Mixed mock

Question 1

What is The Joint Money Laundering Steering Group (JMLSG)?

Answer 1

It is guidance where firms must identify the risks which their own business faces in conducting financial transactions and implementing arrangements, as well as the systems and controls to mitigate against the risk that the firm will be used for financial crime.

Question 1

Under UK MAR where a person has reasonable suspicion regarding an order or a transaction in a financial instrument when placed on any trading venue, they should notify the FCA:

Answer 1

once a full investigation has been completed to assess the nature of the event

Firms should notify the FCA without delay, not necessarily immediate. Firms must undertake reporting directly to the competent authority, in a timely manner, once a full investigation has been undertaken to assess whether an event is considered suspicious and required to be reported.

Question 2

If an independent financial adviser (IFA) passes on the business of a client to a life assurance company, can they rely on the IFA for information?

Answer 2

Yes
Under the rule ‘agent as client’ the insurance company will treat the IFA as client, and therefore rely on the IFA to assess suitability or appropriateness. The fact that this question focuses on a life assurance company is irrelevant. It could easily refer to any firm conducting designated investment business.

Question 3

According to the JMLSG’s guidance notes, for what length of time should client verification records be kept?

Answer 3

Five years from the date the account was closed

Question 4

When considering the rule on product information to be disclosed before providing services, to whom would the firm need to make these disclosures?

Answer 4

RC only

Question 5

What are the threshold conditions for a firm seeking Part 4A permission under the Financial Services and Markets Act 2000?

Answer 5

• legal status
• location of offices
• prudent conduct
• effective supervision (including close links)
• appropriate resources
• suitability
• business model
• appointment of a claims representative

Question 6

How often should an authorised firm report to the FCA in respect of customer complaints?

Answer 6

twice a year

Question 7

A fund manager is providing a discretionary management service to their clients. Halfway through their normal reporting period, the manager makes a large investment for the fund. When do they have to notify the client of the details of this purchase?

Answer 7

In the periodic statement

Management groups providing investment management services for a client do not need to provide trade-by-trade reports, but will provide periodic statements at suitable intervals.

Question 8

Vicky is a member of the RDC, and is confused as to the difference between a ‘statement of misconduct’ and ‘public censure’. How would you help Vicky to distinguish between them?

Answer 8

A statement of misconduct is imposed upon an approved person (i.e. an individual carrying out a senior manager function or controlled function), whereas public censure is imposed upon an authorised person (i.e. a firm carrying out regulated activities). Both are imposed for regulatory breaches, not criminal offences. Both are always published, unless the FCA believes that publication is detrimental to a client’s interests.

Question 9

Which two FCA Principles for Businesses iare disapplied for firms that are in-scope of the Consumer Duty?

Answer 9

PRIN 6: Customers’ interests and PRIN 7: Communications with clients are replaced with PRIN 12: Consumer Duty.

Question 10

Under transaction reporting requirements, trades in international equities and in particular settlement reporting is necessary. Which of the following provide such functionality?

Answer 10

For international equities, an online trade confirmation service provided by an organisation called Omgeo, it can be used for settlement reporting, with transactions reported by both participants by 9.00pm on the day of the trade.

Question 11

what is SETS?

Answer 11

Stock Exchange Electronic Trading Service (SETS) is London Stock Exchange’s flagship electronic order book, trading FTSE 100, FTSE 250, FTSE Small Cap Index constituents, Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs), plus other liquid AIM, Irish and London Standard-listed securities.

Question 12

Under transaction reporting requirements, UK domestic trades are settled on which platform?

Answer 12

For UK domestic transactions, transaction reports for settlement purposes are required on CREST each business day of 8.00pm on the day of trade

Question 13

What products are covered under UK MAR?

Answer 13

financial instruments, commodity derivatives and auctioned products based on emissions allowances (MAR 1). It does not cover life assurance products such as endowments, whether secondary market traded or not.

Question 14

To whom should a dual-regulated firm apply for Part 4A permission?

Answer 14

If the firm is likely to be dual-regulated (ie, it is to be subject to both PRA and FCA supervision) and it wants to become authorised, the firm will make a single application to the PRA as its lead regulator. Although the PRA will make the final decision on the firm’s application, the PRA can only authorise the firm once the FCA has also consented to the firm’s authorisation.

