Incorrect Mock Answers Flashcards

Question 1

Q

Government-approved products fall within clearly defined CAT standards. Which three specific areas are covered?

A Charges, Accounts and Tax
B Charges, Access and Transfers
C Charges, Access and Terms
D Charges, Accounts and Transfers

Answer

A

D Charges, Access and Terms

introduction of requirements for government approval products which fell within Charges, Access and Terms - allowed firms like sainsbury’s and tesco to bring in financial services products

Question 2

Q

Friendly Societies were originally able to offer a very attractive investment proposition to their customers for what reason?

A Ability to invest in funds that other providers couldn’t
B All policies were treated as qualifying, whatever the term
C Investors had complete exemption from taxation on their funds
D Guaranteed bonus payments to investors for each year’s investment

Answer

A

c- Investors had complete exemption from taxation on their funds

Friendly societies were set up in the 19th century with the idea that it would take no profits, but would redistribute it all to it’s members - as it has ‘self help’ status they are exempt from tax

Question 3

Q

Your customer Dave has come to see you regarding managing his debts, you
recommend he speak to an expert debt management organisation. You are aware
several organisations offer a free face to face service. Which of the following
organisations would you NOT recommend Dave speak to -

A Citizens Advice Bureau National Debt line
B Pay Plan
C Stepchange Debt Charity
D OMPS

Answer

A

D - OMPS

OMPS is not a debt management organisation , it is the ‘Oil Market Participants’ Guide in the handbook

Question 4

Q

Mary has recently completed a Capital Repayment mortgage with a local Building
Society, which of the following Interest rate options would Mary not have been
offered?

A Offset
B Flexible Reserve
C Deferred Interest
D Structured

Answer

A

D Structured

Question 5

Q

In October 2003 the State Pension Credit was introduced to replace the Minimum
Income Guarantee (MIG). The amount of State Pension Credit payable to
pensioners depends on three different criteria. Which one of the following is NOT
one of these?

A Age
B NI contributions
C Income
D Savings

Answer

A

b- NI contributions

State pension credit is means tested, not contributions based

This guarantees a minimum income to those of State pension age by topping up the weekly
income.

Question 6

Q

James has recently become unemployed and is aware he may be eligible for
Support for Mortgage Interest (SMI). James is aware any benefit payable will be
paid direct to his mortgage lender and is limited to the interest on the first………of a
mortgage?

A £100,000
B £150,000
C £200,000
D £250,000

Answer

A

c- £200,000

If eligible for SMI can get up to £200k to help pay the interest on your mortgage, need to be in receipt of another qualifying benefit

Question 7

Q

What is the main tax difference between a Compulsory Purchase Annuity (CPA) and a Purchased Life Annuity (PLA)?

A A CPA is exempt from Income Tax and Capital Gains Tax
B A PLA is exempt from Income Tax and Capital Gains Tax
C A CPA is taxed on the whole of the Income paid at 20%,40% or 45% tax rates
D A PLA produces an Income element only, Income tax paid at 20%,40% or 45%
tax rates

Answer

A

c- A CPA is taxed on the whole of the Income paid at 20%,40% or 45% tax rates

CPA - is a lifetime annuity bought from the proceeds of a pension fund - taxed
PLA - bought using other capital - tax free

Question 8

Q

Saving and investing are ways to make money grow. Before people save or invest
it is important that they consider three other priorities before they commit to any
long-term savings or investment plans. Which below is NOT considered a priority in
this circumstance?

A Pay off any debt
B Understand the individual’s attitude to risk
C Consider an adequate emergency fund
D Protect self and family

Answer

A

b- Understand the individual’s attitude to risk

Question 9

Q

The introduction by the Government in 2012 of an individual NEST is intended to ensure
that individuals are less reliant on State benefits in which particular area?

A Medical expenses
B Unemployment
C Pensions
D Sickness and disability

Answer

A

c- Pensions

NEST (National Employment Savings Trust) is a pension scheme designed for smaller employers to meet the needs of autoenrolment

Question 10

Q

Peter and Mary have been married for 18 years and have come to you for a full
financial review and during the meeting you discuss estate planning. You establish
Peter and Mary have a current estate valued at £400,000. Peter asks if he were to
die today, what amount of tax would be payable on the estate left for Mary?

A £75,000
B £30,000
C £15,000
D NIL

Answer

A

d- NIL

Each have £325k tax free and can combine that when married

Question 11

Q

Ivar calls into your office to transact some investments for his elderly mother and
produces a Power of Attorney document on her behalf. What checks should you
make before proceeding?

A That Ivar’s mother is of sound mind
B That the document has been registered with the Office of the Public Guardian
C Exactly what powers are conferred on Ivar
D That Ivar’s mother is resident in the UK

Answer

A

c- Exactly what powers are conferred on Ivar

Need to establish what powers are conferred as a principal priority when an adviser is presented with a POA

Question 12

Q

Noel is an employee of Optimum Insurance Company and sells their products to the
public. When completing a proposal form for a customer he fails to pass on some
significant health information to his Company. What is the result?

A Non-disclosure has occurred, the contract is null and void
B Noel’s duty of care is to his customer not the Insurance Company and the contract
will be cancelled and premiums paid refunded
C Noel’s duty of care is to the Insurance Company not his customer – the contract
will continue in force
D Noel is personally responsible for compliance with FCA rules and will be disciplined
accordingly – the contract will be re-underwritten

Answer

A

c- Noel’s duty of care is to the Insurance Company not his customer – the contract
will continue in force

an employee or a self-employed representative of an insurer is the agent
of the insurer and the insurer is responsible for the agent’s acts and omissions

Question 13

Q

If you are contemplating effecting a life assurance policy on another individual, in
which of the following situations is insurable interest UNLIKELY to exist?

A For your spouse / civil partner
B For an ex-spouse who pays maintenance to you
C For a business partner
D For a non married partner who is financially independent from you

Answer

A

d- For a non married partner who is financially independent from you

Insurable interest requires the proposer of a life contract, i.e. the party to whom the benefits
will be payable, to have a financial interest in the life assured (on whose death the policy
benefits will be payable). This interest must arise through a legal or equitable obligation.

