R01 - Question Bank Flashcards
A bank has its own portfolio management team. This would indicate that it
A. outsources its compliance responsibilities.
B. specialises in wills and executorship.
C. owns a life assurance company.
D. provides a discretionary management service.
Provides a discretionary management service
How are UK gilts issued and traded?
A. New issues and subsequent trading are both carried out on the London Stock Exchange.
B. New issues and subsequent trading are both done through the Debt Management Office.
C. New gilts are issued on the London Stock Exchange and subsequent trading is done through the
Debt Management Office.
D. New gilts are issued by the Debt Management Office and subsequent trading is done on the
London Stock Exchange.
New gilts are issued by the Debt Management Office and subsequent trading is done on the London Stock Exchange
If the EU issues regulations in respect of the financial services industry, how would the UK be
expected to respond?
A. It must implement them without any changes.
B. It may ignore them if existing national regulations already exist.
C. It will amend and then implement them through new UK legislation.
D. The regulations must be reviewed by the UK regulators who will decide on the methods of
implementation.
It must implement them without any changes
Public companies usually raise long-term capital by issuing
A. bonds only.
B. debentures only.
C. shares only.
D. bonds and shares.
Bonds & Shares
What discretion, if any, does the Prudential Regulation Authority and the Financial Conduct
Authority have over the decision to implement the requirements laid down by the EU in respect of
financial services?
A. They have no discretion over any requirements.
B. They have discretion over Directives only.
C. They have discretion over Regulations only.
D. They have discretion over Directives and Regulations.
They have no discretion over any requirements
When determining the interaction between the UK and EU on the regulation of the financial
services industry, the UK government must always
A. seek approval from the European Commission before implementing any new regulations.
B. implement new EU Directives by passing acts of Parliament.
C. accommodate all EU decisions in existing UK legislation.
D. provide copies of new regulations to the European Commission within a reasonable period of
time for their approval.
Seek approval from the European Commission before implementing any new regulations
Samuel met his financial adviser Charlotte to discuss his financial needs and concerns. Samuel
refused to provide details of his income. How should Charlotte react?
A. Only arrange stakeholder products.
B. Only provide advice on an execution-only basis.
C. Record that Samuel refused to provide this detail on the fact-find.
D. Refuse to give any advice at all.
Record that Samuel refused to provide this detail on the fact-find
Albert, a widower aged 66, is reviewing his financial needs and priorities with his financial adviser.
If his attention is particularly being drawn to tax planning issues, this would most likely be because
he has
A. amended his will to include his grandchildren.
B. a current annual income of £30,000.
C. recently downsized his house to fund for long-term care.
D. total assets in excess of £1,100,000.
Total assets in excess of £1,100,000
Matthew’s financial adviser is considering recommending loan consolidation as a way of managing
his debt situation and is satisfied with the affordability of the proposed arrangements. However,
this may NOT help Matthew because he has
A. demonstrated a consistent history of overspending and taking credit.
B. an existing buy-to-let property investment.
C. offered his holiday flat as security, rather than his main residence.
D. recently cancelled his bank overdraft facility.
Demonstrated a consistent history of overspending and taking credit.
A financial adviser is conducting an analysis of the likely impact of the receipt of State benefits on
the amount of cover thought necessary for his client. This will be particularly useful before
recommending
A. an income protection insurance policy.
B. an increasing term assurance policy.
C. a joint life, last survivor, whole of life assurance policy.
D. a unit-linked maximum investment plan.
An income protection insurance policy
An insurance policy which includes accident and sickness cover would most likely be used in
connection with which particular financial need?
A. Estate planning.
B. House purchase.
C. Tax planning.
D. Retirement planning.
House Purchase
Andrew, aged 27, is employed and Samantha, his wife, aged 26, is self-employed. They have just
had their first child and are deciding who should stop work to look after the baby. They should be
aware that
A. Samantha may receive Maternity Allowance for a maximum of 52 weeks.
B. Andrew may qualify for Statutory Paternity Pay for up to 2 weeks.
C. Samantha cannot claim for Statutory Maternity Pay but may elect for the entitlement to be
transferred to Andrew.
D. Andrew cannot claim Statutory Paternity Pay but can take up to 4 weeks leave from work and
claim Statutory Sick Pay.
