1
18.05.13
DipFa
®FinancialServices,Regulation
and Ethics (FSRE)
Exam - Style Questions
2012/13
2
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© Douglas James Training 2013
3 The DipFA is an FSA-approved QCF Level 4 qualification comprising two compulsory units :
• Unit 1 - Financial Services, Regulation and Ethics (FSRE) • Unit 2 -Advanced Financial Advice (AFA)
Unit 1 comprises 90 multi-choice questions, plus two case studies, with 5 multi-choice questions per case study a total of 100 questions. Pass mark 70%. The 10 case study questions will largely be based on ethical behaviour. Approximate weighting of marks in the exam :
Topics Marks 1 – 3 10 4 – 9 10 10 – 11 10 12 10 13 – 14 15 15 – 16 15 17 – 18 15 19 – 20 5 21 10
There are 346 questions in this revision pack
The figures in brackets at the end of the questions indicate the references in the IFS Text. Index
NS&I quiz 33
The FSA Handbook 47 Controlled functions quiz 48 Cancellation period quiz 55
Initial disclosure and product disclosure quiz 57 Classification of risks 76
Record-keeping quiz 82
Solutions to the multi-choice questions 85 Tax tables 87
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Specimen Questions – Topic 1
The role and structure of financial markets
1) Which of the following is not one of the ways in which new shares can be offered to the market ? (1.3.7)
A Public auction B Private placement C Rights issue D Prospectus issue
2) An equilibrium price is one that : (1.1.3)
A provides the highest return for the seller. B ensures that regulatory requirements are met.
C is determined by the interaction of supply and demand. D ensures both buyer and seller settle on a reasonable price.
3) What is the annual rate of interest on a repo agreement, where securities are exchanged for £5,500,000 and repurchased six months later for £5,750,000 ? (1.3.1)
A 4.35%
B 4.54%
C 9.09%
D 9.56%
4) A repo market is : (1.3.1)
A an unsecured secondary market where repossession contracts can be traded. B a primary market for secured sale and repurchase agreements.
C an unsecured market in which banks lend to and borrow from each other.
D an unsecured primary and secondary market that brings together companies and investors. 5) When the securities in a repo agreement are transferred, the borrower retains the
(1.3.1)
A legal title
B economic ownership
C equitable ownership D right of subrogation
6) The price of a corporate bond is primarily determined by the : (1.3.6.1) A interest rate offered.
B term of the bond.
C company’s credit rating.
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7) Which of the following correctly describes a rights issue ? (1.3.7)
A New shares are issued to existing shareholders at current market value .
B New shares are not offered to the general public, but placed with institutional investors. C New shares are issued to the general public at current market value.
D New shares are issued to existing shareholders at a discount to current market value 8) How are Treasury Bills issued ? (1.3.3)
A Guaranteed interest, with a discount to par value B Short term, zero coupon, at a discount to par value C Long-term, with the redemption amount at par value D Deep-discounted, with the redemption amount at par value
9) Which one of the following types of investment does not pay interest ? (1.3.3)
A Gilts
B Treasury bills
C Local authority stock
D Permanent Interest Bearing Shares (PIBS)
10) If Richard pays £95.00 for a Gilt with a coupon of 5%, what is his yield ? (1.3.6)
A 1.9%
B 4.75%
C 5.00%
D 5.26%
11) The Bank of England is a central bank because it (1.1.1) A deposits money with the International Monetary Fund.
B has been approved by the Treasury and lends money direct to other banks. C holds reserves of foreign currency for other banks and institutional investors.
D acts as banker to the government, supervises the economy and regulates the supply of money.
12) Why would a client be interested in the coupon of a gilt-edged security ? (1.3.1.1) A It gives an indication of expected income and capital growth.
B It indicates the amount of capital repaid at maturity.
C It indicates the possible gain over the issue price at the redemption date. D It indicates the interest rate payable over the term.
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13) A large PLC company issued a corporate bond three years ago. There are two years remaining to redemption. The value of the bond has suddenly fallen by over 50%. What are the two main factors likely to have contributed to this fall in value ? (1.3.6.1)
A a reduction in the company’s share price and credit rating B an improvement in the company’s profits and credit rating
C the length of time until redemption and the reduction in the share price D an increase in bank base rate and the company’s share price.
14) Which of the following correctly describes certificates of deposit ? (1.3.4) A Medium term and non-tradeable
B Medium term and tradeable C Short term and non-tradeable D Short term and tradeable
15) CAC40 is a stock market index of: (1.3.7.3) A the major German stocks
B 40 representative blue chip US stocks
C 40 Hong Kong Shares
D the largest French shares 16) Reinsurance refers to (1.3.9)
A the right of an insurer to call on another to meet a claim. B the agent acting outside the terms of an agency agreement. C the unknown consequences of an event occurring.
D a risk-transfer method for insurance companies.
17) The Bank of England is the lender of last resort in the event of : (1.1.1) A Illiquidity and insolvency
B Illiquidity and solvency C Liquidity and solvency D Liquidity and insolvency
18) Which is not a role of the Bank Of England ? (1.1.1)
A Regulate the supply of money and manage gold reserves B Supervise the Financial Ombudsman Service
C Act as adviser to the Government D Act as lender of last resort
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19) How are UK Government gilts issued and traded ? (1.3.1.1)
A New issues and subsequent trading are carried out on the London Stock Exchange. B New issues and subsequent trading are both done through the Debt Management Office
(DMO)
C New gilts are issued on the London Stock Exchange and subsequent trading is done through the Debt Management Office
D New gilts are issued by the Debt Management Office and subsequent trading is done on The London Stock Exchange
20) Which of the following is not one of the traditional functions of money ? (1.1) A A standard for advanced payment
B A unit of account
C Medium of exchange
D A store of value
21) The most important repo market in the UK is the : (1.3.1.1) A Securities repo market
B Equity repo market
C London Stock Exchange
D Gilt repo market
22) Commercial paper is used by : (1.3.5)
A large companies who need short-term unsecured borrowing B smaller companies who need long-term secured borrowing C large companies who need short-term secured borrowing D large companies who need long-term unsecured borrowing
23) The term ‘commercial paper’ is used for securities issued by companies: (1.3.5) A for a term of up to one year
B for terms of between one and five years C for a term of more than five years D for long-term borrowing
24) The main use of a foreign exchange market is : (1.3.8)
A to act as a market where banks and other financial institutions can lend to each other in different currencies
B to enable banks and other financial institutions to convert one currency into another, on their own account, or for their customers
C to act as a market where banks can borrow or lend to each other in different currencies. D to act as an exchange where intermediaries can find the best rates at which to
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25) The main role of the Bank of England is currently to : (1.1.1) A act as the UK’s central bank
B be responsible for microprudential supervision
C be responsible for setting the Government’s inflation target. D regulate the UK money supply.
