of someone else

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11
Q

The Collective Investment Scheme Sourcebook does not apply to which of the following?

A Depository of an ICVC
B Trustees of an authorised unit trust
C Director of an investment trust
D Manager of an authorised unit trust

A

director of an investment trust

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12
Q

In the course of MiFID business, in which one of these situations does the rule of appropriateness apply to a firm?

A Giving a personal recommendation to a client
B Acting as investment manager for a client
C Arranging a swap transaction for a client without giving any advice
D Appropriateness has been assessed on behalf of the firm by another MiFID investment firm

A

arranging a swap transaction for a client without giving any advice

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13
Q

what is switching

A

churning, but for packaged products

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14
Q

When a firm provides designated investment business to a retail client, the training and competency requirements do not apply for which of the following?

A Advising and dealing
B Managing
C Daily oversight
D Arranging

A

arranging

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15
Q

Which of the following statements complies with the inducements rules?

A When a fee is paid that is of low monetary value it does not have to consider the best interests of the client
B Custody costs, settlement and exchange fees, and legal fees are not permissible
C In the case of non-MiFID business commission disclosure is never required
D An acceptable commission is one that has been paid to a client

A

an acceptable commission is one that has been paid to a client

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16
Q

is money deposited in an approved bank account client money (a)

A

no, approved banks do not need to treat money deposited with them as client money

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17
Q

Which ONE of the following is a responsibility of the HOST state regulator under the MiFID directive when a firm is conducting business from a branch in that state?

A Authorisation of the branch
B Conduct of business rules
C Fitness and propriety of the firm’s employees
D Capital adequacy

A

conduct of business rules

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18
Q

Steve is a director within a broking firm. Under the general requirements in the Senior Manager Arrangements, Systems and Controls Sourcebook, the FCA would expect Steve to have which of the following characteristics?

A An appropriate career history and qualifications
B An ability to transcent the need to segregate duties within the firm
C Sufficient remuneration to ensure he remains at the firm
D He must be of good repute and sufficiently experienced

A

he must be of good repute and sufficiently experienced

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19
Q

Which one of the following would be required to seek authorisation under S19 of the Financial Services and Markets Act 2000?

A Newspapers giving financial advice
B Personal representatives
C Certain overseas persons
D Advising on stakeholder pensions

A

advising on stakeholder pensions

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20
Q

is a non-executive director required to be an approved person

A

always

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21
Q

Can a third party appeal to the Tribunal on behalf of an authorised firm against a decision notice?

A Yes, if the appeal is made within 28 days of the notice being issued
B No, unless the time limits for the disciplinary procedures are extended
C Yes, if the other parties agree to this appeal being made
D No, only the firm to whom the notice was issued can appeal

A

yes, if the appeal is made within 28 days of the notice being issued

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22
Q

Under the regime created by the retail distribution review, which of the following is TRUE?

A Advisers must only charge an up-front fee for advice
B Fees should be itemised, based on the product, and disclosed up-front
C The charge can be ongoing and based on a percentage of the funds invested
D Payment of commissions that are already in place for previous advice must continue

A

the charge can be ongoing and based on a percentage of the funds invested

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23
Q

who has to be provided with a client agreement

A

all clients, either retail or professional

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24
Q

how long after a transaction must a confirmation be sent to the client (a)

A

by the next business day

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25
Q

under UKLA disclosure and transparency rules, concert parties must disclose shareholdings to a company where they acquire how much (a)

A

3%

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26
Q

How often should an authorised firm report to the FCA in respect of customer complaints? (a)

A

twice a year

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27
Q

Firm XYZ is an authorised person in the UK and communicates a promotion from Firm JKL, an authorised overseas person. Which of the following is TRUE?

A There would be no compensation cover
B As the promotion is being relayed through a UK firm the compensation scheme is available
C The extent to which the compensation will or will not be available must be stated
D The compensation cover follows home state rules

A

the extent to which the compensation will or will not. be available must be stated

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28
Q

which european regulation relates to the transparency and risk management in the OTC derivative markets

A

european markets infrastructure regulation (EMIR)

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29
Q

Which one of the following is NOT true about the information that must be disclosed by a firm to a client before providing services?

A The rules apply to business done for eligible counterparties
B The firm must disclose its proposed investment strategies
C The information must be in a format that is specific to each client
D Execution venues must be disclosed

A

information must be in a format specific to each client,

it may be provided in a standardised format

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30
Q

Which of the following is not true regarding the Financial Services Compensation Scheme?

A Retail clients may claim in respect of all losses (subject to a maximum claim)
B In certain circumstances professional clients may make a claim on the scheme
C Eligible counterparties may never make a claim on the scheme
D The scheme is funded by levies on authorised firms

A

eligible counterparties may never make a claim on the scheme

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31
Q

What is MOST likely to be covered by the FCA rules on financial promotions?

A One-off financial promotions
B Promotion to investment professionals
C Promotion aimed at private investors
D Promotion to a sophisticated investor

A

promotion aimed at private investors,

one-off financial promotions are exempt

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32
Q

Which of the following applies to a UK firm dealing in shares with an eligible counterparty?

