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R01 > Learning objective 5.2 > Flashcards

Learning objective 5.2 Flashcards

1
Q

2021 mock paper Q40. Within the FCA handbook, what does “Threshold Conditions” refer to?

A

A. The minimum conditions a firm must satisfy to retain permission to conduct investment business

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2
Q

2021 mock paper Q41. Within the FCA handbook, under Threshold Conditions what is the rule around location of offices?

A

D. The head office and registered office must be in the UK if the corporate body is constituted under the law of any part of the UK

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3
Q

2021 mock paper Q42. The overriding purpose of the Remuneration Code is to ensure that:

A

C. firms establish, implement and maintain remuneration policies consistent with effective risk management

“Establish
remuneration policies
Consistent with effective risk management”

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4
Q

2021 mock paper Q43. Jed runs a small advisory firm in the West-end of London. He is on first name terms with a number of employees at the Financial Conduct Authority. Can his firm claim that their affairs have FCA approval?
A. Yes. but only if the firm is authorised by the FCA
B. Yes. but only for regulated activities and done so expressly
C. No. except where required by the rules of the FCA
D. Not under any circumstances

A

C - they’re a bit funny about telling people you have FCA approval, you’re not supposed to do it unless its a particular circumstance where the FCA thinks you have no choice

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5
Q

2021 mock paper Q44. AU works in the marketing department of a life and pensions provider. When can she place the FCA logo on her authorised firm’s materials?
A. On their web site only
B. She is not able to use this on any of their own material
C. On their compliment slips, business cards and headed notepaper
D. On business cards only

A

B

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6
Q

2021 mock paper Q45. Which of the following statements regarding FCA application fees is incorrect?
A. Any firm applying to the FCA for authorisation has to pay an application fee
B. The application fee is refundable if the applicant is unsuccessful
C. Application fees are payable if a firm who is currently authorised seeks to significantly vary the permission it currently holds
D. A straightforward application would be charged a £1,500 application fee

A

B

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7
Q

2021 mock paper Q46. What is the general rule requirement under capital adequacy?

A

D. All businesses must be able to meet their financial obligations as and when they fall due

  • [A-C] all allow for mistakes - they say “you must prepare properly” but capital adequacy doesn’t care if you prepare properly and then fail, you should just always have enough capital to meet obligations.
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8
Q

2021 mock paper Q47. On what basis. did the Capital Requirements Directive divide capital into three tiers?

A

A - Three tiers based on loss absorbency and permanence of the capital

I guess what its means is like is it tied in property etc.

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9
Q 
2021 mock paper Q48. Within the FCA handbook what does COBS stand for? 
A. Conduct of Business Standards 
B. Code of Business Standards 
C. Communication of Business Strategies 
D. Conduct of Business Sourcebook
A

D

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10
Q

2021 mock paper Q49. Why does the FCA have rules regarding inducements under COBS 2?
A. To ensure all offers or inducements are correctly recorded
B. To ensure all intermediaries receive the same inducements
C. To ensure intermediaries are not swayed by any incentives
D. To ensure all life offices are aware what their competitors are offering

A

C - intermediaries should never be swayed by incentives, every part of the FCA handbook says that the clients should always get the best advice possible no matter what

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11
Q 
2021 mock paper Q50. The rules around the selling and marketing of general insurance and pure protection life policies are contained within which of the following? 
A. ICOBS 
B. CASS 
C. COBS 
D. MAR
A

A

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12
Q

2021 mock paper Q51. A financial adviser is meeting with new clients Trisha and Edward. When must the intermediary supply Trisha and Edward with initial disclosures and/or Terms of Business?