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Specimen Questions – Topic 2
The Role of Government
1) Which of the following would not be considered to be one of the main economic objectives of modern governments ? (2.2.1)
A) Price stability B) Low unemployment
C) Balance of payments equilibrium D) Expansionary fiscal policy
2) The Government outlines its fiscal policy in the annual Budget statement. When is this statement normally made each year ? (2.2.2)
A) January B) March C) April D) September
3) The Public Sector Net Borrowing Requirement (PSNBR) is a measure of the amount of money the Government needs to borrow in order to: (2.2.2)
A Manage interest rates B Finance its spending plans
C Determine the level of tax increases D Ensure inflationary pressures are avoided
4) Which one of the following would not be used by the Government as part of its fiscal policy ? (2.2.2) A Interest rates
B Spending C Taxation D Borrowing
5) The Government’s target for annual inflation is 2%. Which of the following statements is correct ? (2.2.3)
A The target is based on RPI and the intention is to keep inflation within 1% (plus or minus) of the target.
B The target is based on RPI with the intention that inflation is kept within 0.5% (plus or minus) of the target.
C The target is based on CPI and the intention is to keep inflation within 1% (plus or minus) of the target
D The target is based on CPI and the intention is to keep inflation within 0.5% (plus or minus) of the target.
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6) The two main functions of the Government in relation to financial markets are : (2.1) A Price stability and low unemployment
B Balance of payments equilibrium and economic growth C Monetary and fiscal policy
D Managing the economy and regulation
7) When the Bank of England Monetary Policy Committee changes interest rates, what is actually changing is : (2.2.3)
A The London Interbank Offered Rate (LIBOR) B The 14-day Gilt Repo Interest Rate
C The average variable mortgage interest rate D Long-term gilt yields
8) What will normally be the effect, if any, if sterling falls in value against other currencies ? (2.2.3.4) A Deflation
B Inflation C Depression
D There would be no effect
9) Which of the following correctly describes the Retail Prices Index (RPI) and the Consumer Prices Index (CPI) ? (2.2.3.1)
A House price movements are included in the CPI, but excluded from the RPI B House price movements are included in the RPI, but excluded from the CPI C Many housing-related costs are included in the CPI, but excluded from the RPI D Many housing-related costs are included in the RPI, but excluded from the CPI 10) Inflation can be described as : (2.2.3.1)
A A fall in the general level of prices and a rise in the purchasing power of money B A rise in the general level of prices and a rise in the purchasing power of money C A fall in the general level of prices and a fall in the purchasing power of money D A rise in the general level of prices and a fall in the purchasing power of money
11) Which of the following is most likely to lead to an increase in the rate of inflation ? (2.2.3.1) A A reduction in interest rates
B A rise in the budget surplus C An interest rate increase D An exchange rate increase
12) What happens to prices during a period of disinflation ? (2.2.3.1) A They match trends in output and demand
B They rise, but at a slower rate than before. C They start to fall across the entire economy D There is negative inflation
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13) During a period of deflation, prices tend to : (2.2.3.1) A rise, but at a slower rate than previously.
B fall significantly across the entire economy. C fall dramatically only for identified industries. D rise and fall in line with average earnings.
14) If the nominal rate of return on an investment is 3.5%, annual inflation is 1.5% and Bank base rate is 0.5%, what, roughly, is the real rate of return ? (2.2.3.2)
A 1.3% B 1.5% C 2.0% D 3.0%
15) In terms of the money supply, which of the following measures is the broad money aggregate ? (2.2.3.3) A M0
B M1 C M3 D M4
16) Financial services regulation in the UK is a five-tier process. Which of the following comprises the first level ? (2.3)
A European legislation B Acts of Parliament C Regulatory bodies D Arbitration schemes
17) The 1987 Single European Act specifies four main freedoms – which of the following is not one of them ? (2.3.1)
A Freedom of movement for assets B Freedom of movement for goods C Freedom of movement of capital
D Freedom to provide services in other states
18) The European Union has issued a new DIRECTIVE. This means that the member state (2.3.1) A must implement the Directive immediately.
B can choose whether or not to adopt the Directive.
C has the choice of how to meet the Directive’s objectives.
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19) The main difference between European Union Regulations and Directives is that EU Regulations : (2.3.1)
A are binding as to the result to be achieved, with the choice as to exactly how they are achieved being left up to the national authorities in each state.
B are binding in their entirety and directly applicable in all member states, unless particular states have specific dispensation.
C have to be adopted by the national authorities of every state before they can be enforced across the whole Union.
D must be achieved within a specific timescale – typically two years.
20) Which approach is the Government likely to take if it is concerned about rising inflation during an economic boom ? (2.2.2)
A Contractionary monetary policy B Contractionary fiscal policy C Expansionary monetary policy D Expansionary fiscal policy
21) If the EU issues regulations in respect of the financial services industry, how would the UK be expected to respond ? (2.3.1)
A It must implement them without any changes
B It may ignore them if existing national regulations already exist C It will amend and then implement them through new UK legislation
D The regulations must be reviewed by the UK regulator, who will decide the merits of their implementation
22) If the UK adopted the euro, what would be the outcome ? (2.3.1) A The need for exchange rates would be eliminated
B The European Central Bank would set interest rates C All eurozone states would have the same inflation rate D Interest rates would immediately reduce
23) Which of the following is most commonly an indicator of an increase in the M4 growth rate ? (2.2.3.3)
A Decreasing consumer borrowing B Decreasing consumer spending C Increased public confidence D Increasing rates of inflation
24) The key component of monetary policy is : (2.2.3) A Interest rates
B Government spending
C Taxation
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25) Under the Freedom of Movement for capital under the Single European Act, restrictions on payments are prohibited for which of the following ? (2.3.1) A Goods only
B Goods and services C Services only
D Neither goods nor services
26) Who sets the inflation target for the UK Monetary Policy Committee ? (2.2.3) A The Governor of the Bank of England
B The Chancellor of The Exchequer C The Financial Secretary to The Treasury D The First Lord of The Treasury
27) Regulation of the UK financial services industry comprises five levels. What is the second level of regulation ? (2.3)
A European legislation B Regulatory bodies C Acts of Parliament D Arbitration schemes
28) What is the typical timescale within which the objectives of a European Directive must be implemented ? (2.3.1)
A Six months
B One year
C Two years
D Three years
29) The real rate of interest is calculated by : (2.2.3.2)
A The nominal rate of interest + the rate of inflation B Inflation rate less the nominal rate of interest C The nominal rate less the rate of inflation
D Inflation rate multiplied by the nominal rate of interest
30) Which of the following would the UK Government not consider in relation to correcting a trade deficit ? (2.2.2.1)
A Reduce interest rates B Borrow foreign currency C Impose import tariffs D Impose exchange controls
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31) Which of the following are the three main components of the Government’s fiscal policy ? (2.2.2)
A Government spending, interest rates and taxation B Taxation, borrowing and Government spending
C Interest rates, taxation, borrowing
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Specimen Questions – Topic 3
Financial services in the wider economy
1) Financial intermediaries can provide ‘maturity transformation’ because they: (3.1) A offer a wide range of deposit accounts to a wide range of depositors. B aggregate many small deposits from a large number of clients.
