Last Minute Study / Past Paper Questions / AI Questions Flashcards by Jack Eden

What are the FCA operational and strategic objects

Strategic:
1. Ensure relevant markets function well

Operational:
1. Consumer Protection Objective
2. Integrity Objective
3. Competition Objective

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What is the PRAs strategic objective and insurance objective

The PRA has been given a single general objective of promoting the safety and soundness of PRA authorised persons

Insurance objective relates to contracts of insurance and is: secure an appropriate degree of protection for policy holders.

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What are the specified activities under RAO?

Deposits
Electronic Money
Rights under Contract of Insurance
Shares
Debentures
Government and Public Securities
Warrants (instruments given entitlements to securities)
Certificates representing certain securities
Units in a CIS
Rights as a stakeholder pension scheme
Rights under a personal pension scheme
Options
Futures
CFDs
Llyods syndicate capacity and syndicate membership
Rights under funeral plan contract
Home finance transactions
Credit Agreements
Consumer hire agreement
Greenhouse gas emission allowance.
Rights to or interest in specified investments.

Focus on remebering deposits, contract of insurance, shares, units in CIS, options, futures, home finance, emmsion allowances.

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Which of the following is an excluded activity and, hence, does not require authorisation under
FSMA?

A. Safeguarding and administering investments
B. Dealing on an agency basis
C. Dealing as principal in connection with an employee share scheme
D. Accepting deposits

C - Dealing as principal in connection with an employee share scheme is an excluded activity and so does
not require authorisation.

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Which of the following are specified investment under the Regulated Activities Order?

A. A cash deposit held with a bank
B. Trade bills, cheques and other bills of exchange
C. Commodity futures for commercial purposes
D. Buying foreign currency for a foreign holiday

A - Commodity futures for commercial purposes, trade bills, cheques and other bills of exchange and products and FX spot transactions (such as the buying of foreign currency for a holiday or trip) are NOT
part of the list of specified investments.

The RAO excludes futures agreed for commercial purposes as opposed to those made for investment/speculative purposes.

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Which of the following are statutory notices?

A. Warning, decision and supervisory notices
B. Warning, decision and final decision notices
C. Warning, decision and discontinuance notices
D. Supervisory, discontinuance and final decision notices

A - The FCA publishes statutory notices on its website that comprise warning, decision and supervisory notices. Notices of discontinuance and final notices are deemed non-statutory for the purposes of the DEPP part of the FCA Handbook and are not published on the FCA website.

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Which of the following instruments are caught under the insider dealing legislation?

A. Debt securities
B. Private Companies
C. Spot Foreign Exchange
D. Bank account and savings account

A - Debt securities are caught under the insider dealing legislation; however, the other three options are not in scope – ie, MiFID financial instruments.

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The Guidance provided by the Joint Money Laundering Steering Group (JMLSG):

A. has been approved by the FCA and forms part of the Handbook
B. is mandatory for all investment firms
C. is approved and published by the FCA and the PRA
D. highlights best practice that has been approved by the Treasury

D - Guidance provided by the JMLSG is not approved by the FCA or the PRSA. The JMLSG guidance is not mandatory; it is industry guidance provided on best practices within the financial services sector.

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One of the two broad reasons for the JMLSG customer due diligence requirements is to help the firm be satisfied that the customer is who they say they are and there are no legal reasons preventing the relationship; the other reason is to:

A. identify the customer or beneficial owner
B. obtain verification of the beneficial owner and conduct additional checks
C. assist law enforcement
D. obtain information about the intended nature of the business relationship

C - as it is one of the two broad reasons. The other answers are the three aspects to CDD at the outset of a new business relationship.

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Which tier imposed by the Information Commissioner’s Office (ICO) is correct for the higher maximum penalty?

A. £3.8 million or 4%
B. £5.2 million or 2%
C. £8.7 million or 2%
D. £17.5 million or 4%

D - There are two tiers of penalty that the ICO can impose – the higher maximum penalty and the standard maximum:
* The higher maximum amount is £17.5 million or 4% of the total annual worldwide turnover in the preceding financial year, whichever is higher. In practice, the higher maximum amount can apply to any failure to comply with any of the data protection principles, any rights an individual may have or
in relation to any transfers of data to third countries.
* The standard maximum may be applied where there are infringements of other provisions, such as administrative requirements of the legislation. The standard maximum is £8.7 million or 2% of the total annual worldwide turnover in the preceding year, whichever is higher.

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If a firm is carrying on activity on an eligible counterparty basis, which of the following rules applies to them?

A. Best execution
B. Client order handling
C. Conflicts of interest
D. Client agreements

C - Options A, B and D are disapplied for eligible counterparties (COBS – Annex 1) business. The conflicts of interest rules (SYSC 10) are applicable to all authorised/regulated firms

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Why is a commodity derivatives dealer classified as a per se professional client?

A. Commodity derivatives are MiFID financial instruments
B. The activity is conducted by way of business
C. The dealer is an investment firm
D. The dealer is unable to qualify as a retail client

C - Clients that are investment firms are, by default, classified as per se professional clients. The dealer does not have to ‘qualify’ for re-classification to retail client; they could request this in order to obtain greater regulatory protection

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In relation to non-MiFID business, which of the following retail clients may be suitable for reclassification as an elective professional client?

A. A newly appointed trustee of a trust exceeding €500,000
B. A client to whom the firm regularly sends financial promotions for non-mainstream investment opportunities
C. A client who has recently inherited a sizeable portfolio
D. The spouse of one of the firm’s investment managers

B - For non-MiFID business, clients whom the firm assesses as capable of making their own investment decisions can be reclassified as elective professional clients. If a firm considers a client sufficiently sophisticated that the firm is able to promote non-mainstream investments to them, that client is likely to satisfy the qualitative assessment for an elective professional client. The other examples do not give any indication of investment expertise.

