Cemap 1 Flashcards
1
Q
Sarah made a complaint to her bank and is not satisfied with the response. If she wants to refer the complaint to the Financial Ombudsman Service, she must do so within what period of the response?
a) 30 days
b) 4 weeks
c) 3 months
d) 6 months
A
d) 6 months.
2
Q
Which of the following would not be eligible to refer a complaint to the Financial Ombudsman Service?
a) A trustee of a trust with net assets of £5.5m.
b) Jordan, who has a complaint about a consumer buy-to-let mortgage.
c) A charity with annual income of £5.5m.
d) James, on behalf of his business, which has 45 employees and annual turnover of £5.5m.
A
a) A trustee of a trust with net assets of £5.5m.
3
Q
Within what timescale must the FCA respond to a super-complaint?
a) 30 days.
b) 60 days.
c) 90 days.
d) 120 days.
A
c) 90 days.
4
Q
Under the Consumer Rights Act Alternative Dispute Resolution options, adjudication decisions can be appealed through courts
a) True
b) False
A
a) True
5
Q
Finance houses raise most of their funds through:
a) customer deposits.
b) wholesale markets.
c) retail markets.
d) private equity markets.
A
b) wholesale markets.
6
Q
Which organisation is responsible for managing new issues of UK gilts?
a) The London Stock Exchange.
b) The UK government.
c) The Debt Management Office.
d) The Bank of England.
A
c) The Debt Management Office.
7
Q
What is the maximum borrowing a building society can raise on the wholesale market?
a) 25% of their assets.
b) 50% of their liabilities.
c) 60% of their liabilities.
d) 75% of their assets.
A
b) 50% of their liabilities.
8
Q
The Workers Credit Union has reserves of £60,000, which equals 6% of its assets. This means it:
a) can only pay dividends to savers.
b) can only pay interest to savers
c) can pay dividends or interest to savers.
d) cannot pay dividends or interest to savers.
A
c) can pay dividends or interest to savers.
9
Q
During the recovery and expansion phase of the economic cycle, share prices are most likely to:
a) neither increase nor fall.
b) increase.
c) fall slightly.
d) collapse.
A
b) increase.
10
Q
Which of the following is not a European Supervisory Authority (ESA)?
a) European Systemic Risk Board.
b) European Securities and Markets Agency.
c) European Insurance and Occupational Pensions Authority.
d) European Banking Authority.
A
a) European Systemic Risk Board.
11
Q
In normal circumstances, what is the maximum number of times the Bank of England base rate could change in a 12-month period?
a) 3.
b) 5.
c) 8.
d) 12.
A
c) 8.
12
Q
Jayne left her job in January and is about to start another. Her previous employer will have given her a:
a) P30.
b) P45.
c) P60.
d) P75.
A
b) P45.
13
Q
Which of the following sources of income is not subject to income tax?
a) State pensions.
b) Share dividends.
c) War widow’s pension.
d) Redundancy payment in lieu of notice.
A
c) War widow’s pension.
14
Q
Greg is self-employed, with annual profits over the lower profits limit. Which of the following classes of National Insurance contributions will he have to pay?
a) Class 2 only.
b) 1 and 2.
c) Class 4 only.
d) 3 and 4.
A
c) Class 4 only.
15
Q
The starting rate of income tax applies to:
a) savings interest.
b)pension income.
c)dividends.
d) all income for low earners.
A
a) savings interest.
16
Q
Alan owns shares in a small company that has share capital of £200,000, and now wants to sell them. In order to be able to claim business asset disposal relief, Alan’s shareholding must be worth at least:
a) £5,000.
b) £10,000.
c) £50,000.
d) £100,000.
A
b) £10,000 - Alan must own at least 5% of the firm’s share capital to be able to claim business asset disposal relief.
17
Q
Karen made a loss of £5,000 when she sold some shares, but did not make any other gains in the tax year. Assuming the capital gains tax annual exempt amount was £6,000 for that tax year, what is the total amount she could carry forward to use against gains in the following tax year?
a) £2,500.
b) £5,000.
c) £6,000.
d) £11,000.
A
b) £5,000 - She can carry forward all losses but not the annual exempt amount.
18
Q
Which of the following is true in relation to the residence nil-rate band (RNRB)?
a) The RNRB is reduced if the value of the estate exceeds £1m.
b) It applies where a main residence is left to a direct descendant of the deceased.
c) Any unused RNRB cannot be transferred to a spouse on death.
d) It is available even if the deceased never lived in the property.
A
b) It applies where a main residence is left to a direct descendant of the deceased.
19
Q
Clare and Clive are getting married. They each have two parents and four grandparents, all of whom have agreed to give them money as a wedding gift. How much could Clare and Clive receive in total, without causing any tax problems for themselves or anyone else?
a) £10,000.
b) £20,000.
c) £40,000.
d) £80,000.
A
c) £40,000.
20
Q
Ashok made a potentially exempt transfer in January 202X but died four years and ten months later. What percentage of the IHT due on the gift would be payable?
a) 20%.
b) 40%.
c) 60%.
d) 100%.
A
c) 60%. - He died between four and five years after making the gift, therefore there is a 40% reduction of IHT.
21
Q
Which of the following would not be subject to corporation tax?
a) A housing association.
b) A football club.
c) A small limited company.
d) A limited liability partnership.
A
d) A limited liability partnership.