A It is a fully regulated activity and must comply with all conduct of business rules
B It is an eligible counterparty business and therefore has limited exposure to the conduct of business rules
C Although the firm is UK based, the location of the client will effect whether the conduct of business rules apply
D Share dealing is an exempt activity under the conduct of business rules

A

it is an eligible counterparty business and therefore has limited exposure to the conduct of business rules

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33
Q

If a retail client has not advised the firm differently, how often must firms send periodic statements?

A Every month
B Quarterly
C Semi-annually
D Annually

A

quarterly,

that is 3 months you idiot

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34
Q

What is the maximum claim on the Financial Services Compensation Scheme in the event of an insolvency of a firm where the investor has lost money through protected investment business?

A £85,000
B £50,000
C £37,500
D £35,000

A

£85,000

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35
Q

To be marketed in an EEA country a UK unit trust must:

A Comply with the member state’s regulations and get FCA permission
B Notify the FCA and conform with the member state’s regulations
C Conform with UCITS directive
D Conform with UCITS directive and member state’s regulations

A

Conform with UCITS directive and member state’s regulations

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36
Q

What must a firm do if it considers, on the basis of information received, that a particular product is not appropriate for a client?

A Refuse to proceed with the transaction
B Advise the client of an alternative product (if any) that is appropriate
C Obtain an indemnity from the client before proceeding with the transaction
D Warn the client that, in its view, the product is not appropriate

A

Warn the client that, in its view, the product is not appropriate,

the client can then decide whether to go ahead or not

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37
Q

Who implements and administers the Freedom of Information Act 2000?

A Data Protection Office
B The Information Commissioner’s Office
C Ministry of Justice
D Department of Business, Information and Skills

A

The Information Commissioner’s Office

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38
Q

If a firm is providing investment research for dissemination to its clients in particular financial investments, when would the firm be permitted to deal on that information?

AThe firm would never be able to deal on that information
B The firm would always be allowed to deal on that information
C The firm would be permitted to deal on the information if they submitted all confirmations of transactions to the firm’s compliance
D The firm would be permitted to deal on the information if granted approval by the firm’s compliance

A

The firm would be permitted to deal on the information if granted approval by the firm’s compliance

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39
Q

Where money is held in connection with a delivery vs. payment transaction, the client money rules will not apply for:

A One business day only
B Up to two business days
C Up to three business days
D Up to four business days

A

3

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40
Q

Where an agent is acting on behalf of a number of underlying clients (who are all, by written agreement, to be treated as clients of the firm), the firm is permitted to send a single communication to the agent, expressed to cover each underlying client in respect of which one of the following?
ATerms of agreement BConfirmations CPeriodic statements DRisk warnings

A

terms of agreement

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41
Q

For how many years must a firm keep information on a complaint for MiFID business?
AThree years from the date it receives the complaint BThree years from the date it resolves the complaint CFive years from the date it receives the complaint DFive years from the date it resolves the complaint

A

Five years from the date it receives the complaint

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42
Q

Which of the following does NOT require a key information document?
ACash deposit individual savings account BA unit-linked life assurance product CRetail structured securities DStructured term deposit

A

Cash deposit individual savings account,

Under PRIIPs, investment funds, insurance-based investment products, retail structured securities and structured term deposits all require KIDs.

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43
Q

When the holdings of a married couple are automatically aggregated as a result of deciding if one of the sizable holdings rules have been broken, this is known as working as:
AConnected parties BA concert party CA working party DAn occlusive group

A

connected parties

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44
Q

For what time period would a firm keep records on confirmation of trades for MiFID business?
AThree years from the date of trade BThree years from dispatch CFive years from the date of trade DFive years from dispatch

A

five years from dispatch,

A firm must retain a copy of any confirmation dispatched to a client for the following periods from the date of dispatch:

  • Five years - MiFID business
  • Three years - non-MiFID business
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45
Q

EMIR sets out requirements for reporting and risk management in the OTC derivative markets. Which firms are covered by this regulation?
AAll EEA-incorporated and established entities BEEA fund management entities only CEEA financial entities only DEEA non-financial entities only

A

All EEA-incorporated and established entities

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46
Q

Under which of the following circumstances do the conduct of business rules not require a firm to enter into a client agreement?

AThe client is habitually resident outside the UK BThe firm has established, by taking reasonable steps, that the client does not want to enter into such an agreement CThe client is habitually resident outside the UK and the firm has established, by taking reasonable steps, that the client does not want to enter into such an agreement DThe client enters into an insurance contract with the firm as principal

A

The client enters into an insurance contract with the firm as principal,

COBS are explicit in saying that mifid business requires a client agreement for all customers, unless the firm acts as principal with an insurance contract

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47
Q

Where a firm becomes aware of a conflict of interest that may damage a particular client’s interests, which of the following procedures must the firm follow?

ADisclose relevant details in a durable medium to the client, allowing the client to decide BDisclose relevant details orally to the client, allowing the client to decide CManage the conflict and continue to deal DRefuse to deal for the client

A

Manage the conflict and continue to deal,

The FCA rules state that a firm must disclose the relevant details to the client in a durable medium if they are NOT able to manage the conflict.

