CeMAP1 Paper A 2024 PDF

UK Financial Regulation (UKFR) Specimen paper: A Length of examination: 2 hours Instructions to candidates 1. Do not open this question paper until instructed to do so. 2. This question paper consists of 100 ques...

UK Financial Regulation (UKFR) Specimen paper: A Length of examination: 2 hours Instructions to candidates 1. Do not open this question paper until instructed to do so. 2. This question paper consists of 100 questions. Each question carries one mark. 3. Answer all questions. Information for candidates 1. Basic silent desktop calculators with+ - x /%and memory functions are allowed. Scientific, programmable or calculators with any additional functions are not allowed. 2. Taxation tables will be provided. No other books, papers or aids may be used in this examination. Note: Taxation rates for the year 2023/24 apply in this examination.  UK Financial Regulation (UKFR) Specimen Paper A Unit 1: ITFS 1. Which of the following is an example of the process of disintermediation? A A bank offering savings accounts. B A building society agreeing to offer a mortgage. C An insurance company underwriting an application for term assurance. D Crowdfunding. 2. A building society has liabilities of £900m. How much, if anything, is the maximum it is permitted to raise on the wholesale markets? A Nil. B £225m. C £450m. D £900m. 3. The term 'bancassurance' was coined to describe the situation where: A a bank offers insurance services. B a bank owns an insurance company. C a bank owns an insurance company or an insurance company owns a bank. D an insurance company owns a bank. 4. Under what circumstances, if any, can an EU member state opt out of a regulation laid down by the European Parliament and Council of Ministers? A None. B Only if a specific dispensation has been granted. C Only if an alternative approach has been agreed. D Only if the member has joined within the previous three years. August 2023 Page 3 of 45  UK Financial Regulation (UKFR) Specimen Paper A 5. The Financial Services Compensation Scheme (FSCS) provides protection for those with deposit- based savings and investments in the event that: A incorrect advice is given in respect of the most suitable type of account to use. B interest rates are reduced. C investment returns fail to match expectations. D the account provider becomes insolvent. 6. Gilt-edged securities are considered to be safe investments, because they: A are backed by assets held by the Central Clearing Bank, which underwrites payment of interest and capital. B are British government securities and the government is unlikely to default on interest or capital repayments. C are regulated by the UK Financial Conduct Authority. D invest in physical assets, such as property and gold, that can be sold to realise redemption proceeds. 7. A new gilt issue has received wide publicity in the financial press, in which it has been referred to as 'medium-dated'. However, the UK Debt Management Office has described it as 'short-dated'. It will therefore be for which of the following terms? A Two years. B Four years. C Six years. D Eight years. 8. If a company distributes 25% of its profits in the form of dividends to shareholders, what is the dividend cover? A 4. B 8. C 10. D 25. August 2023 Page 4 of 45  UK Financial Regulation (UKFR) Specimen Paper A 9. A public limited company wishes to raise additional finance by issuing more shares to its existing shareholders. It is taking which of the following actions? A Arranging a commercial loan. B Delaying dividend payments. C Making a rights issue. D Making a scrip issue. 10. An important consideration when evaluating an investment in buy-to-let property is that: A an annual wear and tear allowance can be claimed in respect of furnishings in the property. B property is a highly liquid investment. C stamp duty land tax is subject to a 3% surcharge. D the benefits of buy-to-let investment are limited to the general benefits of property ownership. 11. In respect of income received from dividends, which of the following statements is correct? A dividends are normally paid annually. B income from equities is subject to capital gains tax. C stamp duty reserve tax is payable on all dividends paid. D tax will be paid on dividend income if it exceeds an individual's dividend allowance. 12. A key difference between a debenture and a loan stock issued by a company is that a debenture: A can be converted to ordinary shares in the company. B holder has the right to vote at the company's annual general meeting. C is secured on the assets of the company. D pays a fixed rate of interest. August 2023 Page 5 of 45  UK Financial Regulation (UKFR) Specimen Paper A 13. Permanent interest bearing shares (PIBS) are issued by: A banks. B building societies. C companies. D local authorities. 