22
Q
By when must capital gains tax normally be paid on disposal of an asset?
a) On 31 July following the end of the tax year in which the gain is made.
b) On 31 January following the end of the tax year in which the gain is made.
c) In two instalments on 31 January and 31 July following the end of the tax year in which the gain is made.
d) By the end of the tax year in which the gain is made.
A
b) On 31 January following the end of the tax year in which the gain is made.
23
Q
Gains from which of the following would be exempt from capital gains tax?
a) Corporate bonds.
b) Shares.
c) Unit trusts.
d) Holiday home.
A
a) Corporate bonds.
24
Q
Which of the following state benefits is tax free?
a) Contribution-based Employment and Support Allowance.
b) Disability Living Allowance.
c) Statutory Sick Pay.
d) Carer’s Allowance.
A
b) Disability Living Allowance.
25
According to government statistics, in the previous 12 months average earnings increased by 4.3% and inflation increased by 3.2%. This means that both the basic state pension and the new state pension will increase by:
a) 2.5%.
b) 3.2%.
c) 4.3%.
d) 5%.
c) 4.3%.
26
In relation to Support for Mortgage Interest (SMI), the loan:
a) must be repaid within 24 months from the end of a claim.
b) payments cover capital and interest on the mortgage.
c) is secured by a first charge on the property.
d) payments are made direct to the lender.
d) payments are made direct to the lender.
27
George is 85 and, having been self-employed all his working life, retired at the age of 66. He could potentially be in receipt of which state retirement benefits?
a) Basic state pension, pension credit, savings credit and an additional state pension.
b) Basic state pension and pension credit only.
c) Basic state pension only.
d) Basic state pension, pension credit and savings credit only.
d) Basic state pension, pension credit and savings credit only. - Assuming a satisfactory National Insurance contribution record, George will receive the basic state pension. Depending on his retirement income, he could also qualify for Pension Credit and Savings Credit. As he was self-employed, he will not have built up entitlement to any additional state pension.
28
Kimberley’s paid £105 for a 4% Treasury gilt with a par value of £100. What is the running yield of the gilt?
a) 2.5%.
b) 3.8%.
c) 4%.
d) 5%.
b) 3.8%. - The running yield is the income of £4 (par value of £100 × 4%) as a percentage of the £105 price paid = 3.8%.
29
Amanda has a permanent interest-bearing shareholding. This means:
a) the issuing organisation is now a bank.
b) the investment is lower risk than a deposit account.
c) she has no guarantee that her original investment will be repaid.
d) she has a corporate bond holding.
c) she has no guarantee that her original investment will be repaid.
30
A structured deposit account:
a) provides a guaranteed fixed return.
b) places the original capital at risk.
c) runs for a fixed term.
d) matches the return from an associated stock market index.
c) runs for a fixed term.
31
Which of the following is true? Peer-to-peer lending is:
a) a direct contract between one lender and one borrower.
b) regulated by the Prudential Regulation Authority.
c) co-ordinated by banks and building societies.
d) not protected by the Financial Services Compensation Scheme.
d) not protected by the Financial Services Compensation Scheme.
32
Income from a Eurobond received by a higher-rate taxpayer qualifies for:
a) the personal savings allowance.
b) the dividend allowance.
c) the capital gains tax annual exempt amount.
d) tax-free status.
a) the personal savings allowance.
33
Sally has an NS&I product, but her friend Sarah cannot open a similar account because new issues of the product are no longer available. This means Sally has an NS&I:
a) premium bond.
b) direct saver.
c) guaranteed growth bond.
d) income bond.
c) guaranteed growth bond.
34
Market capitalisation is a key factor when analysing shares. It represents the:
a) value of the company's assets and reserves.
b) current share value multiplied by the number of shares issued.
c) annual profit figure shown in the company's last annual accounts.
d) number of shares the company has issued.
b) current share value multiplied by the number of shares issued.
35
Today is the ex-dividend date for Acme Ltd shares. The share price is most likely to:
a) remain stable.
b) become more volatile.
c) decrease slightly.
d) increase slightly.
c) decrease slightly.
A share price typically decreases roughly by the value of the dividend when it reaches its ex-dividend date.
36
Bow Ltd has just issued three free shares for every one share a shareholder owns. This is referred to as a:
a) dividend share issue.
b) rights issue.
c) proportional share issue.
d) scrip issue.
d) scrip issue.
37
What percentage of a company's share capital must be in public hands for its shares to have a full listing on the main London Stock Exchange?
a) 10%.
b) 25%.
c) 33%.
d) 49%.
b) 25%.
38
Certificates of deposit:
a) allow penalty-free access at any time.
b) are bearer securities.
c) have a minimum 12-month term.
d) pay interest monthly.
b) are bearer securities.
39
The FTSE 350 Index includes companies listed on the London Stock Exchange. It comprises:
a) the largest 350 companies by capitalisation outside the FTSE 100 and 250 indices.
b) the largest 350 companies by capitalisation.
c) 350 smaller companies who do not meet AIM criteria.
d) the largest 350 companies by capitalisation outside the FTSE 100.
b) the largest 350 companies by capitalisation.
40
Karen is a higher-rate taxpayer who owns a buy-to-let flat. What is the position with tax relief on her mortgage? She will:
a) receive a basic-rate income tax credit.
b) receive higher-rate tax relief.
c) not qualify for any tax relief.
d) receive tax relief at her marginal income tax rate.
a) receive a basic-rate income tax credit.