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48
Q

n which of the following circumstances would identification be required on establishing new business?
ACertain one-off transactions less than €7,500 BA transaction with an EEA financial institution CA member of the Financial Action Task Force DA potential new client resident in the UK

A

A potential new client resident in the UK

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49
Q

Which of the following would NOT be seen by the FCA as meeting the requirement in terms of use of charges for research?
AResearch payments can be made from the firm’s own resources BThe research payment account cannot be funded by research charges made to clients CPayments for research can be made from a separate research payment account DThe firm must regularly assess the quality and effectiveness of paid for research

A

The research payment account cannot be funded by research charges made to clients

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50
Q

Which of the following would be a breach of the Conduct Rule ‘Integrity’?
AMisleading a client by providing false information BFailing to take reasonable steps to apportion responsibilities clearly amongst those to whom responsibilities have been delegated CPermitting transactions without a sufficient understanding of the risks involved DAccepting implausible or unsatisfactory explanations from subordinates without testing the veracity of those explanations

A

Misleading a client by providing false information

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51
Q

Which of the following statements is true with respect to cancellation rights on the sale to a retail client of a packaged product?
ANone required BCancellation rights should be offered CCancellation and withdrawal rights of 21 days are compulsory DCancellation rights may be offered for a minimum period specified by the firm

A

Cancellation rights should be offered

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52
Q

Which of the following is not an appropriate action for avoidance of a conflict of interest?
ADisclosing an interest to a client BRelying on written conflicts of interest policy CDeclining to act for a customer DImplementing Chinese walls in place of a personal account notice

A

Implementing Chinese walls in place of a personal account notice,

Personal account notices cannot be substituted with Chinese walls. The personal account dealing rules are mandatory.

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53
Q

A firm must assess the expertise of elective professional clients. This is known as:
AClient’s best interests rule BProcedural requirement CQuantitative test DQualitative test

A

Qualitative test

54
Q

what is an instrument of payment

A

include cash and any investment used to pay for another investment

55
Q

what is an umbrella fund

A

type of CIS, and units in CIS are MIFID

56
Q

How long must records of non-MiFID custody assets be kept under the client asset rules?
AThree years after they were made BFive years after they were made CThree years after the end of the financial year in which they were made DFive years after the end of the financial year in which they were made

A

Three years after they were made ,

non-mifid business requires three years, whereas mifid business requires five years

57
Q

When the Regulations Decision Committee issues a final notice to a firm at the end of the investigation procedure, which of the following is not included on a final notice?
AAny sanctions the regulators wish to impose BThe date the notice comes into effect CThe disciplinary action taken by the firm DAny other information deemed to be relevant

A

The disciplinary action taken by the firm,

will not include disciplinary action the firm has taken against its employees

58
Q

Who performs the regulatory check of a mail-shot sent by an appointed representative?
AThe compliance department of the appointing firm BThe marketing department of the appointing firm CThe overseer of the appointed representative who authorised the mail shot DThe Financial Conduct Authority

A

The compliance department of the appointing firm ,

The general non-real time financial promotion rules require each promotion to be signed off by compliance or another employee with sufficient knowledge to do so.

59
Q

In relation to data protection, to whom does a firm’s Data Input Officer report?
AThe Information Commissioner BThe Chief Compliance Officer CThe firm’s Data Controller DThe Secretary of State for Trade and Industry

A

The firm’s Data Controller

60
Q

You have gained a new client who wishes to take advantage of your online facilities. Through which of the following methods must you inform your client of the firm’s website address?
AOrally, either face-to-face or via the telephone BBy sending a letter sent to the investor’s home address COn the front cover of a brochure advertising the firm’s online services DThrough an e-mail sent to the client’s email address

A

Through an e-mail sent to the client’s email address,

The FCA website conditions state that the client must be notified electronically of the address of the website, and the place on the website where the information may be accessed. The firm must also satisfy itself that there is evidence that the client has regular access to the internet, such as the provision by the client of an e-mail address. An e-mail sent to the supplied address would constitute electronic notification.

61
Q

what kind of investments are not within the scope of the criminal justice act 1993 (insider dealing)

A

products with no secondary market

62
Q

Which one of these is not an acceptable reason for a firm to fail to execute otherwise comparable orders sequentially?
AA retail client’s order was given priority over other clients BPrevailing market conditions made it impracticable CIt was in the interests of the client to delay execution DThe characteristics of the client’s order made it impracticable

A

A retail client’s order was given priority over other clients,

all clients must be treated equally

63
Q

Which ONE of these per se professional clients is not permitted to become an eligible counterparty?
AAn institutional investor that is not an authorised or regulated person BA company with a turnover of 50 million euros and own funds of 5 million euros CThe management group of a pension fund DA supranational body, such as the International Monetary Fund

A

An institutional investor that is not an authorised or regulated person,

an example of this kind of investor would be a special purpose vehicle designed to create asset backed securities.