Question 15

When are MiFID businesses exempt from issuing a client agreement?

Answer 15

The client enters into an insurance contract with the firm as principal

Question 16

Are conduct risk regulations and compliance rules retrospective or forward looking respectively?

Answer 16

Compliance with rules is retrospective, the conduct risk approach is forward looking

Compliance with rules is generally a backward-looking philosophy. The question tends to be ‘Did the firm comply?’ The conduct risk approach, on the other hand, has a more forward-looking emphasis. ‘Will the actions of the firm lead to poor outcomes for consumers or not?’

Question 17

If a company prepares semi-annual financial reports how long is the close period under the ‘Persons Discharging Managerial Responsibility’ (PDMR) regime of directors’ dealings?

Answer 17

One month

Question 18

A broker is unable to execute a client order due to a trading halt on the exchange. This has led to the client order being postponed. In which of the following situations would the broker have to notify the client? If the order

Answer 18

Came from a retail client

Question 19

Who are considered eligible complainants under FOS?

Answer 19

1) private individuals,
2) micro-enterprises (businesses with a turnover or balance sheet that does not exceed 2 million euros, and fewer than 10 employees at the time the complaint is raised),
3) charities with an annual income of less than £6.5 million.

Question 20

If a reconciliation of client money shows a discrepancy, the firm must investigate it to identify the reason for the discrepancy and ensure that any shortfall is paid into the client bank account. Which of the following would best describe how long the firm should take to correct this discrepancy? It should be corrected:

Answer 20

By COB

Question 21

An authorised firm, acting on behalf of a client, has received an order to buy 5,000 shares in XYZ plc just before the market opens. The firm believes that the market will open with a sharp fall due to significant losses on the S&P 500 overnight. When should the firm execute the transaction?

Answer 21

The correct answer is: C - The firm may delay execution if it believes it is in the best interests of the client

The rule states that a transaction should be executed as soon as is reasonably practicable. Transactions may be delayed if the firm has taken reasonable steps to ensure that the deal will not operate to the client’s disadvantage.

Question 22

What is the geographical scope of the United Kingdom’s Bribery Act 2010?

Answer 22

Worldwide

Question 23

An authorised firm has made a mass detriment reference to the FCA, because it feels that if the customer complaint was referred to the FOS, that the FOS is likely to find in favour of the complainant.
What action, if any, is the FCA required to make?

Answer 23

The FCA must respond within 90 calendar days to the party making a mass detriment reference.

Question 24

What must the firm do when a specific instruction from a client would prevent a firm from following its order execution policy when carrying out the transaction?

Answer 24

Carry out the order as instructed

Question 25

Examples of execution venue

Answer 25

execution venue means
- a regulated market,
- an MTF or OTF,
- a systematic internaliser,
- a market maker or other liquidity provider
- an entity that performs a similar function in a third country to the functions performed by any of the foregoing.

Question 26

What disclosure obligations does a shareholder have if they own 18% of the shares of Widget plc, a listed company and sell 1% of their holdings?

Answer 26

Disclose the sale to the company concerned within two business days

The Companies Act requires material/notifiable interest disclosure. Disclosure to the Stock Exchange is only required for acquisitions.

Question 27

When can a firm make a cold call?

Answer 27

• The recipient of the cold call has an established existing client relationship with the firm and envisages receiving cold calls
• The cold call relates to a generally marketable product (which is not a higher volatility fund)
• The cold call relates to activities where the only investments involved are readily realisable securities (other than warrants) and generally marketplace non-geared packaged products.

Question 28

What are the exceptions to COBS?

Answer 28

• for qualifying credit, a home purchase plan or a home reversion plan
• a promotion for a non-investment insurance contract, or
• the promotion of an unregulated CIS which it is not permitted to approve.

Question 29

What is the FCA threshold on Money Laundering Transactions?

Answer 29

One off transactions above €7500 require identification

Question 30

What is the MAXIMUM level of settlement discount normally available in relation to an enforcement penalty imposed by the FCA?

Answer 30

30%

Question 31

Where domestic transactions take place on systems run by the London Stock Exchange (LSE), transaction reports for settlement purposes are required via CREST by what LATEST time on each business day?

Answer 31

8pm