41
A share's price/earnings ratio is:
a) the number of times the dividend is covered by the company's profits.
b) the share price divided by the earnings per share.
c) the company's net profit divided by the number of shares.
d) the share's dividend as a percentage of the share price.
b) the share price divided by the earnings per share.
42
Jason wishes to cash in his unit trust holding. Which unit price will he receive in normal market conditions?
a) Offer price.
b) Creation price.
c) Cancellation price.
d) Bid price.
d) Bid price.
43
Which function is responsible for overseeing the operation of an open-ended investment company and safeguarding investor interests?
a) The authorised corporate director.
b) The depositary.
c) The manager.
d) The trustee.
b) The depositary.
44
A friendly society tax-exempt savings plan:
a) has a maximum annual savings limit of £270.
b) has a term between 10 and 25 years.
c) offers similar taxation benefits to endowment policies.
d) is offered by proprietary organisations.
a) has a maximum annual savings limit of £270.
45
In relation to investment trusts, which of the following is true?
a) The trust can borrow for investment purposes.
b) The net asset value is the price shares are trading at.
c) Shares trading at a premium can be bought at below their net asset value.
d) The trust deed outlines the trust's investment objectives.
a) The trust can borrow for investment purposes.
46
What percentage of a unit trust's fund must be in cash or fixed-interest investments for distributions to be treated as interest payments?
a) At least 50%.
b) Up to 60%.
c) More than 60%.
d) At least 75%.
c) More than 60%.
47
Which of the following is true in relation to real estate investment trusts?
a)At least 80% of the profit must result from property rentals.
b) At least 90% of profits must be distributed to shareholders.
c) They cannot be held in an ISA.
d) Corporation tax is payable on profits from property rentals.
b) At least 90% of profits must be distributed to shareholders.
48
Which of the following is false in relation to qualifying life assurance policies?
a) They must have a minimum term of 10 years.
b) The death benefit must be at least 101% of the bid value of the policy.
c) Premiums cannot vary beyond specified limits.
d) Premiums must be payable at least annually.
b) The death benefit must be at least 101% of the bid value of the policy.
49
Which of the following is true in relation to unit trusts?
a) The manager is responsible for holding and controlling the fund's assets.
b) Distribution unit trusts pay regular capital amounts to investors from profits.
c) The trustee decides on appropriate investments for the trust.
d) The manager can create units to meet demand.
d) The manager can create units to meet demand.
50
With an Enterprise Investment Scheme (EIS), which of the following are true?
a) Tax relief is available at the investor's marginal rate.
b) Gains are exempt from capital gains tax if shares are held for five years.
c) Tax relief is available on up to £1m investment per tax year.
d) Investment is made through a collective investment scheme.
c) Tax relief is available on up to £1m investment per tax year.
51
Janine is 35 and has a Help-to-Buy ISA. She is now about to buy her first property. In total she has been informed that her ISA will provide £3,600 towards the purchase. This means her current fund, without including the government bonus, is worth:
a) £2,400.
b) £2,880.
c) £3,000.
d) £4,000, because she will not qualify for a bonus due to her age.
b) £2,880. - The government bonus is 25% of the fund. £2,880 × 25% = £720. £2,880 + £720 = £3,600.
52
Sashin wishes to invest into a venture capital trust (VCT). Which one of the following statements is false?
a) VCT dividends are tax free.
b) VCT gains are exempt from capital gains tax.
c) Income tax relief is available at 30%.
d) The maximum investment for tax relief is £500,000.
d) The maximum investment for tax relief is £500,000.
53
Mansour has a flexible cash ISA, having invested £15,000 of the £20,000 annual limit in July. The following December he withdrew £8,000 in an emergency to replace his car. How much, if anything, could Mansour invest in the ISA before the end of the tax year?
a) He cannot make a further investment in the tax year.
b) £5,000.
c) £8,000.
d) £13,000.
d) £13,000.
Mansour can invest £20,000 in the tax year. A flexible ISA allows him to withdraw cash and replace it until the end of the tax year. He had £5,000 of his annual allowance left anyway, and could also replace the £8,000, giving a total of £13,000.
54
Which of the following is untrue regarding ISAs?
a) It is not possible to have a joint ISA.
b) The minimum age for a cash ISA is 16.
c) Shares from an all‑employee savings‑related share option scheme can be held in an ISA.
d) Subject to the annual contribution limit, it is possible to invest in different ISAs in the same year.
b) The minimum age for a cash ISA is 16.
55
Which statement best describes the uncrystallised funds pension lump sum option on a personal pension?
a) Each withdrawal is taxed as income in the owner's hands.
b) The whole fund must be taken, with 25% as a tax-free lump sum.
c) Each withdrawal will be tax free.
d) 25% of each withdrawal is tax free, with the balance taxed as income.
d) 25% of each withdrawal is tax free, with the balance taxed as income.
56
Which type of pension scheme is most likely to allow an individual to hold a direct investment in commercial property?
a) A personal pension.
b) A defined-contribution occupational pension.
c)A stakeholder pension.
d) A self-invested personal pension.
d) A self-invested personal pension.
57
Caroline is 38 and earns £35,000 a year as a department manager for a large firm. What is the maximum contribution that could be paid into her workplace pension to give her maximum tax relief and avoid any tax penalties?
a) £35,000 from Caroline only.
b) Up to £35,000 between Caroline and her employer.
c) £35,000 from Caroline and £25,000 from her employer.
d) £40,000 from Caroline only.
c) £35,000 from Caroline and £25,000 from her employer. - Caroline can pay in an amount up to her salary, and her employer can top it up to the annual allowance amount.
