FCA MOCK EXAM QUESTIONS & ANSWERS
Which of the following does not have any rights under FSCS? - Answers- Authorized
firm with respect to general insurance.
- A retail client, trustee of scheme with assets and a small biz with regard to general
insurance all have rights
What best represents FCA view on industry guidance? - Answers- The FCA will not
monitor or enforce compliance of INDUSTRY guidance b/c it is not mandatory
Market abuse is different than insider dealing in all of the following ways except? -
Answers- Market abuse is based on civil burden-balance of probabilities; it should be
easier for the FCA to demonstrate abusive behavier; and it can be applied to commodity
derivatives.
It is not true that it should be easier for the FCA to impose a custodial sentence as only
FINES can be imposed.
What best reflects the firm systematic framework (FSF) of FCA? - Answers- Risk-based
approach
Proactive Supervision = FSF = preventative work through the structured conduct
assessment of firms.
Event driven = remedial/reactive work = deals with problems that are emerging or have
happened
Issues and Products = thematic supervision/intensive campaigns
Tools = Diagnostic; Monitoring; Preventative; Remedial
What is minimum reflection period for sale of life or pension product irrespective of
whether the firm offers advice? - Answers- 30 days for life and pension products. Firms
may voluntarily offer longer periods at the same or better terms.
The Collective Investment Scheme Sourcebook does not apply to:
Depository of ICVC
Trustees of authorized unit trust
Director of investment trust
Manager of an authorized unit trust - Answers- Director of an investment trust
-Investment companies are not classified as a CIS and therefore not covered by the CIS
sourcebook
Which is responsibility of HOST:
,Authorization of branch
COBS
Fitness and prop of firm employees
Capital adequacy - Answers- COBS is responsibility of HOST
- A firm when conducting biz in another EEA state under MiFID must follow HOST
COBS
The Tax and Chancery Chamber of the Upper Tribunal is operated by? - Answers- A
government department
The Tribunal as an appeal committee is independent of the Regulator. Run by Ministry
of Justice.
To which do COBS apply:
Long term insurance related to life policy
Offering car breakdown insurance
Credit unions
Regulated mortgages - Answers- Long term insurance
- Insurance is DIB and rest are not
Under FSMA 2000 can a person be both authorized and exempt depending on
activities? - Answers- A person cannot be both authorized and exempt regardless of
activities at the same time.
For example, a firm cannot conduct some regulated activities as an authorized person
and others in the capacity of an appointed representative of another firm.
Who can be an eligible complainant - Answers- A small retail customer
How often should an authorized firm report to the FCA re: customer complaints? -
Answers- Twice a year
Under RDR what is true about fees? - Answers- The charge can be ongoing and based
on a percentage of the funds invested.
Advisors must move to fee-based charging. This can be upfront or an ongoing fee for a
percentage of funds invested (as long as an ongoing service is provided). Fees should
be itemied and disclosed up front and based on service not on product.
Any money due the firm is not client money. Approved banks do not need to treat
money deposited with them as client money. Where a firm sells assets held as security
against client obligations, the amount equal to the obligation is the firm's money.
However anything in excess of this obligation has to be returned to the client or treated
as client money.
,Which is always a specified activity?
Acting as ccy dealer
An accountant offering investment advice
Operating a stakeholder pension scheme
Acting as trustee for a trust - Answers- Operating a stakeholder pension scheme
- Currency options and currency futures would be specified but not spot or forward
deals. Accountant offering advice will not be specified if incindental. Acting as a trustee
is not specified provided he is not being paid.
Which is client money?
A transaction fee due the firm
Money deposited in an approved bank account
Settlement charge due the firm
Money held in excess to client's obligations - Answers- Money held in excess to client's
obligations
A financial advisor makes a personal recommendation on a retail investment product to
a retail client. When would he NOT send suitability report?