C provide services to clients from many different geographical locations D reduce the risk of default of fraud by lending to a wide variety of borrowers. 2) Which of the following is always a mutual organisation ? (3.2.1)
A Bank
B Insurance Company
C Centralised lender D Friendly Society
3) All of the following factors relate to the main reasons why companies and individuals need the services of financial intermediaries, with the exception of : (3.1)
A geographic location B maturity transformation C risk transformation D share disintermediation.
4) A bank can use small customer deposits to provide larger loans. This is an example of (3.1)
A Aggregation
B Disintermediation C Maturity transformation D Risk transformation
5) Since the Building Societies Act 1986, building societies have been able to ‘demutualise’. Such a change requires : (3.2.1)
A the consent of its shareholders
B the society to have operated for at least three years
C at least 25% of its issued share capital to be available to the public D approval by its members
6) What minimum percentage of their funds must building societies provide from their retail markets ? (3.2.2)
A 10%
B 25%
C 50%
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7) Which one of the following factors distinguishes building societies from other financial institutions ? (3.2.1)
A they are mutual institutions owned by their members. B they are owned by their shareholders.
C they only lend for mortgage purposes. D they cannot make regulated loans.
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Specimen Questions – Topic 4
Industry obligations to the customer
1) An independent financial adviser has given investment advice to an investment firm which requires advice as well as the execution of the transaction. The firm would be treated as which of the
following categories of client ? : (4.1) A a retail client
B an execution-only investor C a professional client D an eligible counterparty
2) Which of the findings of the Financial Services Trust Index 2009, is correct ? (4.3) A Institutions gain the highest trust ratings in terms of shared values and the
lowest in terms of skills and ability.
B Older customers tend to show significantly higher levels of trust than younger customers.
C Levels of trust amongst those who use the internet is higher, particularly for bank and credit card providers.
D Successful resolution of complaints does little to avoid the negative impact on trust.
3) A survey of consumer attitudes and buying experiences carried out by the Financial Services Consumer Panel in 2006 found that negative perceptions of the industry are higher among those who : (4.3)
A have bought few if any financial products B have significant financial wealth
C have a reasonable knowledge of financial matters D are in the 35-55 age group
4) The target audience for a study which was commissioned by the FSA around its ‘basic advice’ regime, focussed on which of the following groups ? (4.3.1)
A Less sophisticated consumers with annual incomes below £30,000 B The self-employed
C Those who had purchased Stakeholder products D Those in the 35-55 age range
5) Of the three categories of customer, which requires the lowest level of protection ? (4.1)
A Eligible counterparty. B Retail client
C Professional client
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6) One of the findings of the Financial Services Trust Index survey was that although there was a
reasonable level of trust in financial services providers, there was low trust indicated by what percentage of consumers ? (4.3)
A 10%
B 20%
C 30%
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Specimen Questions – Topic 5
Types of customers and their needs
1) Which of the following is true ? (5.4)
A Trustees have automatic borrowing powers, irrespective of the contents of the trust deed. B Trustees have no legal capacity to borrow because of the duty of care they owe to the
beneficiaries.
C Trustees can only borrow if the loan is to be used specifically for dealing with probate matters.
D Trustees can only borrow if they are specifically empowered to do so by the trust deed. 2) Which one of the following is usually the priority financial need for young families ?
(5.5.4)
A Savings
B Investment
C Income and life assurance protection D Pension planning
3) The usual financial priority of a retired individual is to : (5.5.7) A build a capital reserve.
B increase income from investments. C minimise capital gains tax liability. D produce income from capital.
4) Albert, a widower aged 66, is reviewing his financial needs and priorities with his financial adviser. If his attention is particularly being drawn to tax planning issues, this would most likely be because he has :
A amended his will to include his grandchildren. B a current annual income of £20,000
C recently downsized his house to fund for long term care. D total assets valued at £750,000
5) Damian and Collette have been business partners for over 20 years and are reviewing their finances with Jack, their financial adviser. They are keen to mitigate the risk of being personally responsible for any debts of the business over and above any capital that they have invested ; Jack has advised them to consider : (5.3.2.1)
A becoming a limited liability partnership
B becoming sole traders and employing each other
C taking out a re-insurance policy to ring-fence future profits
D taking out separate indemnity insurance policies and assign them to the other partner
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6) Tom and Bobby both run their own businesses, but only Tom is personally liable for the debts of his business, because : (5.3.1)
A Tom is self-employed and Bobby is a company director B Bobby is self-employed and Tom is a company director
C Tom is in a limited liability partnership and Bobby is a company director D Bobby is in a limited liability partnership and Tom is a company director 7) Which of the following would not be seen as a typical financial need for a limited
company ? (5.3.3) A Business banking
B IHT planning
C Business insurance D Loan protection
8) One of the key drawbacks of a limited liability partnership (LLP) compared with an ordinary partnership, is that : (5.3.2.1)
A if one partner disappears, the other partners will be responsible for the debts of the business.
B a limited liability partnership is not a legal entity in its own right.
C requirements for financial and accounting information are far more onerous. D a limited liability partnership does not have the ability to borrow.