Question 14

Q

Fred did not leave a Will and died on 31st October of the current tax year, leaving a
wife and three children. How much will his wife receive?

A Chattels, £270,000 and half of any excess
B Chattels, £322,000 and half of any excess
C Chattels, £250,000 and a life interest in the residue
D Chattels, £270,000 and a life interest in the residue

Answer

A

b- Chattels, £322,000 and half of any excess

Fred died intestate and has a spouse and issue (kids) - according to intestacy rules his wife will receive spouse/civil partner takes personal chattels (car,
furniture, pictures, clothing etc.) plus a statutory legacy of £322,000 plus half of any
balance outright. The surviving issue will take the other half of the remaining estate on
reaching 18.

Question 15

Q

MiFID is a single market directive. To which group of countries does this directive apply?

A EU member states/Isle of Man/Gibraltar
B EEA member states/Gibraltar
C EEA member states/Isle of Man/Gibraltar
D EU member states/Gibraltar

Answer

A

b- EEA member states/Gibraltar

Passporting rights arose under the
EU single market directives. Under the directives, a regulated firm whose head office is
in one EEA State is entitled to carry out an activity in another EEA State. Passporting to Gibraltar is still possible for UK firms

Question 16

Q

To date, Firm ABC has only been authorised for deposit taking, but has been
arranging investments whilst actively seeking FCA approval for this additional
regulated activity. What is the most likely disciplinary action the FCA would take with
regards to this breach of general prohibition?

A Impose penalties for market manipulation
B Request skilled person’s reports for compliance monitoring purposes
C Apply to the court for an injunction
D Imprisonment and other sanctions

Answer

A

d- Imprisonment and other sanctions

Question 17

Q

Which of the following is not one of the FCA’s regulatory principles:
A Sustainable growth
B Senior management responsibility
C Openness and disclosure
D Control of money laundering

Answer

A

d- Control of money laundering

The FCA’s eight regulatory principles:
– Efficiency and economy.
– Proportionality.
– Sustainable growth.
– Consumer responsibility.
– Senior management responsibility.
– Recognising the differences in the businesses carried out by different regulated
persons.
– Openness and disclosure.
– Transparency.

The regulatory principles are what the FCA want to see in the regulated environment.

Question 18

Q

“Where an insider improperly discloses inside information to another person or
selective briefing of information by those in positions of responsibility” describes
which civil offence defined in the Market Abuse Regulation 2016.

A Insider dealing
B Unlawful disclosure
C Manipulating transaction
D Dissemination

Answer

A

b- Unlawful disclosure

Unlawful disclosure. Where an insider improperly discloses inside information to
another person or selective briefing of information by those in positions of responsibility - different to insider dealing as that includes actually dealing not just disclosing

Question 19

Q

Appropriate remuneration policies must take what into consideration?

A Risk management
B Competitor packages
C Commission levels
D Return on investment

Answer

A

a- Risk Management

The remuneration policies and practices detailed in SYSC 19G apply to SNI and non-SNI MIFIDPRU investment firms. These firms must establish, implement and maintain remuneration policies and practices which cover all aspects of the MIFIDPRU Remuneration Code. - Policies need to be proportionate for the risks inherent in the business, gender neutral and be consistent with sound risk manegement

Question 20

Q

Which type of scheme, covered by the Mortgage and Home Finance: Conduct of Business rules can only be sold on an advised basis and cannot be advertised through cold-calling or promotional leaflets?

A Interest Only mortgage
B Lifetime mortgage
C Home Reversion plan
D Sale and rent back

Answer

A

d - sale and rent back

sale and rent back schemes (SRB) are when companies may offer to help clients with financial difficulties by buying their home
and then renting it back to them for a fixed period. - regulated by FCA under MCOBS and can only be sold on an advised basis

Question 21

Q

If no agreement exists, who is entitled to the interest on a client money account?

A The client
B The intermediary
C The fund provider
D The auditor

Answer

A

a - the client

Interest on client money belongs to the client unless agreed otherwise under CASS

Question 22

Q

For which of the following offences does the FCA NOT need to notify the person under
investigation that the investigation is underway?

A Falsely describing oneself as authorised
B Insider dealing
C Breaching a prohibition order
D Failure to co-operate with an FCA investigation

Answer

A

b - Insider dealing

Question 23

Q

Which of the following indirect benefits is NOT allowable under COBS rules

A Freephone call centre
B IT hardware not linked to a software project
C Training
D Tickets to a major sporting event

Answer

A

b - IT hardware not linked to a software project

Indirect benefit is like an under the table payment to sway intermediaries.

Question 24

Q

The Environmental, social and governance sourcebook has rules and guidance on the
disclosure of climate-related, financial information, in line with recommendations set out
by the Task Force on Climate-related Financial Disclosures, which is NOT one of the
categories of these recommendations?

A Governance
B Environmental standards
C Risk management
D Metrics and targets

Answer

A

b - Environmental standards

ESG 2 rules and guidance on the disclosure of climate-related financial information are consistent with the four recommendations set out by the Task Force on Climate-related Financial Disclosures (TCFD) in its final report. The recommendations fall under the following four categories: Governance ,Strategy, Risk management, Metrics and targets

Question 25

Q

A new Senior Manager is being appointed to a regulated firm, they must have a Statement of Responsibilities, which of the following is untrue?

A It should set out any prescribed responsibilities
B It should be concise, factual, and self-contained
C It must be pre-approved by the FCA
D It must be updated where there is a significant change but this won’t need to be
resubmitted to the FCA

Answer

A

d- It must be updated where there is a significant change but this won’t need to be
resubmitted to the FCA

Each Senior Manager must have a Statement of Responsibilities (SoR), which must be pre-approved by the FCA

Question 26

Q

Jayne, an IFA has received a letter of complaint from a client. The complaint relates
to the poor attitude and service offered by an insurance company when the client
telephoned to get information on her policy. What are Jayne’s obligations regarding
this complaint?
A Jayne must write to the client and send details of the complaints procedure
B Jayne may refer the complaint to the insurance company as long as she writes to
the client and provides the insurance company’s contact details
C Jayne must contact the insurance company to investigate the complaint and provide
a response to the client within eight weeks
D Jayne must take joint responsibility for the outcome of the complaint with the
insurance company and advise the FCA of the outcome

Answer

A

d - Jayne must take joint responsibility for the outcome of the complaint with the
insurance company and advise the FCA of the outcome

Question 27

Q

Your client has asked you to complete the application form on his behalf to speed things up. What should you do?