14. An investment trust is best described as: A a company that invests in the stocks and shares of other companies. B a trust that invests solely in commercial property. C a trust that is owned by its members. D an open-ended investment company that invests in shares of other companies. 15. David has been particularly attracted to investment trusts because of their ability to benefit from gearing. This indicates that David believes that the market will: A favour income stocks. B fall. C remain stable. D rise. 16. On a with-profits policy, what is a reversionary bonus? A A payment made on maturity, reflecting the investment performance over the term of the policy. B A payment that is declared regularly and, once allocated to the policy, cannot be removed. C A payment that is pre-set at an anticipated bonus rate, but is reduced if investment performance is less than anticipated. D An irregular payment, made at the discretion of the insurance company from orphan funds. August 2023 Page 6 of 45  UK Financial Regulation (UKFR) Specimen Paper A 17. When assessing the suitability of a proposed recommendation, which of the following factors is not relevant? A Impact on entitlement to state benefits that the client may receive. 8 The financial outlay required from the client. C The remuneration to the adviser generated by the recommended product. D The timescale over which the product will run. 18. Four years ago, when aged 27, Clive started a stakeholder pension plan for the minimum term, which he intended to use to repay the capital under his interest-only mortgage. This minimum term of the mortgage at outset would have been: A 23 years. 8 25 years. C 28 years. D 38 years. 19. What is the main advantage of a capped interest rate option when taking out a mortgage? A If interest rates go up, the mortgage interest rate will be limited to a pre-set ceiling. 8 Interest rates are linked to the Bank of England's base rate. C The amount payable is fixed for the duration of the capped rate. D There is a genuine discount off the normal variable mortgage interest rate. 20. Sue earns £30,000 per annum and does not currently have any pension arrangements. Ignoring carry-forward of previous unused allowances, what is the maximum tax-relieved pension contribution she could make in the current tax year? A £2,880. 8 £3,600. C £30,000. D £60,000. August 2023 Page 7 of 45  UK Financial Regulation (UKFR) Specimen Paper A 21. A mortgage protection assurance policy is a type of: A convertible term assurance. B decreasing term assurance. C increasing term assurance. D level term assurance. 22. Investment risk can most commonly be spread by using which of the following? A Clustering. B Diversification. C Dynamisation. D Gearing. 23. What is the correct name for a mortgage scheme that typically allows overpayments, underpayments and payment holidays? A Cap and collar. B Fixed. C Flexible. D Variable. 24. In relation to stakeholder and personal pensions, the open-market option enables the planholder to: A have more than one personal pension plan, with different providers, in order to get the best returns. B move their pension fund between providers in order to get the best investment return before retirement. C move the accumulated fund at retirement to the pension provider offering the most suitable benefits. D take their pension with one provider, but arrange dependants' benefits with another. August 2023 Page 8 of 45  UK Financial Regulation (UKFR) Specimen Paper A 25. Dave has an onshore investment bond issued by a life office, invested in the office's managed fund. At what rate is the provider's underlying fund deemed to be taxed on gains? A 18%. B 20%. C 32.5%. D 40%. 26. Brian is reviewing a range of investment products before selecting the most appropriate solution for his client, Claire. Which factor is Brian least likely to take into account when selecting an appropriate solution? A Claire's desire to access her investments in five years to purchase a time share in Portugal. B Claire's existing portfolio of investment products. C The fact that she has recently moved into a higher-rate tax bracket. D The possibility of Claire getting married in the future and having children. 27. What is the advantage of explaining both features and benefits when making a product presentation to a client? A It enables the adviser to focus on the sale rather than the client queries. B It enables the client to better understand how this product will meet their needs. C It ensures that all point-of-sale FCA regulatory requirements are met. D It ensures that the client understands the cancellation rights offered by the product. 