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Which of the following is a retail investment product?

A. Home income plan
B. Occupational pension scheme
C. Unit in a collective investment scheme
D. Commodity derivative

C - A unit in any type of collective investment scheme, whether or not the scheme is regulated, is classed as a retail investment product

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Which of the following statements is TRUE about a client that is an eligible counterparty for executing orders?

A. If the client requires investment advice they will be classified as a per se professional client for that service
B. The eligible counterparty status provides the client with regulatory protection for the execution of orders
C. The firm must conduct both qualitative and quantitative assessments on the client before executing orders
D. The firm is only required to conduct a qualitative assessment on the client before executing orders

A - An eligible counterparty only has that classification in relation to eligible counterparty business, such as the execution of orders. If the client requires another service such as investment advice, they will be classified as a per se professional client for that service. Eligible counterparties have little or no protection under the regulatory system. Options C and D are only relevant for retail client reclassification

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What are the retail investment products?

(a) a life policy; or
(b) a unit; or
(c) a stakeholder pension scheme
(d) a personal pension scheme (including a group personal pension scheme);
(e) an interest in an investment trust savings scheme; or
(f) a security in an investment trust; or
(g) any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in the financial asset; or
(h) a structured capital-at-risk product;

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Which of the following is TRUE in relation to the rules on disclosure of costs and associated charges for MiFID business?

A. They apply to retail and professional clients
B. Commissions have to be shown separately
C. All fees, commissions and charges must be disclosed by the firm
D. A firm has to disclose any taxes payable via the firm

C - The disclosure of costs and charges has to be made to retail clients. Commission charges/costs must be itemised separately.

A firm has to disclose all related fees, commissions, charges and expenses and any taxes payable via the firm.

The FCA removed the requirement for professional clients and ECPs – although they could request for this information, and a firm would need to decide whether to provide based on commercial decisions, as it is not a regulatory requirement.

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In which of the following circumstances does a firm have to send a suitability report?

A. If the recommendation is to increase a regular premium to an existing life insurance contract
B. If the recommendation is for a client to undertake a pension transfer
C. If the firm is acting as an investment manager for a retail client and recommends a regulated collective investment scheme (CIS)
D. If the recommendation is to make a further investment into an existing packaged product

B - the other options are all exempt from the requirement to send a suitability report.

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In which of the following circumstances do the rules on appropriateness apply?

A. Personal recommendation to a retail client to purchase a UK-authorised collective investment scheme
B. Retail client responding to a direct offer financial promotion to deal in warrants
C. Discretionary portfolio management for a retail client
D. Personal recommendation to a professional client to invest in a hedge fund

B - The rules on non-advised sales (appropriateness) apply to a range of MiFID and non-MiFID investment services which do not involve advice or discretionary portfolio management.

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In which of the following circumstances is an appropriateness assessment required?

A. Portfolio manager making a discretionary decision to deal
B. Financial adviser who advises a client to invest in a UK-authorised CIS
C. Private wealth manager who advises a professional client to invest in a hedge fund
D. A firm transmitting an execution-only order in a security admitted to trading on a authorised investment exchange (RIE)

D - Options A, B & C would require the firm to undertake a suitability assessment. Whereas option D is captured by the requirement for the firm to complete an appropriateness assessment because it is providing an MiFID investment service

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Which of the following is one of the FCA’s Consumer Duty ‘outcomes’ that firms must comply with?

A. Communications outcome
B. Treating customers fairly outcome
C. Price outcome
D. Consumer understanding outcome

D- because the four outcomes in the Consumer Duty are the:
* Products and Services Outcome
* Price and Value Outcome
* Consumer Support Outcome, and
* Consumer Understanding Outcome.

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What are the 4 Consumer Duty (PRIN 12) outcomes?

Products and Services Outcome
Price and Value Outcome
Consumer Support Outcome, and
Consumer Understanding Outcome.

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How often must a firm internally reconcile client assets tak8ng the standard approach?

A. Everyday
B. Monthly
C. As often as is necessary
D. At whatever frequency is requested by the client

C - It is up to a firm to decide the necessary frequency of completing reconciliations of safe custody
accounts.

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What is the maximum amount of monetary award against an authorised firm that the Financial Ombudsman Service (FOS) can make?

A. £85,000
B. £170,000
C. £375,000
D. £415,000

D - The maximum monetary amount that the FOS can award against a firm is £415,000. For complaints about acts or omissions by firms on or after 1 April 2019 and which are referred to the FOS on or after 1 April 2023.

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Why does the Money Laundering Reporting Officer (MLRO) have responsibility for the training of staff in relation to identifying money laundering activity? A. Compliance officers require MLROs to undertake this function B. It is required by the JMLSG C. It is required by the FCA D. It is required by the Proceeds of Crime Act

**C** - The MLRO’s responsibility is derived from a firms responsibility to have appropriate systems and controls.

When a firm gives permission to an employee to undertake a personal account transaction it must: A. promptly notify the FCA B. promptly notify the employee C. receive prompt notification that the transaction has been conducted D. obtain permission from the FCA

**C** - Personal account dealing rules require details of the transactions undertaken to be notified to the firm promptly so that it keeps record of these personal transactions.

