Incorrect Mock Answers Flashcards
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
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
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
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
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
A
D - OMPS
OMPS is not a debt management organisation , it is the ‘Oil Market Participants’ Guide in the handbook
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
A
D Structured
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
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.
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
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
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
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
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
A
b- Understand the individual’s attitude to risk
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
A
c- Pensions
NEST (National Employment Savings Trust) is a pension scheme designed for smaller employers to meet the needs of autoenrolment
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
A
d- NIL
Each have £325k tax free and can combine that when married
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
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
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
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
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
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.
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
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.
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
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
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
A
d- Imprisonment and other sanctions
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
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.
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
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
19
Q
Appropriate remuneration policies must take what into consideration?
A Risk management
B Competitor packages
C Commission levels
D Return on investment
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
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
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
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
A
a - the client
Interest on client money belongs to the client unless agreed otherwise under CASS
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
A
b - Insider dealing
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
A
b - IT hardware not linked to a software project
Indirect benefit is like an under the table payment to sway intermediaries.
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
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
25
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
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
26
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
d - Jayne must take joint responsibility for the outcome of the complaint with the
insurance company and advise the FCA of the outcome
27
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
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
28
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
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.
29
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
b - A suitability report is not required
30
When establishing a client’s attitude to risk, which of the following questions would
be LEAST helpful to the client?
b - How would you rate your attitude to risk on a scale of 1 – 10?
31
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
b- Outcomes-based regulation
32
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
A Membership of recognised Professional Bodies
33
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
a - Fair treatment of customer messages are only delivered by staff who have had relevant
training
34
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
b - Compliant and ethical
35
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
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.
36
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
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
37
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
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
38
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
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
39
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
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
40
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
A A government of a country
B Another authorised firm
C A central bank
D A local authority
41
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
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
42
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
C Life offices selling life products as a principal
E Direct offer financial promotions
43
MULTIPLE - The FCA list drivers of vulnerability these include
A Health
B Life Events
C World Events
D Capability
E Financial market instability
A Health
B Life Events
E Financial market instability
44
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
d Building societies
When a number of building societies abandoned their mutual status (known as demutualisation) in favour of becoming public corporations
45
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
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
46
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
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.
47
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
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.
48
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
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.
49
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
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
50
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
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.
51
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
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
52
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
B Consideration
consideration means that both parties must pay or stand to pay something to the other.
53
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
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.
54
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
B Favourable tax treatment of the Trust property in question
55
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
C 1, 2 and 4
56
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
B - Monthly
57
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
A Impact and probability
58
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
C Regular inspection visits
59
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
B Reactive
60
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
D Amount and quality
61
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
B At least annually
62
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
C UK Based Head Office function
63
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
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
64
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
C FOS, FSCS and MaPS
65
Under what circumstances can insurance companies apply for exemption from the
Consumer Credit Act 1974?
A When loans are secured on land
B When loans are below £25,000
C When the advertised APR includes all charges
D When a 5-day cooling-off period is provided
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.
66
The FCA identify various characteristics that are associated with the life events driver of
vulnerability, which is not one of these?
A Retirement
B Bereavement
C Poor English language skills
D Domestic abuse
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
67
Which of the following details would NOT normally be found in the ‘Personal’ section
of the fact-find?
A Tax status
B Dependents
C Salary
D Current savings
D Current savings
regular savings identification comes later down the priority chain for the fact find
68
Which of the following is NOT an example of good practice by a senior leadership team
with regards to the fair treatment of customers?
A Senior management allowing middle management to decide what the fair treatment
of customers means for the firm with no input themselves
B Senior management issuing fair treatment of customer related objectives for all staff
C Senior management prosecuting former employees for breaches even though easy
to correct
D Senior management providing fair treatment of customer messages by video link,
rather than face to face meetings, to remote locations
A Senior management allowing middle management to decide what the fair treatment
69
Which of the following penalties could be imposed for failure to remain ‘fit and proper’?
A Fine
B Loss of job
C Disqualification from future roles
D All of the above
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.
70
Ian and Chloe are partners in an IFA firm and are the only regulated individuals offering
financial advice to customers. The firm also employ a para-planner and an administrative
assistant. What would be an acceptable approach for handling conflict identification in
their business?
A Signing their files when complete to say there is no conflict of interest
B Regularly checking samples of each other’s files for conflicts of interest
C Asking their administrative assistant to check files for conflicts of interest
D As it is a small firm it is not required to evidence conflict identification procedures
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.
71
Which of these is NOT a tool that will help employees to deliver ethical practices into a business
A Policies
B Job descriptions
C Training
D Employee benefit package
D Employee benefit package
72
Steve is a tied Adviser who has just completed a level 4 qualification. He had made the
decision not to undertake any further exams as they are not required by his employer.
Steve’s attitude may be regarded as:
A Compliant but not ethical
B Compliant and ethical
C Ethical but not compliant
D Neither compliant nor ethical
A Compliant but not ethical
73
MULTIPLE - Which of the following would be considered to be sensitive personal data under GDPR?
A Address
B Date of Birth
C Race
D Religion
E Sexual orientation
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
74
MULTIPLE - Which of these is applicable to complaints from an eligible complainant?
A They must be acknowledged promptly
B After 8 weeks there must be a final response
C If the complaint is rejected the respondent must refer it to the Financial Ombudsman
Service
D If the complainant accepts the offer made by the respondent, the matter is closed
E A charity is an eligible complainant as long as their income is less than £8 million
a,b,d
75
MULTIPLE - Which of the following complainants could be eligible to be investigated by the
Financial Ombudsman Service?