9) For mature households, which of the following is seen as a priority ? (5.5.6) A pension provision
B savings and investment C long term care
D family protection
10) Ashley is aged 40 and earns £57,000 per annum as a musical director. What is his income tax liability for the 2012/13 tax year ? (5.8.1)
A £ 12,284
B £ 12,684
C £ 15,860
D £ 19,558
11) Martin, a basic rate taxpayer, sold some shares after all deductions and allowances and made a gain of £5,000. If his taxable income in 2012/13 was £25,300, what capital gains tax, if any, will he be required to pay ? (5.8.2)
A £ Nil B £ 900
C £ 1,400
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12) Howard died in Dec 2007 and left his entire estate of £150,000 to his son, when the nil-rate band was £300,000. Hilda, his widow, subsequently died in May 2012, when the nil rate band was £325,000. By how much, if any, was her nil-rate band increased ? (5.8.3)
A Nil
B £150,000
C £162,500
D £325,000
13) Mike recently made a potentially exempt transfer to his son Freddie for £30,000. What is the minimum period he must survive from the date of the transfer before any inheritance tax is charged at a reduced rate ? (5.8.3)
A 2 years
B 3 years
C 4 years
D 7 years
14) A person’s domicile mainly affects which of the following forms of taxation ? (5.8.3) A Capital gains tax
B Income tax C Corporation tax D Inheritance tax
15) Veronica made a gift to her son Jack in excess of the nil-rate band for inheritance tax purposes and then died five years later. What relief, if any, would apply to the gift ? (5.8.3)
A None
B Roll-over relief C Indexation relief D Taper relief
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Specimen Questions – Topic 6
Meeting customers’ needs – protection
1) All other factors being equal, which one of the following statements is correct in relation to life assurance premiums ? (6.1.1.1)
A Men pay higher premiums than women because of higher morbidity risk B Men pay higher premiums than women because of higher mortality risk C Women pay higher premiums than men because of higher morbidity risk D Women pay higher premiums than men because of higher mortality risk
2) John’s employer has an annual gross profit of £500,000 and an annual wage bill of £100,000.John’s salary is £50,000 per annum and his loss would be felt by the firm for three years. What key person cover could the firm apply for on John’s life ? (6.4.1)
A £250,000
B £500,000
C £750,000
D £850,000
3) Which of the following methods of arranging partnership protection gives the remaining partners the right, but not the legal obligation, to purchase the deceased partner’s share ? (6.4.2)
A The automatic accrual method B The buy and sell method C The cross-option method
D The qualifying shareholder method
4) Which one of the following is the most tax-efficient method for establishing a share protection scheme, from an inheritance tax perspective ? (6.4.2)
A Key person insurance B The buy and sell method C The cross-option method D Automatic accrual
5) Which one of the following protection products is designed to provide benefits on death only? A Mortgage payment protection insurance
B Critical illness cover
C Income protection insurance
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6) Which one of the following is unlikely to be considered a financial priority for a young, single adult A Life assurance
B Accident, sickness and unemployment cover
C Savings
D Critical illness
7) Jack and Vera are in their late 50s and their children are now financially independent. Which of the following financial planning needs is likely to be the lowest priority for them ?
A Inheritance tax planning B Family protection
C Private medical insurance D Long-term care insurance
8) The main use of a joint life second death policy is : (6.1.1.4) A to pay a lump sum on diagnosis of a terminal illness. B to provide a tax-efficient savings vehicle
C to provide funds to pay an inheritance tax liability D to repay a joint mortgage
9) Paul and Heather have now decided to divorce. They have two children, George and Stella, aged seven and nine. What actions, if any, should be taken with regard to existing life, accident and health
insurance policies ?
A No action need be taken until a decree absolute is issued by the court.
B All insurances will need to be re-evaluated, which should take place before the next review date.
C Arrangements should be appraised at the next review meeting.
D Life assurance protection should be reviewed and adjusted, because the level of insurable interest will now be reduced.
10) Which of the following benefits and options would not be added to a Universal Whole of Life policy ? (6.1.2.2.1)
A Income Protection Insurance B Critical Illness Cover
C Accident and Sickness cover D Hospitalisation Benefit
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11) What is the assumption where a company decides to adopt the standard formula when
calculating the appropriate level of key person cover for an employee whose loss would have an adverse impact on the profitability of the company ? (6.4.1)
A That the key employee’s contribution to profit is in the same proportion as his/her remuneration bears to the company’s total wage bill.
B That the key employee’s remuneration is in the same proportion as his/her overall contribution to the company’s annual turnover.
C That it would take one year for the company to recover from the financial impact of the loss of the employee.
D That the key employee’s contribution to profit is in the same proportion as his/her remuneration bears to the annual turnover of the company.
12) Which one of the following regarding waiver of premium benefit on a life assurance policy is false ? (6.1.2.2)
A Waiver is not an automatic feature of the plan. B Benefits are usually payable immediately. C There is a small additional monthly charge
D The waiver of premium option is particularly attractive to the self-employed. 13) What is the deferred period under an income protection insurance policy ? (6.2.2)
A The time before the policy cover takes effect.
B A period of sickness during which no benefit is payable.
C The period before the start of the policy and completion of underwriting. D A period during which no premiums are allocated to purchase units. 14) Derek made a claim on his critical illness policy, but later recovered and
returned to work. How was his policy affected ? (6.2.1)
A He had the option to re-start the policy at a higher premium. B The cover was reinstated, but his previous illness was excluded. C No further premiums were required because the policy had ceased. D The policy could be reinstated, provided he repaid the claim.
15) For whom is income protection insurance (PHI) particularly important ? (6.2.2)
A Self-employed
B Part time employees C Full-time employees D Part time self-employed
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16) On a with-profits policy, what is a reversionary bonus ? (6.1.2.1)
A An irregular payment determined by the type of policy and the number of lives
assured.
B A payment made on maturity at the discretion of the assurance company. C One which reverts to a minimum level in the event of a claim.
D One which is declared regularly and once attached to the policy is guaranteed payable at the maturity of the policy.
17) There are three key elements to consider when advising on life cover – which of the following is not included ? (6.1.1.1)
A The level of cover required B The type of plan
C Potential inheritances
D The term for which cover is required
18) What will cause fluctuations in the value of a unit-linked policy ? (6.1.2.2) A Fluctuations in the value of the underlying investments.
B The amount of the reversionary bonuses which have been allocated. C The length of time the policy has been held.
D The amount of terminal bonus added.
19) How would a life company underwrite premiums on an increasing term assurance plan (6.1.3.2)
A On the initial level of cover B By a fixed percentage each year
C On the level of cover halfway through the policy term D On the final level of sum assured.
20) John is a self-employed bricklayer. To which benefit is he initially entitled if he is unable to work because of illness ? (6.2.6.2)
A Statutory Sick Pay
B Employment and Support Allowance C Short-term higher rate Incapacity Benefit D Long-term Incapacity Benefit
21) Under the Employment and Support Allowance, an assessment phase rate is initially paid for what period of the claim ? (6.2.6.2)
A Three days B The first 13 weeks C The first 14 weeks D 28 weeks
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22) Keith is considering using the conversion option under his convertible term assurance policy and can easily afford to increase his premiums. What factor is most likely to influence his choice of the two main options typically available under this facility ? (6.1.3.4)
A The amount of disability cover he already has in place B The degree of risk he is prepared to accept
C The duration of cover required D The state of health of his wife
23) An insurance policy which includes accident cover would most likely be used in connection with which particular financial need ?