Which of the following is true with regards to the Inducements rules for MiFID business? A. Minor non-monetary benefits do not need to be disclosed to retail clients B. The requirements apply to activities undertaken with a client classified as an ECP C. Firms are not required to provide detailed disclosure to clients, even when requested D. Minor non-monetary benefits must be capable of enhancing the quality of service provided by the firm to the client

**D** - The inducements rules should be seen as payment rules as they prohibit any payment, unless expressly permitted. The rules on inducements apply to firms carrying on designated investment business which is MiFID business as well as non-MiFID business. The rules only apply to professional clients and retail clients; therefore, investment firms undertaking ECP business will not be subject to the detailed inducement provisions A minor non-monetary benefit is one which: * is clearly disclosed prior to the provision of the relevant service to the client is capable of enhancing the quality of service provided to the client * is of a scale and nature that it could not be judged to impair the firm’s compliance with its duty to act honestly, fairly and professionally in the best interests of the client Firms can satisfy their disclosure obligations under these rules if they: * disclose the essential arrangements for such payments/benefits in summary form undertake to their client that further details will be disclosed on request, and * do, in fact, give such details on request

Which of the following is true of persons discharging managerial responsibilities under UK MAR? A. Notifications must be made promptly B. Notifications must be made within 7 days C. There are no restrictions relating to the pending announcement of a firm’s annual or interim results D. The FCA must approved all transactions 30 days prior to the company’s annual or interim results being announced

**A** - the notification must be made promptly after the transaction/s has been executed.

The Proceeds of Crime Act (POCA) 2002 includes provisions related to which of the following? A. The offence of market abuse B. The offence of making false and misleading statements C. The protection of persons who inform authorities of their concerns D. The requirement to disclose suspicious money laundering transactions

**D** - POCA is concerned with laundering the proceeds of criminal activities

When must a firm normally send a written confirmation after carrying out an order for a retail client? A. The same business day B. No later than the next business day C. Within three business days D. Within five business days

**B** - For retail clients, the trade confirmation must be sent as soon as possible and no later than the next business day.

In relation to the FCA’s complaints handling requirements, which of the following is TRUE? A. The complaint must be dealt with at the firm by an individual involved in the original matter B. The firms is not obliged to advise the complainant of their rights to take the complaint to the FOS C. The firm’s procedures for the receiving of eligible complaints apply to complaints received by both oral and written notification D. The firm must maintain a document on its internal procedures for dealing with complaints. However, it is only required to provide this to clients/complainants when requested to do so

**C** - Customer complaints procedures apply to complaints received orally or in writing

Which of the following is TRUE in connection with a MiFID firm communicating with retail clients? A. The firm’s name must be included in the communication B. The information can highlight benefits without having to highlight risks C. Financial promotions must name the FCA or PRA as the firm’s regulator D. Where comparisons are made, the source of the information does not have to be identified

**A** - The firm’s name must be included in communications.

The rules on personal account dealing do not apply to which of the following? A. Options B. Overseas markets C. Life policies D. Initial Public Offerings (IPOs)

**C** - The rules on personal account dealing do not apply to personal transactions in life policies.

Under the Consumer Duty Cost-Cutting rules, which of the following applies regarding a firm’s requirement to avoid causing foreseeable harm to retail consumers? A. All retail customers must be protected from all risks associated with buying a firms product or service B. Firms are prohibited from talking a commercial view to profiting from retail consumers on new products and services C. Firms must ensure that retail consumers understand and accept the inherent risk associated with their product or service D. Firms must ensure that all products or services sold to retail consumers are designed to meet their financial needs and requirements

**C** - because Firms must ensure that retail customers understand and accept the inherent risk in products, Firms do not have a responsibility to protect customers from all foreseeable harm and customers must understand and accept inherent risks associated with products (which must be presented in a manner by firms that is clear, fair, not misleading and transparent).

A firm is permitted to deal for itself prior to the publication of a research recommendation under which of the following circumstances? A. It anticipates customer demand B. It is a market maker acting in good faith C. The market price is likely to be unaffected by publication D. The firm’s documentation states that it may deal ahead of publication

**B** - Exceptions to the restriction on trading ahead of the publication of research include execution-only client orders and market makers acting in good faith.

Which of the following is true of the restrictions on the promotion of certain financial instruments to retail clients? A. There are no bans or restrictions on firms to incentive retail clients to invest or purchase high risk investments B. It relates to the sale of ‘Non-Mass investments’ C. Only ‘Restricted Mass Markets Investments’ can be marketed and sold to Professional Clients D. Risk warnings can be generic and be available on the firm’s website

**B** - From 1 December 2022, rules related to risk warnings for financial promotions of high-risk investments apply, in particular: * Promotion of ‘Non Mass Market Investments’ (NMMI) is banned to retail investors. * Promotions of ‘Restricted Mass Market Investments’ (RMMI) are subject to certain restrictions to retail investors * Banning incentives to invest – i.e. the provision of monetary or non-monetary benefits such as refer a friend or new joiner bonuses * Personalised risk warnings. * Investors with a firm must be provided with a personalised risk warning – it must include the client’s name.

What must firms be subject to to be classified as a Common Platform Firm?

Firms subject to either the Capital Requirements Directive (CRD) or the Markets in Financial Instruments Directive (MiFID).

What does DTR stand for?

Disclosure and Transparency Rules (DTR). Contained in the FCA’s DTR Sourcebook. The rules apply to issuers of securities on certain markets and aim to ensure that information is properly handled

Who are the Joint Money Laundering Steering Group (JMLSG)?

A group whose membership is made up of trade bodies in the financial services sector. The JMLSG has published guidance notes which set out how firms should interpret and implement the Money Laundering Regulations. This guidance is not binding but, where there is a breach, compliance with the guidance

What is a nominated officers (NO)?