A A complainant who received a final response from the relevant company five months
ago
B A complainant with an FSAVC which was taken out twelve years ago
C A complainant who is dissatisfied with investment advice received five years ago
D A complainant with a whole of life policy taken out ten years ago and made paid up
after three years
E A complainant who was advised to opt out of a final salary scheme in 1991
abce
76
MULTIPLE - If a firm does business online, it is subject to the e-commerce rules whose main
provisions are:
A Minimum information must be easily, directly and permanently accessible, i.e. name,
address and e-mail address.
B FCA status disclosure must be given although the Financial Services Register number
is not needed
C There must be clear information as to the services provided
D Any orders submitted must be accepted
E Orders must be acknowledged without delay
ace
If a firm does business online or even advertises online, it is subject to the e-commerce rules in COBS 5.2
77
MULTIPLE - A suitability report must be provided to the client
A For an investment, before the transaction is concluded
B For a personal pension, no later than the fourteenth day after the contract is concluded
C For a life policy, no later than the fourteenth day after the contract is concluded
D For a pension transfer, in good time before the transaction is effected
E For an increase to a regular premium on an existing product, no later than 10 days after
the direct debit has been signed.
abd
78
MULTIPLE - Which of the following statements is CORRECT in respect of Stakeholder products?
A Medium term investments can include an option called “lifestyling”
B The maximum charge that can be made for medium investment term and pension
products reduces by a third after 10 years
C Basic advice cannot be given on an independent basis
D The minimum investment on a short-term product is £20
E Medium term investments can include an option called “lifestaging
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
79
MULTIPLE - Which of the following are guidelines to be followed in making suitable
recommendations?
A The Adviser can select the most appropriate product for a client’s circumstances
using a process of elimination
B The Adviser must observe the duties of disclosure and utmost good faith
C Advice should be considered, arrived at conscientiously and purely in the client’s
best interest
D Existing investments should be considered only if they can be cancelled
or surrendered
E Disadvantages should only be disclosed if they can be explained and quantified
in simple language
a,c
80
A Renewable Term Assurance Plan allows the client to
A Increase the sum assured on a regular basis with evidence of health
B Gives the right to put in place a similar policy without evidence of health in the future
C Change the policy into and endowment plan or whole of life plan in the future
D On death allow a partner to renew the plan without evidence of healt
B - Gives the right to put in place a similar policy without evidence of health in the future
81
Gary is single with no dependants. Seven years ago, he was made redundant from his
job at DMW Ltd. Which of the following State benefits is Gary least likely to qualify for
while he is unemployed and seeking new employment?
A Income Support for Mortgage Interest (ISMI)
B Income Support (IS)
C Jobseekers Allowance (JSA)
D Working Tax Credit (WTC)
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
82
When assistance is available for mortgage payments via Support for Mortgage
Interest (SMI), benefit is payable after the claimant has been unemployed for how
many weeks?
A 26 weeks
B 12 weeks
C 13 weeks
D 39 weeks
D - 39 weeks
The payments are made directly to the lender after a waiting period of 39 weeks after claiming the income-related benefit
83
Which State funded retirement provision was introduced on April 6th 1978?
A Basic State Pension (BSP)
B Graduated State Pension (GSP)
C State Earnings-Related Pension Scheme (SERPS)
D Enhanced Earnings-Related Pension Scheme (EERPS)
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.
84
Building Societies issue a form of fixed interest investment called a
A Perpetual Subordinated Bond
B Permanent Interest Bearing Share
C Perpetual Interest Bearing Share
D Permanent Subordinated Bond
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.
85
JM Stadiums Limited seeks advice from you as to what tax it will pay.
A Neither Income Tax nor CGT, but Corporation Tax
B No Income Tax but CGT and Corporation Tax
C No CGT but Income Tax and Corporation tax
D Income Tax, CGT and Corporation Tax
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).
86
After reading an advertisement from Consolidated Life for an Income Protection
Policy, Norman requested some further policy details. He has now received these
details and, having decided he would like to proceed with the policy, he has
completed and returned the proposal form. How is the proposal form classified under
contract law?
A Invitation to treat
B Offer
C Counter Offer
D Acceptance
B Offer
87
Nathan has recently arranged life cover with an insurance company through an
IFA. Which of the following is true regarding the Law of agency?
A The IFA owes a duty of care to the client
B The IFA owes no duty of care to the insurer
C The Client is responsible for the acts of the IFA
D All of the above
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
88
Ruby is a Life Tenant of a Trust. This means she is entitled to:
A Income for life and capital at any time
B No Income but access to capital if deemed necessary by Trustees
C Income for life, but not capital
D Vary the default beneficiaries
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
89
Which committee takes control of the PRA’s most important financial stability and
supervision policy decisions?
A Monetary Policy Committee
B Prudential Regulation Committee
C Financial Policy Committee
D Bank of England Committee
B Prudential Regulation Committee
PRC supervises the PRA who makes these day to day decisions
90
Which of the following is NOT included in the summary of the FCA’s approach to
regulation
A Product intervention and governance
B Super-complaints
C Competition powers
D Environmental Governanc
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
91
Which is not an example of FCA early intervention initiatives
A Banning products
B Withdrawing misleading financial promotions
C Reviewing a firms complaints statistics
D Publication of enforcement action
C Reviewing a firms complaints statistics
92
Which of the following would fall under the category of “Business Operations” in
relation to compliance monitoring?
A Competence of Advisers
B Client money systems
C Fair treatment of customers
D Control of inducements
C Fair treatment of customers
A & D would be personnel matters
B customer matters
93
Should a firm take receipt of a client’s money then this should be paid into a client’s
bank account within what period of time?