28. Which of the following financial needs is usually the priority for young families? A Financial protection. B Investment. C Retirement planning. D Savings. August 2023 Page 9 of 45  UK Financial Regulation (UKFR) Specimen Paper A 29. Of the information below, gathered in respect of Alice, which item represents a 'hard' fact? A Her investment portfolio has performed below her expectations. B Her savings account balance has fallen to £5,000. C She hopes to retire by the age of 60. D She wishes to be financially secure when she retires. 30. Martin has set up a trust fund for the benefit of his three grandchildren and has appointed two trustees with discretion to exercise their powers. In these circumstances, which of the following is correct? A Both trustees must agree, before exercising their discretionary powers. B Martin is known as the testator of the trust and the grandchildren as the beneficiaries. C The Trustee Act 2000 requires the grandchildren to obtain advice when reviewing investments. D The trustees have no legal interest in the trust property. 31. Having been named as an executor under a will, Stella now has the legal authority to act, because: A letters of administration have been granted. B probate has been granted. C the testator has signed the will. D the witnesses have signed the will. 32. Any loss made by a partnership is usually: A deducted from future dividends. B the responsibility of the partners. C the responsibility of the shareholders. D written off. August 2023 Page 10 of 45  UK Financial Regulation (UKFR) Specimen Paper A 33. Under the law of agency, a recent act by an agent has been subject to ratification. This implies that the agent has: A asked his principal to deal directly with a client. B exceeded his authority. C received money or money's worth from a client. D submitted a written contract. 34. Walter and Winnie own their house on a joint tenancy basis. If Walter dies: A his share of the property will pass automatically to Winnie. B his share will pass to whoever is nominated as beneficiary in his will. C Winnie will need to purchase Walter's share of the property. D Winnie will own 50% of the property but retain an interest in the other 50%. 35. The difference between a lasting power of attorney and an ordinary power of attorney is that: A a lasting power of attorney can be agreed on a verbal basis between donor and donee but ordinary power of attorney must be registered at the Public Trust Office. B a lasting power of attorney can be revoked at any time by the donor, whereas an ordinary power of attorney can only be revoked by the Court of Protection. C an ordinary power of attorney becomes invalid if the donor loses mental capacity, whereas a lasting power of attorney remains effective. D an ordinary power of attorney remains valid if the donor loses mental capacity, whereas a lasting power of attorney becomes invalid. 36. If Roger is declared bankrupt, under normal circumstances, for how long will his bankruptcy order remain in place? A 1 year. B 2 years. C 3 years. D 4 years. August 2023 Page 11 of 45  UK Financial Regulation (UKFR) Specimen Paper A 37. Which of the following persons would most likely be considered automatically resident in the UK for tax purposes? A Bella, a first-time visitor to the UK, who will spend 180 days in this tax year in the UK developing her Italian-based fashion company. B Dmitri, a first-time visitor to the UK, who has a seven-month contract for business consultancy in London, which commenced in January 2019. C Luigi, a first-time visitor to the UK, who has a nine-month contract in Essex with a telecoms company, which commenced in April 2019. D Sandra, who normally lives in France, but spends two months a year helping on the family farm in Scotland. 38. Harold is a higher rate tax-payer who has received a cheque for £300 in respect of share dividends. He has already received other dividend income of £7,200 during the current tax year. In assessing his income tax liability on this latest payment, what gross income figure is used in calculating the tax due? A £333.33. B £300. C £367.50. D £387. 39. Jake has been advised that his redundancy payment will definitely suffer a tax liability because: A he is a higher rate taxpayer in the current tax year. B he was previously made redundant four years ago. C the availability of an alternative employment was rejected. D the total amount of his redundancy payment is £52,500. 