Transactions in a reg CIS
Surrender of stakeholder pension
Making withdrawals on short term annuity
Small life policy from friendly society - Answers- Small life policy
Other exclusions are recommendations relating to: a regulated CIS where the firm is
acting as investment manager, the client is habitually resident outside EEA, increases to
a reg premium in an exsiting contract; an additional single contribution to a product
where a single contribution had already been paid.
According to JMLSG, how long must client verification records be kept? - Answers- 5
years from date account was closed
Which is not a per se eligible cpty?
Insurance co
UCITS scheme
Local authority
Supranational org - Answers- Local authority
Local are retail clients and can never be treated as eligible cpty
Which is not senior manager?
Investment advisor
Internal audit
CEO
MLRO - Answers- Inv advisor
, Inv advisor is a certification function which is the only category of function not classified
as senior manager function
What is required for all firms?
Senior Management Arrangements, Systems and Controls
Code of Market Conduct
Training and Competence
Fit and Proper Test for Approved Persons - Answers- Sr Mgmt Arrangements sets out
requirements for ALL firms.
Training sets out further requirements for RETAIL firms only
Fit and Proper is for approved persons only
To whom is PRA directly accountable?
HMT
Bank of England
UK Government
FCA - Answers- Bank of England
PRA accountable to govt but via Bank of England.
FCA is ultimately accountable to the UK govt on how it carries out its functions but does
so via HMT.
When can unauthorized make financial promotion?
Never
Only if content and inducement approved by authorized person
Only if content , but not inducement approved
Always - Answers- Only if content and the inducement have been approved by an
authorized person
Which is not a 4A threshold condition?
Location of offices
Effective supervision
Market conduct
Appropriate resources - Answers- Market conduct
Market conduct is a Principle of Business not a threshold condition.
Thresholds:
legal status, location of offices, prudent conduct, effective supervision (incl close links),
appropriate resource, suitability, business model, appointment of claims rep
IFA passes on client to life assurance co, the life assurance co:
Can rely on info about the client from IFA
Is responsible for assessing suitability
Must assess approp and IFA must assess suitability
Would only assess suitability for exec only trades - Answers- Can rely on info from IFA
Which of the following does not have any rights under FSCS? - Answers- Authorized
firm with respect to general insurance.
- A retail client, trustee of scheme with assets and a small biz with regard to general
insurance all have rights
What best represents FCA view on industry guidance? - Answers- The FCA will not
monitor or enforce compliance of INDUSTRY guidance b/c it is not mandatory
Market abuse is different than insider dealing in all of the following ways except? -
Answers- Market abuse is based on civil burden-balance of probabilities; it should be
easier for the FCA to demonstrate abusive behavier; and it can be applied to commodity
derivatives.
It is not true that it should be easier for the FCA to impose a custodial sentence as only
FINES can be imposed.
What best reflects the firm systematic framework (FSF) of FCA? - Answers- Risk-based
approach
Proactive Supervision = FSF = preventative work through the structured conduct
assessment of firms.
Event driven = remedial/reactive work = deals with problems that are emerging or have
happened
Issues and Products = thematic supervision/intensive campaigns
Tools = Diagnostic; Monitoring; Preventative; Remedial
What is minimum reflection period for sale of life or pension product irrespective of
whether the firm offers advice? - Answers- 30 days for life and pension products. Firms
may voluntarily offer longer periods at the same or better terms.
The Collective Investment Scheme Sourcebook does not apply to:
Depository of ICVC
Trustees of authorized unit trust
Director of investment trust
Manager of an authorized unit trust - Answers- Director of an investment trust
-Investment companies are not classified as a CIS and therefore not covered by the CIS
sourcebook
Which is responsibility of HOST:
,Authorization of branch
COBS
Fitness and prop of firm employees
Capital adequacy - Answers- COBS is responsibility of HOST
- A firm when conducting biz in another EEA state under MiFID must follow HOST
COBS
The Tax and Chancery Chamber of the Upper Tribunal is operated by? - Answers- A
government department
The Tribunal as an appeal committee is independent of the Regulator. Run by Ministry
of Justice.