58
Ali has been a member of his company’s 1/50th defined-benefit pension for 20 years and is about to retire. His pensionable salary is £30,000. What will Ali’s pension be?
a) £10,000.
b) £12,000.
c) £15,000.
d) £30,000.
b) £12,000. - 20/50th of £30,000 = 20/50 × £30,000 = £12,000.
59
When does the Money Purchase Annual Allowance apply to pension contributions? If the plan holder:
a) uses the fund to purchase an annuity.
b) takes benefits before the scheme retirement date.
c) takes benefits through the uncrystallised funds pension lump sum option.
d) earns more than the income threshold.
c) takes benefits through the uncrystallised funds pension lump sum option.
60
The 'direct pay' arrangement is where a personal scheme member pays the contributions directly to the pension provider.
a) True
b) False
b) False - It is where the employer collects the employee's contribution from their pay and passes it on to the pension provider.
61
Which method of providing a personal pension income is free from investment risk?
a) Purchasing an annuity.
b) Taking the 25% pension commencement lump sum and leaving the balance in the fund.
c) Taking regular withdrawals using the uncrystallised funds pension lump sum option.
d) Flexi-access drawdown.
a) Purchasing an annuity.
62
Which of the following is true regarding the NEST scheme?
a) It cannot run alongside an existing occupational scheme.
b) The minimum contribution per employee is 10% of earnings.
c) Contributions can only be made into the default fund.
d) Benefits can be taken from age 55.
d) Benefits can be taken from age 55.
63
Jim has a with-profits whole-of-life plan, and Jenny has a low-cost with-profits whole-of-life plan, both offering the same death benefit. The main difference in the two plans is that:
a) The fixed death benefit on Jim's plan will be lower.
b) Jenny's policy will not benefit from regular bonuses.
c) Part of the death benefit on Jenny's policy is on a reducing basis.
d) The value of units on Jenny's plan will be lower.
c) Part of the death benefit on Jenny's policy is on a reducing basis.
64
What add-on benefit will ensure a life assurance policy will continue to provide cover when premiums are suspended due to the policyholder's illness preventing them from working?
a) Terminal illness benefit.
b) Waiver of premium benefit.
c) Income protection benefit.
d) Temporary disability cover.
b) Waiver of premium benefit.
65
Which of the following is true of a unitised with-profits endowment?
a) It cannot be assigned to a lender.
b) Only terminal bonuses are added.
c)Unit values cannot fall.
d) The full unit value is payable on surrender of the policy.
c)Unit values cannot fall.
66
Jason has a flexible whole-of-life assurance policy on a maximum cover basis. This means that Jason's:
a) premiums will be higher than those of a balanced cover policy.
b) sum assured will increase after ten years.
c) plan will accumulate a higher investment value than a minimum cover policy.
d) premiums are likely to increase after ten years.
d) premiums are likely to increase after ten years.
67
In strong stock market conditions, which type of mortgage-linked endowment is most likely to allow early repayment of the mortgage?
a) Non-profits.
b) Low-cost with profits.
c) Unit-linked.
d) With-profits.
c) Unit-linked.
68
What is the normal maximum age for exercising the renewal option on a renewable term assurance policy?
a) 50.
b) 55.
c) 60.
d) 65.
d) 65.
69
Payment protection insurance:
a) is not covered by the Financial Services Compensation Scheme.
b) pay outs are typically limited to 12 months.
c) can cover the applicant's combined borrowing.
d) provides benefits in the event of death, accident, sickness or unemployment.
b) pay outs are typically limited to 12 months.
70
Which of the following is true in relation to long-term care insurance?
a) Any annuity payments from a long-term care plan are tax free.
b) Inability to carry out four or more activities of daily living is required for a successful claim.
c) Inability to move between rooms would be an activity of daily living for a claim.
d) Long-term care benefits are only payable when the insured is in a care home.
c) Inability to move between rooms would be an activity of daily living for a claim.
71
In relation to insurance for commercial purposes, pecuniary loss is a loss resulting from:
a) injury, illness or death of an employee.
b) a defaulting creditor.
c) criminal damage of vandalism.
d) an interruption to a business's operation.
b) a defaulting creditor.
72
Sean has been claiming on his income protection insurance policy for six months and has now been cleared to return to work on a part-time basis on a lower salary. What policy feature would solve his concern about the reduced income?
a) Suspension of premiums during a claim.
b) Proportionate (pro-rata) benefit.
c) Increasing benefit.
d) A shorter deferred period.
b) Proportionate (pro-rata) benefit.
73
Which of the following is the same for both accident, sickness and unemployment insurance and income protection insurance when taken out on an individual basis?
a) Deferred period.
b) Taxation of benefits.
c) Deduction of state benefits from payments.
d) Length of the policy term.
b) Taxation of benefits.
74
Which of the following statements is true in relation to income protection insurance (IPI)?
a) IPI provides a surrender value for early surrender.
b) Benefits are paid for a maximum of 12 or 24 months.
c) A tax-free income benefit will be payable after a specified period of incapacity.
d) It is the same as an ASU policy, but without redundancy cover.
c) A tax-free income benefit will be payable after a specified period of incapacity.