40. For a UK resident, which of the following personally owned assets would be exempt from capital gains tax? A A piece of personal jewellery valued at £20,000. B A Spanish property used for holiday visits. C Euros held for use on foreign holidays. D Shares purchased on the UK stock market. August 2023 Page 12 of 45  UK Financial Regulation (UKFR) Specimen Paper A 41. Gains from which of the following are not exempt from capital gains tax in the hands of the investor? A Authorised unit trust. B Gilts. C NS&I Savings Certificates. D Stocks and shares ISA. 42. In the calculation of capital gains tax liability, which of the following costs can be taken into account to reduce the amount of taxable gain? A Capital allowances only. B Costs incurred in acquiring and disposing of an asset only. C Costs incurred in acquiring, enhancing and disposing of an asset. D Costs incurred in acquiring, maintaining and disposing of an asset. 43. When shares are purchased using an electronic trading system, the: A buyer pays the stamp duty reserve tax based on the market value. B owner of the shares must be a stockbroker. C share transfer can be registered before the documents are stamped. D transaction has been completed orally so no stamp duty reserve tax is payable. 44. A sole trader with no employees may be subject to which classes of National Insurance contributions? A Classes 1 and 4. B Classes 2 and 3. C Classes 2 and 4. D Classes 3 and 4. August 2023 Page 13 of 45  UK Financial Regulation (UKFR) Specimen Paper A 45. Mandy is pregnant with her first baby. She has been a full-time self-employed graphic designer since leaving university four years ago. What state benefit might Mandy be able to claim before her baby is born? A Child Benefit. B Income Support. C Maternity Allowance. D Statutory Maternity Pay. 46. When a 'chargeable lifetime transfer' is made, what maximum rate of tax, if any, can apply immediately? A Nil. B 18%. C 20%. D 40%. 47. A company will pay corporation tax on a quarterly basis where: A it has more than 1,000 employees. B profit is less than £1.5m per year. C profit is more than £1.5m per year. D turnover is less than £1.5m per year. 48. For an investment to grow in real terms, it must increase in value: A after allowing dealing costs. B at a rate greater than inflation. C at regular intervals. D in line with national average earnings. August 2023 Page 14 of 45  UK Financial Regulation (UKFR) Specimen Paper A 49. Which type of fee is normally charged on a fixed-rate mortgage, but not on a standard-variable rate mortgage? A Arrangement fee. B Broker fee. C Higher lending charge. D Valuation fee. 50. An advantage of a variable rate mortgage is that: A arrangement fees can always be added to the loan. B borrowers are able to benefit from reductions in interest rates. C first-time buyers are able to budget accurately in the early years. D repayments to the lender are lower than any other product. August 2023 Page 15 of 45  UK Financial Regulation (UKFR) Specimen Paper A Unit 2: UKFS 1. The specialist sourcebooks section within the FCA Handbook includes arrangements for: A individual responsibilities. B international trading. C product derivatives. D professional firms. 2. Which body is responsible for the Financial Ombudsman Service? A Competitions and Markets Authority. B Financial Conduct Authority. C Financial Policy Committee. D Prudential Regulation Authority. 3. One of the six outcomes for retail consumers in relation to the fair treatment of customers requires that firms ensure that there are no unreasonable barriers to: A accessing products, receiving suitable advice, or complaining. B accessing products, switching product or provider, or making a claim. C switching product or provider, receiving suitable advice, or making a claim. D switching product or provider, making a claim, or complaining. 4. Miranda performs a senior management function in the firm she works for. Which of the following principles does not specifically apply to her role? A She must, at all times, act to avoid situations that could lead to risks to the business. B She must disclose appropriately any information of which the FCA or PRA would reasonably expect notice. C She must take reasonable steps to ensure that the business of the firm for which she is responsible complies with relevant regulatory requirements and standards. D She must take reasonable steps to ensure that the business of the firm for which she is responsible is organised so that it can be controlled effectively. August 2023 Page 16 of 45  UK Financial Regulation (UKFR) Specimen Paper A 5. The FCA requires that a firm's systems and controls must: A be agreed by the FCA before implementation. B be notified to customers. C be regularly reviewed. D meet an agreed industry standard. 