A At the earliest practical opportunity
B By close of business on the same day
C By close of business on the next working day
D By close of business within two working days
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
94
With regards to property purchase which of the following mortgage contracts would
NOT be “regulated”?
A A residential property purchased by A2B Ltd
B A second charge taken on a residential property
C A shop with living accommodation, where the living accommodation represents 45%
of the mortgaged property
D A mortgage taken against a buy to let property where the owner inherited the property
from their grandparents
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
95
Russell is an Accountant who does not hold any FCA authorisation. One of his clients
has asked him to clarify the tax position of encashing a Unit Trust. Which of the
following is TRUE regarding Russell’s options?
A Russell can give advice on any areas of investing as he is a member of a Designated
Professional Body
B Russell can give advice in this area as it is considered incidental to his professional
services
C Russell will need to apply for FCA authorisation before he can give this advice
D Russell cannot give the advice and must refer the client to an IFA
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
96
Amir is a financial adviser who has just started working for a large firm that is directly
authorised by the FCA, what level of authorisation will the Amir need?
A Amir must apply directly to the FCA for approval
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
C Whilst he is in training he does not need to be authorised, but get CF30 approval from
the FCA before he can be signed off as competent
D Amir is not in a SM&CR role, so no authorisation is necessary.
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
97
What does the Pension Wise service offer?
A It offers generic details of all the types of pension plans available
B It is a free impartial government service that helps those with defined contribution
pension schemes decide how to take benefits in retirement.
C It helps those with occupational schemes track down the details of lost schemes
D It is a register of all pension transfer specialists
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.
98
If an Adviser makes a recommendation with which the client disagrees and the
client subsequently instructs the Adviser to effect a transaction which the Adviser
believes to be unsuitable, what action should the Adviser take?
A The Adviser should accept whatever decision the client makes and justify this in
the suitability report
B The Adviser should record disagreement on the fact find, and potentially decline
to arrange the transaction
C The Adviser should arrange for the client to get a second opinion from a
more sympathetic Adviser
D The Adviser should go ahead with his initial recommendation and ignore the
client’s wishes
B The Adviser should record disagreement on the fact find, and potentially decline
to arrange the transaction
99
What is the maximum permitted charge in the 11th year for a stakeholder pension and
a stakeholder medium term investment product where both have fund values of
£8,000?
A £160
B £200
C £240
D £300
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
100
Kathleen recently applied for health insurance and has been offered cover with a loaded premium. This is because:
A She is married
B She cycles to work
C Her occupation is mainly desk based
D She is a diabetic
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.
101
An authorised firm has failed to maintain adequate financial resources to satisfy its
regulatory requirements. Which of the FCA’s principles for businesses (PRIN) has been
breached?
A Skill, care and diligence
B Management and Control
C Financial Prudence
D Clients’ assets
C Financial Prudence
102
Which of the following is NOT specifically one of the 11 FCA Principles for Businesses
(PRIN)?
A Integrity
B Compliance
C Market conduct
D Customers: Relationship of Trust
B Compliance
103
A leadership behaviour that is significant in shaping the ethos of a firm is known as:
A Tone at the top
B Management information analysis
C Walking the talk
D Talking the talk
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.
104
Which of the following may be considered a breach of ethical requirements?
A Refusing corporate hospitality
B Criticising a colleague in an open office
C Reporting a long-standing customer for money laundering
D Disclosing a potential conflict of interest before making recommendations
B Criticising a colleague in an open office
105
An example of an indirect measure of ethics is:
A Customer complaints
B Ethical feedback in employee surveys
C Persistency ratios
D Customer surveys on ethical perceptions
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
106
MULTIPLE - Which of the following are regulated by the FCA?
A Occupational pension schemes
B Government securities
C Cash deposits
D Electronic money
E Rights under insurance contracts
BCDE
B Government securities
C Cash deposits
D Electronic money
E Rights under insurance contracts
107
MULTIPLE - Alison is looking at the limits available to her under the Financial Services
Compensation Scheme, which of her holdings is likely to benefit from full protection
A A deposit of £45,000 held with a subsidiary of a bank where she holds £82,000.
B A deposit account of £110,000 that she holds jointly with her husband
C The unexpired premiums on her mobile phone insurance
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.
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
108
Which of the following would constitute a real time financial promotion?
A Information provided by an Adviser in the course of a personal visit
B A poster illustrating past performance of a with profits fund
C A telephone Adviser discussing the merits of a rollover option for a client’s
maturing investment
D A flyer promoting the benefits of a pension transfer service
E A written invitation to invest in a structured investment product
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
109
Which of the following apply to non-real time financial promotions?
A Past investment returns can be used to project future performance
B Records for life and pension products must be kept indefinitely
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
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
110
In which documents would details of a customer’s cancellation rights appear?
A Fact-find
B Services and costs disclosure document
C Terms of business letter
D Key features document
E Suitability report
D Key features document
E Suitability report
111
Within the UK economy, an example of disintermediation would be the
A. arrangement of a life assurance policy through an independent adviser.
B. arrangement of a personal loan with a bank.
C. purchase of securities from a stockbroker.
D. purchase of UK gilts from the Debt Management Office.
D. purchase of UK gilts from the Debt Management Office.
Disintermediation means cutting out the middle man (intermediary) and buying directly from the supplier
112
John, aged 64, is married to Margaret, aged 62, and they are both approaching retirement. They have always worked for the same company and have both accrued pension benefits through the company’s group money purchase scheme. If they both purchase annuities at retirement and both wish to receive the maximum possible income level, they should both select
A. an index-linked annuity payable on a single-life basis with no guarantee.
B. an index-linked annuity payable on a joint-life basis with a 10-year guarantee.
C. a level annuity on a single-life basis with no guarantee.
D. a level annuity on a joint-life basis with a 10-year guarantee.
C. a level annuity on a single-life basis with no guarantee
113
. Bob and Gillian, both aged 28, have recently arranged an interest-only mortgage on their first home
which they intend to repay with the proceeds of a trust fund that Bob will receive when he attains
the age of 35. To ensure that this loan is adequately protected in the event of death before the
trust fund is distributed, the most suitable arrangement is likely to be
A. a reducing term assurance policy on Bob’s life only for the outstanding mortgage amount.
B. a level term assurance policy on a joint-life basis for the outstanding mortgage amount.
C. an income protection insurance policy for both of them to cover the monthly repayments.
D. a whole of life assurance policy on Bob’s life only for the outstanding mortgage amount.
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.