75
Which of the following would be least likely to be covered on a critical illness assurance policy?
a) Breast cancer.
b) Heart attack.
c) Angina.
d) Kidney failure.
c) Angina.
76
Which of the following is incorrect for a discounted-rate mortgage?
a) The monthly mortgage payment can vary.
b) There is usually a penalty if the loan is repaid before a specified date.
c) The discount is from the lender's standard variable rate.
d) The payable rate is directly linked to the Bank of England base rate.
d) The payable rate is directly linked to the Bank of England base rate.
77
Second charge loans:
a) do not require equity in the property.
b) are charged at a higher rate than first charge loans.
c) become part of the existing mortgage.
d) are regulated under the Consumer Credit Act 2006.
b) are charged at a higher rate than first charge loans.
78
Secured lending can only be arranged on land or property.
a) True
b) False
b) False - Although property is the most common asset used, borrowing can be secured on a range of assets.
79
Barbara, aged 70, has heard she can use her property to provide some extra cash as and when she needs it. She would like to leave as much of the property's value to her two children as possible. Which arrangement would best satisfy her needs?
a) A drawdown lifetime mortgage.
b) A home reversion plan.
c) A home income plan.
d) A lifetime mortgage.
a) A drawdown lifetime mortgage. - As Barbara doesn't need a large lump sum immediately, a plan that would allow her to take money in stages would be best. A drawdown lifetime mortgage would allow her to do this, and as interest is only charged on the money withdrawn, the roll-up would be much lower than if she had taken a large initial lump sum from a standard lifetime mortgage. The slower roll-up of interest would mean more equity when the plan ended and so more left for her children. A home reversion plan would involve her selling all or part of the property to a provider, which could mean nothing would be left for the children.
80
What type of mortgage product interest rate can vary, but cannot rise above a pre-set limit?
a) Base-rate tracker.
b) Capped rate.
c) Discounted rate.
d) Fixed rate.
b) Capped rate.
81
Equity release is regulated by:
a) the Financial Conduct Authority only.
b) the Financial Conduct Authority and the Equity Release Council.
c) the Prudential Regulation Authority only.
d) the Equity Release Council only.
a) the Financial Conduct Authority only.
82
The FCA prescribes the format of the factfind and the information required.
a) True
b) False
b) False
83
There is a well‑established pattern to the way in which most savers and investors build up and hold their assets. Which of the following is usually the last part of that pattern?
a) Current account.
b) Short-notice deposits.
c) Equity-based products.
d) Fixed-term bonds.
c) Equity-based products.
84
When advising a self-employed customer, it is important to establish their:
a) regular overtime.
b) basic salary.
c) net profits.
d) commission earnings.
c) net profits.
85
An investment product's tax treatment is the most important factor when deciding suitability.
a) True
b) False
b) False - Tax is just one factor in assessing suitability – risk, accessibility, product type, minimum contributions and investment term are just some of the other factors to be considered.
86
Bland Plc has taken out a key employee assurance policy on Jim, the sales director. In order to qualify as a business expense for corporation tax purposes, the policy would need to be:
a) a non-qualifying life assurance policy.
b) a term assurance policy with a term of at least ten years.
c) a term assurance policy with a term of five years or less.
d) a whole-of-life policy.
c) a term assurance policy with a term of five years or less.
87
What percentage of national average earnings does the state pension provide?
a) 25%.
b) 33%.
c) 50%.
d) 66%.
b) 33%.
88
Shareholder protection is appropriate for:
a) private limited companies.
b) limited liability partnerships.
c) private limited companies and large corporations.
d) public limited companies and large corporations.
a) private limited companies.
89
Which of the following is not a usual method of setting up a partnership agreement?
a) Buy-and-sell agreement.
b) Automatic accrual.
c) Automatic aggregation agreement.
d) Cross-option agreement.
c) Automatic aggregation agreement.
90
Bartholomew has debts he cannot service and has applied for an individual voluntary arrangement (IVA). He owes £15,000 to his credit card company, £2,000 to a local builder, £1,500 to his bank and £1,500 to a local furniture shop. Which of the following is true?
a) Bartholomew can insist on the IVA being approved.
b) The IVA application can be approved if the builder, bank and furniture shop agree.
c) The credit card company can veto the IVA application.
d)All four creditors must agree for the IVA application to be approved.
c) The credit card company can veto the IVA application. - Creditors who represent at least 75% of the value of the debt must agree to the IVA. 75% of Bartholomew's debts is £15,000. That means that if the credit card company does not agree to the IVA, it will not be approved.
91
To register a lasting power of attorney, application should be made to the:
a) County Registrar.
b) Office of the Public Guardian.
c) County Court.
d) Court of Protection.
b) Office of the Public Guardian.
92
Gary is a 50% partner in a limited liability partnership with his friend Mike. Gary has invested £30,000 and has provided a personal guarantee on a £50,000 bank loan the partnership took out. The business has become insolvent with debt of £1,000,000 and Mike cannot be found. What is Gary's liability?
a) 50% of the partnership's debts.
b) The £30,000 he initially invested.
c) The £30,000 he initially invested and the £50,000 bank loan.
d) All the debts of the partnership.
c) The £30,000 he initially invested and the £50,000 bank loan.