6. Individuals performing which of the following roles will be individually vetted and approved by the FCA/ PRA? A Those performing an ancillary role. B Those performing senior management functions. C Those in 'significant harm' functions. D Those in 'significant harm' functions and those performing senior management functions. 7. Under the definitions of market abuse, which of the following is specifically covered? A Dishonesty. B Insider dealing. C Money laundering. D Pricing. 8. Which of the following is not one of the Financial Conduct Authority's Principles for Businesses? A To act with due skill, care and diligence. B To act with integrity. C To have a clear chain of responsibility. D To observe proper standards of market conduct. August 2023 Page 17 of 45  UK Financial Regulation (UKFR) Specimen Paper A 9. One of the Pension Regulator's powers is that they are able to investigate schemes to identify and monitor risks. All schemes must carry out the following actions except: A give notification of any changes to important information. B inform the regulator quickly if it discovers that it cannot meet the funding requirements. C make regular returns to the Pensions Regulator. D provide details to the regulator of every transfer out of the scheme. 10. When buying goods or services consumers have a right to each of the following except: A Clear and honest information before they buy. B To be supplied with goods and services that are fit for purpose. C To get what they have paid for. D To pay a fair price that reflects market rates. 11. To which of the following will the provisions of MiFID always apply? A firm which provides: A Cash ISA advice. B Investment advice C life assurance advice. D mortgage advice. 12. Which oversight group would be most likely to review an authorised firm's financial statements and accounts? A Compliance officers. B External auditors. C Internal auditors. D Trustees. August 2023 Page 18 of 45  UK Financial Regulation (UKFR) Specimen Paper A 13. Which of the following risks would be defined as that arising from the way a business is run and managed? A Capital adequacy risk. B Internal risk. C Liquidity risk. D Operational risk. 14. In the context of FCA supervision of firms, the term 'flexible portfolio' means: A firms with a customer base that is prone to significant fluctuations. B firms with a wide range of regulatory permissions. C firms with diverse investment interests. D lower-risk firms supervised through market based thematic work and engagement programmes. 15. When undertaking investment business, the charges made of the client should reflect: A the provider recommended. B the service provided. C the status of the adviser. D the type of product recommended. 16. If the FCA discovers a contravention of its rules, one of the steps it may take is to vary a firm's permissions. This means that the firm: A may have its authorisation withdrawn. B may have one of its regulated activities removed or restricted. C will be forced to transact business that it does not wish to conduct. D will be subject to an injunction preventing it from profiting from the breach. August 2023 Page 19 of 45  UK Financial Regulation (UKFR) Specimen Paper A 17. Christo undertakes a certified role for a Bank function. To undertake this role he must have: A deemed to be fit and proper by his firm. B confirmed his personal financial status to the Financial Conduct Authority. C obtained approval from the Prudential Regulation Authority. D passed the Financial Conduct Authority's conduct and ethics test. 18. In seeking to promote competition, the FCA uses its powers to ensure all except which of the following? A Customers are engaged to drive competition. B There are no undue barriers preventing new providers entering the market. C Preventing any single firm from dominating the market. D Offering 'light touch' regulation for providers that show a strong track record in product innovation. 19. What specific FCA requirements apply to direct offer financial promotions? A Records must be retained for 7 years. B The promotion must be approved by a director of the firm. C The promotion must contain the name of the conduct regulator, the FCA. D They must only be sent to customers who have specifically requested them. 20. Which risk warning must appear on all advertising material containing details of past investment performance? Past performance: A is not necessarily a reliable indicator of future performance. B is not necessarily better than future performance. C is only a general guide to the future. D over a period of five years or more is a reasonable guide to the future. August 2023 Page 20 of 45  UK Financial Regulation (UKFR) Specimen Paper A 21. Once an employee of a regulated firm is deemed to be competent, the firm must have arrangements in place for this competence to be maintained. This is most commonly achieved through: A continuing professional development. B imposed learning courses. C in-house tutorials. D regular testing. 