A Make sure the client reads the form properly after completion
B Complete the application form in rough with the client and fill in the gaps afterwards
C Complete the application form from the fact find after the meeting
D The adviser should never complete the application form

Answer

A

a - Make sure the client reads the form properly after completion

There is no rule preventing an adviser from helping a client to complete an application form, however, the adviser should ensure that the client reads the form and agrees with the information

Question 28

Q

You have just completed a sale with one of your clients. A Principles and Practice of
Financial Management document was included in the paperwork presented to him.
This was because it was for:

A A unit linked bond
B A stakeholder personal pension where basic information was given
C A stakeholder stocks and shares ISA where only basic information was given
D A with-profit regular savings policy

Answer

A

d - A with-profit regular savings policy

Every life office carrying on with-profits business must have a principles and practices
of financial management (PPFM) document setting out how they manage their
with-profits business.

Question 29

Q

Under the stakeholder regime a lighter touch approach is appropriate. This means:

A Normal advice will be given but on a limited range of products
B A suitability report is not required
C Records need only be kept for one year
D Advisers only need to have passed the basic level of external exams

Answer

A

b - A suitability report is not required

Question 30

Q

When establishing a client’s attitude to risk, which of the following questions would
be LEAST helpful to the client?

Answer

A

b - How would you rate your attitude to risk on a scale of 1 – 10?

Question 31

Q

What is the regulatory approach known as Intensive Supervision designed to deliver?

A Outcomes-based regulation
B Principles-based regulation
C The FCA Code of Practice
D Close monitoring of Treating Customers Fairly adherence

Answer

A

b- Outcomes-based regulation

Question 32

Q

What is not a criteria for the FCA to base its judgement on, when assessing an senior manager under SM&CR’s honesty, integrity and reputation for Fit and Proper status?

A Membership of recognised Professional Bodies
B Past dealings with regulators
C Employment record
D Any criminal, civil or disciplinary proceedings

Answer

A

A Membership of recognised Professional Bodies

Question 33

Q

Which of the following is NOT a positive indicator of the cultural driver of decision making?

A Fair treatment of customer messages are only delivered by staff who have had relevant
training
B The interests of customers are properly balanced against those of shareholders
C The firm uses staff and customer feedback with timely action to address it
D Decision making at all levels reflects the fair treatment of customers

Answer

A

a - Fair treatment of customer messages are only delivered by staff who have had relevant
training

Question 34

Q

Pete recently received a letter of complaint from a client. Pete read the letter, realised he had made an error and telephoned the client immediately to apologise and agree with the client how to put the error right. He confirmed their agreement in writing the same day. Pete’s actions would be considered as:

A Compliant but not ethical
B Compliant and ethical
C Ethical but not compliant
D Neither compliant nor ethical

Answer

A

b - Compliant and ethical

Question 35

Q

MULTIPLE - Firms have to report to the FCA via the RegData system, examples of the data they
need to supply include

A Persistency statistics
B Number of complaints received
C When they appoint new staff members for the call centre
D Annual accounts and financial statements
E Percentage of emails dealt with within 5 working days

Answer

A

A Persistency statistics
B Number of complaints received
D Annual accounts and financial statements

FCA Electronic reporting is carried out via the RegData system
Reports cover such matters as:
* firms’ annual accounts and financial statements;
* the amount held in client bank accounts;
* the value of clients’ assets which are in a discretionary portfolio manager’s possession;
* the numbers of staff undertaking different roles within the firm;
* the types of business being undertaken; and
* the number of complaints received and persistency statistics (which enable the FCA to
get some idea of the quality of the selling by representatives).

Persistency is defined as the percentage of an insurance company’s already written policies
remaining in force, without lapsing or being replaced by policies of other insurers.

Question 36

Q

MULTIPLE - Jerry has joined a firm to act as an investment adviser, he does not yet have his full Level 4 Diploma qualification, which of the following statements are correct?

A Jerry is unable to conduct any investment business before he has obtained his Diploma
B He must complete his Level 4 exams within 48 months of starting to act as an
investment advisor
C He is only allowed to resit any exam 2 times.
D The firm can choose to limit the number of attempts allowed for each exam
E He must complete his Level 4 exams within 24 months of starting to act as an
investment advisor

Answer

A

B He must complete his Level 4 exams within 48 months of starting to act as an
investment advisor
E He must complete his Level 4 exams within 24 months of starting to act as an
investment advisor

Those entering the industry as investment advisers have 48 months to complete the investments Level 4 examinations. Firms can choose to limit the number of attempts or the amount of time an individual is allowed in order to pass an appropriate examination

Question 37

Q

MULTPILE - You are on a real time presentation call with a client, which of these rules apply?

A Your presentation must be approved by an appropriate person
B Your presentation must be fair, clear and not misleading
C The client must be given a contact point
D The call must not take place at an unsocial hour
E The client must be shown clearly how to place an order

Answer

A

B Your presentation must be fair, clear and not misleading
C The client must be given a contact point
D The call must not take place at an unsocial hour

Question 38

Q

MULTIPLE - You are preparing the sales pack for a client regarding a whole of life policy you have recommended for IHT protection. What would you expect to find in the key features document?

A Name of the life office
B Cancellation rights
C Details of the will
D Name of the executor
E Value of the estate

Answer

A

A Name of the life office
B Cancellation rights

FCA require For non-PRIIP packaged products a key features document (KFD) is provided with name of life office and canellation rights provided

Question 39

Q

Your investment bond projection must follow certain rules. These are?