A

A - before offering any advice

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13
Q

2021 mock paper Q52. There is no requirement for a cancellation notice to be sent out in relation to Peters new policy. This is because he has taken out:
A. a critical illness policy with a 5-year term
B. an income protection policy with a 2-year term
C. a travel policy with a 2-week term
D. a life policy with a 1-year term

A

C

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14
Q 
2021 mock paper Q53. Which of the following categories of mortgage firm would normally need regulating by the FCA? 
i) Advisers 
ii) Surveyors 
iii) Lenders 
iv) Administrators 
A. ii and iv only 
B. i and ii only 
C. ii and iii only 
D. i, iii and iv only
A

D

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15
Q 
2021 mock paper Q54. As a result of the Mortgage Credit Directive, which of the following mortgage contracts became regulated by the FCA? 
A. A commercial buy to let mortgage 
B. A mortgage loan to a partnership 
C. A commercial loan 
D. A loan secured on a second charge
A

D

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16
Q

2021 mock paper Q55. Which of the following would be regarded as advice?
A. Information on the advantages of owning a property rather than renting
B. General advice on the disadvantages of borrowing in order to buy a house
C. Giving an opinion on the merits and suitability of a particular product
D. Information on a fixed mortgage compared with a variable mortgage

A

C

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17
Q

2021 mock paper Q56. Chloe is considering equity release as a means of boosting her retirement income. Can you explain to her the purpose of a home reversion plan?
A. A shorter-term loan for older homeowners. where the ownership of the home reverts back to the client at the end of the loan period
B. Enables older homeowners to release equity in the home without having to move out
C. To enable first time buyers to get onto the property ladder
D. To allow the older homeowner a method of transferring ownership of the house to family members to avoid/reduce the impact of IHT

A

B

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18
Q

2021 mock paper Q57. As a result of the Mortgage Credit Directive, firms must now provide a binding mortgage offer and a minimum reflection period of how many days?

A

C. 7

19
Q

2021 mock paper Q58. Which of the following statements regarding client money is incorrect?
A. Interest earned on client money belongs to the client unless agreed otherwise
B. Client money must be paid into the client bank account by close of business the next working day
C. Client money reconciliations must be done every 25 days
D. A client bank account must be designated and held with an approved bank

A

C

20
Q

2021 mock paper Q59. The FCA is planning to investigate an adviser. What are the requirements?
A. Notify the firm but not to inform the adviser so as to avoid concealing evidence
B. No notice can be given to the adviser as the instigator is protected under a whistleblowing policy
C. Notify the adviser prior to starting the investigation and verbally inform of any changes to the nature of the investigation
D. No notice is required as the investigation relates to possible insider dealing

A

D - both C & D are true, stupid ass question tbh

21
Q

2021 mock paper Q60. What is the purpose behind the Upper Tribunal (Tax and Chancery Chamber)?

A

B - It is the appeal body for those objecting to FCA disciplinary decisions

22
Q

2021 mock paper Q61. Who does the Consumer Credit Act 1974 affect?
A. Almost everyone who provides any form of credit or advice on obtaining/repaying debt
B. Building societies and banks only
C. Loans secured on land and property authorised by Life Offices
D. Estate agents and land surveyors

A

A

23
Q

2021 mock paper Q62. Under the Consumer Rights Act 2015, what is the requirement for expressing standard terms?

A

B. The terms must be in plain and intelligible language

24
Q

20/21 Q42. How is an authorised firm affected by the Financial Conduct Authority’s fair treatment of customers requirements?
A. They must be evidenced in all areas of the firm.
B. They only apply to customer-facing staff.
C. They only apply to senior management.
D. They only apply to investment-related business.

A

A

25
Q

20/21 Q43. In the Prudential Standards section of the combined handbook of the Financial Conduct Authority Handbook and the Prudential Regulation Authority, which type(s) of firm are covered by the MIPRU requirements?
A. All authorised firms.
B. Discretionary fund managers only.
C. Administrators, home finance providers, intermediaries, and general insurance intermediaries only.
D. Investment management firms only.