22. Simon has undergone his initial training as a financial adviser but has not yet passed the regulatory module of an appropriate approved examination. Under what circumstances might he be allowed to advise customers about regulated products, if at all? A He may do so, provided he acts under close supervision. B He may do so, provided investments are below an agreed level. C He may do so, if all advice is double-checked by a representative of the FCA. D Under no circumstances can he offer advice to customers. 23. For a firm involved in non-MiFID business, training and competence records for all individuals must be retained for what minimum period after they have stopped carrying out regulated activity? A Three years. B Five years. C Seven years. D Ten years. 24. Which of the following statements is true in relation to Training and Competence rules? A All employees must pass an appropriate examination. B All new entrants to the industry must attain competence within 12 months. C Firms must monitor the continuing competence of their employees. D Records of assessment criteria must be kept for ten years. August 2023 Page 21 of 45  UK Financial Regulation (UKFR) Specimen Paper A 25. When carrying out designated investment business, other than advising on packaged products, a firm must provide which additional document to the client? A A business card carrying out-of-hours contact details. B A client agreement. C A suitability letter. D An Initial disclosure document (IDD). 26. Simon has found that his loan, taken out in 2005, is subject to FCA regulation under MCOB. This is because it is a: A business loan, secured by a first charge over his business premises. B buy-to-let loan, taken out to help buy a property to add to his portfolio of buy-to-let. C an unsecured debt-consolidation loan D home-improvement loan, secured by a first charge over his residential property. 27. Ben, an adviser, is required under FCA rules to provide a European Standardised Information Sheet (ESIS) detailing the APRC to his client. This means that the client has expressed a particular interest in: A collective investment business. B mortgage business. C offshore business. D protection business. 28. Jason is in the process of applying for a mortgage and has just received a tariff of charges from the lender. What is the latest point in the process that he has reached? A Issue of the initial disclosure documentation. B Pre-application disclosures. C Offer stage. D Completion date. August 2023 Page 22 of 45  UK Financial Regulation (UKFR) Specimen Paper A 29. David, who currently gives advice on mortgages for residential property purchase, would be required to take a further examination to be permitted to give advice on which of the following mortgages? A Buy-to-let. B Equity release. C Further advances. D Second charges. 30. If a customer cancels their level term assurance contract within the cooling-off period, the insurance company must return any sums paid to it within how many days? A 7. B 14. C 28. D 30. 31. Which of the following is most likely to be classed as an eligible counterparty? A A firm acting on behalf of a retail client. B A private individual. C A small business. D Another authorised firm. 32. An authorised firm was unable to describe the advice it offered as being independent, because it: A did not provide advice on insurance products. B only offered products from providers that were legally linked to it. C only provided advice on investment products. D used a panel of providers for the products it recommended. August 2023 Page 23 of 45  UK Financial Regulation (UKFR) Specimen Paper A 33. To meet the FCA definition of independent advice, recommendations must be based on: A a sufficiently diverse range of relevant products. B all areas of financial advice. C all of a client's financial needs. D all products on the market. 34. Which of the following statements most accurately describes the advice that must be given by an independent adviser? A That based on the most suitable products from the host employer. B That which is based on a sufficient range of relevant products sufficiently diverse to meet a client's objectives. C The cheapest product from any provider. D The cheapest product from the host employer. 35. Robo-advisers provide financial advice which is primarily based on the use of: A algorithms. B case-studies. C human intervention. D web-analytics. 