A You must show projections using 4%, 6% and 8%
B You must always show the effect of deductions
C The cost of advice must be shown
D The projection must be based on reasonable assumptions
E A risk warning must be included

Answer

A

D The projection must be based on reasonable assumptions
E A risk warning must be included

The projection must be based on a reasonable number of realistic simulations and assumptions which are supported by objective data with a risk warning

Question 40

Q

MULTIPLE - Which of these would NOT be regarded automatically as a retail client?

A A government of a country
B Another authorised firm
C A central bank
D A local authority
E A small business selling mobile homes

Answer

A

A A government of a country
B Another authorised firm
C A central bank
D A local authority

Question 41

Q

MULTIPLE - You are meeting a client for the first time. Under the status disclosure rules you must provide the client with

A Details of how the firm is paid
B The complaints procedure
C Details of the services to be provided
D Details of the Financial Services Compensation scheme applicable to their holdings
E Details of ownership of the firm

Answer

A

A Details of how the firm is paid
B The complaints procedure
C Details of the services to be provided
E Details of ownership of the firm

On first contact with a retail client where advice or arrangements in packaged products are contemplated (i.e. before fact-finding takes place), a firm must provide a client with specific information about the firm and its relationship with the client, including the answers

Question 42

Q

MULTIPLE - Client agreements are NOT required for

A Single premium investments of less than £5,000
B Regular premium contracts of less than £500 per month
C Life offices selling life products as a principal
D A building society selling life and pension products as a tied agent
E Direct offer financial promotions

Answer

A

C Life offices selling life products as a principal
E Direct offer financial promotions

Question 43

Q

MULTIPLE - The FCA list drivers of vulnerability these include

A Health
B Life Events
C World Events
D Capability
E Financial market instability

Answer

A

A Health
B Life Events
E Financial market instability

Question 44

Q

The process of ‘demutualisation’ is concerned with which type of financial organisation?
A Banks
B Providers of MiFID products
C Providers of protection products
D Building Societies

Answer

A

d Building societies

When a number of building societies abandoned their mutual status (known as demutualisation) in favour of becoming public corporations

Question 45

Q

Life cycles is one way of illustrating the interaction of factors that impact on the level of
protection that is required part of financial planning. Which of these is not one of the
seven stages?
A Childhood
B Young partnered
C Family with older children
D Post retirement

Answer

A

d - post retirement

7 stages in the personal financial lifecycle model
- childhood
- young single
- young partnered
- starting a family
- family with older children
- post family or pre retirement
- retirement

post retirement is not one of the stages

Question 46

Q

Adam has a Reviewable Critical Illness Plan; he asks you what his premium reviews
are based on in the future, you tell him?
A Client’s health at time of the review
B Advances in medical science at the time of the review
C Client’s health and medical science at the time of the review
D None of the above its age that is taken into consideration

Answer

A

b - advances in medical science at the time of the review

Reviewable premiums are considerably cheaper than guaranteed ones. The policies are reviewed every five or ten years, based on general advances in medical science at that time and not on individual circumstances or the individual insured’s health.

Question 47

Q

John is self-employed and has completed an application for an Income Protection
Insurance. You are discussing underwriting considerations with John, and you tell
him an Income Protection Plan underwriting is based on?
A Mortality
B Morbidity
C Moratorium
D Any of the above each company is different

Answer

A

B Morbidity

Life assurance is based on the study of mortality, that is – the length of time someone is likely to live.
With income protection policies, underwriting is based on morbidity – the rate of incidence of disease or medical problems.

Question 48

Q

Terry, single no dependants, is self-employed and has recently had an accident
at work which has left him too ill to work, which State Benefit would be most
likely payable to Terry?
A Invalidity Benefit
B Employment and Support Allowance
C Jobseekers Allowance
D Working Tax Credit

Answer

A

B Employment and Support Allowance

Claimants can apply for ESA if they have a disability or health condition that affects how much they can work.

Working tax credit is paid to people on low
incomes and can, in certain cases, include a ‘childcare element’ to help with up to 70% of
childcare costs.

Question 49

Q

Which of following state benefits for those bringing up children is NOT “contributions
based”?
A Maternity Allowance
B Statutory Maternity Pay
C Child Benefit
D Statutory Paternity Pay

Answer

A

C Child Benefit

A universal non-means-tested benefit for parents to claim for their children. A tax charge is payable if the parent or their spouse, civil or cohabiting partner has an income of over £60,000.

Maternity allowance pays a standard weekly rate of £184.03 or 90% of average weekly earnings (before
tax), whichever is the smaller, to somebody who does not qualify for statutory maternity pay

Question 50

Q

Duncan has a pension scheme from his employment that promises a proportion
of salary averaged over his whole career, this is a …..?
A A final salary defined benefit scheme
B A career average revalued earnings scheme
C A money purchase scheme
D A stakeholder pension scheme

Answer

A

B A career average revalued earnings scheme

A CARE scheme is still a DB scheme, but promises a proportion of salary averaged over a
worker’s whole career, rather than their final salary at retirement. This, generally, leads to a
lower pension being paid.

Question 51

Q

What is the minimum nominal share value for a company to have allotted to be able
to trade as a Public Limited Company (plc)?
A £20,000
B £50,000
C £100,000
D £1,000,000

Answer

A

B £50,000

Public companies need an extra certificate from the Registrar of Companies after incorporation before they can start trading. To acquire this, PLCs must have allotted shares with a nominal value of at least £50,000

Question 52

Q

Brenda is purchasing a book in a shop. She hands over £6.99 cash. What element
of the contract does this cash represent?
A Intention
B Consideration
C Offer
D Acceptance

Answer

A

B Consideration

consideration means that both parties must pay or stand to pay something to the other.

Question 53

Q

Reese, 16, is employed by a hairdressing firm. Under English Law she is a minor,
but how is the contract of employment considered from a legal perspective?
A Binding
B Binding unless repudiated
C Not Binding
D Unrecognised

Answer

A

A Binding

For Minors, Contracts which are binding, e.g. a contract of employment and similar agreements such
as contracts of apprenticeship. The contract is binding if it is, on the whole, for the minor’s
benefit.