Andrew may qualify for Statutory Paternity Pay for up to 2 weeks
Paul, aged 38, wishes to save £1,500 per month to build up a lump sum towards a special holiday
for his 40th birthday. He is considering investing in either a cash ISA or a stocks and shares ISA and
seeks advice on the best option. He should be aware that
A. the amount exceeds his annual ISA limit.
B. he may transfer funds between the two forms of an ISA if he wishes to do so.
C. the stocks and shares ISA is more suitable as pound cost averaging will protect the value of his
investment.
D. the stocks and shares ISA will always produce higher returns albeit at greater risk.
He may transfer funds between the two forms of an ISA if he wishes to do so
Adam is married with three young children and following a financial review the need for additional
life assurance was identified with the proceeds going to someone outside of his family. This was
justified because he is
A. self-employed.
B. the trustee of a deceased estate.
C. one of three business partners.
D. a discharged bankrupt.
One of three business partners
The life cover protection need for Ivor, aged 28, is of a reducing nature, tailing off by age 40.
However, a decreasing term assurance was not considered to be suitable. What other product is
likely to best address this need?
A. Convertible term assurance.
B. Family income benefit assurance.
C. Whole of life assurance.
D. Gift inter vivos term assurance.
Family income benefit assurance
Keith is considering using the conversion option under his convertible term assurance policy and
can easily afford to increase his premiums. What factor is most likely to influence his choice of the
two main options typically available under this facility?
A. The amount of disability cover he already has in place.
B. The degree of risk he is prepared to accept.
C. The duration of cover required.
D. The state of health of his wife.
The duration cover required
William required £100,000 of stand-alone level critical illness cover, but was quoted a prohibitively
expensive first year premium. How was he able to immediately reduce the premium whilst
maintaining the same cover?
A. He increased the deferred period.
B. He increased the premium payment frequency.
C. He elected for a reviewable premium basis.
D. He acted on an execution-only basis.
He elected for a reviewable premium basis.
James, aged 64, is planning to retire at age 65 and has a large retirement fund. Despite having
considerable cash deposits the most likely reason for him to take his pension commencement lump
sum is that
A. it will reduce his potential Inheritance Tax liability.
B. it will allow him to apply for State Pension Credit.
C. he plans to exercise his open market option.
D. it is tax efficient to do so.
it is tax efficient to do so.
Damian and Collette have been business partners for over 20 years and are reviewing their finances
with Jack, their financial adviser. They are keen to mitigate against the risk of being personally
responsible for any debts of the business and therefore Jack has advised them to consider
A. becoming a limited liability partnership.
B. becoming sole traders and employing each other.
C. taking out a reinsurance policy to ring-fence future profits.
D. taking out separate indemnity insurance policies and assigning them to the other partner.
Becoming a limited liability partnership
Karen and Julia both have leases within the same building. They both wish to exercise the right to
purchase the freehold of the building. Why can only Karen exercise this right?
A. Julia has a commercial lease.
B. Karen has an original lease for 20 years and Julia has an original lease for 25 years.
C. Karen has lived there for 1 year and Julia has held her lease for 3 years.
D. Julia is not one of the original tenants.
Julia has a commercial lease.
Customer X is in liquidation and customer Y is in administration. This confirms that
A. customer X and customer Y are both subject to Individual Voluntary Arrangements.
B. customer X and customer Y are both companies.
C. only customer Y has debts in excess of £100,000.
D. only customer Y has previously been declared bankrupt.
Customer X and customer Y are both companies.
Alfred died intestate aged 88 leaving a spouse and one sister. If his estate is valued at £500,000,
how will it be distributed?
A. It will all go to his spouse.
B. His spouse and sister will each receive £250,000.
C. £325,000 will go to his spouse and £175,000 will go to his sister.
D. £475,000 will go to his spouse and £25,000 will go to his sister.
It will all go to his spouse.
Peter applied to an insurer for a term assurance policy on his own life. The insurer was prepared to
accept the risk subject to an increased premium as a result of the medical underwriting process.
Peter agreed to the revised terms and submitted a direct debit from which premiums would be
collected. Which statement regarding the requirements for establishing the contract is true?
A. Offer was satisfied by Peter submitting the direct debit mandate.
B. Consideration was satisfied by the insurer completing the underwriting process.
C. Consideration was satisfied by Peter submitting the proposal form.
D. The revised terms offered by the insurer represent a counter offer.
The revised terms offered by the insurer represent a counter offer.