A Estate planning B House purchase
C Tax planning
D Retirement planning
24) Adam is married with three young children and following a financial review, the need for additional life assurance was identified, with the proceeds going to someone outside the family. This was justified because he is :
A self-employed
B the trustee of an estate
C one of three business partners D a discharged bankrupt
25) Statutory Maternity Pay is payable for a maximum of : (6.2.6.7)
A 11 weeks
B 26 weeks
C 33 weeks
D 39 weeks
26) In which of the following circumstances would a decreasing term assurance not be considered suitable ? (6.1.3.6.1)
A As part of a low-cost endowment policy. B As a gifts inter-vivos plan.
C As cover for an interest-only loan.
D As a mortgage protection policy linked to a repayment mortgage.
27) Employers who contribute to private medical insurance for their employees : (6.2.4.2) A receive plan benefits that are taxed as trading receipts.
B can claim the cost as an allowable deduction against corporation tax. C pay benefits to employees without deduction of income tax
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28) Which of the following would not be considered a factor in the underwriting process ? (6.1.1.1)
A Health
B Marital status
C Age
D Sex
29) When a life policy is being taken out on a ‘life of another’ basis, which legal principle applies ? (6.1.1.4)
A Caveat emptor
B Utmost good faith C Insurable interest
D Subrogation
30) The maximum life assurance cover that a person can arrange on themselves is : (6.1.1.4)
A unlimited
B £10 million
C 10 times their current salary
D Equivalent of the person’s lifetime income
31) Which of the following is generally the maximum benefit on an Income Protection Plan (PHI) ? (6.2.2)
A 50% - 65% of pre-disability earnings plus state benefits B 55% - 60% of post-disability earnings less state benefits C 50% - 60% of pre-disability earnings less state benefits D 60% - 65% of post-disability earnings plus state benefits 32) Units in a unit-linked policy are purchased at the : (6.1.2.2)
A Bid price B Offer price
C Cancellation price D Strike price
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State Benefits summary
People on low incomes Means-tested income Means-tested savings Dependent on NI contributions Taxable
Working Tax Credit Yes Yes No No
Income Support Yes Yes No No
Jobseekers’ Allowance:
Contribution-based No No Yes Yes
Income-based Yes Yes No No
Child Tax Credit Yes Yes No No
People bringing up children
Statutory Maternity Pay No No Yes Yes
Maternity Allowance No No No No
Child Benefit Yes No No No
People who are ill or disabled
Statutory Sick Pay No No Yes Yes
Incapacity Benefit No No Yes Yes
Employment & Support All. No No Yes Yes
Attendance Allowance No No No No
Disability Living Allowance No No No No
Carer’s Allowance Yes No No Yes
People in hospital or residential/nursing care
Income Support Yes Yes No No
People in retirement
Basic State Pension No No Yes Yes
Additional State Pension No No Yes Yes
Bereavement
Bereavement payment No No Yes No
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Specimen Questions – Topic 7
Meeting customers’ needs – savings and investment
1) Mr and Mrs Green have three children aged 15, 17 and 19. Excluding Junior ISAs, what is the maximum monthly contribution the family can make to stocks and shares ISAs in the 2012/13 tax year ? (7.5.3)
A £2,820
B £2,670
C £3,760
D £4,700
2) Which of the following National Savings and Investments products provides tax-free returns ? (7.6.7)
A Investment Account B Guaranteed Growth Bond
C Fixed Interest Savings Certificates
D Income Bonds
3) The minimum opening deposit in a NS & I Direct Cash ISA is (7.6.6) A £ 10.00
B £ 100.00 C £ 500.00
D £1,000.00
4) A higher level of interest applies to NS & I Income Bonds with a balance of over : (7.6.5)
A £10,000
B £15,000
C £25,000
D £50,000
5) Jack encashed his two-year NS&I Fixed Rate Certificate after just 10 months. What did he receive back ? (7.6.7)
A Return of capital + tax-free interest B Return of capital + taxable interest C Return of capital only
D Return of capital only, less an early redemption penalty.
6) Public limited companies whose business is investing in the stocks and shares of other companies are known as : (7.4.3.4)
A Unit trusts B Investment trusts C Venture capital trusts D Corporate bonds
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7) The price at which clients buy units in a unit trust is known as the: (7.4.3.1.4) A Creation price
B Offer price
C Cancellation price D Bid price
8) Margaret invested £30,000 in an insurance investment bond 15 years ago. The investment has now grown to £61,000. Which of the following withdrawals would have triggered a chargeable event ? (7.4.3.6.1.4)
A £1,000 in year 11 B £4,000 in year 12 C £7,200 in year 15 D £8,300 in year 5
9) The maximum overall investment into an Individual Savings Account (ISA) in the 2012/13 tax year is £11,280. What percentage of this figure can be invested in a cash ISA ? (7.5.3)
A 25%
B 50%
C 75%
D 100%
10) Bob is aged 67, retired and wishes to save £80 per month for an event occurring in four years’ time. He wants a tax-efficient, risk-free environment. Which of the following savings products would you consider to be the most suitable for him ?
A A maximum investment plan B NS and I Guaranteed Income Bond
C A National Savings Fixed Interest Savings Certificate
D A Cash ISA
11) Which of the following pooled investments permits investment in unquoted private companies ? (7.4.3.4)
A Investments trusts only B OEICs and unit trusts
C OEICs only
D Unit trusts and investment trusts
12) In an Open Ended Investment Company (OEIC), the role of the Depository is to : (7.4.3.2)
A manage the investments. B buy and sell the OEIC shares.