A term for the officer who is required to receive a firm’s internal suspicion reports under the Proceeds of Crime Act (POCA), the Terrorism Act and the Money Laundering Regulations. In practice, this is usually the same individual as the money laundering reporting officer (MLRO)

What is the Public Interets Disclosure Act (PIDA) 1998?

Realtes to whisleblowing. Among other things, this provides protection for employees who, in good faith, disclose suspicions of wrongdoing within an organisation. Firms cannot retaliate against its staff and must have suffienet procedures in this and appoint a whilsterblower champion.

Who are the Regulatory Decisions Committee (RDC)?

* An (almost) independent committee (part of the FCA board) make the certain regulatory decisions. * The committee reviews evidence presented by both FCA staff and the firm or individual in question, providing an unbiased judgment on matters like sanctions, warnings, and disciplinary actions. * The RDC can refuse/revoke Part 4A permission and give prohibition orders. Essentially the FCA’s final decision maker on enforcement. * They can set policies around regulated activities and make Part 4A changes. | The PRA use the Enfrocement Decision Making Committee (EDMC).

What is the UK European Market Infrastructure Regulation (UK EMIR)?

The European Market Infrastructure Regulation (EMIR) on derivatives, central counterparties and trade repositories came into force in 2012. UK EMIR became applicable on 31 December 2020, following the end of the Brexit transition period. The UK EMIR is where you report derivative transactions.

What is Short Selling Transaction Reporting (UK SFTR)?

- Regulated by the FCA though the EU Short Selling Regulations (SSR) and the amendment though the EU Exit Regulation 2018. - Need to report your transactions if you are net short.

What is the punishment for breaching genereal prohibition?

2 years jail and unlimited fine. All previius agreements are unenforceable. Defense: they took all reasonable precautions when performing due diligence

What is a prohibition order?

- The FCA/PRA can issue a prohibition order to stop an entity from performing a function. - Breach of order is a fine. - You can apply to varied or revoked. - Defense: they took all reasonable precautions when performing due diligence

What are the three types of customer due diligence (CDD) requiremetns set out by the JMLSG Guidance?

1. ID Customer/Beneficial Owner 2. Get Verification of their ID 3. Get information about the intended nature of their business.

When would you need to carry out an appropriateness test?

Non-advised sales apply to a range of MiFID (and some non-MiFID) investment services which do not involve advice or discretionary portfolio management. It occurs when a cleint is is wanting to do a non-advised transaction. It should cover the clients knowledge regarding service/transaction type, nature, volume, frequency in transactions, level of education. ## Footnote Firms don’t need to ask for this test if * they are execution only * client is insistant * tested already for the same client doing the same type of transaction

What should a firm do if a client does not pass the appropriateness test?

They should warn its not appropriate

What is the difference between compulsory jurisdictions (CJ) and voluntart juristiction (VJ) in reagards to the Financial Ombudsmen Service (FOS)

CJ relates to FCA authorised firms where its compulsory for unresolved complaints to be brough to the FoS. Vj refers to when a firm opts into being in an agreement with the FOS, becoming VJ participants.

What are the Penalties for Market Abuse Offenses | UK MAR penalties

Conviction: 1 year jail and limited fine Conviction on Inducement: 10 year jail and a fine Pubilic Censure

What are the penalties for breaching the proceeds of crime act? (i.e. relation to criminal property, tipping of a person with a SAR report against them), disclosure failere)

- 14 years in jail and a fine for Concealment, Arrangement, Acquisition. - 5 years in jail and a fine for failing to disclose. - 2 years in jail and a fine for tipping off.

What are the penalties for bribing?

10 year jail for the indivdual. Corporate offence is an unlimtied fine.

What are the 4 forms of market manipulation?

1. Manipulating Transactions 2. Manipulating Devices 3. Dissemination 4. Benchmark manipulation

What should be known by managers/ Persons discharging managerial responsibilities | Managers Transactions (UK MAR Section 19)

They (and their connected persons) are required to disclose personal transactions in relation to their firms issuance. These notifications must be made promptly after the transactions and can only be made 30 calendar days before the companies interim or annual financial report.

What is the primary purpose of the FCA's client suitability requirements? A. To maximize firm profits B. To ensure clients receive advice tailored to their needs C. To guarantee clients achieve high returns D. To simplify financial product offerings

How does the FCA define "suitability" in the context of financial advice? A. Recommending high-yield investments B. Matching a product or service to a client’s needs, goals, and risk tolerance C. Promoting low-risk products to all clients D. Following industry trends without individual assessment

Why is it important for firms to comply with client suitability requirements? A. To avoid FCA audits B. To protect clients and maintain trust in the financial industry C. To prevent competitors from gaining an advantage D. To comply with international trade agreements

What key factors must firms consider when assessing the suitability of a product for a client? A. Product popularity and commission fees B. Client's age, financial situation, goals, and risk tolerance C. Market trends and competitor offerings D. Past performance of similar products

How should a firm evaluate a client’s investment knowledge and experience? A. By assuming all clients are inexperienced B. By reviewing their portfolio size only C. By asking targeted questions about their past investment activities and understanding of risks D. By analyzing their income levels

What steps must firms take to ensure a product aligns with a client’s risk tolerance? A. Offer only low-risk products B. Conduct a detailed risk assessment and confirm the client understands the associated risks C. Encourage the client to take more risk for potential higher returns D. Avoid assessing risk tolerance if the client is confident

What are the FCA's expectations regarding the documentation of suitability assessments? A. Firms are not required to document suitability assessments B. Firms must keep comprehensive, accurate, and up-to-date records of all suitability assessments C. Documentation is only required for high-net-worth clients D. Firms should only document assessments if requested by the FCA

How long must firms retain records of client suitability assessments under FCA rules? A. 1 year B. 3 years C. 5 years D. 10 years