Question 54

Q

There are many different reasons why a Trust can be viewed as a useful tool. Which
of the following would NOT be considered as one of these reasons?
A Speed in which the Trust property can be delivered to beneficiaries on death of settlor
B Favourable tax treatment of the Trust property in question
C Apportioning Trust property for the benefit of minors
D Re-apportioning an individual’s estate to minimise tax paid on death

Answer

A

B Favourable tax treatment of the Trust property in question

Question 55

Q

Which of these comes under the scope of the FSMA 2000?
1 - Home Reversion Plans, 2 - Funeral Plan Contracts
3 - Buy to Let Loans, 4 - Futures
A 1, 3 and 4
B 1, 2 and 3
C 1, 2 and 4
D 1, 2, 3 and 4

Answer

A

C 1, 2 and 4

Question 56

Q

The Chancellor announced plans to enhance the transparency and accountability of the
UK’s financial regulatory system through the establishment of the Standing Committee
for Financial Stability. How often does it meet?
A Bi-Annually
B Monthly
C Annually
D Quarterly

Answer

A

B - Monthly

Question 57

Q

As a general principle, on what basis does the FCA assess the risk of individual firms?
A Impact and probability
B Impact and size
C Size and probability
D Size and scale

Answer

A

A Impact and probability

Question 58

Q

Which of the following monitoring activities by the FCA would be considered as
proactive?
A Reviewing accounts and audit statements
B Compiling complaint statistics
C Regular inspection visits
D Investigating concerns raised by the Competition and Markets Authority

Answer

A

C Regular inspection visits

Question 59

Q

The FCA can take disciplinary action following a review of an authorised firm’s
compliance monitoring. In what respect could this be describing the regulator?
A Proactive
B Reactive
C Passive
D Hands-on

Answer

A

B Reactive

Question 60

Q

Regulated firms must maintain adequate resources to ensure they can meet their
liabilities as they fall due. These resources must be of adequate:
A Accessibility and term
B Accessibility and quality
C Amount and accessibility
D Amount and quality

Answer

A

D Amount and quality

Question 61

Q

How often are firms required to test the adequacy of their financial resources under
FCA rules?
A Every 5 years
B At least annually
C At least quarterly
D At least monthly

Answer

A

B At least annually

Question 62

Q

Which of the following does NOT form part of the ‘common platform requirements’?
A Keeping up to date Management Information
B Robust process for Record Keeping
C UK Based Head Office function
D Checking honesty and competence of employees

Answer

A

C UK Based Head Office function

Question 63

Q

Any firm applying to the FCA for authorisation has to pay an “application fee”. If the
application is considered to be “straightforward then fees start at:-
A £5,000
B £3,000
C £2,500
D £1,000

Answer

A

C £2,500

Any firm applying to the FCA for authorisation has to pay an application fee. These were simplified in 2022 and start at £2,500, with higher levels of fees for firms seeking permissions beyond advising and arranging

Question 64

Q

Which other organisations collect fees and levies from regulated firms
A PRA and FSA
B Upper Tribunal and FSCS
C FOS, FSCS and MaPS
D FOS and NS&I

Answer

A

C FOS, FSCS and MaPS

Answer 65

A

A When loans are secured on land

Agreements involving credit of not more than £25,000 are regulated by the Act, although
some provisions apply to other loans. Some specified bodies, including insurance
companies, can apply for exemption if such loans are secured on land.

Answer 66

A

C Poor English language skills

Life events drivers of vulnerability include
- Retirement
- Bereavement
- Relationship breakdown
- Domestic abuse
- Caring responsibilities
- ‘other circumstances that affect people’s experience of financial services’

Poor english skills is in capability driver

Answer 67

A

D Current savings

regular savings identification comes later down the priority chain for the fact find

Answer 68

A

A Senior management allowing middle management to decide what the fair treatment

Answer 69

A

D All of the above

FIT stipulates Individuals must keep their regulatory responsibilities clearly in mind at all times. If they neglect or deliberately ignore these responsibilities the FCA may take disciplinary action against them. This could result in financial penalties, the loss of their job, and perhaps curtail any prospect of future employment in the financial services industry.

Answer 70

A

B Regularly checking samples of each other’s files for conflicts of interest

The approach of some small firms to handling conflict identification is through regular file reviews with senior staff showing a serious approach to making sure exceptions are monitored, followed up, and managed effectively.

Answer 71

A

D Employee benefit package

Answer 72

A

A Compliant but not ethical

Answer 73

A

c,d,e

The legislation creates special categories of personal data so as to provide additional
safeguards for sensitive information. The categories are:
* race or ethnic origin;
* political opinions;
* religious or philosophical beliefs;
* trade union membership;
* genetic data;
* biometrics (where used for ID purposes);
* health information;
* information about sex life; and
* sexual orientation.

Personal data is mainly data used to identify someone, sensitive is more about them

Answer 74

A

ace

If a firm does business online or even advertises online, it is subject to the e-commerce rules in COBS 5.2

Answer 75

A

bc

The basic advice rules were introduced in 2005 to enable firms to provide simpler and lower cost advice to consumers on a range of stakeholder products using pre-scripted questions

Answer 76

A

B - Gives the right to put in place a similar policy without evidence of health in the future

Answer 77

A

C - Jobseekers Allowance (JSA)

JSA is a contribution based unemployment/ low income benefit which is taxable - helps people when they are looking for work, they need to have previously worked and received class 1 NICs, as well as taking reasonable steps to look for work

Answer 78

A

D - 39 weeks

The payments are made directly to the lender after a waiting period of 39 weeks after claiming the income-related benefit

Answer 79

A

C State Earnings-Related Pension Scheme (SERPS)

Additional State Pension, also known as the State Earnings-Related Pension Scheme (SERPS) and State Second Pension, is an extra amount of money you could get on top of your basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953.

Answer 80

A

B Permanent Interest Bearing Share

Building societies used to issue a form of fixed interest investment called a permanent
interest bearing share (PIBS). PIBS are very similar to the other fixed interest investments
we have discussed except:
* they are undated;
* interest payments can be missed in exceptional circumstances; and
* missed interest payments do not need to be made up at a later stage.
Therefore, this type of investment is higher risk than other forms of loan stock but does tend
to produce higher rates of return.