Claire and Charles are the ordinary unsecured creditors of a debtor in bankruptcy. They are
respectively owed £1,000 and £2,000. If after all else is settled, £2,400 remains for their total
combined settlement, they will respectively receive
A. £400 and £2,000.
B. £600 and £1,800.
C. £800 and £1,600.
D. £1,000 and £1,400.
£800 and £1,600.
Shirley and Grant are trustees of separate trusts, but Shirley’s duties are much more
straightforward than Grant’s. This is most likely to be because
A. Grant is also the settlor of his trust.
B. they are trustees of an absolute trust and a discretionary trust respectively.
C. Shirley is also a beneficiary under her trust.
D. they are trustees of a discretionary trust and flexible trust respectively.
They are trustees of an absolute trust and a discretionary trust respectively.
Sam, aged 12, has accidentally entered into an online contract whilst using the family computer.
What is the legal position regarding this contract?
A. It is enforceable as Sam is over the age of 10.
B. It is enforceable as he was using a computer owned by his parents.
C. It is not enforceable as Sam does not have the capacity to contract.
D. It is not enforceable because it is against the rules of the Consumer Contracts Regulations 2013.
It is not enforceable as Sam does not have the capacity to contract.
William and George are creating a trust. William is certain who his beneficiaries should be, but
George is NOT. Which type of trust(s) should William and George each create?
A. Both William and George should create absolute trusts.
B. Both William and George should create discretionary trusts.
C. William should create a discretionary trust and George should create an absolute trust.
D. William should create an absolute trust and George should create a discretionary trust.
William should create an absolute trust and George should create a discretionary trust.
Tom and Bobby both run their own businesses but only Tom is personally liable for the debt of his
business. This is because
A. Tom is self-employed and Bobby is a company director.
B. Bobby is self-employed and Tom is a company director.
C. Tom is in a limited liability partnership and Bobby is a company director.
D. Bobby is in a limited liability partnership and Tom is a company director.
Tom is self-employed and Bobby is a company director.
The Competition and Markets Authority (CMA) has submitted a report to HM Treasury following an
investigation into retail investment products. If the report requires remedial action to be taken,
the most likely immediate outcome will be the
A. CMA and HM Treasury will apply the recommendations jointly.
B. CMA will issue new regulations.
C. Financial Conduct Authority will apply the recommendations unilaterally.
D. HM Treasury will provide direction to the Prudential Regulation Authority and the Financial
Conduct Authority.
HM Treasury will provide direction to the Prudential Regulation Authority and the Financial
Conduct Authority.
A client has previously written to her former adviser opting out of any marketing activities from the
firm or any third parties. However, she continues to receive direct investment offers from the firm.
She should complain based on the firm NOT complying with which set of regulations?
A. Conduct of Business Rules.
B. Consumer Contracts Regulations 2013.
C. Data protection legislation.
D. Fair treatment of customers.
Data protection legislation.
The Financial Services and Markets Act 2000 regulates the provision of which type(s) of financial
advice?
A. Advice to vulnerable individuals only.
B. Advice to all individuals.
C. Advice to all individuals unless they are elective professional clients.
D. Advice to all individuals unless they are per se professional clients.
Advice to all individuals.
The directors of an authorised firm have formally appointed an external compliance support
company. Why does the authorised firm retain responsibility for the compliance oversight
function?
A. The authorised firm is not allowed to delegate their regulatory responsibilities.
B. The appointment of the compliance support company was not made on the basis of a binding
contract.
C. The compliance support company does not have suitable professional indemnity cover.
D. The compliance support company is not an authorised firm
The authorised firm is not allowed to delegate their regulatory responsibilities.
The implementation of financial regulation across EU Member States is carried out under which
overarching programme?
A. Financial Services Action Plan.
B. Financial Services and Markets Act 2000.
C. Markets in Financial Investments Directive II (MiFID II).
D. Insurance Distribution Directive.
Financial Services Action Plan.
Which individual or organisation is directly responsible for overseeing the activities of the Financial
Conduct Authority?