What are the consequences for firms that fail to meet suitability requirements? A. Loss of clients and reduced profits only B. Fines, sanctions, and reputational damage C. Immediate business closure D. Temporary suspension of services

How can firms demonstrate compliance with the FCA’s suitability rules during an audit? A. By submitting all client complaints B. By providing documented assessments and evidence of client communication C. By showing marketing materials used for client acquisition D. By highlighting their overall profit margins

How should a firm handle a situation where a client insists on investing in a high-risk product that doesn’t match their risk profile? A. Allow the client to proceed without further action B. Refuse to provide any advice C. Explain the risks clearly, document the client’s decision, and ensure they understand the potential consequences D. Encourage the client to choose a safer product instead

hat steps should be taken if a client’s financial situation or objectives change significantly? A. Update the client’s suitability assessment and adjust recommendations accordingly B. Ignore the changes and continue with the original plan C. Terminate the client relationship D. Offer only low-risk products going forward

How do FCA suitability requirements interact with MiFID II regulations? A. They replace MiFID II requirements B. They are aligned and reinforce the need for suitability assessments C. MiFID II overrides FCA requirements entirely D. They apply only to UK firms working in the EU

What is the primary purpose of a suitability report? A. To explain why a financial product or service is suitable for a client’s needs B. To summarize all available financial products for the client C. To promote high-performing investment funds D. To meet marketing requirements

When is a suitability report required? A. Only when the client requests one B. Whenever a firm provides personal recommendations about regulated financial products C. Only for high-value investments D. Only during audits

Who is responsible for ensuring the accuracy of a suitability report? A. The client B. The financial advisor or firm providing the recommendation C. The FCA directly D. An independent auditor

How should a suitability report handle conflicts of interest? A. By ignoring them to maintain client trust B. By disclosing them fully and explaining how they are being managed C. By focusing only on the benefits of the recommendation D. By avoiding mention of conflicts entirely

What is the consequence of failing to provide an accurate and compliant suitability report? A. The client may reject the recommendation B. FCA fines, sanctions, and reputational damage to the firm C. The firm must offer free advice to the client D. No significant consequences

What is the primary distinction between a suitability assessment and a suitability report? A. The suitability assessment evaluates the client’s needs, while the suitability report documents and explains the recommendation based on that assessment. B. The suitability assessment is optional, while the suitability report is mandatory. C. The suitability assessment involves collecting regulatory data, while the suitability report is only for internal use. D. The suitability assessment is about market trends, while the suitability report focuses on client satisfaction.

**A** - The suitability assessment focuses on analyzing the client’s needs and determining the appropriate product or service, while the suitability report is the written explanation of why that product or service is recommended, provided to the client for transparency and regulatory compliance. Both are crucial in ensuring that advice is appropriate and aligned with the client’s best interests.

Under SM&CR, which of the following is the primary responsibility of a Senior Manager? A. Ensuring the firm has a business continuity plan in place. B. Reviewing marketing materials for regulatory compliance. C. Ensuring the firm complies with all employment law regulations. D. Overseeing and managing client relationships.

A - Under the SM&CR, one of the primary responsibilities of senior managers is ensuring that the firm has appropriate systems and controls in place, including a business continuity plan. This plan ensures that the firm can continue to operate in the event of disruptions, such as financial crises or operational issues, and that it can fulfill its regulatory obligations even during emergencies.

Under the FCA Handbook, which of the following is not required to include a Key Investor Information Document (KIID)? A) UCITS (Undertakings for Collective Investment in Transferable Securities) B) Non-UCITS retail schemes C) Packaged Retail and Insurance-based Investment Products (PRIIPs) D) Hedge funds

Which of the following categories does PRIIPs include? A) All insurance products B) Only retail clients' investments in UCITS C) Packaged retail investment products and insurance-based investment products D) Only investments in financial instruments listed on exchanges

If a firm applies for authorisation for an individual to perform a Senior Management Function, regulatory references should be obtained from all their previous employers over what MINIMUM period? A Three years B Four years C Six years D Seven years

Who is responsible for the completeness and accuracy of information and the appropriateness of recommendations when a MiFID firm relies on a third party firm? A Both the third party firm and the MiFID firm B The third party firm only C It depends on the terms of the third party agreement D The MiFID firm only

B - The third party firm only

Which of the following is TRUE in relation to a portfolio manager's duty to act in a client's best interest when transmitting client orders? A. The application of best execution does not apply to a fund manager transmitting orders to a broker B. It must review its execution policy on a quarterly basis C. The portfolio manager must provide appropriate information to the client in respect of its execution policy D. There is no requirement for a portfolio manager to review the prices obtained from the broker

The FCA deems a financial promotion poses an unacceptable risk to consumers. What powers of intervention does it have? Ban the product: A. immediately for up to 24 months B. for up to 12 months without consultation C. only after a consultation process D. only if it is associated with new social media

In accordance with the rules on client classification for a MiFID firm, which of the following is in the Quantitative test in respect of elective professional clients? A. The client has made a significant trade in the past year B. The client has traded 10 times in the last year C. The client’s portfolio exceeds Euro 500,000 D. The client’s total net worth exceeds Euro 500,000

Which of the following payments are permitted to a third party on behalf of a client, by an introducer of business? A. Payments made only from and to a bank outside the EEA related to the volume of business introduced B. Fees which are necessary for the provision of the service - such as custody fees C. Subscriptions to information services from overseas where the payments are not disclosed to the client D. Allocations of gold bullion held by a custodian bank in New York where the client is informed only that such payments are made but not their value