93
Novak died without a valid will, leaving an estate of £500,000. He had not made a will because he assumed that his estate would automatically pass to his civil partner, and then to their two adult children. How will Novak’s estate be distributed?
a) His wife will inherit £322,000 and the children will inherit £89,000 each.
b) His wife will inherit £411,000 and the children will inherit £44,500 each.
c) The courts will decide on a fair distribution of the estate.
d) His wife will receive £500,000, and on her death the children will inherit whatever is left.
b) His wife will inherit £411,000 and the children will inherit £44,500 each.
94
Which one of the following is not a legal requirement for a will to be valid?
a) The will must be properly executed.
b) The will must be in writing.
c) The testator must be aged 18 or over.
d) The will must be dated.
d) The will must be dated.
95
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 Monetary Policy Committee.
b) The Bank of England.
c) The Prudential Regulation Authority.
d) The Financial Policy Committee.
d) The Financial Policy Committee.
96
In relation to the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS), which of the following is true?
a) The PRA is responsible for the FOS and the FCA is responsible for the FSCS.
b) The PRA and the FCA are jointly responsible for the FOS, and the FCA is responsible for the FSCS.
c) The PRA and the FCA are jointly responsible for the FSCS, and the FCA is responsible for the FOS.
d) The FCA and the PRA are jointly responsible for both schemes.
c) The PRA and the FCA are jointly responsible for the FSCS, and the FCA is responsible for the FOS.
97
Which one of the four Consumer Duty outcomes which firms must incorporate into their approach to dealing with retail customers requires that consumers be given the information they need to enable them to make effective, timely and properly informed decisions regarding products and services?
a) Product and services.
b) Consumer understanding.
c) Consumer support.
d) Price and value.
b) Consumer understanding.
98
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.
99
Which of the following is false in relation to the fair treatment of customers?
a) It applies to all stages of the product and sales cycle.
b) It is the responsibility of senior management in a firm.
c) It requires high-quality advice to prevent mis-sales.
d) It is based on six specific rules.
d) 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.
100
In relation to the FCA’s Principles for Businesses, which of the following is false?
a) A requirement for firms to consider affordability when advising clients is covered by Principle 4 'Financial prudence'.
b) Principle 3 'Management and control' covers the way firms should address risks facing the business.
c) A Delivering good outcomes for retail customers is covered by Principle 12 'Consumer Duty'.
d) Principle 11 'Relations with regulators' requires a firm to report itself in the event of a breach of FCA regulations.
a) A requirement for firms to consider affordability when advising clients is covered by Principle 4 'Financial prudence'.
101
Compliant Finance is a small firm of advisers that have been categorised as a flexible portfolio firm for supervision purposes. This means that the firm:
a)is supervised through the FCA customer contact centre.
b) only deals with retail customers.
c) is supervised by a named individual.
d) is able to add new regulated activities without seeking permission.
a)is supervised through the FCA customer contact centre.
102
Which of the following is not an FCA-regulated activity?
a) Debt collecting.
b) Cryptoassets.
c) Mortgage administration.
d) Accepting deposits.
b) Cryptoassets.
103
Jeremy's firm is assessing his fitness and propriety and is considering his complaints record. Which element of the test would this be considering?
a) Competence.
b) Financial soundness.
c) Capability.
d) Honesty, integrity and reputation.
d) Honesty, integrity and reputation.
104
A firm has taken disciplinary action against a senior manager for a breach of FCA conduct rules. Within what period must the firm report the breach to the FCA?
a) 7 days.
b) 10 days.
c) 14 days.
d) 28 days.
a) 7 days.
105
The Senior Managers Regime includes four specific conduct rules for those covered by the regime. Which one of those rules is incorrectly stated below?
a) SM1: take reasonable steps to ensure that the business of the firm is controlled effectively.
b) SM2: take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.
c) SM3: take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibilities effectively.
d) SM4: disclose appropriately any information of which the FCA or PRA would reasonably expect notice.
a) SM1: take reasonable steps to ensure that the business of the firm is controlled effectively. - SM1 should read: you must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.
106
FCA rules require a firm to seek references from previous employers before an individual can be appointed to a senior manager or certification function. The references must cover what period?
a) The last 3 years.
b) The last 5 years.
c) The last 6 years.
d) The last 10 years.
c) The last 6 years.
107
Misha started a role as a trainee investment adviser with a firm of independent financial advisers in January 2024. By when must Misha pass an appropriate qualification?
a) March 2026.
b) December 2027.
c) January 2028.
d) December 2028.
c) January 2028. - Misha must achieve the qualification within 48 months of starting the role.
108
Under Basel II, the capital required to cover operational risk is gross annual income multiplied by:
a) 0.10.
b) 0.15.
c) 0.20.
d) 0.25.
b) 0.15.
109
Total loss‑absorbing capacity (TLAC) requirements apply to:
a) All banks and deposit-takers.
b) Globally systemically important banks.
c) Insurance companies.
d) Investment companies.
b) Globally systemically important banks.
110
The Capital Requirements Directives (CRDs) apply to banks, building societies and insurers.
a) True
b) False
b) False - It applies to banks, building societies and investment companies.
111
The Basel Committee acts under the auspices of the:
a) European Central bank.
b) Bank for International Settlements.
c) World Bank.
d) International Monetary Fund.
b) Bank for International Settlements.
112
The Basel III net stable funding ratio, requires that a bank's:
a) assets meet specified quality requirements.
b) income and profits meet certain stability standards.
c) short-term financial resources exceed short-term commitments.
d) long‑term financial resources exceed long‑term commitments.
d) long‑term financial resources exceed long‑term commitments.