A. The Governor of the Bank of England.
B. HM Treasury.
C. The Competition and Markets Authority.
D. The Monetary Policy Committee of the Bank of England.
HM Treasury
Which body, set up by the Financial Services and Markets Act 2000, ensures that the investigation
and recommendation functions of the Financial Conduct Authority are carried out separately from
the determining of any action and issuing of statutory notices?
A. Consumer panel.
B. Practitioner panel.
C. Regulatory Decisions Committee.
D. Upper Tribunal.
Regulatory Decisions Committee.
Gilbert, a financial adviser, has arranged a new investment bond for his client. According to the
Conduct of Business Rules, what should Gilbert do on receipt of the policy document?
A. Ask the product provider to retain the document for safekeeping.
B. Retain the document until the next annual review.
C. Retain the document indefinitely.
D. Send out the document to his client as soon as is practically possible.
Send out the document to his client as soon as is practically possible.
A firm has successfully appealed to the Financial Conduct Authority’s Upper Tribunal. A possible
consequence of this would be
A. additional regulated activity authorisation being granted.
B. guidance notes automatically being issued to the industry.
C. existing controlled functions being reduced.
D. senior management functions being outsourced.
Additional regulated activity authorisation being granted.
Carl, an independent financial adviser, has committed a market abuse offence. He has been fined
and as a consequence
A. all of his clients must be notified.
B. all of his clients’ investment contracts must be reviewed.
C. it may affect his future employment prospects.
D. he will automatically be prohibited from working in the financial services industry.
It may affect his future employment prospects.
Jon and Carol are both employed by an authorised firm. The firm’s record-keeping requirements
for Jon’s responsibilities are greater than for Carol’s. This is because
A. Jon is a senior manager and Carol is a customer adviser.
B. Jon is head of compliance and Carol is head of internal audit.
C. Jon undertakes a sales function and Carol undertakes a senior management function.
D. Jon was previously served with a prohibition order but Carol was not.
Jon is a senior manager and Carol is a customer adviser.
Keith is a financial adviser for firm X, which is an appointed representative of firm Y. Keith recently
arranged a life policy for a client and the paperwork was checked by his supervisor, Mark. Who is
deemed to be the principal in relation to this business?
A. Mark.
B. Keith.
C. Firm X.
D. Firm Y.
Firm Y
An authorised firm of financial advisers holds a client money bank account. The directors of the
firm should be aware that
A. an annual client money audit and an annual report is required.
B. client money must be paid into the client money bank account on the day it is received.
C. interest earned on the account can always be retained by the firm.
D. reconciliation of the client money bank account must always be performed daily.
An annual client money audit and an annual report is required.
Ian and Paula were both financial advisers and were both subject to disciplinary sanctions. As a
result, only Ian’s offence warranted criminal prosecution because
A. Ian breached a prohibition order whereas Paula failed to properly deal with a complaint.
B. Paula lost adviser records whereas Ian failed to properly control his sales force.
C. only Paula was a senior manager.
D. only Ian provided advice on defined benefit pension transfers.
Ian breached a prohibition order whereas Paula failed to properly deal with a complaint.
Freddie is being prosecuted for market abuse. If he is found guilty of a criminal offence, what is
the maximum penalty that can be imposed on him?
A. A fine of £100,000 only.
B. An unlimited fine only.
C. A 7-year prison term only.
D. An unlimited fine or a 7-year prison term.
An unlimited fine or a 7-year prison term.
Following a recent assessment, the Financial Conduct Authority has advised an authorised firm of
its concern over the firm’s efforts to implement the principles for the fair treatment of customers.
This was most likely to be because
A. the firm was unable to demonstrate the fair treatment of customers across its entire range of
activities.
B. only four of the fair treatment of customers outcomes were relevant to the firm’s business.
C. management information was submitted as evidence for all the fair treatment of customers
outcomes being achieved.
D. compliance checks were submitted as evidence of the fair treatment of customers outcomes
being achieved within the advice process.
The firm was unable to demonstrate the fair treatment of customers across its entire range of
activities.
Sharon was arranging personal pension plans for her clients, leading them to believe they would be
adequate for their retirement needs. A subsequent complaint has indicated that she has failed to
meet the requirements of the principles of the fair treatment of customers because she
A. created unrealistic client expectations.
B. failed to predict a stock market crash.
C. failed to take into account possible future changes in State benefits.
D. did not take into account the costs of long-term care.
Created unrealistic client expectations.