If a firm is unable to provide a retail client with the total adviser charge it will levy before it makes a personal recommendation, then the firm must: A. issue the client with a disclaimer B. provide its charging structure before it gives any advice C. provide an estimate at least 14 days in advance D. issue the client with a reason for the non-disclosure

Which of the following imposes the anti-money laundering requirements of criminal law on a stockbroker? A. Systems and Control Sourcebook B. Joint Money Laundering Steering Group guidance C. Proceeds of Crime Act 2002 D. Financial Services and Markets Act 2000

If a complainant accepts an adjudication decision made by the Financial Ombudsman Service (FOS), to what extent, if any, is it binding? A. It is binding on the complainant only B. It is binding on the firm only C. It is binding on both parties D. It is not binding on either party

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? A. 4.00pm B. 5.00pm C. 7.00pm D. 8.00pm

An authorised firm holds client money and is subject to the MiFID client money rules. A retail client must be informed: A. of the firm's obligations under the CASS rules B. of the due diligence in selecting a third party custodian C. what will happen in the event of a change of Financial Services Compensation Scheme limits D. what will happen if the third party that holds its funds becomes insolvent

A firm has received an instruction from a third party IFA. When must the firm report the transaction to the client following receipt? A. By the end of the following day B. In the monthly transaction summary C. In the quarterly reviews D. Never; it only reports to the IFA

For retail clients, periodic reports must contain prescribed information, which includes: A. the firm's name B. the firm's VAT number C. a summary of the performance of various stock markets D. the portfolio benchmarked against an appropriate index

With respect to clients, what is the general purpose of the provision of information rules within FCA's COBS? A. To provide information about the financial circumstances of the client B. To enable the client to assess the performance of the firm C. To provide information about costs and associated charges D. To list the historical investment performance of the firm

C? Check

A professional client receives a financial promotion. Which one of the following statements relating to this promotion is TRUE? A. Promotions to professional clients must always be in writing and identifiable as such B. The financial promotion rules do not apply to professional clients C. The promotion need not be clearly identifiable as a financial promotion as it is being made to a professional client D. As the client is either a retail client or a professional client the promotion does not need to be identifiable as such

In which of the following circumstances is a client agreement required when non-MiFID designated investment business is supplied? A. To a Retail Client B. To a Professional Client C. To an Eligible Counterparty D. To all customers

Which types of provisions which can be incorporated by the FCA are rules which are not binding in their own right? A. Directions and requirements B. Evidential provisions C. Guidance D. UK legislative material

What is the role of the Financial Ombudsman Service? A. Administer and operate a dispute resolution service for clients of FCA-authorised firms B. Take civil action against FCA-authorised firms for valid customer service complaints C. Replace the role of the court system with a free dispute resolution service to eligible clients D. Make rules and regulations related to the handling of complaints about financial services firms

Which activity falls within the scope of the Training and Competence Sourcebook and requires an individual to have a full qualification before commencing that activity? A. Providing basic advice on stakeholder products B. Advising on friendly society tax-exempt policies C. Advising on regulated sale and rent back agreements D. Providing advice on non-investment insurance products

In line with the FCA Conduct of Business Sourcebook, what method of information storage meets the requirements for a durable medium? A. Wealth manager's website B. Financial Times website C. Email from an investment manager D. Sales call between investment manager and client

Which body has the power to refuse an application for Part 4A permission or cancel an existing permission? A. Financial Conduct Authority B. Training and Competence Committee C. Regulatory Decisions Committee D. Prudential Regulation Authority

A client wants to cancel her investment in an authorised UK unit trust. What is the maximum number of days after her original purchase that she can cancel without incurring possible charges? A. 7 days B. 14 days C. 28 days D. 30 days

Which of the following is TRUE of the FCA's principles based approach to money laundering? A. Senior management can outsource the responsibility for the controls that will apply to the firm B. A firm is not required to undertake identification of its customers prior to the provision of designated investments C. Senior management is not liable for any risks associated with the firm's regulatory requirements D. The firm has to have appropriate and adequate systems and controls based on the firm's business activities

What is the MAXIMUM level of settlement discount normally available in relation to an enforcement penalty imposed by the FCA? A. 15% B. 25% C. 30% D. 40%

The general defence of 'not expecting any person to deal....' is only available against an allegation of insider dealing: A. in relation to the offence of disclosure B. in relation to the most serious aspects of this offence C. if the offence was committed within the previous three months D. if the offence related to debt securities or warrants

Financial firms which prepare research recommendations have to comply with detailed standards in relation to presentation and disclosure in order to ensure that: A. conflicts of interests cannot arise B. disclosures of interests are appropriately managed C. past performance figures are not distorted D. such recommendations are fairly presented

In accordance with the SYSC rules on conflicts of interests, where a conflict arises, which of the following must the firm do as a MINIMUM requirement? A. Telephone the client and inform them of the conflict of interest B. Email the client and inform them of the conflict of interest C. Telephone the client, give them sufficient information and ask the client to decide how to proceed D. Email the client with sufficient information and ask the client to decide how to proceed

An exemption from the FCA's CASS rules is granted in connection with: A. ICVCs B. Corporate bonds C. Private company shares D. ISAs

What do you have to do to get reclassifed as an Elective Professional Client?

Pass Qualatative test (assesed by the frim) and for MIFID 10 large transactions in each quarter or a portfolio of 500k Euros or worked as a professional in the industry in the alast ear in the sector which the trnascaiton is happening.

If a firm is subject to Custody/Client Money rules what must be disclosed to the client?

The thrid party's name and information around protections in place for if the custody was to become insolvent.

How frequent do MIFID fims have to reveiw their execution policies?

Annually or when a material change takes place

Are execution polcies disclosed to retail and professional cleints?

