MCQs - Old Book Flashcards
In respect of the client classification requirements, if a client wishes to change its default categorisation, for which type of client is the ‘quantitative’ test applied?
A. Retail client
B. Per se professional client
C. Private client
D. Eligible counterparty
A
If an investment firm provides services to professional clients, which of the following is TRUE in relation to the FCA’s treating customers fairly (TCF) initiative?
A. The TC requirements only apply to retail clients
B. The firm can impose post-sale restrictions on its products without advising the client
C. Consumers are provided with products that perform as firms have advertised/promoted and as the client can expect
D. The firm is expected to treat all customers alike, offering them the same product, service and charging structure irrespective of size
C
The FCA’s approach to the prevention of money laundering is described as principles-based. Which of the following best describes the most appropriate application of this for a firm?
A. The money laundering reporting officer (MLRO) must report all suspicious activities to the FCA and National Crime Agency (NCA)
B. An MLRO is not required if the firm can demonstrate the low impact and risk of it being used for money laundering activity
C. The MLRO must be a member of the firm’s board of directors
D. Firms’ senior management must carry out a risk assessment
D
Which of the following is exempt from the requirements to obtain permission and authorisation to carry on regulated activities under the Regulated Activities Order?
A. A fund manager managing money from an eligible counterparty
B. The Bank of England engaging in market-related transactions
C. A financial adviser making a personal recommendation to a professional client
D. An investment firm undertaking market-making activities
B
Which of the following is correct in respect of the Bribery Act 2010?
A. The Act does not cover non-UK registered/incorporated companies
B. The Act only covers the offering or promising of a bribe when carried out in the UK
C. The Act only covers legal persons/companies, not individuals
D. It creates a corporate liability for failing to prevent bribery on behalf of a commercial organisation
D
Which of the following is a Prudential Regulation Authority (PRA) statutory objective?
A. To promote and ensure a no failure regime amongst deposit takers and investment firms
B. To promote the financial safety and soundness of firms
C. To secure an appropriate degree of protection for consumers
D. To promote effective competition in the interest of consumers
B
The FC rules regarding the recording of voice conversations and electronic requirements were mainly developed for market abuse and market manipulation monitoring. However, the rules do not apply to all activities undertaken by firms.
Which of the following activities require a firm to comply with the CA’s voice conversations and electronic conditions?
A. The corporate treasury function of a listed company calling a bank to carry out a deposit and
FX activity
B. A member of staff carrying out corporate finance procedures
C. A collective investment scheme operator making scheme purchases
D. A fund manager calling a broker to place an order on behalf of accounts managed by them
D
What is a key role of the Bank of England in terms of the UK economy?
A. It borrows money on behalf of the government in the market, by issuing gilts
B. It carries out activities in the money markets to stabilise sterling and sets interest rates
C. Both the PRA and the FCA are subsidiaries of it
D. It has direct responsibility for the prudential supervision of all UK-regulated firms
B
You are an HR manager at the London branch of a foreign company. The head office of your company has decided that it wants to be seen as an ethical enterprise. You have been asked to create an ethics programme for employees to follow. Which of the following will be the most effective way of ensuring success of the programme?
A. Ensuring the programme has buy-in from senior management, and that they are seen to embody the values of the organisation as well as hold themselves to the high standards expected of all employees
B. Require all staff members to sign up to the company’s code of ethics annually
C. Promote the programme with a high-profile launch and training for all staff members
D. Ensure that the programme is taken seriously by introducing disciplinary sanctions for an staff who are seen to break the rules or fail to uphold company values
A
In order to conduct designated investment business in the UK, firms must be authorised or exempted. Which of the following is required to obtain authorisation to carry on regulated
activities in the UK?
A. The European Investment Bank
B. The London Stock Exchange
C. The London Clearing House
D. An investment firm making two-way prices in UK and European equities to eligible counterparties
D
ANP Bank receives an execution-only order, which has not been solicited, from one of its clients.
The client, the chief executive of SDC plc, wishes to sell 150,000 shares in his company. ANP Bank acts as the corporate broker for SDC plc. What should ANP Bank do?
A. Decline to act for the client and report the order to the FCA
B. Report the client and the transaction to the FCA and the NCA but execute the order
C. Decline to act for the client, explaining that there is a non-manageable conflict of interest
D. Carry out the client order but report the transaction to the FCA
D
It is widely recognised that poor corporate governance in firms was a contributor to the financial crisis. The FCA’s supervisory approach supports effective corporate governance in regulated firms by:
A. requiring that all directors of regulated firms pass relevant industry exams
B. using outcomes-based intensive supervision to ensure that firms are well managed and have appropriate governance
C. allowing supervisory staff to make all judgements and decisions which do not have to be explained to firms
D. subjecting directors to annual reviews and assessments by the FCA
B
In respect of its Markets in Financial Instruments Directive (MiFID) business, a firm receives the following payments:
1. Payment 1 - custodian fees
2. Payment 2 - management fees for providing legal services in respect of ongoing investment services
3. Payment 3 - settlement fees
Which of the following is TRUE?