Answer 81

A

A Neither Income Tax nor CGT, but Corporation Tax

There are major tax differences between limited companies and unincorporated businesses
(i.e. businesses which are not companies): limited companies pay neither income tax nor
CGT; they do, however, pay corporation tax on all forms of profit made by the company
(including capital gains).

Answer 82

A

D All of the above

Someone seeking insurance may use an independent financial adviser (IFA) to find the most
suitable contract on the market for them. Under the law of agency the:
* IFA is the agent of the client and owes a duty of care to the client;
* IFA owes no duty to the insurer, but must comply with the relevant FCA rules; and
* client is responsible for the acts of the IFA

Answer 83

A

C Income for life, but not capital

A beneficiary may have an absolute interest, a life interest, a reversionary interest, or a
contingent interest. A life interest means that the beneficiary is entitled to the income from the trust property for life, but cannot touch the capital. A beneficiary who has a life interest is known as a life tenant

Answer 84

A

B Prudential Regulation Committee

PRC supervises the PRA who makes these day to day decisions

Answer 85

A

D Environmental Governance

ABC are included in the summary of the FCA’s approach to regulation, super complaints are those complaints made on behalf of a large group of people

Answer 86

A

C Reviewing a firms complaints statistics

Answer 87

A

C Fair treatment of customers

A & D would be personnel matters
B customer matters

Answer 88

A

C By close of business on the next working day

According to CASS A firm must hold client money separate from its own money in a client bank account. The
money must normally be paid into the client bank account by close of business the next
working day

Answer 89

A

A A residential property purchased by A2B Ltd

The FCA regulates mortgage contracts where the:
* lender provides credit to an individual (or trustees);
* obligation is secured by a legal first mortgage on land in the UK; or
* at least 40% of the property is to be used as a dwelling by the borrower or a
related person.
It includes where the loan is secured on a second or subsequent charge and consumer (not
commercial) buy-to-let mortgages.
This means that where the borrower is a company (e.g. a commercial mortgage for
the purchase of an office block, whether for occupation or buy-to-let) the contract is
not regulated

Answer 90

A

B Russell can give advice in this area as it is considered incidental to his professional
services

Professional firms that are a member of a designated professional body (DPB) do not
need FCA authorisation for regulated activities which are incidental to their professional
services. For example, a solicitor would not need authorisation for assisting a policyholder to
make a claim under a life policy, and an accountant would not need authorisation for advice
on the taxation of an investment as these are incidental to their professional services

Answer 91

A

B As he will now be under the SM&CR regime, it is the firm that must confirm Amir is fit and proper to undertake the role

Answer 92

A

B It is a free impartial government service that helps those with defined contribution
pension schemes decide how to take benefits in retirement.

Pension Wise, part of MoneyHelper, is a free, impartial Government service, supplied over the phone, face to face and online. It is available to individuals over the age of 50, with defined contribution pension schemes that require them to decide how to take their benefits in retirement.

Answer 93

A

B The Adviser should record disagreement on the fact find, and potentially decline
to arrange the transaction

Answer 94

A

A £160

Providers of the medium-term investment product and pension product can charge a
maximum annual management charge of 1.5% of the value of the plan/pension each year
reducing to 1% after ten years

Answer 95

A

C Her occupation is mainly desk based

a mark-up to the standard premium paid by a consumer that enables additional commission to be paid to an intermediary.

Answer 96

A

C Financial Prudence

Answer 97

A

B Compliance

Answer 98

A

C - Walking the talk

It is generally agreed that the ‘tone at the top’ (the values and behaviour of the board and senior management) plays a major part in setting and reinforcing the ethics of any business.
This behaviour, ‘walking the talk’, can be as significant as structural and organisational
factors (such as targets and information management) in shaping the ethos of a firm.

Answer 99

A

B Criticising a colleague in an open office

Answer 100

A

C Persistency ratios

customer complaints and ethical feedback in employee surveys are direct measures of ethics, while persistency ratios and engagement with ethics training are indirect measures of ethics

Answer 101

A

BCDE

B Government securities
C Cash deposits
D Electronic money
E Rights under insurance contracts

Answer 102

A

B A deposit account of £110,000 that she holds jointly with her husband
D A valid claim she has under her car insurance policy
E A deposit of £98,000 she received one month ago as an inheritance from her mother’s
estate.

The claim must be made by an eligible claimant for:
* a protected deposit;
* a protected insurance contract; or
* protected investment business

Answer 103

A

A Information provided by an Adviser in the course of a personal visit
C A telephone Adviser discussing the merits of a rollover option for a client’s
maturing investment

Answer 104

A

C They should contain the name of the firm and an address or contract point
D Records should be kept for at least 3 years for non-MiFID firms
E Any risks to a client’s capital must be clearly stated

Answer 105

A

D Key features document
E Suitability report

Answer 106

A

D. purchase of UK gilts from the Debt Management Office.

Disintermediation means cutting out the middle man (intermediary) and buying directly from the supplier

Answer 107

A

C. a level annuity on a single-life basis with no guarantee

Answer 108

A

B. a level term assurance policy on a joint-life basis for the outstanding mortgage amount.

Level term assurance offers a level sum assured in return for a level premium
throughout the term of the contract. Would be suitable for the couple on a joint life assured basis to protect the mortgage if one of them passes.

Answer 109

A

B. Jimmy only.

As its regarding trust assets and Jimmy is the trustee, only Jimmy as Betty is not listed

Answer 110

A

B. agent to the client only.

Under the law of agency the:
* IFA is the agent of the client and owes a duty of care to the client;
* IFA owes no duty to the insurer, but must comply with the relevant FCA rules; and
* client is responsible for the acts of the IFA

Answer 111

A

B. Katrina can avoid all liability under the contract.

Minors have restrictions re their capacity to act, a minor is someone under 18.
Contracts made by minors fall into three
categories:
* Contracts which are binding, e.g. a contract of employment and similar agreements such
as contracts of apprenticeship. The contract is binding if it is, on the whole, for the minor’s
benefit.
* Contracts which are binding unless repudiated, e.g. a lease or partnership and the
holding of shares in a company. The minor may cancel the contract either during their
Chapter 3 3/8 R01/July 2024 Financial services, regulation and ethics minority or within a reasonable time afterwards. The minor is then freed from any further liability under the contract such as further rent payments.
* Contracts which are not binding on the minor. All other contracts fall into this category
and include contracts to borrow money. Although these contracts do not bind the minor they do bind the other party, the minor can, therefore, sue if the other party does not keep to the contract. The minor does not have to cancel the contract to avoid liability – even if
they do nothing they are not bound.