64
Q

An authorised firm, acting on behalf of a client, has received an order to buy 5,000 shares in XYZ plc just before the market opens. The firm believes that the market will open with a sharp fall due to significant losses on the S&P 500 overnight. When should the firm execute the transaction?
AThe order should be executed as soon as possible at all times BThe transaction may be postponed, providing the firm has obtained permission from the client to delay the transaction CThe firm may delay execution if it believes it is in the best interests of the client DThe transaction must be executed as soon as the market opens

A

The firm may delay execution if it believes it is in the best interests of the client,

The rule states that a transaction should be executed as soon as is reasonably practicable. Transactions may be delayed if the firm has taken reasonable steps to ensure that the deal will not operate to the client’s disadvantage.

65
Q

Which of the following is the correct interaction between the FCA regulations on money laundering and the JMLSG guidelines?
AJMLSG guidelines are statutory, the regulations are guidance BThe regulations are statute, JMLSG guidelines are guidance CJMLSG guidelines overrule the regulations if money laundering is suspected DFirms cannot usually be disciplined for not following the regulations if they follow the JMLSG guidelines

A

Firms cannot usually be disciplined for not following the regulations if they follow the JMLSG guidelines

66
Q

The FCA intend to take action against a firm for a breach of a rule. Which of the following will inform the firm of the action proposed?
AWarning notice BDecision notice CFinal notice DNotice of discontinuance

A

Warning notice,

The warning notice gives the recipient details about the action proposed and why the FCA proposes to do so.

67
Q

If the FCA requires information from an authorised firm for the purpose of an investigation, which is NOT a method through which the firm is usually informed?
AThrough a recorded telephone conversation BAn e-mail giving 24 hours’ notice CA visit from a FCA employee DA letter

A

An e-mail giving 24 hours’ notice ,

All are possible but the time period with regard to the e-mail makes it the best answer.

68
Q

What must the firm do when a specific instruction from a client would prevent a firm from following its order execution policy when carrying out the transaction?
ADecline to carry out the transaction BAsk the client to confirm the instruction in writing CCarry out the order as instructed DIgnore the instruction and follow its order execution policy

A

Carry out the order as instructed

69
Q

With regards to money laundering, the FCA will check whether a firm is in breach of the rules on systems and controls with reference to the firm’s adherence to:
AThe conduct of business rules BNCA reporting rules CJMLSG guidance DThe Proceeds of Crime Act

A

JMLSG guidance

70
Q

The purpose of the Public Interest Disclosure Act 1998 in terms of whistleblowing is:
ATo render an employee’s contract of employment invalid BTo enable firms to ensure that employees do not talk to third parties about activities within the firm CTo invalidate clauses in employment contracts that preclude protected disclosures DTo enable the FCA to inform law enforcement agencies of criminal activity

A

To invalidate clauses in employment contracts that preclude protected disclosures,

The act was designed to protect employees from retaliation if they inform regulators of their concerns.

71
Q

Which of the following best describes Chinese walls? An arrangement that requires:
APaperwork held by a person in the course of carrying on one part of its business to be withheld from, or not to be used by, persons with or for whom it acts in the course of carrying on another part of its business BInformation held by a person in the course of carrying on one part of its business not to socialise with other persons with or for whom it acts in the course of carrying on another part of its business CInformation held by a person in the course of carrying on one part of its business to be withheld from, or not to be used by, persons with or for whom it acts in the course of carrying on another part of its business DInformation held by a person in the course of carrying on one part of its business not to talk to persons with or for whom it acts in the course of carrying on another part of its business

A

Information held by a person in the course of carrying on one part of its business to be withheld from, or not to be used by, persons with or for whom it acts in the course of carrying on another part of its business

72
Q

Who is allowed to make a mass detriment reference?
AFinancial Conduct Authority BHMT designated consumer body CFinancial Services Compensation Scheme DFOS and Authorised firms

A

FOS and Authorised firms,

FOS and Authorised firms can make mass detriment references to the FCA where it appears there have been regular failures by firms to comply with regulatory requirements. The FCA must publish a response within 90 days.
HMT designated consumer bodies, such as the Citizen’s Advice Bureau, are able to make super complaints.

73
Q

Which of the following bodies oversees a firm’s behaviour towards their clients and the markets on which they participate?
AFinancial Services Authority BPrudential Regulation Authority CFinancial Conduct Authority DFinancial Policy Committee

A

Financial Conduct Authority,

FSA does not exist anymore

74
Q

The Appropriateness rule, in the FCA Conduct of Business rules, applies to:
AAdvisory business on complex products with regard to all clients BRetail clients performing discretionary and advisory business in any investment CA professional client purchasing a capital at risk structured product with no advice DAny service provided to a retail client

A

A professional client purchasing a capital at risk structured product with no advice

75
Q

A retail client approaches a financial advisor (FA) to gain advice on a pension product. Which of the following must be disclosed regarding the scope and range of the advice by the FA before doing business?
AScope and range of advice in a durable medium BRange of advice in a durable medium, as the scope is not relevant given that the client wants advice on pensions only CScope and range of advice in a durable medium, only if the advisor is independent DScope only of advice in a durable medium, if the pension is a stakeholder product

A

Scope and range of advice in a durable medium

76
Q

If providing execution only services in a non-complex product, the only information a firm requires is the client’s:
AName and address BFinancial situation CExperience and expertise DInvestment objectives

A

Name and address,

The choices available reflect the rule on suitability or appropriateness:
- Client’s knowledge
- Client’s financial capability
- Client’s objectives
These are not required for execution only services in non-complex products. The only choice left is the name and address of the client. This makes logical sense, in that the firm needs to know to whom they must send the contract notes, etc.