Tom is currently an adviser in an authorised firm. He is about to be promoted to undertake a senior
manager’s role. This means that he
A. must provide a personal guarantee to the firm.
B. will still be allowed to advise clients.
C. must become a director of the firm.
D. must accept ultimate responsibility for all of the firm’s compliance issues.
Will still be allowed to advise clients.
An individual is acting in accordance with the Financial Services and Markets Act 2000, despite
NOT being directly authorised by the Financial Conduct Authority. This is because they are
A. providing advice on investment business only.
B. providing advice on pension business only.
C. the principal of an authorised firm.
D. an appointed representative.
An appointed representative.
Rachel works in the treasury department of a local authority. How is this activity viewed under the
Financial Services and Markets Act 2000?
A. She needs to be individually authorised by the Financial Conduct Authority.
B. She is exempt but the local authority must obtain authorisation.
C. Both Rachel and the local authority must be authorised.
D. Neither Rachel nor the local authority must be authorised.
Neither Rachel nor the local authority must be authorised.
In what circumstances, if any, must the Financial Conduct Authority notify an adviser of a change in
the scope of an ongoing investigation into his conduct?
A. There is no requirement to notify of a change of scope.
B. If absence of notification may prejudice the adviser.
C. If the change is more than six months after the commencement of the investigation.
D. If the investigation is likely to lead to criminal charges.
If absence of notification may prejudice the adviser.
Caroline and Anne are both financial advisers but only Caroline is a senior manager. In accordance
with the regulations, this means that
A. the requirement for Caroline to exercise due skill, care and diligence is broader.
B. the requirement for Caroline to observe proper market conduct standards lasts for a longer
period of time.
C. only Anne can be personally fined for an offence.
D. only Anne can be imprisoned for an offence.
The requirement for Caroline to exercise due skill, care and diligence is broader.
The Financial Conduct Authority (FCA) is able to take action against an individual who is a manager
performing a senior management role but is NOT authorised to give investment advice because of
A. his contract of employment with the employer.
B. the fact that he is regulated by the FCA and must adhere to their rules.
C. the provisions within the Senior Management Arrangements, Systems and Controls Sourcebook.
D. the wider overarching powers contained within the fair treatment of customers outcomes.
The fact that he is regulated by the FCA and must adhere to their rules.
An authorised firm is moving offices and during the move discovers a file relating to a pension
transfer made in 2014 for a former client. What must the firm do with this record?
A. Destroy it under data protection legislation as it relates to a former client.
B. Return it to the client.
C. Retain it for a further two years where after it may be destroyed.
D. Retain it indefinitely.
Retain it indefinitely.
Stuart, an employee of an investment management company, is subject to an ongoing Fit and
Proper test specifically because he
A. is an administration manager.
B. is a senior manager.
C. is the human resources manager.
D. does not require individual registration.
Is a senior manager.
The UK Government seeks to meet its responsibilities under the National Financial Capability
Strategy by
A. bringing together organisations and interested parties to improve the nation’s knowledge and
understanding of personal finance.
B. establishing the National Employment Savings Trust (NEST) to promote workplace savings.
C. appointing the Financial Skills Partnership to set appropriate and relevant qualifications.
D. establishing a module in the national curriculum to deliver financial education in UK schools and
colleges.
Bringing together organisations and interested parties to improve the nation’s knowledge and
understanding of personal finance.
When, if at all, can an alternative status disclosure statement be used by an authorised firm?
A. Never, as all firms can only state they are authorised and regulated by the Financial Conduct
Authority.
B. Only if awaiting regulatory approval, when they must state they are provisionally authorised and
regulated by the Financial Conduct Authority.
C. Only if they are a law firm carrying out investment business, when they must state that they are
authorised and regulated by the Law Society.
D. Only if they are a firm from another EU member state using a passporting of authorised
permissions, when they must state that they are authorised by their respective regulator.
Only if they are a firm from another EU member state using a passporting of authorised
permissions, when they must state that they are authorised by their respective regulator.
As a result of a recent investigation, the practitioner panel has made a recommendation to the
Financial Conduct Authority (FCA). Therefore, the FCA must
A. amend the appropriate FCA rules within six months.
B. consider the recommendation without any obligation to amend its rules.
C. issue a guidance note immediately.
D. refer the recommendation to HM Treasury.
Consider the recommendation without any obligation to amend its rules.