Answer 112

A

B. It will be passed to Tony’s estate.

If it was a joint tenancy then the survivors would inherit the shares, as they;re tenants in common they hold their shares seperately and when they die the share passes to the estate not the other tenants in common

Answer 113

A

A. on a commonhold basis.

Commonhold was introduced by the Commonhold and Leasehold Reform Act 2002. Its aim was to provide an alternative to leasehold and eventually to replace it.

Owners of flats under commonhold are called unit-owners. They own their flats in perpetuity (as with freehold) and are members of a Commonhold Association. The Commonhold Association owns the land, the building and the common parts. Unit-owners have a vote in the operation of the Association, which is responsible for the management, maintenance, repair and
servicing of the building.

Answer 114

A

B. To allow professional trustees to be remunerated for their services.

Where a trust corporation is appointed as trustee, it will normally insist on there being a ‘trustee charging clause’.

Answer 115

A

B. any firms or individuals regardless of whether they are on the FCA register.

Answer 116

A

B. regulated by the provisions of the Insurance: Conduct of Business sourcebook (ICOBS).

the ICOBS handbook introduces three product categories: general insurance
products, pure protection (term assurance, income protection and critical illness cover) and payment protection insurance (PPI)

Payment Protection Insurance (PPI) is a financial product that protects a borrower’s ability to make debt repayments if they are unable to work for a limited time.

Answer 117

A

D. the business is transacted by telephone

A firm must provide a retail client with a client agreement (sometimes referred to as the
Terms of Business) before conducting the business, or immediately afterwards where the business was concluded using a means of distance communication which prevented the
Chapter 8 8/30 R01/July 2024 Financial services, regulation and ethics
firm from doing so. For example, a client agreement need not be provided beforehand if the business is conducted by telephone.

Answer 118

A

A. every business day.

Firms must perform an internal client money reconciliation each business day as part of CASS 7, It’s a secondary control that ensures enough client money is segregated to meet client obligations

Answer 119

A

D. The authorised firm only

Answer 120

A

C. Five years.

MIFID related record keeping is usually 5+ years

Answer 121

A

B. Before the start date.

Answer 122

A

C. £195,000

FOS pays a ‘money award’, telling the firm what specific sum of money it should pay the customer to cover any financial losses they have suffered as a result of the problem they have complained about. The maximum monetary award the FOS can require a firm to make to a complainant is

£430,000 - date complaint referred to FOS On or after 1 April 2024 - date act happened on or after 1 April 2019

£195,000 - date complaint referred to FOS - On or after 1 April 2024 - date act happened before 1 April 201

Answer 123

A

C. OEIC and the unit trust only.

Top ups don’t require suitability report if advice has already been given and agreed upon

Answer 124

A

C. Some discretion is allowed to the firm in how they comply with the obligations.

Answer 125

A

A. Senior management only

Answer 126

A

D. maintain strict neutrality.

Answer 127

A

B. Report his concerns to the bank’s Money Laundering Reporting Officer.

Answer 128

A

A. clearly-phrased and unambiguous questions.

Answer 129

A

b.
capital management

Answer 130

A

d.
on-exchange financial market.

Member firms use on-exchange markets to trade investments such as equities and
derivatives via the trading floor, whether electronic or (rarely now) physical. The FCA
regulates the key exchanges in the UK.

Answer 131

A

a.
stockbroking service.

Stockbroking services enable customers to buy and sell securities, gilts and/or
corporate bonds (called an execution-only service) - different to a DFM who have specialist managers to manage a suitable portfolio on behalf of the client

Answer 132

A

d.
family income benefit.

Family income benefit policies - These are a special form of decreasing term assurance
whereby, on the death of the life assured, the life office will make a series of regular
annual or monthly payments, instead of one lump-sum payment

Answer 133

A

d.
Claims relating to DVT would automatically be initially excluded from cover as Wendy suffered from this condition within the last five years.

Clients can also apply for cover
on a moratorium basis, which means they will not be asked any questions about their
health, but if they have suffered from any health conditions in the last five years these will initially be automatically excluded from cover.

Answer 134

A

C - Part of every PLA income payment is treated as capital and is tax-free; the interest element is taxed at 20%

Answer 135

A

a.
£40,000 own-life whole of life policy with increasing cover, written in trust.

Answer 136

A

a - That he cannot be pursued for partnership debts, except where he has provided a personal guarantee.

As the name suggests, an LLP
also has limited liability like a company and the partners are not individually liable for the
LLP’s debts.

Answer 137

A

c.
counter offer.

The letter of acceptance is, at law, a counter offer, which the proposer can accept by paying
the first premium.

Answer 138

A

A - prove Rina’s inability to pay by showing she has not complied with a statutory demand within three weeks or that a court order has not been enforced.

Answer 139

A

a.
Dawn receives his entire net estate.

If the intestate dies leaving:
1. Spouse/civil partner but no issue (e.g. children or grandchildren) – the surviving spouse/
civil partner is the sole beneficiary of the intestate’s estate.

Answer 140

A

b.
Aafia made no will and so died intestate

Administrators of an estate where there is no will must apply to the Probate Registry for
a Grant of Letters of Administration. The procedure for this and paying IHT is similar
to that described above for executors. When the administrators have paid the IHT and
obtained the Letters of Administration, the estate must be distributed according to the law
of intestacy.

Answer 141

A

a.
interest in possession trust.

Interest in
possession trusts -
A beneficiary has a present right to
income from (or enjoyment of) the trust
property. That beneficiary might (or might
not) also be entitled to the capital.