77
Q

A firm engaging in a transaction triggered the COBS requirement to display proof of appropriateness for the transaction because the client:
AWas resident outside the UK BEngaged in execution only trades CRequested it DHad been categorised as a professional client

A

Engaged in execution only trades

78
Q

do you need to assess appropriateness or suitability for execution only

A

YES, appropriateness, only when relating to a complex product

79
Q

What disclosure obligations does a shareholder have if they own 18% of the shares of Widget plc, a listed company and sell 1% of their holdings?
ADisclose the sale to the market by noon the next day BDisclose the sale to the market within two business days CDisclose the sale to the company concerned by noon the next day DDisclose the sale to the company concerned within two business days

A

Disclose the sale to the company concerned within two business days

80
Q

Which of the following would be considered a retail investment product, but not a packaged product?
ARegulated collective investment scheme BShares in an investment trust CStakeholder pension DLife insurance policy

A

Shares in an investment trust

81
Q

Which of these is an eligible claimant under the FSCS?
ATrustees of a CIS BTrustee of a pension fund COverseas financial institution DA shareholder who owns < 5% of an organisation

A

A shareholder who owns < 5% of an organisation,

Eligible claimants are certain persons who have a protected claim against an authorised person who is in default. This includes most clients of the defaulting firm, except:

  • Other authorised firms
  • Overseas financial institutions
  • Supranational institutions, governments and central administrative authorities
  • Provincial, regional, local and municipal authorities; and
  • Large companies or large mutual associations
82
Q

The purpose of the Capital Requirements Directive is to ensure that firms maintain adequate resources in excess of their:
ACapital resource requirements BHome state rules CHost state rules DRival firms resources

A

Capital resource requirements,

The purpose of the CRD is to ensure that firms have enough capital to operate safely. It does this by setting a capital resource requirement that firms must exceed.

83
Q

To assess suitability for a retail client which one of the following, regarding the client, is the first thing that a firm should obtain from the client?
AAppetite for risk BFinancial commitments CKnowledge and experience DPreferred investment types

A

Knowledge and experience,

Although all four might be considered for suitability, the first thing to be assessed would be the client’s level of knowledge and experience as this would then lead in to the other areas.

84
Q

An unsolicited real-time communication is simply an elaborate regulatory description of a cold call, but what can be promoted via such a communication?
AReadily realisable securities which include warrants BA personal pension CHigher volatility fund DGeared packaged products

A

A personal pension,

A firm may only make a cold call in one of the following three circumstances:

  • The recipient of the cold call has an established existing client relationship with the firm and envisages receiving cold calls
  • The cold call relates to a generally marketable product (which is not a higher volatility fund)
  • The cold call relates to activities where the only investments involved are readily realisable securities (other than warrants) and generally marketplace non-geared packaged products.
85
Q

Which of the following is true of internal reconciliations of clients’ assets?
AReconciliation must be performed by firms at the end of every business day BAny shortfall must be corrected by the firm within 48 hours of discovery CAny excess discovered can be retained in the client money account DIf a firm cannot comply with the requirements on reconciliation it must notify the FCA

A

If a firm cannot comply with the requirements on reconciliation it must notify the FCA

86
Q

Although a client provides a firm with specific instructions, the firm executes the trade in accordance with their own trade execution policy. What must the firm do?
AAdvise the client by close of business on the next business day, stating the reasons for its action BIssue the client with a disclaimer CReport itself to the FCA, as it is potentially in breach of regulations DProvide the client with a copy of their trade execution policy as soon as reasonably possible

A

Report itself to the FCA, as it is potentially in breach of regulations

87
Q

In relation to providing investments, the rule on inducements in the Conduct of Business rules, which ONE of the following is TRUE?
AThe rules apply only to retail clients BThe rules allow the firm to pay an inducement to the client CThe rule prohibits any non-monetary benefit, no matter how minor it may appear to be DThe inducement must not be disclosed to the client until after the service is provided

A

The rules allow the firm to pay an inducement to the client,

The rule ““A firm must not pay to, or accept from, a person other than the client, any fee, commission or non-monetary benefit”” allows payment to, and from, the client.

The inducement rules apply to all customers, i.e. professional clients and retail clients.

Disclosure of the inducement must be made to the client before providing the service. The prohibition does not apply to ‘minor non-monetary benefits’.