An authorised firm’s senior management controls must
A. be approved annually by the Financial Conduct Authority.
B. form part of the firm’s disclosure documentation.
C. be reviewed regularly by the firm.
D. conform to accepted industry practice standards.
Be reviewed regularly by the firm.
The Financial Capability Strategy for the UK is using a programme in schools which is designed to
A. embed a basic understanding of financial matters in young people.
B. reduce the cost of financial advice for parents with children.
C. increase the number of children who progress to careers in financial services.
D. shift responsibility for financial education in schools to the Money and Pensions Service.
Embed a basic understanding of financial matters in young people.
Alan and Colin both work for a life office. Alan is a senior discretionary investment manager and
Colin is a junior member of the compliance department. A key regulatory difference between them
is that
A. only Alan will require prescribed supervision.
B. only Alan is carrying out a senior manager role.
C. only Colin will be subject to a fit and proper test.
D. only Colin will need to be individually registered with the Financial Conduct Authority.
Only Alan is carrying out a senior manager role.
Firm A has been fined £100,000 by the Prudential Regulation Authority for insider dealing. Firm B
has been fined £1,000,000 for market abuse. This indicates that
A. both firms have received the maximum fine.
B. only firm A has received the maximum fine.
C. neither firm have received the maximum fine.
D. only firm B has received the maximum fine.
Neither firm have received the maximum fine.
An authorised firm disagrees with the enforcement action taken by the Financial Conduct Authority.
To which body would it appeal?
A. The Upper Tribunal.
B. The Practitioner Panel.
C. The Regulatory Decisions Committee.
D. The Treasury Select Committee.
The Upper Tribunal.
An authorised firm has discovered that they have breached one of the Financial Conduct Authority’s
(FCA’s) Principles for Businesses. What action must the firm take?
A. The firm has a maximum period of six months to notify the FCA and take remedial action.
B. The firm’s compliance officer must notify the FCA immediately and implement remedial actions
as soon as possible.
C. The firm’s compliance officer must include details of the breach and remedy on the firm’s next
six-monthly return.
D. The breach must be remedied within seven days and the regulator need not be informed.
The firm’s compliance officer must notify the FCA immediately and implement remedial actions
as soon as possible.
When Lionel and Yvonne’s bank was declared insolvent in May 2019, Lionel had £60,000 on deposit
and Yvonne had investments worth £60,000 with the bank. How much in total would they be
entitled to receive under the Financial Services Compensation Scheme?
A. £100,000
B. £108,000
C. £110,000
D. £120,000
£120,000
A client referred his complaint about the investment advice received from his adviser to the
Financial Ombudsman Service (FOS) in January 2019. The FOS has ruled that the advice was
unsuitable and has recommended an award of £125,000 plus £2,500 costs. How much is
the maximum amount of compensation that the adviser firm will be obliged to pay?
A. £100,000
B. £102,500
C. £125,000
D. £127,500
£127,500
Jonas is an independent mortgage and financial adviser. He has NOT passed long-term care or
equity release examinations to enable him to transact business in those areas. Which of the
following transactions will Jonas be able to undertake?
i) A new term assurance with critical illness cover
ii) A remortgage for a 40-year-old applicant
iii) An immediate needs annuity
iv) A home reversion plan
v) A compulsory purchase annuity for a 65-year-old applicant
A. i and ii only.
B. i, ii and v only.
C. ii, iii and iv only.
D. iii and iv only.
i, ii and v only.
Diane and Martin have two children, aged 16 and 18. The entire family intend to open their first ISA
accounts and invest the maximum available amounts. They only wish to consider stocks and shares
ISAs and NOT any other form of ISAs. What is the total amount they would be allowed to invest in
the tax year 2019/2020?
A. £40,000
B. £45,720
C. £60,000
D. £80,000
£60,000
Various parties to a discretionary trust are set out in the table below. David Trustee Simon Sole-named beneficiary Amanda Beneficiary’s spouse A fiduciary duty exists between
A. David and Amanda only.
B. David and Simon only.
C. Simon and Amanda only.
D. David, Simon and Amanda.
David and Simon only.
