MCQs - Old Book

Question 1

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?

Answer 1

A. Retail client
B. Per se professional client
C. Private client
D. Eligible counterparty

A

Question 2

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

Answer 2

C

Question 3

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

Answer 3

D

Question 4

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

Answer 4

B

Question 5

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

Answer 5

D

Question 6

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

Answer 6

B

Question 7

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

Answer 7

D

Question 8

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

Answer 8

B

Question 9

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

Answer 9

A

Question 10

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

Answer 10

D

Question 11

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

Answer 11

D

Question 12

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

Answer 12

B

Question 13

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

Answer 13

D

Question 14

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

Answer 14

C

Question 15

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

Answer 15

B

Question 16

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

Answer 16

C

Question 17

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

Answer 17

B

Question 18

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

Answer 18

B

Question 19

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

Answer 19

A

Question 20

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

Answer 20

B

Question 21

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

Answer 21

C

Question 22

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

Answer 22

A

Question 23

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

Answer 23

C

Question 24

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

Answer 24

B

Question 25

Appointed representatives are permitted to undertake certain activities subiect to FSMA 2000 and the Appointed Representatives Regulation 2001. Which of the following activities is an appointed representative permitted to undertake?
A. Dealing in investments as principal
B. Market making
C. Advising on investments
D. Managing investments

Answer 25

C

Question 26

26. The Proceeds of Crime Act (POCA) 2008 established five money laundering offences. Which of the following is not an offence under the POCA 2002?
    A. The placement of illicit proceeds within the banking industry
    B. Dealing for your own account on non-public and confidential information
    C. The layering of illicit proceeds with a financial services company
    D. The acquisition and use of criminal property

Answer 26

B

Question 27

Which of the following is TRUE of the client categorisation requirements?
A. The term customer refers to retail clients and professional clients
B. A professional client will include, as default, experienced investors who work in the financial
services sector
C. Retail clients are not permitted to opt-up to professional client status
D. Eligible counterparty status only relates to activities in respect of firms acting as market makers

Answer 27

A

Question 28

KB Stockbrokers is the corporate brokers to Sunshine Holdings pc. Sunshine Holdings has advised KB that its half yearly profits will be 55% higher than expected due to recent increased demand for its special summer promotions. Sunshine Holdings is to provide a trading statement update to the market.
If an employee of KB attempts to use this information before it is made public, and encourages a friend to buy shares in Sunshine Holdings, which she then does, what is the outcome?
A. Both are guilty of insider dealing
B. The KB employee has breached the firm’s internal personal account dealing policy
C. Nothing, this information is public knowledge. An individual user could find out this information by research and by standing outside the company’s shops
D. Both are guilty of misleading statements, as the information is not known to the market

Answer 28

A

Question 29

YWQ Bank plc is a UK bank that is authorised and regulated by the PRA and regulated by the FCA.
It has a deposit-taking permission.
i.
Tony is the head of compliance, for the UK and globally il. Tara works in the bank’s UK finance department as a manager
fill. Elizabeth is the head of the foreign exchange (FX) spot desk in London, as well as globally, and
reports to Lisa
iv. Lisa is the global head of the bank’s markets division, she is based in the London office
In respect of the Senior Managers & Certification Regime (SMCR), based on the above:
A. Elizabeth and Lisa are subject to the Certificate Regime
B. Only Tony and Lisa are performing senior management functions
C. Tony and Tara are subject to the Conduct Rules only
D. Elizabeth, Tony and Lisa are performing senior management functions

Answer 29

B

Question 30

Your firm’s investment strategy and policy is to select companies which exhibit high standards of integrity. Which of the following four companies is most likely to meet that requirement?
A. Company A actively encourages staff to do charity work in their spare time
B. Company B sponsors vaccination programmes in third world countries
C. Company C is known for low staff turnover and high customer satisfaction
D. Company D has published ethics and corporate governance policies on its website and staff are required to agree to these annually