Yes

What is the one non-binding status of provisions in the FCA handbook?

E. Evidential Provisions

What is the criteria for being classed as an ECP?

A client can only be categorised as an ECP for the following types of business: * executing orders, and/or * dealing on own account, and/or * receiving and transmitting orders. For Per Se ECP, they also must be a professional investor first but not be a large undertakings comapany.

Are COBS rules applied to ECP Classed Clients?

No. Only retail and professional

What are the requirements for a retail client to become an elective professional cleints?

1. Qualitative test: When the frim has assesed their expertise and knowledge 2. Quantative test: cleint has done 10 transactions in relevent market in each of the past 4 quarters, portfolio is >500keuros, client has worked in the industry with that product for over a year.

What are the quantitative and qualitative requirements for a professional client to become an elective ECP client?

Qualitative: Qualitative test: When the frim has assesed their expertise and knowledge Quantitative: 1. Portfolio >10mn 2. 10 transaction each quarter of significant size 3. They are authorised to carry out activty on behalf of a professional /administrating authority

Do insurance firms issuing life polcies need a client agreement?

No. It only applues to designated investment business for retail cleints and for MIFID musiness and achillary services or third country business carried on for a retail or professiaonl cleint.

Should the client agreement contain conflicts ofs interest to retails clients?

yes

How long should client agreements be kept for?

5 years and indefintely for Pension Transfers.

List some of the disclosures of costs that a retail client must know

1. Total price to be paid 2. Costs charged by the firm 3. costs and taxes which are not paid or imposed 4. How costs are to be paid 5. information about the compensation scheme.

Does disclosure of costs apply to a professional client

No. Only retail but it can be requested by the professiaonal cleint or ECp but the firm does not have to.

If the final decision of the FOS is accepted by the claiment, to which party is it binding to

Both the Firm and the claiment.

Are professional cleints able to go to the FOS?

What firm activities are not subject to CASS

* UCITS * ICVCs * A credit instituion * Coins held for the value of their metal * money due and payable to the firm * Client transfers full ownership (Right of use) issued through a mandate

When must a CASS Resolution pack be distributed when a firm is asked?

No longer than 48hrs

Does the TC sourcebook apply to professional investors?

No. Only retail clients

True or False: Firms must not allow an employee to carry on any of those specified activities without appropriate supervision

True - Firms are required to ensure that employees are appropriately supervised at all times. Firms are also required to review on a regular basis their employees’ competence

What three section make up the SM&CR?

1. Senior Managers Regime SMR - Senior Managers who need FCA or PRA approval (ones performing SMFs) 2. Certification Regime - for employees in significant harm functions. Firm assess the staff on being fit and proper 3. Conduct Rules -High level minimum standards on what all staff should act like and includes additional rules for SMF only.

What does the FCA Threshold Conditions (TCs) relate to including to the business?

The minimum standards expected by authorised persons. The firms business model also has a TC applies where it must show it meets the clients need and doesn't place them at undue risk

What SMF roles for an FCA solo regulated frim are subject to SM&CR approval?

*SMF1 – Chief executive * SMF3 – Executive director * SMF27 – Partner * SMF9 – Chair * SMF16 – Compliance oversight * SMF17 – MLRO * SMF18 – Other overall responsibility (enhanced firms only).

Is a client agreement needed for designated investment business for a professional client?

No. Retail client only for this type of investment

Is a client agreement needed for MIFID business and ancillary services for a professional and retail client?

Yes

Is a client agreement needed for insurance firms issuing life policies as principal?

No.

Must a frim provide information about the firm itself to ECP clients?

Yes to all classifications

Must a frim provide information about the Nature of Risks to professional and retail clients?

Yes

Are ECP clients subject to receiving information in regards to UK MIFID Custody/Client Money Rules?

Yes, all classifications are

Which of the following requirements is a Statement of Principle relating to approved persons? A To act with due skill, care and diligence B To prevent financial crime taking place C To obtain qualifications for the role they perform D To act in their clients' best interests at all times

Which of the following must be disclosed to a retail client when holding designated investments or client money subject to MiFID? A The name or names of nominee companies used B Details of any banks used to hold or transmit client money C Details of any investor compensation scheme applicable D Details of the national law applicable

The main focus of the FCA's supervisory approach on which its resources are focused is to: A. ensure the risks faced by financial firms are minimised B. reduce financial crime C. achieve its statutory objectives D. test and implement sound systems and controls within firms

To successfully apply for exemption from the qualification requirements prescribed by the training and competence regime, an employee must have relevant overseas experience covering what MINIMUM period? A. One year B. Two years C. Three years D. Five years

If a firm adopts the alternative approach to handling client money, at what MINIMUM frequency must it carry out internal client money reconciliations? A. Each business day B. Twice a week C. Once a week D. Fortnightly

Which of the following circumstances requires a regulated firm to seek approval for an individual to be an approved person? If the individual is going to be: A. involved in staff recruitment and training B. a non-executive director C. responsible for other members of staff D. employed in compliance

Which ONE of the following is a defence against an accusation of bribery? A. The allegation is against a third party agent and the company was unaware of their activities B. Adequate procedures to prevent bribery were put in place C. The allegation is made against an unincorporated group D. The practice is generally accepted and not illegal in the jurisdiction it is alleged to have taken place

How would a trading venue typically become aware of a suspicious transaction? A. In its regular audit B. When arranging or executing a transaction C. Where it has received a tip-off from an insider in connection with the transaction D. Where a client encashes their portfolio in full without giving a reason for doing so

