Ch 1 - Mock Questions

Question 1

Which regulatory body is responsible for the prudential regulation of banks and insurance firms in the UK?
a) Financial Conduct Authority (FCA)
b) Prudential Regulation Authority (PRA)
c) Financial Ombudsman Service (FOS)
d) Competition and Markets Authority (CMA)

Answer 1

B - Prudential Regulation Authority (PRA)

Question 2

What is the main role of the Financial Conduct Authority (FCA)?
a) Ensure financial stability in the UK
b) Supervise banks’ capital requirements
c) Regulate the conduct of financial firms
d) Set monetary policy

Answer 2

C - Regulate the conduct of financial firms

Question 3

The UK financial services industry operates under which regulatory structure?
a) Twin Peaks Model
b) Single Regulatory Model
c) Decentralized Oversight Model
d) European Union Model

Answer 3

A - Twin Peaks Model

Question 4

What is the primary objective of financial regulation?
a) Prevent firms from making profits
b) Ensure customer protection and market integrity
c) Increase tax revenue for the government
d) Reduce competition among firms

Answer 4

B - Ensure customer protection and market integrity

Question 5

The Financial Services and Markets Act 2000 (FSMA) established which of the following?
a) The Prudential Regulation Authority (PRA)
b) The Bank of England’s independence
c) The regulatory framework for UK financial services
d) The Competition and Markets Authority (CMA)

Answer 5

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Question 6

What does the FCA’s Senior Managers and Certification Regime (SM&CR) aim to achieve?
a) Ensure firms are treating customers fairly
b) Strengthen individual accountability within firms
c) Set interest rates for financial products
d) Supervise credit rating agencies

Answer 6

B - Strengthen individual accountability within firms

Question 7

Which of the following is an example of market abuse under the Market Abuse Regulation (MAR)?
a) A company issuing new shares
b) Insider dealing
c) Mergers and acquisitions
d) Paying dividends to shareholders

Answer 7

B - Insider dealing

Question 8

What is the purpose of the Financial Ombudsman Service (FOS)?
a) Prosecute financial criminals
b) Resolve disputes between financial firms and consumers
c) Oversee financial institutions’ capital adequacy
d) Enforce anti-money laundering regulations

Answer 8

B - Resolve disputes between financial firms and consumers

Question 9

What is the role of the Prudential Regulation Authority (PRA)?
a) Oversee the conduct of investment firms
b) Set capital requirements for banks and insurers
c) Regulate financial advertising standards
d) Manage consumer complaints in financial services

Answer 9

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Question 10

Which of the following is NOT a statutory objective of the FCA?
a) Consumer protection
b) Financial stability
c) Market integrity
d) Promoting competition

Answer 10

B - Financial stability

Question 11

Under the UK regulatory framework, what is the role of the Financial Services Compensation Scheme (FSCS)?
a) Regulate financial advertising
b) Provide compensation to consumers when a firm fails
c) Investigate financial fraud cases
d) Approve new financial products

Answer 11

B - Provide compensation to consumers when a firm fails

Question 13

What is the maximum compensation available under the FSCS for investment losses?
a) £50,000
b) £85,000
c) £100,000
d) £150,000

Answer 13

B - £85,000

Question 14

Which body is responsible for setting UK monetary policy?
a) FCA
b) PRA
c) Bank of England
d) HM Treasury

Answer 14

C - Bank of England

Question 15

Which of the following institutions does the PRA regulate?
a) Mortgage brokers
b) Investment funds
c) Insurance companies
d) Financial technology firms

Question 16

Which financial act introduced the ‘Twin Peaks’ regulatory structure?
a) Financial Services and Markets Act 2000
b) Financial Services Act 2012
c) Banking Act 2009
d) Companies Act 2006

Answer 16

B - Financial Services Act 2012

Question 17

The FCA’s principles for businesses require firms to?
a) Maximize shareholder returns
b) Act with integrity and in the best interests of clients
c) Only serve high-net-worth individuals
d) Seek government approval for financial products

Question 18

What is a regulated activity under FSMA 2000?
a) Buying property
b) Providing financial advice
c) Renting office space
d) Advertising job vacancies

Question 19

Which entity supervises financial crime compliance in the UK?
a) National Crime Agency (NCA)
b) HM Treasury
c) Department for Business and Trade
d) Competition and Markets Authority (CMA)

Answer 19

A - National Crime Agency (NCA)