88
Q

What is the MAIN purpose of the appropriateness requirement by the FCA?
ATo ensure that advice given to retail clients is appropriate BTo perform a duty of care for retail clients when providing discretionary services CTo perform a duty of care for retail clients when providing execution only services DTo ensure that all clients are given suitable and appropriate advice

A

To perform a duty of care for retail clients when providing execution only services

89
Q

Fatima’s role involves dealing with customers, specified as a significant harm function by the regulator. Under the certification regime, which of the following is true?
AFatima needs regulatory pre-approval by the regulator before performing the role BFatima needs to be certified by her firm before performing the role only CFatima needs to be certified by her firm before performing the role and annually thereafter DFatima could perform the role without the need for an assessment of fitness and propriety

A

Fatima needs to be certified by her firm before performing the role and annually thereafter

90
Q

A broker is unable to execute a client order due to a trading halt on the exchange. This has led to the client order being postponed. In which of the following situations would the broker have to notify the client? If the order:
AWas based on a specific client instruction BCame from an eligible counterparty CWas based on a specific order execution policy DCame from a retail client

A

Came from a retail client,

A firm may promote or postpone a client order in certain situations. Those situations could include market conditions, like a trading halt. In these cases, the retail client must be notified.

91
Q

The FCA is pursuing an investigation into insider dealing. Which of the following would provide the accused with a special defence under the Criminal Justice Act against an accusation?
ADid not expect the recipient to deal BMarket maker acting in ordinary course of business CBelieved the information was published DWould have dealt anyway

A

Market maker acting in ordinary course of business

92
Q

Under FCA regulations, which of the following is true of a written financial promotion?
AA firm may not arrange for a third party to carry out the confirmation exercise BA firm can arrange for a third party to carry out the confirmation exercise and the responsibility for the promotion lies with the third party CA confirmation exercise is not required for a non-real time promotion DA firm can arrange for a third party to carry out the confirmation exercise and the responsibility for the promotion remains with the firm

A

A firm can arrange for a third party to carry out the confirmation exercise and the responsibility for the promotion remains with the firm,

Notice that there is a difference between confirmation and approval. Approval would lead to the approving firm taking on the responsibility. Confirmation, effectively proof reading, would leave the responsibility with the original firm.

93
Q

Which of the following could be categorised as an elective professional client?
AAn investor with a personal portfolio worth €100,000 and on average 20 transactions per quarter BA clerk at a financial services firm with, on average, five transactions per year CThe head of research at a fund management firm with a portfolio worth €700,000 DAn unauthorised firm with a balance sheet of €40m and turnover of €55m

A

The head of research at a fund management firm with a portfolio worth €700,000
,

The quantitative criteria for being an elective professional client are: Average trade frequency of ten transactions per quarter over previous four quarters. Portfolio > €500,000. Works or worked in the financial sector for at least one year in a professional capacity. D would be treated as a per se professional client.

94
Q

In relation to rules governing regulated and unregulated activities, Part 9A of the Financial Services and Markets Act 2000 empowers the FCA to do which one of the following?
AMake rules that are legally binding on authorised firms concerning regulated activity only BSuggest rules to HM Treasury that would be legally binding on authorised firms concerning regulated activity only CCreate rules that are legally binding on authorised firms concerning regulated activity and also activity that is not regulated DPropose rules to HM Treasury that would be legally binding on authorised firms concerning regulated activity and also activity that is not regulated

A

Create rules that are legally binding on authorised firms concerning regulated activity and also activity that is not regulated,

Part 9A of the FSMA empowers the FCA to make rules that are legally binding on authorised firms concerning regulated activity and also activity that is not regulated.

95
Q

A firm discovers that it can execute a trade more favourably than the specific client instruction it has received. According to the specific client instructions rules, how should the firm proceed?
AExecute using the alternative method BConsult with the firm’s risk committee CRefuse to execute DExecute according to the client’s instructions

A

Execute according to the client’s instructions

96
Q

The COBS relating to financial promotions require an individual with appropriate expertise to check that the promotion is fair, clear and not misleading. For which of the following types of financial promotion is such a confirmation exercise required before issue?
AReal-time financial promotions BNon real-time financial promotions CAll financial promotions DReal-time and non real-time financial promotions

A

Non real-time financial promotions

97
Q

Following an FCA investigation, the Regulatory Decisions Committee can issue a range of statutory notices. What is the best description of a warning notice?
ASent by the RDC when the RDC believes no wrongdoing has been done but proper procedures have not been followed BSent by the FOS when a customer complaint has not been resolved CSent by the FSCS if a firm is in danger of becoming insolvent DSent when the FCA believes that there is sufficient evidence to suggest wrongdoing has taken place and it intends to discipline

A

Sent when the FCA believes that there is sufficient evidence to suggest wrongdoing has taken place and it intends to discipline

98
Q

Which of the following would not be a valid exception to the rule prohibiting the front running of investment research?
AThe research is for the firm’s own use BAn associate of the firm carries out the trade and Chinese walls prevented any knowledge of the research CThe firm fulfils an unsolicited client order DThe research is for eligible counterparties only

A

The research is for eligible counterparties only,

“If the research is not meant for anyone but the firm, then front-running rules do not apply.
If a Chinese wall is in place, so that an associate trades and has no knowledge of the research; this is acceptable.
The front running rules apply to all clients and therefore protect market counterparties.”

