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CISI Financial Regulations Questions and Answers
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CISI Financial Regulations A firm engaging in a transaction triggered the COBS requirement to display proof of appropriateness for the transaction because the client: - Answer-Engaged in execution only trades Appropriateness is for non-advised trades and protects both professional and retail ...

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Document information

  • April 14, 2024
  • 12
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

Subjects

  • examples of client money
  • warnin
  • cisi financial regulations
  • a firm engaging in a transaction triggered the cob
  • in relation to customer complaints the following
  • eligible claimants excludes the following

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CISI Financial Regulations
A firm engaging in a transaction triggered the COBS requirement to display proof of appropriateness for
the transaction because the client: - Answer-Engaged in execution only trades

Appropriateness is for non-advised trades and protects both professional and retail clients. The most
likely factor to trigger the requirement to assess appropriateness is the execution only service, specifically
when relating to a complex product.

Examples of client money - Answer-Interest earned on client money
Uncleared cheques
Amounts deposited by the client to be held on discretion

Not: Monies due to the firm

In relation to customer complaints, the following are compulsory: - Answer-The presence of written
procedures in relation to investigating complaints
The creation of written procedures in relation to responding to complaints
Disclosure of the right to refer the complaint to the Financial Ombudsman Scheme

NOT: always paying compensation

Eligible claimants excludes the following: - Answer-- Other authorised firms
- Overseas financial institutions
- Supranational institutions, governments and central administrative authorities
- Provincial, regional, local and municipal authorities; and
- Large companies or large mutual associations

Warning notice - Answer-Sent when the FCA believes that there is sufficient evidence to suggest
wrongdoing has taken place and it intends to discipline

The warning notice is sent after the FCA investigation. A firm can make a representation to the RDC
based on this notice.

Example of an investment not protected by COBS: - Answer-Property - purchase of property is not
classed as a designated investment business

In relation to an authorised firm placing reliance on others for information, which of the following is not a
qualifying criteria? - Answer-The information provider must be based in the UK

When a firm uses a website to promote a product and gives the facility for an online application this would
be considered to be? - Answer-Direct non real-time offer

A firm has received a sell limit order from a professional client. The order cannot be executed immediately
through the firm. Which of the following reasons would justify the firm not making the order public on the
LSE? - Answer-The only exceptions to this requirement is if the client instructs otherwise, or if the order
volume is greater than normal market size.

The rule within the COB's Appropriateness applies to: - Answer-execution only services in complex
products - capital at risk structured products are considered complex. Advisory and discretionary services
would need to ensure suitability.

, Which of the following represents an acceptable inducement under COBS? - Answer-Allowable services
are those that would be directly relevant to customers - e.g. management fees

Which of these would be exempt from the need for authorisation under the Financial Services and
Markets act? - Answer-If a firm has been authorised in one EEA member state to provide investment
services, this single authorisation enables the firm to provide those investment services in other EEA
member states without requiring any further authorisation.

Which of the following gives the FCA the power to prosecute insider dealing offences? - Answer-Financial
Services and Markets Act 2000

The offence is contained within the CJA 1993, however the ability of the FCA to prosecute comes from
FSMA 2000

Once a prospectus prepared under the Prospectus Directive by a UK issuer has been approved: -
Answer-The issuer can market their securities throughout the EU

The Prospectus Directive allows an issuer to passport prospectuses throughout the EU, enabling them to
raise capital from the investors of each state. The prospectus will have been approved by the FCA, so
there is no need for further application to the UK Listing Authority

Under the Market Abuse Regulation the FCA has the power to do which one of the following with respect
to market abuse? - Answer-Civil enforcement

Market abuse is a civil offence. Therefore, the FCA will sue the firm in the civil courts. The maximum fines
are set out under the Market Abuse Regulation.

eligible complainants under the FOS - Answer-- A consumer (retail client)
- An enterprise with fewer than ten employees and turnover or annual balance sheet not exceeding €2
million (a micro enterprise) at the time the complaint is raised
- Charities with an annual income of less than £1m at the time the complaint is raised; or
- A trustee of a trust with a net asset value of less than £1m at the time the complaint is raised

A retail client approaches a financial advisor (FA) to gain advice on a pension product. Which of the
following must be disclosed regarding the scope and range of the advice by the FA before doing
business? - Answer-The scope and range of advice needs to be disclosed by all financial advisors, unless
they are giving advice on stakeholder products. The disclosure must be made in a durable medium.

The COBS relating to financial promotions require an individual with appropriate expertise to check that
the promotion is fair, clear and not misleading. For which of the following types of financial promotion is
such a confirmation exercise required before issue? - Answer-Non real-time financial promotions

The general requirement for such a check is a requirement for non-real time financial promotions only.

Which ONE of the following needs to be included in a firm's order execution policy? - Answer-The firm
must include details of the execution venues that consistently achieve the best possible results for their
clients.

All of the following are specified by the FCA as a controlled function except - Answer-dealing with the
assets of the firm

Control functions are listed within section 10 of the supervision sourcebook (SUP 10), which does not
include dealing with the assets of the firm.

Assuming that the activity is to be performed in the UK, which of the following would require authorisation
under s19 of FSMA 2000, the general prohibition? - Answer-Arranging currency options

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