114
A financial adviser has been approached by his client, Billy, who has recently been appointed as a deputy by the Court of Protection on behalf of his mother, Betty, who has lost mental capacity. Betty is a joint trustee of a discretionary trust with her brother, Jimmy. Who will have the power to act on any advice given in relation to the trust assets?
A. Billy only.
B. Jimmy only.
C. Only Billy and Jimmy acting together.
D. Either Billy or Jimmy.
B. Jimmy only.
As its regarding trust assets and Jimmy is the trustee, only Jimmy as Betty is not listed
115
An independent financial adviser within a large authorised firm is recommending a new personal pension arrangement to her client. She is acting as
A. agent of personal pension provider only.
B. agent to the client only.
C. agent for the client and the pension provider jointly.
D. agent for the authorised firm only.
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
116
Katrina entered into a personal loan arrangement with a finance company 3 months before her
18th birthday. What is the legal position in respect of this arrangement?
A. The contract is valid as she was within 6 months of her 18th birthday.
B. Katrina can avoid all liability under the contract.
C. Katrina’s parents could be made liable for the debt.
D. the contract is automatically made void from outset.
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.
117
Tony, Peter and Steve jointly own an investment property as tenants in common. Tony owns 20%, Steve owns 30% and Peter owns 50% of the property. The property is subject to a mortgage. If Tony dies, what will happen to his share of the property?
A. It will be automatically shared equally between Steve and Peter.
B. It will be passed to Tony’s estate.
C. It will be passed to Steve and Peter in proportion with their current respective shareholdings in
the property.
D. It will be passed to the lender to repay Tony’s share of the mortgage.
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
118
Michaela owns a property outright and in perpetuity, but does NOT own the freehold. This is most
likely to be because the ownership is
A. on a commonhold basis.
B. on a leasehold basis.
C. subject to feudal tenure.
D. subject to a shared ownership agreement.
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.
119
In creating a trust for her client, a solicitor recommends the inclusion of a charging clause in the trust wording. What is this most likely to relate to?
A. To allow ad hoc payments to beneficiaries, for their education or advancement.
B. To allow professional trustees to be remunerated for their services.
C. To clearly set out the costs of preparing and executing the trust deed under the Law Society
rules.
D. To prevent trustees from deriving any personal benefit from the trust.
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’.
120
In relation to breaches of the current Money Laundering and Terrorist Financing (Amendment)
Regulations 2019, the Financial Conduct Authority (FCA) has the power to act against
A. any firms, but not individuals, regardless of whether they are on the FCA register.
B. any firms or individuals regardless of whether they are on the FCA register.
C. only firms on the FCA register.
D. only firms or individuals on the FCA register
B. any firms or individuals regardless of whether they are on the FCA register.
121
Gavin, a financial adviser, has sold a payment protection insurance contract to his client. In respect of this sale, he should be aware that the sale is
A. not regulated.
B. regulated by the provisions of the Insurance: Conduct of Business sourcebook (ICOBS).
C. regulated by the provisions of the Mortgages and Home Finance: Conduct of Business
Sourcebook (MCOB).
D. regulated by the provisions of the Financial Services Act 201
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.
122
A financial adviser may transact business without the prior existence of a client agreement when
A. the client is a retail client.
B. a stakeholder pension is being arranged.
C. risk warnings are not required.
D. the business is transacted by telephone
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.
123
An authorised firm holding client money for designated investment purposes must carry out a reconciliation of client bank account records at least once
A. every business day.
B. every two business days.
C. per week.
D. per month.
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
124
Danny is employed as a financial adviser by an appointed representative of an authorised firm. With whom does the primary responsibility for assessing Danny’s continuing competency lie?
A. Both Danny and the appointed representative.
B. Both the authorised firm and the appointed representative.
C. The appointed representative only.
D. The authorised firm only
D. The authorised firm only
125
Following the cessation of her employment, for how long must training and competence records be
kept in respect of an employee engaged in retail investment mediation only under MiFID II rules?
A. One year.
B. Three years.
C. Five years.
D. Indefinitely
C. Five years.
MIFID related record keeping is usually 5+ years
126
By what latest point must an authorised firm satisfy itself that a new employee meets the Financial
Conduct Authority’s fit and proper criteria?
A. On receipt of a completed job application form.
B. Before the start date.
C. Within 3 months of the start date.
D. Within 12 months of the start date.
B. Before the start date.
127
Following settlement of a Financial Ombudsman Service (FOS) case, the complainant was awarded compensation. The complaint related to a loss that occurred in March 2019. The FOS calculated the loss to be £250,000 and recommended compensation be paid. If the complaint was made to the FOS in May 2024 and assuming that the FOS makes the judgement that the respondent should
meet the claim against them, the amount that is binding on the respondent is
A. £100,000
B. £150,000
C. £195,000
D. £250,000
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
128
A financial adviser recommends that a retail client makes a top-up contribution to an existing
annual premium personal pension policy and also makes payments into an open-ended investment
company (OEIC) and a unit trust. When preparing a suitability report, the financial adviser must
give his reasons for recommending the
A. top-up contribution only.
B. top-up contribution and the OEIC only.
C. OEIC and the unit trust only.
D. top-up contribution, the OEIC and the unit trust.
C. OEIC and the unit trust only.
Top ups don't require suitability report if advice has already been given and agreed upon
129
What discretion does an authorised firm have, if any, when it sets out to comply with the Financial Conduct Authority’s Principles for Businesses?