99
Q

In relation to the following communication which ONE could an authorised firm approve on behalf of a firm which is NOT authorised?
APersonal visit BMagazine advert CTelephone conversation DA webcam conversation

A

Magazine advert,

An authorised firm cannot approve any communication which cannot be provided in advance i.e. telephone conversation, conversations during a personal visit or meeting or other interactive dialogues.
An authorised firm could approve a magazine advert as this can be approved in advance of it being communicated to the client.

100
Q

Under the Remuneration Code what are senior management staff and anyone whose professional activities could have a material impact on a firm’s risk profile referred to as?
ASignificant Influence functions BSenior management CCode Staff DPersons influencing management decisions

A

Code Staff,

Sifs applies to approved persons but the Remuneration Code applies to a group of senior employees called Code Staff.

101
Q

Which of the following is not a sanction that the PRA can impose on a firm breaching PRA rules?
AMaximum fine of £250,000 BVarying Part 4A permission CCancelling permission DPublic censure

A

Maximum fine of £250,000,

The maximum fine is unlimited.

102
Q

Which of the following best describes the FCA’s attitude with regard to the enforcement of the Principles for Business?
AA firm can be prosecuted for failure to comply with the principles BThe FCA will fine firms for violation of the principles CFCA firms can be disciplined because of a principle violation DThe FCA doesn’t enforce the principles

A

FCA firms can be disciplined because of a principle violation,

A firm cannot be criminally prosecuted for breach of the Principles for Business but they can be disciplined by the regulator.

103
Q

For which personal account purchase would it be necessary for a relevant employee to obtain prior permission to deal, according to the personal account dealing rules?
AShares in a UCITS scheme by the employee BA life policy CA fund managed by an independent broker DShares purchased by the employee on behalf of her spouse

A

Shares purchased by the employee on behalf of her spouse,

All of the trades mentioned here are specifically excluded for personal account dealings, except the purchase of shares. The fact that the shares are purchased for the employee’s spouse is irrelevant.

104
Q

The Financial Conduct Authority’s Principles for Businesses do NOT include which of the following statements? A firm must:
ADeal with its regulators in an open and cooperative way BPay due regard to the interests of its customers and treat them fairly COperate an appropriate and effective complaints procedure DTake reasonable care to organise and control its affairs responsibly and effectively

A

Operate an appropriate and effective complaints procedure

105
Q

On which of the following trading platforms is an exchange trade reported automatically and published immediately?
ACREST BSEAQ CNEX DSETS

A

SETS

106
Q

Which of the following is an ancillary service under the Markets in Financial Instruments Directive?
AUnderwriting an issue of corporate securities BProviding advice on commodity derivatives CProviding investment research into equities DDealing in contracts for difference

A

Providing investment research into equities

107
Q

When a firm trades with an eligible counterparty, which one of the following rules does not apply?
ASelling and advising BPersonal account notices CClient assets DClient classification

A

Selling and advising

108
Q

The maximum amount that a firm is bound to pay under FOS (plus costs) is:
A£50,000 B£85,000 C£100,000 D£350,000

A

£350,000

109
Q

When a firm holds client money with a third party, it must inform:
AThe third party BA retail client CThe FCA DAll stakeholders

A

A retail client,

In the case of a retail client, that client must be notified that the client money has been transferred to the other person.

110
Q

Which of the following would not be exempt from requiring authorisation?
ARecognised investment exchange BAppointed representative CLloyd’s of London DMembers of certain professions

A

Lloyd’s of London

111
Q

When the FCA grants an exchange with recognised status, it:
AConfers authorisation to do investment business BRequires cooperation from the exchange with overseas regulators CRequires that the exchange must be fit and proper DImplies that all transactions will be settled in a timely manner

A

Confers authorisation to do investment business,

RIE status grants the exchange an exemption from the requirement to seek Part 4A permission, not the permission itself.

112
Q

Which one of the following is overseen jointly by both the FCA and PRA?
AUKLA BFOS CCMA DFSCS

A

FSCS

113
Q

n order for an authorised firm to assess the suitability of a transaction in MiFID business for an elective professional client, the firm must assess investment objectives and:
ANothing else BFinancial situation CInvestment knowledge and experience DInvestment knowledge and experience, and financial situation

A

Financial situation

114
Q

The FCA`s COBS rules apply to:
A a French insurance company providing a policy for a London based client
B a UK based re-insurance company writing a policy for a Paris based client
C an American investment bank providing corporate finance advice to a FTSE 100
listed company
D a UK investment management company managing a pension fund for a Berlin
based company

A

UK investment management company managing a pension fund for a brazil based company

115
Q

Which of the following must be disclosed to a retail client when holding designated
investments or client money subject to MiFID?
A The name or names of nominee companies used
B Details of any banks used to hold or transmit client money
C Details of any investor compensation scheme applicable
D Details of the national law applicable

A

Details of any investor compensation scheme applicable

116
Q

Which of the following claimants would warrant compensation by the Financial Services
Compensation Scheme?
A The trustee of a personal pension fund
B A shareholder with more than 5% stake
C A trustee of a collective investment scheme
D A small overseas financial institution