36. For new sales of which of the following product types can an independent financial adviser receive commission from a product provider? A Income protection insurance. B Investment bond. C Stocks and shares ISA. D Unit trust. August 2023 Page 24 of 45  UK Financial Regulation (UKFR) Specimen Paper A 37. David has arranged a life policy for his customer, Jane. Assuming that Jane does not require immediate cover and that details of suitability are not provided orally, what is the latest date that the suitability report can be sent to Jane? A Five days after the end of the cooling-off period. B Five days after the final interview. C Five days after the initial interview. D Before conclusion of the contract. 38. Responsibility for product selection in relation to 'execution-only' business rests with the: A adviser. B customer. C product provider. D regulator. 39. Under the EU Fourth Money Laundering Directive, beneficial owners of legal entities are defined as those who own or control what minimum percentage of the legal entity? A 5%. B 10%. C 25%. D 50%. 40. Henry invested £10,000 in a unit-linked lump sum product and cancelled seven days later. He subsequently received a refund of £9,500. What did the reduction in his original investment represent? A The adviser's fee. B The cancellation charge. C The handling charge. D The reduction in the value of investment. August 2023 Page 25 of 45  UK Financial Regulation (UKFR) Specimen Paper A 41. A financial adviser must issue a key features document prior to a sale being concluded, for all of the following products except: A gilt-edged securities. B life assurance. C stakeholder pensions. D unit trusts. 42. In relation to money laundering, how is 'property' defined under the Third Money Laundering Directive 2005? A Assets held in cash within the European Union only. B Assets of every kind, including legal documents giving title to such assets. C Intangible assets only. D Tangible assets only. 43. What is the main reason why the senior management of an authorised firm must obtain an annual report from its money laundering reporting officer? A So that they can be compliant with the Financial Services and Markets Act. B So that they can be compliant with the Proceeds of Crime Act. C To monitor activities and report suspicions. D To review any problems the firm has experienced and strengthen controls. 44. Why was the Financial Action Task Force set up? A To assist consumers who have unmanageable debts. B To co-ordinate the international fight against money laundering. C To implement the Treating Customers Fairly initiative. D To provide a central point for consumers to receive information on pension queries. August 2023 Page 26 of 45  UK Financial Regulation (UKFR) Specimen Paper A 45. Why might money laundering regulations create financial exclusion? A Because certain non-residents cannot be offered banking facilities. B Because customers want to know why they have been declined for a financial product. C Because financial organisations are wary of opening bank accounts with cash deposits. D Because not everyone can provide the necessary identification. 46. Under the FCA's complaints-handling requirements, firms must make a commitment to try to resolve complaints within: A three working days. B one month. C eight weeks. D three months. 47. Which of the following statements regarding complaints referred to the Financial Ombudsman Service is false? A The firm involved should investigate the complaint before the Ombudsman. B The Ombudsman's decision is binding on the firm and the client. C The Ombudsman's decision is binding on the firm only. D The Ombudsman will start charging a firm case fees once 26 complaints have been received in respect of the firm each year. 48. John held deposits with Bank A and Bank B and they were both declared insolvent on 1 September 2017. The FSCS paid a higher amount of compensation for his holdings with Bank A because: A Bank B had recently made the annual interest payment on John's account. B John and his wife held £164,000 in a joint account in Bank A and £80,000 in his sole name in Bank B. C John had £70,000 in a joint account with his brother in Bank A and £35,000 in his sole name in Bank B. D John had £100,000 saved with Bank A and £90,000 with Bank B. August 2023 Page 27 of 45  UK Financial Regulation (UKFR) Specimen Paper A 49. Under the Data Protection Act 1998, the definition of 'sensitive personal data' includes all of the following areas, except: A correspondence address. B mental health. C political persuasion D religious beliefs. 