Answer 142

A

a.
The Financial Policy Committee.

Having identified the risks, the FPC has the power to take various policy measures to
counteract them. Examples of so-called macro-prudential tools include:
* Setting countercyclical capital buffers: ensuring that banks increase their capital in the
‘good times’ so that they have protection for the bad. This should also have the effect of
tempering lending during a boom and so dampening the effect of the credit cycle.

Answer 143

A

b.
Efficiency and economy.

Answer 144

A

A - The FCA

Answer 145

A

a.
PRA.

As it’s a bank it would be the PRA dealing with authorisation

Answer 146

A

a.
systems and controls, governance arrangements and risk management capabilities.

Answer 147

A

d.
£1,250.

An authorised firm may seek to significantly vary the scope of its permission, and that
variation, if granted, may cause it to fall into new fee blocks it was not allocated to before the
variation. In these cases, a variation of permission (VoP) fee is payable, charged at 50% of
the equivalent application fee that a new firm falling into the new fee block(s) would pay.

Answer 148

A

b.
mortgage offer is binding on the lender, who must allow the borrower a minimum seven-day reflection period.

Answer 149

A

a.
insider dealing.

Under the FSMA 2000 the FCA is required to notify any person who is the subject of
an investigation by its officers that the investigation is under way.

Exceptions to this notification requirement include the investigation of possible insider
dealing, market abuse or misleading statements plus breaches of the restriction on financial
promotion or promoting collective investment schemes. In these instances the investigator
may not know the identity of the perpetrator at the outset of the investigation, or may be
looking into market circumstances rather than investigating a particular person or persons.

Answer 150

A

A - Core

SM&CR is applied to solo-regulated firms in a proportionate manner by dividing firms into
three categories:
* Limited scope firms – These are smaller firms which are subject to fewer requirements
than core firms. For example, sole traders and authorised professional firms such as
accountants and solicitors.
* Core firms – firms that do not qualify as Limited Scope or Enhanced will be subject to the
baseline regime, which is a pared-back version of the SM&CR for banks.
* Enhanced firms – the largest, most complex, or riskiest firms are subject to additional
requirements above the baseline Core regime, more akin to the requirements for banks.
Examples are:
– significant IFPRU firms;
– large CASS firms;
– asset managers with assets under management (AUM) of £50bn or more (calculated
as a three-year rolling average);

Answer 151

A

a.
It is not permitted to hold client money under any circumstances.

ARs are not permitted to hold client assets for longer than is necessary to deal with them
(which must not exceed 28 days) and in no circumstances may they hold client money

Answer 152

A

b.
records relating to the advice will have been retained for a minimum of five years, and the literature for six years.

Five years – for life policies and pension contracts, although financial promotions for such products should be retained for six years

Answer 153

A

c.
relied on pre-ticked boxes to verify consent to process personal data.

Answer 154

A

d.
17 August 2024

Answer 155

A

d- her income tax status

Part one of a typical fact-find covers general information about the client and their
circumstances, including name, address, relationship status and health.

Answer 156

A

a.
to advise the wider family members of the possible impact any recommendations may have on them

Answer 157

A

b.
Their matrimonial home only.

The assets part of the fact find requires the client to list used assets and invested assets. Used assets include
their house and personal belongings which, though of significant value, cannot easily be used for investment purposes or to subsidise lost earnings due to illness

Answer 158

A

d.
Failed to arrange adequate protection for its clients’ assets.

PRIN 10. Clients’ assets - A firm must arrange adequate protection for clients’ assets when it is
responsible for them

Answer 159

A

c.
culture and values

Answer 160

A

c.
culture and values.

Answer 161

A

a.
investigate why there is no improvement in performance.

Answer 162

A

a,d,f

If a firm is authorised and it is thinking of changing its legal status, e.g. from being a
partnership to a limited company, the new legal entity must apply for authorisation. This is
because the FSMA does not permit the authorisation to be transferred from one legal entity
to another.

Answer 163

A

a.
For no longer than is necessary.

Under the six data protection principles, once personal data has been processed it must not be held for longer than is necessary for the purposes for which the personal data was processed.

Answer 164

A

B - FPC

The Bank of England is responsible for the macro-prudential regulation of the financial services industry through its Financial Policy Committee (FPC), and micro-prudential regulation of firms that manage complex risks through the Prudential Regulation Authority (PRA) and the PRA’s governing body the Prudential Regulation Committee (PRC).

Answer 165

A

d.
An IFA selling a collective investment scheme to a client.

Direct offer financial promotions do not require a client agreement, and neither do life offices selling life and pension policies as a principal. The IFA, on the other hand, will require a client agreement.

Answer 166

A

d.
Intention to create a trust, specified subject matter and specified beneficiaries.

Knight v. Knight (1840) established that for a trust to be valid, three certainties must be present: i) the words used must unmistakably show that a trust is intended; ii) the subject matter must be certain, i.e. the property to be subject to the trust must be specified; iii) the objects of the trust, the beneficiaries, must be certain. The beneficiaries may be stated by name or by a recognised class, e.g. wife, husband or children.

Answer 167

A

d - If an IFA is authorised to hold client money it must hold it separately from its own money in a client bank account.

Many IFAs do not have the authority to handle client money and so must ensure that all cheques or other payments for investments arranged are payable direct to the product provider. In these circumstances, they do not need client money accounts. If they are authorised to hold client money, they must hold it separately from its own money in a client bank account.

Answer 168

A

c.
Elena’s 19 year old nephew Simon, who is not named as a beneficiary in Elena’s will.

Jared and Cecilia (by virtue of her marriage) are beneficiaries of Elena’s will and therefore should not act as witnesses. Chloe is a minor and therefore cannot act as a witness. Simon, on the other hand, can witness it, as he is not a beneficiary.

Answer 169

A

Whereas fixed portfolio firms were subject to all three pillars and had a named supervisor, flexible portfolio firms were subject to pillars 2 and 3 only.

Brainscape's Knowledge GenomeTM

Incorrect Mock Answers Flashcards

Brainscape's Knowledge Genome^TM