A. It can apply for exemption if its application is supported by a designated professional body.
B. It can apply for exemption provided it is responsible for the activities of less than 10 appointed
representatives.
C. Some discretion is allowed to the firm in how they comply with the obligations.
D. A firm’s obligations are prescribed in a regularly-updated tariff and no discretion is allowed.
C. Some discretion is allowed to the firm in how they comply with the obligations.
130
Who within an authorised firm is ultimately responsible for compliance with the Financial Conduct Authority’s outcomes-based regulatory regime?
A. Senior management only.
B. The compliance officer only.
C. All members of staff.
D. The Money Laundering Reporting Officer only.
A. Senior management only
131
Shaun is an architect and a client of Alice, who is a financial adviser. Shaun refers his employee, Brian, to Alice for pensions and protection advice. Brian informs Alice that he is dissatisfied with the benefits package he receives from Shaun. Alice is wary of a potential conflict of interest and must therefore
A. advise Brian on pension matters, but not on protection matters.
B. advise Brian on protection matters, but not on pension matters.
C. decline to offer Brian any financial advice.
D. maintain strict neutrality.
D. maintain strict neutrality.
132
Nigel is a senior manager with a large bank’s financial advice team and is advising Robert on
retirement and investment planning. Robert has disclosed to Nigel that his net profit last year was £7,500, but, as a self-employed landscape gardener, he regularly accepts cash payments for work completed and does not declare this additional income to HM Revenue & Customs (HMRC).
Considering solely the ethical requirements of the Financial Conduct Authority’s Statements of Principle and Code of Practice for Approved Persons (APER), what action should Nigel take if any with regard to Robert’s additional income?
A. He needs to not take any action as Robert is contributing less than £7,500 per annum to his
pension.
B. Report his concerns to the bank’s Money Laundering Reporting Officer.
C. Report his additional income to the pension provider immediately.
D. Report this matter to HMRC.
B. Report his concerns to the bank’s Money Laundering Reporting Officer.
133
When establishing a new risk profile questionnaire for its clients, an authorised firm should consider the use of
A. clearly-phrased and unambiguous questions.
B. additional charts and graphs.
C. technical phrases and abbreviations.
D. open questions.
A. clearly-phrased and unambiguous questions.
134
MULTIPLE - In respect of an authorised firm’s record-keeping requirements
A. all advice records must be kept indefinitely.
B. pension transfer records can be destroyed after seven years.
C. financial promotions for occupational pension contracts must be kept for a minimum of six
years.
D. pension opt-out records must be kept indefinitely.
E. life assurance advice and recommendation records must be kept for a minimum of five years.
cde
135
Frank posted a letter of complaint to his independent financial adviser (IFA) on 1 March, which was
received by the firm on 3 March. The firm sent an acknowledgement on 5 March, a holding
response on 30 March and a final response on 26 April. From this information, it can be deduced that the
A. acknowledgement was not sent within the prescribed time limit.
B. final response was sent within the prescribed time limit.
C. Frank was not kept informed of progress correctly.
D. IFA must have informed Frank of his Financial Ombudsman Service referral rights by 26 April.
bd
136
Jim, a sole trader independent financial adviser, is considering his position regarding the Financial Ombudsman Service’s (FOS) rules and jurisdiction. He should be aware that
A. the maximum award ignoring costs and interest for complaints is currently £170,000.
B. compensation may be awarded for both financial and non-financial loss.
C. compensation may be awarded to a limited company if it suffers financial loss.
D. all FOS decisions are binding on both Jim and the complainant.
bc
137
What circumstances would give rise to a financial crime under the Financial Conduct Authority’s jurisdiction?
A. Failing to report a suspicious transaction.
B. Using privileged information about a company to make a financial gain.
C. Failing to keep client records up to date.
D. Knowingly recommending a product with high charges.
a,b
138
MULTIPLE - Martin is an independent financial adviser. In the course of dealing with his clients he
A. is not required to offer a fee charging option.
B. always acts as an agent for his clients.
C. may not refer clients to professional connections.
D. may undertake pension transfer business if suitably qualified.
b,d
139
MULTIPLE - Who may be categorised as a per se professional client?
A. A firm authorised by the Financial Conduct Authority.
B. A mortgage applicant in the UK.
C. A credit institution.
D. A small limited company with a turnover of £10,000.
a,c
140
MULTIPLE - When a firm of independent financial advisors makes a recommendation and completes a financial transaction for a client, in respect of the firm’s fiduciary relationship with the client, the firm should be aware that
A. it acts as an agent for the client only.
B. its relationship stops if the client declines a recommendation.
C. its relationship continues during all stages of the transaction.
D. the responsibilities of the relationship are greater for a professional client than a retail client.
a,c
141
MULTIPLE - When an authorised firm is dealing with execution-only and limited advice transactions, the firm
should be aware that the
A. client can request to proceed on a limited advice basis.
B. know your customer requirements only apply to limited advice transactions.
C. firm is required to assess the appropriateness of limited advice transactions only.
D. complaint-handling rules in relation to the Financial Ombudsman Service only apply to limited
advice transaction
a,b,d
142
MULTIPLE - When considering client cancellation rights, an authorised firm should be aware that
A. if cancellation rights are not issued when required, a client may cancel at any future point.
B. for pension transfers, the firm may issue a pre-sale right to withdraw as an alternative.
C. the firm must always accept a notice to cancel an annuity, even if the annuitant is deceased.
D. the firm must maintain records of cancellation notices for personal pensions for a maximum of 3
years only.