C ensure the share price reflects the underlying net asset value of the OEIC investments. D oversee the operation of the company and ensure compliance with the rules for
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13) EIS shares are eligible for 100% Business Property Relief if they have been held for what period prior to the investor’s death ? (7.7.2)
A One year
B Two years
C Three years
D Five years
14) Who buys and sells the shares of an Open-Ended Investment Company (OEIC), as required by investors ? (7.4.3.2)
A The Authorised Corporate Director
B The Depositary
C The Fund Manager
D The Trustee
15) Hannah wants to build a retirement fund and has been recommended a stocks and shares ISA, rather than a stakeholder pension. This was because :
A her National Insurance record is not up to date
B she is in good health, with a family history of longevity C the entire fund is to finance a round the world cruise
D her employer closed the company scheme several years ago
16) Which of the following statements relating to (EIS) Enterprise Investment Schemes is
correct ? (7.7.2)
A EIS shares held for a minimum of two years qualify for IHT Business Property Relief
B Dividends from EIS shares are free of tax if held for five years
C Investors receive tax relief of 30% on investments up to £200,000 in each tax year
D Gains will not be subject to capital gains tax if shares are held for five years
17) An insurance company may pay a terminal bonus on a with-profits endowment policy in which of the following situations ? (7.4.3.6.2.1)
A Death only
B Surrender only C Death or maturity
D Death, maturity or assignment
18) In which of the following ways does a unit-linked endowment differ from a traditional with-profits endowment ? (7.4.3.6.2.2)
A The sum assured relates only to the death benefit. B The qualifying rules are different
C A potential capital gains tax liability exists for the investor D They are more readily saleable on the traded endowment market.
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19) Which one of the following is true in relation to the manager of an investment trust ? (7.4.3.4)
A He cannot borrow funds
B He can borrow to improve capital growth and income.
C He can issue more units or repurchase units according to demand. D He can cancel units if the fund value falls sharply
20) Since 6 April 2012, the maximum investment into an Enterprise Investment Scheme (EIS) that will attract tax relief, is : (7.7.2)
A £100,000
B £150,000
C £400,000
D £1million
21) A higher rate taxpayer receives a net dividend of £90.00. What additional tax will be payable, if any ? (7.4.3.1.5))
A Nil
B £18
C £20
D £22.50
22) The fixed price at which a put option can be exercised is known as the : (7.7.1.1) A Spot price
B At the money price C Strike price
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National Savings and Investments (NS&I)
Here is a blank NS & I matrix with which to practice
Product Tax Min Max Basic criteria Interest
Premium Bonds Index – linked Certificates Fixed Interest Certificates Direct ISA Children’s Bonus Bonds Guaranteed Income Bond Guaranteed Growth Bond Direct Saver Investment Account Income Bonds
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National Savings and Investments (NS& I)
These are a range of savings and investment products offered on behalf of the Government. All products guarantee a return of capital.
Now one of the largest savings organisations in the UK, NS&I has almost 27 million customers and over £97 billion invested.
The table below sets out the key NS&I products with which you will need to be familiar for the exam. The first 5 products in the table provide tax-free returns and can be remembered by the pnemonic – PIFI Kids
Product Tax Min Max Basic criteria Interest
Premium Bonds
Tax Free £100 £30,000 Age 16 Index – linked
Certificates
Tax Free £100 £15,000 Age 7
3 & 5 yrs •
Fixed rate + RPI Fixed Interest
Certificates
Tax Free £100 £15,000 Age 7
2 & 5 yrs •
Fixed rate Direct ISA Tax Free £100 £ 5,640 Age 16
UK Residents •
Variable rate Children’s
Bonus Bonds
Tax Free £25 £ 3,000 Individuals
Under 16 •
Fixed rate
Guaranteed Income Bond
Taxable £500 £1 million 16 • Paid net of basic rate tax
Guaranteed Growth Bond
Taxable £500 £1 million 16 • Paid net of basic rate tax at end of the term Direct Saver Taxable £1 £2 million 16 • Variable rate
• Gross Investment
Account
Taxable £20 £1 million 7 • Gross • Variable rate Income Bonds Taxable £500 £1 million 7 Monthly income • Gross • Taxable • Variable rate
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Topic 8 – Specimen Questions
Meeting customers’ needs – retirement and estate planning
1) Molly will receive the basic State pension in her own right next month when she retires. The pension she receives will be directly related to : (8.1.3.1)
A her credited National Insurance contributions
B a percentage of her average band earnings over her working life.
C her age
D her pre-retirement salary
2) The Government is in the process of equalising the State retirement age for men and women. The equalisation will be fully implemented in : (8.1.3)
A 2010
B 2015
C 2020
D 2023
3) Pensions and certain other investments, such as ISAs, offer tax advantages. Which of the following is an advantage that is enjoyed by pensions, but not by ISAs ?
A No capital gains tax in the fund B The ability to take tax-free cash C Tax relief on contributions
D No income tax liability, other than the tax credit on UK dividend income.
4) How much tax-free cash, if any, can be taken from a pension arrangement at retirement ? (8.1.1.3)
A None
B 25%
C 50%
D 100%
5) What is the minimum number of qualifying years’ contributions or credits required to qualify for a full basic State pension ? (8.1.3.1)
A 20
B 25
C 30
D 35
6) What is the minimum age at which National Insurance Contributions can be made ? A There is no minimum age
B 16
C 18 or the end of full-time education
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7) Robert, an additional rate taxpayer, makes a contribution to a pension scheme which exceeds the annual allowance by £15,000. What tax charge, if any, will be applied ? (8.1.1.2)
A Nil
B £3,300
C £7,500
D £8,640
8) Which of the following has the effect of restricting the amount of tax-relieved contributions in an individual tax year ? (8.1.1.2)
A Annual allowance
B Lifetime allowance C Pension input amount
D Earnings cap
9) Richard’s pension fund growth will become totally free of taxation if he switches from : A Corporate bonds to ordinary shares
B Ordinary shares to corporate bonds C Ordinary shares to preference shares D Property to preference shares
10) Which one of the following will not affect the level of retirement benefits received by an individual in a defined-benefit scheme ? (8.1)
A The individual’s final salary
B The number of years for which the individual is a member of the scheme C The investment performance of the pension fund
D The scheme’s accrual rate
11) From April 6th 2011, the basic State pension increases each year by: (8.1.3.1) A the increase in the Retail Prices Index (RPI)
B the greater of the annual increase in earnings and RPI
C the greater of the annual increase in earnings, Consumer Prices Index and 2.5%
D 2.5%
12) On a stakeholder pension taken out in 2008/9, annual charges must not exceed what percentage of the value of the fund ? (8.1.2.2.1)
A 0.5%
B 1.0%
C 1.5%
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13) A SIPP can borrow up to what percentage of the net value of the fund with which to buy a commercial property ? (8.1.2.2.2)
A 25%
B 50%
C 75%
D 100%
14) Teresa, 60 has no net relevant earnings. Assuming she has funds to invest in both a stakeholder pension and a stocks and shares ISA, she can invest how much more, if any, in the ISA than the stakeholder pension in 2012/13 ? (8.1.1.2)
A The contributions are the same
B £ 2,040
C £ 7,080
D £ 7,680
15) Jill has relevant earnings of £3,000 per annum in the 2012/13 tax year. What is the maximum net annual tax-relievable contribution she can make to a personal pension or stakeholder plan ? (8.1.1.2)
A £2,400
B £2,880
C £3,000
D £3,600
16) The ‘flexible drawdown’ facility is available to those with secure retirement income of what annual amount ? (8.1.1.3)
A £ 20,000
B £ 25,000
C £ 30,000
D £ 50,000
17) A Stakeholder Pension has which one of the following features ? (8.1.2.2.1) A Guaranteed returns
B Proceeds easily accessible
C Low charges
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Topic 9 – Specimen Questions
Meeting customers’ needs : borrowing
1) Which of the following might be regarded as a disadvantage of an interest-only mortgage? (9.1.1.2)
A The interest rate charged is usually higher than for a repayment mortgage. B The outstanding capital remains constant throughout the mortgage term. C The mortgage cannot be arranged on a monthly or a daily rest basis. D The mortgage term cannot be longer than that of any repayment vehicle.