Answer 30

C

Question 31

Which of the following general powers of attorney will continue to have authority to deal with a donor’s financial affairs?
A. Power of attorney provided to a relative, who is then declared bankrupt
B. Power of attorney provided by the donor to their son, then nine months later the donor dies
C. Power of attorney provided to the sister of the donor, based solely on personal welfare matters and then one year later the donor becomes mentally incapacitated
D. Power of attorney provided by a donor to a relative, who three years later emigrates and takes up US citizenship

Answer 31

D

Question 32

What is the main purpose of the legislation in the Public Interest Disclosure Act (PIDA) around whistleblowing?
A. To allow regulated firms to make complaints against the FCA
B. To allow staff working in financial services firms to report concerns that they have in relation to their place of work
C. To provide the legislation for when incidents occur in the UK
D. To provide the process for staff to make issues known and aware to senior management

Answer 32

B

Question 33

The financial promotion rules provide exemptions from the rules in specific circumstances. Which of the following is exempt from the financial promotion rules?
A. A promotion to a professional client
B. The promotion of non-MiFID business to a retail client
C. The promotion of packaged products to a UK-domiciled retail client
D. One-off promotions that are not cold calls

Answer 33

D

Question 34

Which of the following best describes the role of the FOS in dispute resolution between investment firms and complainants?
A. Awards made against FCA-regulated investment firms by the FOS are voluntary and not binding
B. The FOS can award compensation against investment firms of up to £100,000 in respect of fair compensation
C. Complaints by consumers are subject to the voluntary jurisdiction regime
D. The FOS can make directions against investment firms, with which they must comply promptly and take appropriate action

Answer 34

D

Question 35

An analyst at PLZ Bank makes an investment recommendation to the firm’s retail clients to buy shares in Sunrise Holidays pic up to a price of F1.55. Wrich of the following iS TRUE in relation to the recommendation made by the analyst at PLZ Bank?
A. The Market Abuse Regulation (MAR) disclosure requirements do not apply to recommendations made to retail clients
B. The fact that the recommendation must be shown to the issuer (Sunrise Holidays plc) does not
need to be disclosed
C. Only a legal person (firm) can issue investment recommendations
D. The date and time of the completion and distribution of its publication must be disclosed

Answer 35

D

Question 36

In which of the following circumstances will the FCA/PRA vary a firm’s Part 4A Permissions?
A. The firm has reported losses for the calendar year, stopped its dividend and announced a rights issue
B. The FCA/PRA consider the CEO and the finance director not competent to perform their roles
C. To protect the interests of consumers
D. To protect the firm from regulatory fines

Answer 36

C

Question 37

Following the introduction of the liquidity rules in the UK, what is the overarching role that amplifies the PRA’s liquidity framework?
A. A firm is able to meet its liabilities as they fall due
B. A firm’s governing body establishes a risk tolerance
C. The firm’s governing body approves appropriate contingency funding plans
D. Firms have in place sound, effective and complete process, strategies and systems controls

Answer 37

A

Question 38

Which of the following types of trust is the most suitable for Louise and Adam, who wish to set aside money for their grandchild? The funds will not be permitted to be drawn/used until they reach the age of 18.
A. Interest in possession trust
B. Bare trust
C. Discretionary trust
D. Power of appointment trust

Answer 38

B

Question 39

The aim of MiFID was to develop a single market and enhance investor protection. This was achieved by allowing:
A. firms to provide investment services into other EU member states
B. single currency and the harmonisation of trading hours
C. the cross-selling of investment funds
D. investment advice to retail clients, which is considered as a core service

Answer 39

A

Question 40

Which of the following is TRUE in relation to the relationship between money laundering and terrorist financing?
A. A firm’s MLRO must ensure training is provided to all staff to identify and deal with suspected terrorist funding; no such requirement exists for money laundering
B. Investment firms are required to have a dedicated individual responsible for the monitoring of terrorist financing
C. Money laundering typically involves large sums of money, whereas terrorist financing normally involves smaller sums
D. Investment firms must report suspicious activities to the NCA and the PRA

Answer 40

C