Topic 17 Flashcards
The FCA's aims and activities
The Financial Conduct Authority’s single strategic objective is to:
a. make sure that relevant markets function well.
b. govern organisations that manage investments on behalf of other people.
c. oversee the administration of all types of investment business.
d. regulate the marketing and sale of all life assurance products.
a. make sure that relevant markets function well.
The FCA Handbook contains both rules and guidance.
Rules are best described as being:
a. binding obligations.
b. indications of how to comply.
c. best practice standards.
d. the optimal way of conducting business.
a. binding obligations.
Which of the following is not one of the Financial Conduct Authority’s Principles for Businesses?
a. Customers: relationships of trust.
b. Facilitation of competition.
c. Management and control.
d. Relations with regulators.
b. Facilitation of competition.
The rules contained in the FCA Market Conduct Sourcebook apply primarily to:
a. financial advice firms.
b. insurance providers.
c. investment firms.
d. mortgage providers.
c. investment firms.
Which of the following is most likely to be seen as initial evidence that insider dealing may have taken place?
a. A person being in a position of trust.
b. A person having access to restricted information.
c. A significant degree of trading.
d. Transmission of information.
b. A person having access to restricted information.
When firms are considering their fair treatment obligation to provide clarity in sales to their customers, they must ensure that product literature is clear and:
a. appropriate to the expected financial sophistication of the target customer group.
b. available in all languages, whether or not the product is being sold outside of the UK.
c. contains relevant comparisons with products available from competitors.
d. suitable for all customers whether they have, or do not have, existing financial knowledge.
a. appropriate to the expected financial sophistication of the target customer group.
The specialist sourcebooks section within the FCA Handbook includes arrangements for:
a. individual responsibilities.
b. international trading.
c. product derivatives.
d. professional firms.
d. professional firms.
In relation to how a firm deals with the regulatory bodies, which of the following is not defined within the Financial Conduct Authority’s Principles for Businesses?
A firm must:
a. deal with its regulators in a co-operative way.
b. disclose all data on a regular basis to its regulator.
c. deal with its regulators in an open way.
d. disclose anything of which the regulator would reasonably expect notice of.
b. disclose all data on a regular basis to its regulator.
Which of the following is not an operational objective of the Financial Conduct Authority?
a. Promoting effective competition in the interests of consumers.
b. Protecting and enhancing the integrity of the UK financial system.
c. Removing all risk from the UK financial system.
d. Securing an appropriate degree of protection for consumers.
c. Removing all risk from the UK financial system.
The FCA has powers under the Competition Act 1998 and the Enterprise Act 2002, meaning, in respect of competition, it is a concurrent regulator with the:
a. Competition and Markets Authority.
b. Competition Commission.
c. Financial Policy Committee.
d. Prudential Regulation Authority.
a. Competition and Markets Authority.
Which body is responsible for the Financial Ombudsman Service?
a. Competition and Markets Authority.
b. Financial Conduct Authority.
c. Financial Policy Committee.
d. Prudential Regulation Authority.
b. Financial Conduct Authority.
In seeking to promote competition, the FCA uses its powers to ensure all except which of the following?
a. Customers are empowered to engage in such a way as to drive competition.
b. There are no undue barriers preventing new providers entering the market.
c. Prevention of any single firm or small group of firms from dominating the market.
d. Light touch regulation for providers that show a strong track record in product innovation.
d. Light touch regulation for providers that show a strong track record in product innovation.
Which one of the following are aspects that are specifically covered under market abuse?
a. Bribery.
b. Dishonesty.
c. Insider dealing.
d. Money laundering.
c. Insider dealing.
Which part(s) of the Financial Conduct Authority Handbook contain(s) binding obligations for firms?
a) Rules only.
b) Evidential provisions only.
c) Guidance and evidential provisions.
d) Rules and guidance.
a) Rules only.
The Financial Conduct Authority’s objectives do not include which of the following?
a) Securing an appropriate degree of protection for consumers.
b) Limiting competition in the interests of consumers.
c) Ensuring that relevant financial markets function well.
d) Protecting and enhancing the integrity of the UK financial system.
b) Limiting competition in the interests of consumers.
Which body “looks at the economy in broad terms to identify and address risks that may threaten the stability of the whole (or large parts of the) economy”?
a) The Financial Policy Committee.
b) The Prudential Regulation Authority.
c) The Bank of England.
d) The Monetary Policy Committee.
a) The Financial Policy Committee.
‘A person knowingly gives out false or misleading information in order to influence the price of a share for personal gain’ is a definition of:
a) insider dealing.
b) market manipulation.
c) pecuniary advantage.
d) whistleblowing.
b) market manipulation.
In relation to the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS), which of the following is true?
a) The PRA and the FCA are jointly responsible for the FSCS, and the FCA is responsible for the FOS.
b) The FCA and the PRA are jointly responsible for both schemes.
c) The PRA is responsible for the FOS and the FCA is responsible for the FSCS.
d) The PRA and the FCA are jointly responsible for the FOS, and the FCA is responsible for the FSCS.
a) The PRA and the FCA are jointly responsible for the FSCS, and the FCA is responsible for the FOS.
Which Act of Parliament saw the creation of a number of new regulatory bodies and the abolition of the FSA?
a) The Financial Services Act 1986.
b) The Financial Services and Markets Act 2000.
c) The Financial Services Act 2012.
d) Bank of England and Financial Services Act 2016.
c) The Financial Services Act 2012.
Which of the following is false in relation to the fair treatment of customers?
a) It requires high-quality advice to prevent mis-sales.
b) It is the responsibility of senior management in a firm.
c) It is based on six specific rules.
d) It applies to all stages of the product and sales cycle.
c) It is based on six specific rules.
The FCA has six outcomes to ensure fair treatment of customers. These are things a firm should strive to achieve, rather than rules that it must follow.
Which of the following is subject to a specific Conduct of Business sourcebook in the FCA Handbook?
a) Credit unions.
b) Professional firms.
c) Mortgages and home finance.
d) Consumer credit.
c) Mortgages and home finance.
In relation to the FCA’s Principles for Businesses, which of the following is false?
a) Principle 3 ‘Management and control’ covers the way firms should address risks facing the business.
b) Principle 11 ‘Relations with regulators’ requires a firm to report itself in the event of a breach of FCA regulations.
c) The fair treatment of customers is mainly covered by Principle 6 ‘Customers’ interests’.
d) A requirement for firms to consider affordability when advising clients is covered by Principle 4 ‘Financial prudence’.
d) A requirement for firms to consider affordability when advising clients is covered by Principle 4 ‘Financial prudence’.
Principle 4 ‘Financial prudence’ requires firms to maintain adequate financial resources.
The main benefit of principles-based regulation is that it:
a) ensures firms follow the detailed principles contained in the regulator’s rules.
b) provides firms with absolute clarity about the processes they must follow.
c) allows firms to take decisions on how to achieve expected regulatory outcomes.
d) provides firms with guidance rather than any specific rules.
c) allows firms to take decisions on how to achieve expected regulatory outcomes.
Within an authorised firm, the Financial Conduct Authority considers that responsibility for ensuring the fair treatment of customers lies with:
a. all employees.
b. the firm’s advisers.
c. the firm’s senior management.
d. the firm’s operational managers.
c. the firm’s senior management.
Which of the following is not regarded as a financial crime by the FCA?
a. Insider dealing.
b. Market manipulation.
c. Mis-selling investments.
d. Money laundering.
c. Mis-selling investments.