2) Charles has a capital and interest tracker mortgage - which of the following is a correct description ? (9.1.2.5) A capped B fixed. C LIBOR -linked D variable rate
3) Anne has a mortgage with a 2% discount over the first two years. At the end of the discount period her payments : (9.1.2.4)
A are expected to increase. B are expected to decrease. C are expected to stay the same.
D could decrease or increase, depending on prevailing interest rates.
4) Personal loans are offered by banks, building societies and some finance houses. The purpose of the loan determines whether it is regulated under the terms of the
(9.3.1)
A Consumer Credit Act 2006 B Financial Services Act 1986 C Investment Services Directive D Financial Services Action Plan
5) Which of the following would be a benefit to a couple who have a tracker mortgage linked to a stocks and shares ISA ? (9.1.2.5)
A The addition of reversionary bonuses B A rise in the rate of inflation
C A rise in the FTSE 100 index D A rise in interest rates
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Topic 10 – Specimen Questions
Regulatory authorities in the UK
1) Supervisory powers for the financial services industry are delegated to the Financial Services Industry under the Financial Services and Markets Act 2000 by the : (10.3)
A Chancellor of the Exchequer
B Secretary of State for the Department of Business, Innovation and Skills C EU Commissioner for Financial Markets
D Governor of the Bank of England
2) Which of the following defines regulated investments ? (10.3.3)
A FSMA 2000
B The Regulated Activities Order 2001 C The Regulated Investment Act 2002 D The Bank of England
3) Which of the following is not one of the FSA’s Statutory objectives ? (10.5) A EU harmonisation of financial services
B Market confidence C Consumer protection D Reducing financial crime
4) Which of the following would be exempt from the Consumer Credit Act 2006 regulations ? (10.7.1)
A A loan to a small partnership for £26,500 B A loan to a self-employed builder for £15,500 C A loan to a small business for £30,000
D A loan to an individual for £25,000
5) Which of the following is not deemed to be included in the terms of the Supply of Goods and Services Act 1982 ? (10.7.4)
A The work will be done to a specified standard. B The work will be done with reasonable care. C A reasonable charge will be made
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6) Any firm applying for permission to carry out a regulated activity must satisfy the FSA that it is fit and proper, by meeting a set of threshold conditions. Which of the following is not one of those conditions ? (10.3.1)
A Close links
B Adequate resources C Legal status
D Accountability
7) The tripartite system of regulation comprises : (10.4) A HM Treasury,The Office of Fair Trading and The FSA B The FSA, The Bank of England and the Home Office C The Bank of England, HM Treasury and The FSA
D The FSA, HM Treasury and the Department for Trade and Industry (DTI) 8) What is the function of the Pensions Regulator ? (10.7.2)
A To advise the FSA on the regulation of occupational pension schemes. B To deal with complaints about the running of pension schemes.
C To give advice and general information about pension schemes. D To protect the benefits of members of work-based pension schemes.
9) Jack’s complaint to his credit card company under the Unfair Terms in Consumer
Contracts Regulations Act 1999 is still unresolved – to whom can he now take his complaint ? (10.7.5) A The Office of Fair Trading
B The Financial Ombudsman Service C The Consumer’s Association
D The FSA
10) Which one of the following contracts would be subject to the Unfair Terms in Consumer Contracts Regulations 1999 ? (10.7.5)
A A contract between two businesses for the supply of metal sheeting. B A contract for the sale of a house between a private seller and buyer. C An individually negotiated contract for the sale of a fitted kitchen.
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Topic 11 – Specimen Questions
International regulation
1) The implementation of financial regulation across EU member states is carried out under which overarching programme ? (11.4.1)
A Financial Services Action Plan
B Financial Services and Markets Act 2000
C Markets in Financial Investments Directive (MiFID) D Insurance Mediation Directive
2) Regulations concerning minimum capital adequacy requirements for banks, are focused on which of the following ? : (11.1.1)
A Basel Accord
B Banking Act 1987
C Financial Services and Markets Act 2000 D FSA Conduct of Business rules
3) The effect of the 1988 ‘Basel Accord’ was that any losses made when bank customers defaulted on their loans should be borne by the bank’s : (11.1.1)
A Depositors
B Directors
C Regulators
D Shareholders
4) The Basel Committee on Banking Supervision is a multinational committee of which of the following institutions ? (11.1.1)
A The Bank of England
B The Bank of International Settlements C The European Parliament
D The European Central Bank (ECB)
5) Which one of the following is not one of the specific objectives of the Financial Services Action Plan ? (11.4.1)
A Open and secure retail markets B A single market for financial services
C State of the art prudential rules and supervision
D A single regulatory authority for all financial services in the UK
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6) The Life Directive of 2002 stipulated that for policies that carry an investment risk, a life assurance company’s required minimum solvency margin is what
percentage of its mathematical provisions ? (11.2)
A 4%
B 99%
C 100%
D 104%
7) Under Basel 11, the minimum capital requirements are calculated by multiplying the institution’s gross income by : (11.1.1)
A 0.1
B 0.15
C 4%
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Topic 12 – Specimen Questions
The FSA’s responsibilities and approach to regulation
1) Caroline and Anne are both approved persons, but only Caroline performs a significant influence function, which means that: (12.7.4)
A Caroline’s requirement to exercise due skill, care and diligence, is broader B Caroline’s requirement to observe proper market conduct standards lasts longer
C only Caroline can be personally fined for an offence D only Caroline can be imprisoned for an offence
2) Stuart, an employee of an investment management company, is subject to an ongoing fit and proper test because he: (12.7.4.1)
A is an administration manager B undertakes a controlled function C is a senior manager
D does not require individual registration
3) An authorised firm’s senior management controls should : (12.7.2.2) A be approved by the Financial Services Authority annually B form part of the firm’s disclosure documentation
C be reviewed regularly by the firm D conform to accepted industry practice
4) If the FSA discovers a contravention of its rules, one of the steps it may take is to ‘vary a firm’s permissions’ – this means that : (12.6.1)
A the firm may have one of its regulated activities removed. B the firm will be required to sell assets to provide restitution.