A

A trustee of a collective investment scheme

117
Q

Which of the following imposes the anti-money laundering requirements of criminal law
on a stockbroker?
A Systems and Control Sourcebook
B Joint Money Laundering Steering Group guidance
C Proceeds of Crime Act 2002
D Financial Services and Markets Act 2000

A

Proceeds of Crime Act 2002

118
Q

Financial firms which prepare research recommendations have to comply with detailed
standards in relation to presentation and disclosure in order to ensure that:
A conflicts of interests cannot arise
B disclosures of interests are appropriately managed
C past performance figures are not distorted
D such recommendations are fairly presented

A

such recommendations are fairly presented

119
Q 
Which types of provisions which can be incorporated by the FCA are rules which are
not binding in their own right?
A Directions and requirements
B Evidential provisions
C Guidance
D UK legislative material
A

Evidential provisions

120
Q 
Authorisation by the FCA is NOT required by which of the following in relation to
specified investments?
A Firms giving advice
B Firms arranging deals as agent
C Publishers of tip sheets
D Trustees of an estate
A

Trustees of an estate

121
Q

The primary purpose of the regulator`s supervision arrangements is to:
A reduce the regulatory responsibilities of senior management in organising and
controlling the business
B delegate the compliance monitoring of authorised persons to external specialists
C mitigate and manage risks to the achievement of the statutory objectives
D replace prudential regulation with risk-based regulation

A

mitigate and manage risks to the achievement of the statutory objectives

122
Q

Which of the following would be an offence under the Proceeds of Crime Act 2002, Part
7 Money Laundering?
A A disclosure of suspicious activity comes to the attention of the suspected partys solicitor who advises the suspected party B A firms nominated officer suspects money laundering is occurring. However, a
disclosure to the authorities could “tip off” the suspected clients at this stage and
she considers it wise to delay further action by 2 weeks
C Suspicious activity is reported to a firms nominated officer who does not share the suspicion and therefore does not report the matter to the authorities D A firms nominated officer suspects money laundering is occurring. However, she
is about to travel abroad for a vital business trip and decides to delay the
disclosure to the authorities by a week

A

A firm`s nominated officer suspects money laundering is occurring. However, she
is about to travel abroad for a vital business trip and decides to delay the
disclosure to the authorities by a week

123
Q

Under the personal account dealing rules, which of the following must a firm ensure
when placing a personal deal?
A It does not conflict with the interests of its clients
B Client deals are placed first
C Clients are informed of the personal deal only
D Clients are informed and agree to the personal deal

A

It does not conflict with the interests of its clients

124
Q

A bank advertises securities to the public.
What must be included in this advertisement?
A The name of the bank`s complaints officer
B Details of where investors can obtain the full prospectus
C The address of the Financial Conduct Authority
D Information on how to obtain a translation of the advertisement to any official EU
language

A

Details of where investors can obtain the full prospectus

125
Q

Which activity falls within the scope of the Training and Competence Sourcebook and
requires an individual to have a full qualification before commencing that activity?
A Providing basic advice on stakeholder products
B Advising on friendly society tax-exempt policies
C Advising on regulated sale and rent back agreements
D Providing advice on non-investment insurance products

A

Advising on friendly society tax-exempt policies,

Some roles require exam success before they are performed (even with supervision). These are:
Background
• Advising on/dealing on securities and derivatives • Advising on Lloyds syndicate participation
• Acting as a broker fund adviser
• Acting as a pension transfer specialist

126
Q

If a firm is unable to provide a retail client with the total adviser charge it will levy before
it makes a personal recommendation, then the firm must:
A issue the client with a disclaimer
B provide its charging structure before it gives any advice
C provide an estimate at least 14 days in advance
D issue the client with a reason for the non-disclosure

A

provide its charging structure before it gives any advice

127
Q 
Which body has the power to refuse an application for Part 4A permission or cancel an
existing permission?
A Financial Conduct Authority
B Training and Competence Committee
C Regulatory Decisions Committee
D Prudential Regulation Authority
A

Regulatory Decisions Committee

128
Q

With respect to clients, what is the general purpose of the provision of information rules
within FCA`s COBS?
A To provide information about the financial circumstances of the client
B To enable the client to assess the performance of the firm
C To provide information about costs and associated charges
D To list the historical investment performance of the firm

A

To enable the client to assess the performance of the firm

129
Q

The rules relating to the use of dealing commission apply to firms that:
A deal with retail clients
B do not charge clients a fee for their services
C act as an investment manager
D are authorised in the UK

A

act as an investment manager

130
Q

In accordance with the SYSC rules on conflicts of interests, where a conflict arises,
which of the following must the firm do as a MINIMUM requirement?
A Telephone the client and inform them of the conflict of interest
B Email the client and inform them of the conflict of interest
C Telephone the client, give them sufficient information and ask the client to decide
how to proceed
D Email the client with sufficient information and ask the client to decide how to
proceed

A

Email the client with sufficient information and ask the client to decide how to
proceed

UK Financial Regulation (7 decks)

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