a,b
143
One of the essential functions of UK financial services is to provide a vehicle through which savings are protected and channelled into:
a.
strategic compatibility.
b.
capital management.
c.
sectoral cohesion.
d.
asset growth
b.
capital management
144
Nick works in the City, trading investments such as equities and derivatives via a trading floor. This is known as a[n]:
a.
real-time financial market.
b.
over-the-counter financial market.
c.
commodity financial market.
d.
on-exchange financial market.
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.
145
Angela wants to retain control of her investment decisions and be able to buy and sell securities when she wishes. The most appropriate service for her would be a:
a.
stockbroking service.
b.
advisory management service.
c.
selection of collective investments.
d.
discretionary management service.
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
146
Marcus and Philippa have a joint life assurance policy, which expires in 14 years when their youngest child is 21. The policy provides £200,000 life cover that in the event of a claim, would usually be paid to the surviving spouse in instalments for the remainder of the policy term. The type of policy they have is a:
a.
whole of life.
b.
level term assurance.
c.
convertible term assurance.
d.
family income benefit.
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
147
Wendy had treatment for deep vein thrombosis [DVT] three years ago. If she applied now for private medical insurance cover on a moratorium basis, how would the insurer respond to any claim she made in respect of this specific illness?
a.
Cover would only be provided to pay for out-patient treatment for DVT.
b.
Cover would only be provided if Wendy's DVT three years ago did not result in surgery.
c.
Claims relating to DVT would not be automatically excluded, she may be offered a cash benefit instead.
d.
Claims relating to DVT would automatically be initially excluded from cover as Wendy suffered from this condition within the last five years
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.
148
Mario, a basic-rate taxpayer, has just retired and has bought a purchased life annuity [PLA] using the proceeds of a maturing investment. How would the income be taxed?
a.
Half of every PLA income payment is treated as capital and is tax-free; the other half is taxed at 20%.
b.
In the early years, the capital element of the PLA income payments is very low, and so the majority of the income is taxed at 20%.
c.
Part of every PLA income payment is treated as capital and is tax-free; the interest element is taxed at 20%.
d.
Part of every PLA income payment is treated as interest and is tax-free; the capital element is taxed at 20%.
C - Part of every PLA income payment is treated as capital and is tax-free; the interest element is taxed at 20%
149
Norman, a widower, intends to leave his £600,000 estate to his daughter. His main asset is the family home, and he does not want his daughter to have to sell the house in order to meet an inheritance tax [IHT] liability. Assuming he did not inherit any nil rate band or residence nil rate band from his deceased wife, what would be the most suitable life policy to meet the potential IHT liability on his estate?
a.
£40,000 own-life whole of life policy with increasing cover, written in trust.
b.
£100,000 renewable term assurance policy, written in trust, with an initial term of seven years.
c.
£40,000 own-life renewable endowment policy, written in trust.
d.
£100,000 own-life whole of life policy with increasing cover, written in trust
a.
£40,000 own-life whole of life policy with increasing cover, written in trust.
150
Dan and Bert have a limited liability partnership. Bert wants to know to what extent, if any, creditors could pursue him personally for the debts of the partnership. What will you tell him?
a.
That he cannot be pursued for partnership debts, except where he has provided a personal guarantee.
b.
That his liability in respect of partnership debts is limited to the size of his estate at the time the partnership was entered into.
c.
That he can only be pursued for partnership debts to the extent that his partner, Dan, is also pursued.
d.
That he and Dan are jointly and severally liable for the debts of the partnership and that he can be pursued personally to the full extent.
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.
151
In terms of the law of contract, as it applies to contracts of insurance, a letter of acceptance from an insurance company is considered, at law, to be a[n]:
a.
acceptance.
b.
offer.
c.
counter offer.
d.
invitation to treat.
c.
counter offer.
The letter of acceptance is, at law, a counter offer, which the proposer can accept by paying
the first premium.
152
Rina's creditor, Banana Loans, is petitioning the court for a bankruptcy order. Before the court will make such an order, Banana Loans must:
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.
b.
prove that it has followed every possible avenue before seeking a bankruptcy order.
c.
prove that Rina has the ability to repay the amount owed to it, but has so far failed to do so.
d.
prove that it is not the only creditor to which Rina owes money.
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.
153
Mike, who lived in England, died in an accident and had not made a will. Ignoring his personal chattels, which pass to his wife Dawn, how is his net estate of £750,000 distributed, given that they had no children, his parents are dead and he has two sisters?
a.
Dawn receives his entire net estate.
b.
Dawn receives £450,000 and Mike's sisters each receive £150,000 each.
c.
Dawn receives £600,000 and Mike's sisters each receive £75,000.
d.
Dawn receives £322,000 and Mike's sisters each receive £214,000
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.
154
Why might Aafia's legal personal representatives have to apply to the Probate Registry for a Grant of Letters of Administration?
a.
Aafia left her estate to various charities.
b.
Aafia made no will and so died intestate.
c.
Aafia's estate consisted only of a house which she owned jointly with her son.
d.
Aafia's will was made before she was widowed.
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.
155
When Jack died, he left his investment portfolio under trust to his wife Mavis. The trust provisions state that she could enjoy the income during her life and then, on her death, the capital should be split equally between their two children. This type of trust is known as a[n]:
a.
interest in possession trust.
b.
resulting trust.
c.
discretionary trust.
d.
power of appointment trust.