C the firm will need to vary its authorisation from a different regulator. D the firm will need to submit each sale to the regulator for approval.
5) An authorized person has made a direct profit of £500,000 by contravening an investment regulation. The FSA is now seeking restitution from the Court. The restitution order will require the person to forfeit the profit to whom ? (12.6.1)
A The Police Authority
B The Financial Services Compensation Scheme C The Regulator
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6) Phil has been asked by his firm’s senior management to carry out an audit of their systems and compliance procedures. Under FSA regulations, Phil must have: (12.7.2.2)
A no operational involvement.
B been a former member of the firm’s sales team. C been an employee for at least 5 years.
D a governing function.
7) The Public Interest Disclosure Act 1998 covers which of the following ? : (12.7.2.3) A Data protection
B Disclosure
C Whistle-blowing D Prevention of crime
8) There are eleven Principles for Business which apply to the behaviour of firms and those that carry out the firm’s activities; the principle covering ‘conflicts of interest’ means that firms must : (12.4)
A take reasonable care to ensure the suitability of its advice.
B arrange adequate protection for clients’ assets when conflicts of interest arise. C deal in a fair way between itself and its customers.
D deal with its regulator in a way that does not cause conflicts of interest. 9) A ‘prudential’ risk is described as : (12.1.2)
A The risk of the firm collapsing because of incompetent management. B The risk of loss due to mis-selling or misrepresentation.
C The risk of a customer not understanding a product.
D The risk that investments fail to deliver the expected returns.
10) Which part of the FSA Handbook contains the Principles for Businesses (12.3.1) A Prudential standards
B High level standards C Specialist standards D Business standards
11) Which one of the following roles in a regulated firm would be classified as a ‘customer function’ ? (12.5.1)
A John, a director of a multi-national insurance company.
B George, the manager of a department dealing in risk-assessment. C Paul, in charge of a claims department.
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12) Which set of criteria has the FSA established in order for an individual to be approved to undertake a controlled function ? (12.7.4.1)
A Authorisation B Fit and Proper test
C Part 4 Permission Eligibility D Controlled Functionality test
13) Which of the following types of risk is closely associated with fraud, in relation to the selling of investment products. (12.1.2)
A Prudential risk B Fraud risk C Provider risk D Bad faith
14) Any firm applying for permission to carry out a regulated activity must satisfy the FSA by meeting a set of : (12.7.3)
A high level standards B threshold conditions
C OFT guidelines
D statutory objectives
15) In which category of controlled function would insurance underwriting be listed ? (12.5.1) A significant management
B governing
C systems and control
D required
16) The concept of Treating Customers Fairly developed from which of the following FSA initiatives ? (12.4.1.)
A Threshold Conditions for approved persons B Statutory objectives
C Principles for Business D Prudential standards
17) Which of the following is not one of the FSA’s Statutory objectives ? (12.1.1) A To maintain confidence in the UK financial system
B To promote financial stability
C Secure an appropriate level of protection for consumers D To employ a risk-based approach to regulation
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18) Which of the following roles is not included in the categories of ‘controlled functions’ ? (12.5.1)
A Head actuary
B Mortgage adviser C Investment adviser
D Money Laundering Reporting Officer
19) Which of the five sections of the FSA handbook deals with the requirements firms must meet in relation to their financial soundness ? (12.3.2)
A High Level Standards B Prudential Standards C Business Standards D Regulatory Processes
20) Arrangements for the supervision of professional firms, such as accountants and solicitors, can be found in which section of the FSA Handbook ? (12.3.5)
A High Level Standards B Regulatory Processes C Business Standards D Specialist Sourcebooks
21) In which category of controlled function would a Money Laundering Reporting Officer be included ? (12.5.1)
A Governing
B Required
C Systems and control D Significant management
22) Effective balance sheet management is seen as a way of mitigating which one of the following risks ? (12.1.2)
A Prudential risk B Capital adequacy risk C Credit risk
D Operational risk
23) Which of the following would not be a step that the FSA would take if it discovered a contravention of its rules ? (12.6.1)
A Rendition
B Variation of a firm’s permissions C Injunction
D Restitution
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The FSA Handbook - 12.3
The main Handbook is divided into five sections as outlined below: 1 - The High Level Standards
• The Principles for Businesses
• Senior management arrangements, systems and controls – responsibilities of directors and senior management.
• The threshold conditions – minimum standards for FSA authorisation • The statements of principle for approved persons
• The ‘fit and proper’ test for approved persons
2 - Prudential Standards
• Requirements of financial soundness that a firm must meet , including the valuation of a firm’s assets and liabilities
3 - Business Standards
• The Conduct of Business Sourcebook – standards applied to the marketing and sale of financial products
• The Market Conduct Sourcebook – covers investment firms and investment markets, will include issues such as insider dealing.
4 - Regulatory Processes
• The rules and guidance for the authorisation of firms for firms seeking authorisation; includes the Supervision Manual, which sets out how the FSA regulate and monitor the compliance of
authorised firms.
5 - Redress and Specialist Sourcebooks
• Covers, redress, investor complaints and compensation
• Specialist sourcebooks covering the arrangements for credit unions and professional firms, such as accountants, solicitors and the supervision of Lloyd’s of London
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Approved persons and controlled functions
Role Governing Required Systems & Control Significant Management Customer Manager – insurance underwriting Money Laundering Reporting Officer Investment adviser Compliance officer Corporate finance Adviser Chief executive Chief Internal Auditor Actuary Head of risk assessment Manager of a claims department Sole Trader Director Pension Transfer Specialist Business Operations Manager
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Approved persons and controlled functions
Role Governing Required Systems & Control Significant Management Customer Manager – insurance underwriting a Money Laundering Reporting Officer a Investment adviser a Compliance officer a Corporate finance Adviser a Chief Executive a
Chief internal auditor
a Actuary a Head of risk assessment a Manager of a claims department a Sole Trader b Director b Pension Transfer Specialist b Business Operations Manager b