A

C

26
Q

20/21 Q44. The rules in section 12 of the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU), are primarily aimed at dealing with the issues of
A. liquidity and the management of liquidity issues.
B. money laundering responsibilities.
C. professional indemnity insurance requirements.
D. training and competence requirements.

A

A

27
Q

20/21 Q45. 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 2012.

A

B

28
Q

20/21 Q46. A financial adviser may transact business without the prior existence of a client agreement when

A

D - the business is transacted by telephone.

(Or a direct advertisement)

must be given immediately afterwards though.

29
Q

20/21 Q47. The client’s best interests rule applies to

A

A. all types of client except those transacting execution-only business.

30
Q

20/21 Q48. An independent financial adviser is comparing free asset ratios. This is most likely to be because she is
A. considering a with-profits investment.
B. completing her six-monthly Financial Conduct Authority return.
C. compiling complaints data.
D. seeking to comply with data protection requirements.

A

A

31
Q

20/21 Q49. An authorised firm holding client money for designated investment purposes must carry out a reconciliation of client bank account records at least once

A

A. every business day.

32
Q

20/21 Q50. In an authorised firm, the services of a nominee company are being used. This would typically be to

A

A. protect the assets of a client.

33
Q

20/21 Q51. What is the maximum financial penalty, if any, that the Financial Conduct Authority can impose on an authorised advisory firm engaging in misleading conduct?
A. No financial penalties may be imposed.
B. £5,000,000
C. £10,000,000
D. There is no upper limit.

A

D

34
Q

20/21 Q52. Which authorised firms undertaking financial advice activities in the UK are exempt from the Financial Conduct Authority’s Training and Competence Rules?

A

D - Non-UK-domiciled firms only.
just have to remember this, I guess there are systems in place to make sure that non-UK domiciled firms are properly regulated from their original country

35
Q

20/21 Q53. 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.

A

D

36
Q 
20/21 Q54. 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.
A

C

37
Q 
20/21 Q55. Patrick has recently left an authorised firm where he advised on pension transfers. For what minimum period, if any, must the firm retain his training records? 
A. Three years. 
B. Five years. 
C. Seven years. 
D. Indefinitely.
A

D - in case there are any important discrepancies that need investigating in the future (AML stuff)

38
Q

20/21 Q56. How, if at all, does being made bankrupt affect an individual in terms of being fit and proper to give financial advice that is regulated by the Financial Conduct Authority (FCA)?

A

D. Bankruptcy would not automatically preclude an individual from giving advice and each case is individually assessed by the FCA.

  • you can still be an IFA after bankruptcy you just have to apply for it
  • I guess this is a situation where an approved person regime is in place of SM&CR
39
Q

20/21 Q57. 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

B - Before the start date

40
Q

20/21 Q58. Martin has recently become a trainee financial adviser for the first time, although he has no financial services qualifications. In what circumstances, if any, may he be allowed to provide advice to clients without supervision?

A

A. In no circumstances

41
Q

2021m 45. Apart from the periodic, application and special project fees, what other fees are due from authorised firms?

A

A - Financial Ombudsman Service, Financial Services Compensation Scheme and Money and Pensions Service fees

Money and Pension service fees - dont forget these

42
Q

2021m 47. Rachel’s firm’s professional indemnity insurance requirements are set out in MIPRU? This means that she must work for a

A

D - Home finance firm

43
Q

2021m 53. If a firm passes mortgage leads to an authorised person for a fee, does that firm require FCA authorisation?

A

A - No authorisation is required as the introducer is not advising the client

44
Q

2021m 54. Which of the following mortgage contracts are regulated?

i) Where the borrower is a company
ii) Where 40% of the property will be used by the borrower
iii) Where the loan is secured by a legal second charge mortgage
iv) Where the loan is secured by a legal first mortgage

A

C - ii, iii and iv only

Remember that commercial buy-to-let mortgages are not regulated
At least 40% of the property will be used by the borrower - this is the threshold for making it a retail mortgage for a personal home

R01 (12 decks)

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