113
Basel III liquidity coverage ratio requires a bank's available high‑quality liquid assets to exceed the net cash outflows expected over the next:
a) 7 days.
b) 14 days.
c) 28 days.
d) 30 days.
d) 30 days.
114
Although it has adequate assets, Blazing Bank is unable to meet customers' demands to withdraw cash. This means it has a:
a) liability concentration problem.
b) capital adequacy problem.
c) liquidity problem.
d) solvency shortage.
c) liquidity problem.
115
A suitability report is not required for:
a) Mortgages.
b) Personal pensions.
c) Open-ended investment companies.
d) Whole of life assurance policies.
a) Mortgages.
116
Which product would not require the adviser to give the customer a key information document (KID) as part of the product disclosure requirements?
a) A personal pension.
b) An investment trust.
c) A unit-linked endowment.
d) Derivatives.
a) A personal pension.
117
Bobbie has declined her adviser's recommendation and instructed them to arrange a different product. This means Bobbie will be regarded as:
a) an insistent client.
b) an exception client.
c) a professional client.
d) an execution-only client.
a) an insistent client.
118
For which product might a customer not receive a full refund of money paid to the provider when exercising their statutory cancellation rights?
a) Personal pension.
b) An annuity.
c) Unit-linked whole-of-life policy.
d) Unit-linked investment bond.
d) Unit-linked investment bond.
119
Which of the following is true in relation to advice and suitability?
a) If a suitable product is not available to an adviser, they can recommend a product that meets some of the need criteria.
b) An independent financial adviser can use panels of providers to provide advice.
c) An independent financial adviser must provide advice from all products available in the market.
d) An independent financial adviser cannot offer advice restricted to certain areas of need.
b) An independent financial adviser can use panels of providers to provide advice.
120
What is the cooling-off period for a whole-of-life assurance policy?
a) 14 days from the later of the date the contract begins or when the customer receives contractual terms.
b) 14 days from the date the application is received from the customer.
c) 30 days from the date the application is received from the customer.
d) 30 days from the later of the date the contract begins and the date the customer receives contractual terms.
d) 30 days from the later of the date the contract begins and the date the customer receives contractual terms.
121
Harminder is an investment adviser who makes decisions and executes investments for his customer without seeking permission each time. As part of initial disclosure for a new customer interested in that service, what additional document must Harminder present at the beginning of the relationship, specifically due to the nature of his services?
a) A product disclosure document.
b) An initial disclosure document.
c) A written client agreement.
d) A services disclaimer document.
c) A written client agreement. - Harminder would have to present an initial disclosure document anyway, as part of the COBS requirements. Due to the nature of his services, he would also have to present a client agreement.
122
For how long must a firm keep a record of a non-real-time financial promotion for mortgages after it was last used?
a) 12 months.
b) 24 months.
c) 36 months.
d) Indefinitely.
a) 12 months.
123
When assessing affordability, MCOB considers council tax to be what type of expenditure?
a) Committed.
b) Cost of living.
c) Basic essential.
d) Discretionary.
c) Basic essential.
124
Jane's adviser has explained that they will only provide advice on pensions for her. This is an example of:
a) focused advice.
b) basic advice.
c) generic advice.
d) simplified advice.
d) simplified advice.
125
Which of the following customers would not be considered vulnerable under MCOB?
a) Andy, who is entering a sale‑and‑rent‑back agreement.
b) Dorothy, who is applying for a lifetime mortgage.
c) John, who is exercising his statutory Right‑to‑Buy.
d) Sarah, who is buying a shared-ownership flat.
d) Sarah, who is buying a shared-ownership flat.
126
Which of the following is true regarding the Payment Services Directive?
a) Payments are not covered by the Directive if one of the payment service providers is outside the European Economic Area.
b) Payment service providers must respond to complaints within 15 working days of receipt.
c) In cases not involving fraud or negligence, the maximum a payer can be obliged to pay for an unauthorised payment is €150.
d) Banks do not have to give third‑party providers access to accounts in order to carry out transactions.
b) Payment service providers must respond to complaints within 15 working days of receipt.
127
In terms of mortgage regulation, which of the following is not one of the criteria for a mortgage to be regulated by MCOB?
a) The mortgage is taken out by an individual or trustees.
b) The dwelling must occupy at least 40% of the land.
c) The land or property must be in the UK or the European Economic Area.
d) The mortgage must be secured on land.
c) The land or property must be in the UK or the European Economic Area.
128
In which one of the following situations would a mortgage be classified as a consumer buy-to-let mortgage?
a) Tim and Penny, who intend to raise a further mortgage on their property to buy a second property to rent out as a business.
b) Stephen, who has just moved into his new wife's property and intends to raise a mortgage on his own property to bring it to a standard to let out long-term.
c) Clare, who owns three rental properties and will use one as security for a mortgage to buy another rental property.
d) Clyde, who has inherited a house that needs major renovation. He needs a mortgage to complete the refurbishment before letting it out until he has decided on his next step.
d) Clyde, who has inherited a house that needs major renovation. He needs a mortgage to complete the refurbishment before letting it out until he has decided on his next step.
129
Mahir and Salena are arranging an interest-only mortgage, supported by an ISA, to buy their new home. What obligations does their lender have?
a) To advise them on their choice of ISA or refer them to an IFA.
b) To check at least once during the mortgage term that the ISA is still in place.
c) To check the performance of the ISA at least annually.
d) To insist that they have appropriate life cover in place for the mortgage.
b) To check at least once during the mortgage term that the ISA is still in place.