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.
156
A new UK bank would need to be authorised by the:
a.
PRA.
b.
FCA.
c.
Financial Policy Committee.
d.
Prudential Regulation Committee.
A - PRA
157
Which body has the power to ensure banks increase their capital during periods of growth and profitability, so that they are sufficiently protected during periods of declining business and market instability?
a.
The Financial Policy Committee.
b.
The FCA.
c.
The Prudential Regulation Committee.
d.
The PRA.
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.
158
If the FCA was to substantially increase the number of rules in its Handbook, this might be seen as being contrary to which FCA regulatory principle?
a.
Responsibility for customers.
b.
Efficiency and economy.
c.
Transparency.
d.
Openness and disclosure.
b.
Efficiency and economy.
159
Which regulator is responsible for monitoring the activities of the London Stock Exchange?
a.
The FCA.
b.
The PRA.
c.
The Financial Policy Committee.
d.
The Bank of England.
A - The FCA
160
DepositOn is an online bank offering a range of current and savings accounts, including ISAs. It also offers a financial planning service through its subsidiary InvestOn. Its Part 4A permission will be provided by the:
a.
PRA.
b.
European Banking Authority.
c.
FCA.
d.
Financial Policy Committee
a.
PRA.
As it's a bank it would be the PRA dealing with authorisation
161
In its role as prudential supervisor, in addition to ensuring the adequacy of a firm's financial resources, the FCA also considers:
a.
systems and controls, governance arrangements and risk management capabilities.
b.
compliance, internal audit and efforts to combat financial crime.
c.
outsourcing and potential conflicts of interest with and between customers.
d.
market conduct, liquidity risk and senior management arrangement
a.
systems and controls, governance arrangements and risk management capabilities.
162
Alpha Finance, an authorised firm, is seeking significant variations to its FCA permissions. The variation has been approved but it causes the firm to fall into a new fee block not allocated before the variation. What would be the application fee, if the fee for a new firm falling into this block would be £2,500?
a.
£2,500.
b.
£250.
c.
£500.
d.
£1,250.
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.
163
Under the terms of the Mortgage Credit Directive, a[n]:
a.
key features illustration must be provided to the borrower, with a minimum fourteen-day reflection period.
b.
mortgage offer is binding on the lender, who must allow the borrower a minimum seven-day reflection period.
c.
affordability assessment must be carried out for all mortgage applicants, apart from high net worth borrowers.
d.
explanation must be given of all early repayment charges that apply beyond the first two years.
b.
mortgage offer is binding on the lender, who must allow the borrower a minimum seven-day reflection period.
164
Bradley is currently subject to an FCA investigation about his behaviour but he has not been notified about this. The offence being investigated is most likely to be suspected:
a.
insider dealing.
b.
acting in a manner that constitutes a conflict of interest.
c.
carrying on a regulated activity without authorisation.
d.
inappropriate advice.
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.
165
Ki-Jung has applied for a loan that is regulated under the Consumer Credit Acts. If the advance copy of the form of agreement is sent to him on 5 January, what is the earliest date that the actual agreement can be posted to him for signing?
a.
19 January.
b.
10 January.
c.
15 January.
d.
12 January.
166
Under the Senior Managers and Certification Regime [SM&CR], a firm can be classified as:
a.
core.
b.
authorised.
c.
restricted.
d.
approved.
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);
167
Under what circumstances, if any, can an appointed representative hold client money?
a.
It is not permitted to hold client money under any circumstances.
b.
It is only permitted to hold client money overnight.
c.
It is subject to the same client money regime as the principal authorised firm.
d.
It can only hold client money with the prior consent of the principal authorised firm.
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
168
Malik took out a personal pension through a financial adviser a few years ago. He now wishes to see a copy of his suitability letter and the promotional literature he received at that time. In this case:
a.
the fact-find will have been retained indefinitely, the suitability letter for five years, and there are no rules relating to literature.
b.
records relating to the advice will have been retained for a minimum of five years, and the literature for six years.
c.
all records relating to the sale of personal pensions, including literature, must have been retained for six years.
d.
records relating to the advice will have been retained indefinitely, and the literature five years.
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
169
SureSearch Ltd has breached a data protection principle. This is most likely to be because it:
a.
failed to refresh existing consents in preparation for the General Data Protection Regulations.
b.
had a lawful basis to process personal data but failed to obtain consent.
c.
relied on pre-ticked boxes to verify consent to process personal data.
d.
separated consent to process personal data from its general terms and conditions.
c.
relied on pre-ticked boxes to verify consent to process personal data.
170
Richard commenced his business relationship with Higgins Investments Ltd on 14 June 2015 when he invested in a unit trust. The client relationship ended on 17 August 2024. What is the earliest date the client agreement relating to the initial investment could be destroyed?
a.
14 June 2018.
b.
17 August 2027.
c.
14 June 2021.
d.
17 August 2024.
d.
17 August 2024
171
Sarah has approached her adviser to discuss estate planning. When completing the fact-find, which area is LEAST likely to be relevant?
a.
Her health.
b.
Her willingness to gift to charity.
c.
Her residence and domicile.
d.
Her income tax status.
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.
172
Subject to data protection rules, an adviser may gather details about a client's dependants and parents for various reasons, APART from:
a.
to advise the wider family members of the possible impact any recommendations may have on them.
b.
to qualify and quantify the need for protection policies.
c.
to ensure death and/or sickness benefits are paid to the correct beneficiaries.
d.
to accumulate a list of possible referrals from the client in due course.
a.
to advise the wider family members of the possible impact any recommendations may have on them
173
Married clients, Jonah and Jane, have assets that include a joint endowment policy, Jonah's portfolio of shares, joint bank deposits and their matrimonial home. Which of these are regarded as 'used' assets?
a.