A client's portfolio is managed on a discretionary basis. A key risk to the client in these circumstances is that: A. the FCA's Conduct of Business Rules will only apply on a limited basis B. churning may take place C. an assessment of suitability on the client's portfolio will not be required because the client will be a professional client D. switching will always result in the payment of additional fees

Which of the following is exposed to the offence of insider dealing under the Criminal Justice Act 1993? A. A director of the company concerned acting as a broker in the shares of that company B. An employee of the company concerned who buys the company's shares after learning of a purchase by the Chairman C. The audit partner who sells the company's shares after reviewing the audit file prior to signing the annual accounts D. A shareholder acting on information contained in the company's regular letter to shareholders

In order to comply with the Data Protection Act 1998, for how long should personal data be held? A. Indefinitely B. No longer than 3 years C. No longer than 5 years D. No longer than necessary

When the FCA requires a firm to provide specified information, how much notice MUST be given to the firm? A. A reasonable period B. 24 hours C. 5 business days D. 10 business days

An exemption from the FCA's CASS rules is granted in connection with: A. ICVCs B. Corporate bonds C. Private company shares D. ISAs

If a firm intends to provide information to clients by means of a website the FCA requires that: A. the information is displayed every day between 09:00 and 17:00 B. clients are sent a letter detailing the website address C. the information is updated at least on a weekly basis D. there must be evidence that the client has regular internet access

Which of the following must be disclosed to a retail client when holding designated investments or client money subject to MiFID? A. The name or names of nominee companies used B. Details of any banks used to hold or transmit client money C. Details of any investor compensation scheme applicable D. Details of the national law applicable

Who is responsible for assessing competence under the Training and Competence regime? A. The individual's firm B. The FCA C. The individual themselves D. The PRA

A firm was unable to provide a retail client with information on costs and charges at the time the investment service was provided. The firm should: A. avoid future transactions for this client until they are in a position to provide the information B. remove the charges from this transaction C. provide a total for all charges as soon as possible D. provide the basis on which the charges will be calculated

An employee was exempt from the personal account dealing rules because: A. all of their deals were below the normal market size B. their deals were of insignificant value C. their firm was outside of the closed period D. their deals were executed by a discretionary management service with which they have no contact

One of the aspects of the purpose of the Disclosure Rules is to: A. set out specific circumstances in which an issuer can delay the public disclosure of inside information B. ensure firms disclose potential conflicts of interest C. ensure firms disclose all necessary information to clients prior to dealing D. set out the format in which information must be disclosed

Why would a criminal, involved with money laundering, undertake layering? A. In an attempt to introduce criminal proceeds into the banking system B. To disguise the original source and owner of the funds C. In order to fund terrorist activity D. To hide the money from the tax authorities

In order to satisfy their terrorist financing prevention obligations, firms must retain customer due diligence records for a MINIMUM of: A. three years B. five years C. seven years D. eight years

The financial promotion rules are disapplied for communications that are: A. for eligible counter parties (ECP) B. more than three months old C. for UK clients from outside the UK D. subject to the Takeover Code

What are the 4 exceptions to financial promotion rule are there noted in the Financial Promotion Order, FPO?

1. Promotion to high-net worth individuals and sophisticated investors 2. Promotion that cannot have an effect within the UK or happen outside the UK. 2. From outside UK but would be exempt under FPO. 3. One off promotions that are not cold calls 4. Subject to Takeover Code

What is a direct offer financial promotion?

Promotions which make an offer to any person to enter into an agreement and include a form of response or specify the manner of responding. For retail client targeted promotions, it must contain: * Information about firm, services and management of investments * Safekeeping ofcleint investments and money * Costs and charges * Risks and tax information where relavent. * Mention of Prospectus and where to get it | Can include ads in newspaper, trade magazines, direct mail

When does PRR 3.3 Apply? ## Footnote Prospectus Regulation Rules for Financial Promotion

Prospectus Regulation Rules PRR 3.3 applies to offers, or admission to trading, of transferable securities where a prospectus is required/produced under FSMA

What are considered high-risk financial promotions?

Non Mass Market Investments (NMMI) Restricted Mass Market Investments (RMMI)

When firms reference thier past performance, what considerations must be met under COBS 4?

1. Past performance is not the most prominent feature 2. Covers performance over 5 years, or period where it has been offered when and only when its over 12 months. 3. Reference periods and relevant sources are shown 4. Indication that it is showing past performance. 5. Any currency figures quoted other than GBP highlight FX fluctuation risks 6. If performance is gross, all associated fees, commission and tax are disclosed.

When firms use simulated past performance to promote a product what must it use to determine it?

1. Use an financial index 2. Based on actual past performance of simiar products 3. Meet past performance rules with exceptions 4. Contains a warning that it is not a reliable indicator ## Footnote Simulated performance can be used for new products, or one that doesnt have a track record yet

What are some risk warnings requirements that are to be included in retail investor promotions?

* Stating that they could lose money * Risk Summaries * Banning of Incentives to Invest * Cooling Off Priods * Personalised Risk Warnings * Client Cataogrisation * Appropriate tests * record keeping requirements * Displaying name of approver and date promo was approved.

What requirements are needed for approving financial promotions on behalf of a unauthorised firm?

Authorisation/Approval (Part 4A) or Gateway Approval ## Footnote The firms approving also need to ensure the promotion meet the COBS 4/FPO/PRR 3.3 requirements

What is a direct offer financial promotion?

Promotions which make an offer to any person to enter into an agreement and include a form of response or specify the manner of responding. For retail client targeted promotions, it must contain: * Information about firm, services and management of investments * Safekeeping ofcleint investments and money * Costs and charges * Risks and tax information where relavent. * Mention of Prospectus and where to get it ## Footnote Can include ads in newspaper, trade magazines, direct mail

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