130
For the purposes of the Consumer Credit Act, a small partnership has how many partners?
a) Two or fewer.
b) Three or fewer.
c) Four or fewer.
d) Five or fewer.
b) Three or fewer.
131
The EU Credit Directive requires that a representative APR must be shown in any advert that shows an interest rate. The representative APR must apply to at least what percentage of successful applicants for the credit product?
a) 26%.
b) 51%.
c) 76%.
d) 81%.
b) 51%.
132
When recommending a credit product to a customer, which of the following must the lender provide?
a) A demands and needs statement.
b) An explanation of alternative options.
c) An adequate explanation of the product.
d) A suitability report for the product.
c) An adequate explanation of the product.
133
Which of the following is one of the restrictions the FCA has placed on high‑cost, short‑term credit?
a) Fees and charges can never exceed 75% of the amount borrowed.
b) Default fees cannot exceed £20.
c) Loans cannot be rolled over.
d) Interest and fees cannot exceed 0.8% of the loan per day.
d) Interest and fees cannot exceed 0.8% of the loan per day.
134
High-cost, short-term credit must include the message: "Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org."
a) True
b) False
a) True
135
The annual percentage rate of charge applies to which of the following?
a) Mortgages and personal loans.
b) Credit cards and hire purchase agreements.
c) Mortgages, personal loans and credit cards.
d) Mortgages only.
d) Mortgages only.
136
Under the Consumer Credit Directive, how much notice must a creditor give when terminating a credit agreement?
a) Six weeks' notice, or two weeks' notice if still within the cooling-off period.
b) Two months' notice, and they must explain their reasons for termination.
c) Three months' notice, unless the debt is being sold to a third party.
d) One month's notice, and they must notify the borrower in writing.
b) Two months' notice, and they must explain their reasons for termination.
137
To meet money laundering obligations, what is the minimum length of time an organisation must keep supporting evidence of a transaction after it was executed?
a) 12 months.
b) 3 years.
c) 5 years.
d) For the length of the client relationship.
c) 5 years.
138
Freddie is making a single premium payment into a life assurance policy. What is the minimum level of premium that will require the firm to carry out due diligence?
a) €1,000.
b) €2,500.
c) €10,000.
d) €15,000.
b) €2,500.
139
EU member states must keep a central register of the beneficial owners of legal entities. A beneficial owner is someone who owns or controls at least what percentage of the entity?
a) 10.
b) 20.
c) 25.
d) 49.
c) 25.
140
The Money Laundering Regulations 2017 define a politically exposed person as anybody in a senior position in a national or international governing body.
a) True
b) False
b) False - It is defined as individuals who, because of their position, are considered to be more vulnerable to corruption.
141
The Pension Protection Fund does not protect members of personal pension schemes.
a) True
b) False
a) True
142
What is not a power available to the Pensions Regulator?
a) Issuing compensation notices for personal pension mis-sales.
b) Imposing fines or prosecuting offences through courts.
c) Issuing contribution notices.
d) Disqualifying trustees who are not considered fit and proper.
a) Issuing compensation notices for personal pension mis-sales.
143
The Insurance Mediation Directive and the Insurance Distribution Directive do not apply to tied agents of an insurance company.
a) True
b) False
a) True
144
The EU Consolidated Life Directive (2002) does not apply to which of the following?
a)Whole of life assurance.
b) Annuities.
c) Income protection.
d) Personal pensions.
d) Personal pensions.
145
Which of the following data protection principles is incorrectly stated?
a) Principle 1: data must be processed lawfully, fairly and in a transparent manner in relation to individuals.
b) Principle 2: data must be collected for specified, explicit and legitimate purposes.
c)Principle 3: data must be adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed.
d) Principle 5: data must be kept in a form which does not identify data subjects in any circumstances.
d) Principle 5: data must be kept in a form which does not identify data subjects in any circumstances. - Principle 5 allows data to be kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed, although archiving is allowed in certain circumstances.
146
Which of the following is defined as a special category of personal data under data protection legislation?
a) Sex.
b) Race.
c) Address.
d) Age.
b) Race.
147
With regard to oversight, which of the following is true?
a) Compliance officer is not a senior management function under the Senior Managers and Certification Regime.
b) External auditors are concerned with a firm's processes and risk management.
c) Unit trust trustees are the legal owners of the trust assets.
d) Internal auditors are responsible for making sure a firm's financial statements are accurate.
c) Unit trust trustees are the legal owners of the trust assets.
148
Which of the following is true in relation to UK domiciled alternative investment funds (AIFs)?
a) AIFs is the term used for UK UCITS wishing to market into the EU since Brexit.
b) UK AIFs sold in EU countries are subject to UK marketing rules.
c) UK AIFs can be marketed cross-border to a retail investor using the marketing passport.
d) Passporting rights give UK AIFs the facility to be marketed in EU member states under a streamlined process.
a) AIFs is the term used for UK UCITS wishing to market into the EU since Brexit.
149
A firm subject to the Markets in Financial Instruments Directive must seek authorisation in each EEA country it intends to operate in.
a) True
b) False
b) False
150
The Markets in Financial Instruments Directive applies to advising on:
a) life assurance.
b) mortgages.
c) unit trusts.
d) personal pension.
c) unit trusts.