Their joint endowment policy and their joint bank deposits.
b.
Their matrimonial home only.
c.
Their matrimonial home and their joint bank deposits.
d.
Jonah's portfolio of shares only.
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
174
Davies Insurance has acted in breach of Principle 10 of the FCA’s Principles for Businesses. What might Davies Insurance have done?
a.
Allowed a conflict of interest to impair its judgement.
b.
Failed to take reasonable care to organise and control its affairs.
c.
Not acted to deliver good outcomes for clients.
d.
Failed to arrange adequate protection for its clients' assets.
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
175
The regulation of authorised firms is increasingly focusing on ethical practices such as their:
a.
initiatives and financial rewards.
b.
values and processes.
c.
culture and values.
d.
processes and initiatives.
c.
culture and values
176
The regulation of authorised firms is increasingly focusing on ethical practices such as their:
a.
initiatives and financial rewards.
b.
values and processes.
c.
culture and values.
d.
processes and initiatives.
c.
culture and values.
177
From Indigo Insurance's quarterly monitoring of persistency, it appears that performance has declined slightly over the last four quarters. The FCA would expect Indigo to:
a.
investigate why there is no improvement in performance.
b.
continue with the current level of monitoring.
c.
change the method of assessment and analysis.
d.
change the monitoring frequency to monthly.
a.
investigate why there is no improvement in performance.
178
MULTIPLE - When would it be necessary for an authorised firm to apply for 'reauthorisation' by the FCA?
a.
In a partnership of two, one of the partners has died and the remaining partner will continue as a sole trader.
Chapter reference 7A4
b.
Two officials in an unincorporated association have retired and have been replaced.
c.
A partner in a firm of six has retired and has not been replaced.
d.
A business of a sole trader is becoming a limited company.
e.
A partnership of three is expanding and has recruited a further two partners.
f.
A business is being transferred from a partnership to a limited company.
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.
179
The key aims of the Senior Managers and Certification Regime [SM&CR] are to:
a.
make the firm responsible for authorising all of those who undertake senior management functions.
b.
give the FCA wider powers to take enforcement action.
c.
ensure that all those who undertake significant harm functions are pre-approved by the regulators.
d.
make the firm responsible for authorising those who undertake significant harm functions.
e.
provide greater clarity of responsibility.
a,c,e
180
Beryl has an investment bond with an insurance company worth £140,000, and savings in a building society of £110,000 held jointly with her husband. If neither institution was able to meet its liabilities, what would Beryl receive under the Financial Services Compensation Scheme?
a.
£140,000 from the investment bond.
b.
£85,000 from the investment bond.
c.
£85,000 of savings.
d.
£55,000 of savings.
e.
£110,000 of savings.
a, d
181
MULTIPLE - Annabel, an adviser, has recommended that Peter takes out a personal pension plan. In the suitability report, she must:
a.
explain why the personal pension plan is at least as suitable for Peter as a stakeholder plan.
b.
show any possible disadvantages of the plan for Peter.
c.
give a projection of the benefits that are likely to be paid on Peter's retirement.
d.
explain all the alternatives she had considered for Peter and why they are less suitable.
a,b,c,d
182
For how long must personal data processed for a particular purpose be held?
a.
For no longer than is necessary.
b.
A minimum of 5 years.
c.
Indefinitely.
d.
There are no restrictions where data is processed for a particular purpose.
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.
183
Which of the following is responsible for the macro-prudential regulation of the financial services industry?
a.
Monetary Policy Committee.
b.
Financial Policy Committee.
c.
Prudential Regulation Committee.
d.
Prudential Regulation Authority.
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).
184
Which of the following sales situations requires a client agreement?
a.
A life office selling a life policy as a principal.
b.
A life office selling a pension policy as a principal.
c.
A firm selling its products via direct offer financial promotions.
d.
An IFA selling a collective investment scheme to a client.
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.
185
What are the three certainties that must be present to create a valid trust?
a.
Execution of a deed, specified trustees and specified beneficiaries.
b.
Execution of a deed, specified trust property and specified terms.
c.
Intention to create a trust, specified trustees and specified trust deed.
d.
Intention to create a trust, specified subject matter and specified beneficiaries.
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.
186
Which of these rules applies to an independent financial adviser (IFA) under the Financial Conduct? Authority Client Assets sourcebook (CASS)?
a.
An IFA can only hold client money for a maximum period of one business day before transferring the money to the relevant product provider.
b.
An IFA must not hold client money under any circumstances and must ensure that all payments it receives from clients for investments are made out to the relevant product provider.
c.
An IFA can only hold client money as an agent of the relevant product provider under a written agreement to do so.
d.
If an IFA is authorised to hold client money it must hold it separately from its own money in a client bank account.
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.
187
Who, out of the following, can be a witness to Elena's will?
a.
Elena's 17 year old niece Chloe, who is set to inherit a legacy of £10,000.
b.
Jared's wife, Cecilia, who is not named as a beneficiary in Elena's will.
c.
Elena's 19 year old nephew Simon, who is not named as a beneficiary in Elena's will.
d.
Elena's son, Jared, who is named as the main beneficiary of Elena's will.
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.
188
Under the Financial Conduct Authority's (FCA's) risk-based approach to supervision, flexible portfolio firms were subject to:
a.
pillars 2 and 3 only.
b.
pillar 1 only.
c.
pillars 1 and 2 only.
d.
pillars 1, 2 and 3
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.
189