In which of the following situations is a referral to another adviser appropriate?
i) A restricted adviser who does not have a suitable product in his company’s range refers
to a restricted adviser within another firm.
ii) A restricted adviser who does not have a suitable product in his company’s range refers
to an independent financial adviser.
iii) A restricted adviser who knows a similar product can be obtained cheaper from another
provider refers to an adviser of that firm.
iv) An independent financial adviser is not deemed competent to provide pension transfer
advice refers to another independent financial adviser who is suitably qualified and
holds the appropriate Financial Conduct Authority permissions.
A. i only.
B. ii and iv only.
C. ii, iii and iv only.
D. iv only.
ii and iv only.
An authorised firm has arranged the following products on 1 June. All products were based on
recommendations made to retail clients on a face to face basis. For all products arranged the
clients received cancellation notices on the same date.
i) A cash ISA
ii) A level term assurance
iii) An Enterprise Investment Scheme
iv) A stakeholder pension plan
v) A child trust fund
Which of the products is still within its cancellation period on 25 June?
A. i and iii only.
B. ii and iv only.
C. iii and iv only.
D. i, ii and v only.
ii and iv only.
During the course of the fact-finding process, a financial adviser decided to ask a number of
open-ended questions. The primary purpose of this approach was to
A. instill a sense of commitment from the client.
B. obtain the client’s views and opinions.
C. quantify the client’s assets and liabilities.
D. secure the client’s trust.
Obtain the client’s views and opinions
Susan and Nicola both have lump sums to invest and both intend to use life office managed funds.
Why are the opportunities for Susan to benefit from diversification more limited than Nicola’s?
A. Susan has decided to adopt a socially responsible approach.
B. Nicola has less to invest than Susan.
C. Susan is significantly younger than Nicola.
D. Nicola is in significantly better health than Susan.
Susan has decided to adopt a socially responsible approach.
Following the completion of a fact-find, a financial adviser has recommended a unit trust and an
investment bond to a retail client. In addition, the client has requested a personal pension be
arranged on an execution-only basis. The disadvantages of which product(s) must be included
within the suitability report?
A. Personal pension only.
B. Unit trust and investment bond only.
C. Personal pension and unit trust only.
D. Personal pension, unit trust and investment bond.
Unit trust and investment bond only.
In considering a number of pension products, Jenny’s adviser has pointed out that the reduction in
yield figures are important in helping her understand the
A. financial strength of the providers.
B. impact of charges.
C. impact of inflation on the fund.
D. volatility of investment performance.
Impact of charges.
Julian, a financial adviser, has been praised for the quality of his recent professional conduct. This
would most likely indicate that he has
A. achieved his annual sales target.
B. acted with appropriate integrity.
C. been influenced by colleagues.
D. maintained up-to-date continuing professional development records.
Acted with appropriate integrity.
How should an authorised firm react in the event of a conflict of interest arising from a couple’s
divorce where both parties are clients of the firm?
A. By recommending an independent arbitrator.
B. By referring the couple to another authorised firm.
C. By seeking to maintain strict neutrality.
D. By supporting the client who provides most business.
By seeking to maintain strict neutrality.
An investment provider has announced new charges for switching between its funds. If these
charges are likely to be deemed excessive, this would
A. be regarded as a breach of the financial regulators’ Principles for Businesses.
B. lead to an investigation by the Competition and Markets Authority.
C. require the investment provider to reapply to the Financial Conduct Authority for relevant
permissions.
D. trigger the immediate imposition of a Prudential Regulation Authority approved default charging
structure.
Be regarded as a breach of the financial regulators’ Principles for Businesses.
In order to adhere to the Financial Prudence principle of the Financial Conduct Authority’s
Principles for Businesses, an authorised firm should
A. ensure that its customers do not take on more debt than they can afford.
B. aim to increase its customers’ understanding of day-to-day money management.
C. have adequate financial resources to meet its obligations.
D. not market financial products with excessive investment risk.
Have adequate financial resources to meet its obligations.
To what degree, if any, must an authorised firm adhere to the Financial Conduct Authority’s
Principles for Businesses?
A. They must adhere to them but they have discretion as to how they comply with their obligations.
B. They can ignore them provided they follow the rules within the relevant sourcebooks
C. They can elect to become exempt from them subject to holding prescribed levels of capital
resources.
D. They can elect to be exempt from them provided they are a member of a recognised trade
association.
They must adhere to them but they have discretion as to how they comply with their obligations.