To which do COBS apply:
Long term insurance related to life policy
Offering car breakdown insurance
Credit unions
Regulated mortgages - Answers- Long term insurance
- Insurance is DIB and rest are not
Under FSMA 2000 can a person be both authorized and exempt depending on
activities? - Answers- A person cannot be both authorized and exempt regardless of
activities at the same time.
For example, a firm cannot conduct some regulated activities as an authorized person
and others in the capacity of an appointed representative of another firm.
Who can be an eligible complainant - Answers- A small retail customer
How often should an authorized firm report to the FCA re: customer complaints? -
Answers- Twice a year
Under RDR what is true about fees? - Answers- The charge can be ongoing and based
on a percentage of the funds invested.
Advisors must move to fee-based charging. This can be upfront or an ongoing fee for a
percentage of funds invested (as long as an ongoing service is provided). Fees should
be itemied and disclosed up front and based on service not on product.
Any money due the firm is not client money. Approved banks do not need to treat
money deposited with them as client money. Where a firm sells assets held as security
against client obligations, the amount equal to the obligation is the firm's money.
However anything in excess of this obligation has to be returned to the client or treated
as client money.
,Which is always a specified activity?
Acting as ccy dealer
An accountant offering investment advice
Operating a stakeholder pension scheme
Acting as trustee for a trust - Answers- Operating a stakeholder pension scheme
- Currency options and currency futures would be specified but not spot or forward
deals. Accountant offering advice will not be specified if incindental. Acting as a trustee
is not specified provided he is not being paid.
Which is client money?
A transaction fee due the firm
Money deposited in an approved bank account
Settlement charge due the firm
Money held in excess to client's obligations - Answers- Money held in excess to client's
obligations
A financial advisor makes a personal recommendation on a retail investment product to
a retail client. When would he NOT send suitability report?
Transactions in a reg CIS
Surrender of stakeholder pension
Making withdrawals on short term annuity
Small life policy from friendly society - Answers- Small life policy
Other exclusions are recommendations relating to: a regulated CIS where the firm is
acting as investment manager, the client is habitually resident outside EEA, increases to
a reg premium in an exsiting contract; an additional single contribution to a product
where a single contribution had already been paid.
According to JMLSG, how long must client verification records be kept? - Answers- 5
years from date account was closed
Which is not a per se eligible cpty?
Insurance co
UCITS scheme
Local authority
Supranational org - Answers- Local authority
Local are retail clients and can never be treated as eligible cpty
Which is not senior manager?
Investment advisor
Internal audit
CEO
MLRO - Answers- Inv advisor
, Inv advisor is a certification function which is the only category of function not classified
as senior manager function
What is required for all firms?
Senior Management Arrangements, Systems and Controls
Code of Market Conduct
Training and Competence
Fit and Proper Test for Approved Persons - Answers- Sr Mgmt Arrangements sets out
requirements for ALL firms.
Training sets out further requirements for RETAIL firms only
Fit and Proper is for approved persons only
To whom is PRA directly accountable?
HMT
Bank of England
UK Government
FCA - Answers- Bank of England
PRA accountable to govt but via Bank of England.
FCA is ultimately accountable to the UK govt on how it carries out its functions but does
so via HMT.
When can unauthorized make financial promotion?
Never
Only if content and inducement approved by authorized person
Only if content , but not inducement approved
Always - Answers- Only if content and the inducement have been approved by an
authorized person
Which is not a 4A threshold condition?
Location of offices
Effective supervision
Market conduct
Appropriate resources - Answers- Market conduct
Market conduct is a Principle of Business not a threshold condition.
Thresholds:
legal status, location of offices, prudent conduct, effective supervision (incl close links),
appropriate resource, suitability, business model, appointment of claims rep
IFA passes on client to life assurance co, the life assurance co:
Can rely on info about the client from IFA
Is responsible for assessing suitability
Must assess approp and IFA must assess suitability
Would only assess suitability for exec only trades - Answers- Can rely on info from IFA