A. Payments 1 and 3 must be treated as an inducement under the rules
B. Payments 2 and 3 are classed as non-monetary benefits
C. Only payment 2 must be disclosed to the client
D. In order for them to be received, they all must enhance the service to the client
D
Client A is a retail client who has been sold a personal pension; however, they are also a member of their employer’s pension scheme. Client B was advised to invest in a UK equity income fund and a European growth fund for long-term investment opportunities. Client C is a regulated firm that outsources its back and middle office functions to another regulated firm. Which of the following
is TRUE?
A. All three clients are eligible complainants
B. The FCA will deal directly with the complaint made by client C, as it is an FCA-regulated firm and the outsourced provider is also an FCA-regulated firm
C. The firm who sold the personal pension to client A must have adequate processes and procedures in place for dealing with complaints
D. All three clients are covered under the PRA’s treating customers fairly initiative
C
The Financial Services and Markets Act (FSMA) gives the FCA powers to undertake enforcement action when it is satisfied that a person has engaged in market abuse.
Which of the following penalties can the FCA impose on a person whom it is satisfied has undertaken market abuse?
A. Fine the profit made, as permitted under FSMA 2000
B. Ban them from working in a controlled function and levy a fine
C. If their firm fines and sacks them, the FCA cannot take any further action
D. Withdraw their approved person status
B
YZB It is an FCA-authorised investment manager. Amongst its employees are the following:
i
Bill is the manager of the foreign exchange settlements department ii. Thomas is the compliance officer
iii. Sandra is the finance officer iv. Wendy is responsible for Sales Based on the above information:
A. Bill, Thomas and Sandra are carrying out controlled functions
B. Thomas, Sandra and Wendy will be certified individuals
C. Only Wendy is carrying out a Senior Management Function role
D. Thomas is performing a Senior Management Function role
C
Mr Smith is 40 and has worked at the same company for 20 years. His company offers an occupational pension scheme. He has no mortgage, as he owns his house outright. He is concerned that he needs to save for the future and he has some surplus income. Which of the following is the most appropriate course of action in respect of managing his finances?
A. Take out a personal pension plan, rather than joining his company’s non-voluntary pension scheme
B. Invest in the stock market, purchasing unit trusts or investment trusts, with a ten-year time horizon
C. Free up capital from his property to invest in the stock market
D. Enter into an aggressive investment strategy
B
One of the main purposes of the Senior Management Arrangements, Systems and Controls (SYSC)
Sourcebook is to ensure that firms:
A. delegate responsibility to another firm when they enter into outsourcing arrangements
B. appropriately allocate the functions of dealing with apportionment of responsibilities
C. ensure that staff understand their regulatory responsibilities
D. train their staff to the minimum threshold level of competence
B
Moon Asset Management Id undertakes both MiFID and non-MiFID business in the UK. In respect of the FCA’s client categorisation requirements, how should the firm perform client categorisation?
A. The MiFID basis
B. The non-MiFID basis
C. A third basis is called the mixed basis
D. The firm can decide how to classify clients for both MiFID and non-MiFID business
A
ADP Bank It is a subsidiary of a large European listed bank. It is regulated by the PRA and the FCA and must comply with the Remuneration Code. Which of the Code’s requirements are the most problematic, considering that the operational and governing bodies of AD report direct to the parent company’s main supervisory board?
A. Setting and documenting remuneration of directors and the compliance function staff
B. The creation of a remuneration committee
C. Assessments and the calculation of bonuses are based on profits, not revenue forecasts or sales targets
D. Remuneration for risk and compliance staff should be independent of other business areas
B
Which of the following is an FCA threshold condition principle that will be applied when a firm’s application for authorisation is reviewed?
A. The firm has to be a body corporate
B. The firm must hold sufficient cash reserves which count towards its regulatory capital
C. The firm must carry on business in the UK
D. They will not authorise firms, products and services that pose a threat to their statutory objectives
C
Which of the following is a defence to a charge of carrying out misleading statements and impressions under Section 89-92 of the Financial Services Act 2012?
A. The individual reasonably believed that the action taken would not create a false impression
B. The individual was acting on an agency basis, on behalf of an independent third party
C. The recipient of the information was a market maker
D. The recipient of the information signed an information disclaimer notification
A
The FCA interacts with a number of other bodies. In terms of its relationship with the Financial Ombudsman Service (FOS), which of the following is TRUE?
A. FSMA 2000 directed the FCA to create an independent body to oversee complaints against the
FCA and to set compensation levels for investors
B. The FOS can require a firm to pay over money as a result of a complaint
C. The board members of the FOS are appointed by the FCA but they remain independent
D. The FCA oversees and reviews the outcomes of the FOS where compensation is awarded against firms
C
Which of the following BEST describes the main purpose of inheritance tax (IHT)?
A. To raise revenue for the government when someone dies
B. To tax wealth, including when someone dies and on gifts
C. To levy a tax on wealthy individuals with assets of more than £1 million
D. To permit gifts providing that the provider survives for at least three years from the date of the gift
B