50. To which body should a firm report a significant breach if handling personal data: A The Financial Conduct Authority. B The Financial Ombudsman Service. C The Prudential Regulation Authority. D The Information Commissioner. August 2023 Page 28 of 45  UK Financial Regulation (UKFR) Specimen Paper A Answers and Justifications Unit 1: ITFS Q1 D Unit1;U1.1 A Savings accounts are an example of intermediation. B Mortgages are an example of intermediation. C Underwriting insurance is not an example of disintermediation. D Correct. Crowdfunding is an example of disintermediation as the business wanting to raise funds deals directly with potential investors. Q2 C Unit 1; U1.2 A Building societies can raise funds on the wholesale markets up to 50% of the value of their liabilities. B Building societies can raise funds on the wholesale markets up to 50% of the value of their liabilities. C Correct. Building societies can raise funds on the wholesale markets up to 50% of the value of their liabilities. D Building societies can raise funds on the wholesale markets up to 50% of the value of their liabilities. Q3 C Unit1;U1.2 A A bancassurer is a bank that owns an insurance company or an insurance company that owns a bank. B A bancassurer is a bank that owns an insurance company or an insurance company that owns a bank. C Correct. A bancassurer is a bank that owns an insurance company or an insurance company that · owns a bank. D A bancassurer is a bank that owns an insurance company or an insurance company that owns a bank. Q4 B Unit 1; U1.3 A A state can opt out if a specific dispensation has been granted. B Correct. A state can opt out if a specific dispensation has been granted. C An alternative approach is allowed under directives, but not under regulations. D No such time limit applies. Q5 D Unit 1; U2.1 A The FSCS provides protection in the event that an institution becomes insolvent. B The FSCS provides protection in the event that an institution becomes insolvent. C The FSCS provides protection in the event that an institution becomes insolvent. D Correct. The FSCS provides protection in the event that an institution becomes insolvent. Q6 B Unit 1; U2.2 A Gilts are considered to be safe, as interest and capital repayments are guaranteed by the government. B Correct. Gilts are considered to be safe, as interest and capital repayments are guaranteed by the government. C Gilts are considered to be safe, as interest and capital repayments are guaranteed by the government. D Gilts are considered to be safe, as interest and capital repayments are guaranteed by the government. August 2023 Page 29 of 45  UK Financial Regulation (UKFR) Specimen Paper A 07 C Unit 1; U2.2 A A two year gilt is commonly referred to as 'short-dated' by both the financial press and the Debt Management Office. B A four year gilt is commonly referred to as 'short-dated' by both the financial press and the Debt Management Office. C Correct. The financial press refers to medium-dated as 5 to 15 years but the Debt management office refers to 0-7 years as 'short-dated'. D An eight year gilt is commonly referred to by both the financial press and the Debt Management Office as 'medium-dated'. 08 A Unit 1; U2.3 A Correct. The dividend cover indicates the number of times that dividends could have been paid from profits. If a company distributes 25% of profits, the dividend cover is 4. B The dividend cover indicates the number of times that dividends could have been paid from profits. If a company distributes 25% of profits, the dividend cover is 4. C The dividend cover indicates the number of times that dividends could have been paid from profits. If a company distributes 25% of profits, the dividend cover is 4. D The dividend cover indicates the number of times that dividends could have been paid from profits. If a company distributes 25% of profits, the dividend cover is 4. 09 C Unit 1; U2.3 A A commercial loan does not involve issuing more shares. B Delaying dividend payments does not involve the issuing of further shares. C Correct. Further shares must first be offered to existing shareholders via a rights issue. D A scrip issue means that capital held by the company is distributed to shareholders, no additional capital is raised. 10 C Unit 1; U2.4 A Second properties, including buy-to-let are subject to a 3% stamp duty land tax surcharge. An annual wear and tear allowance is no longer available. B Second properties, including buy-to-let are subject to a 3% stamp duty land tax surcharge. Property is viewed as an illiquid investment. C Correct. Second properties, including buy-to-let are subject to a 3% stamp duty land tax surcharge. D Second properties, including buy-to-let are subject to a 3% stamp duty land tax surcharge. Buy- to-let investment offers the prospect of an income stream as well as capital growth. 11 D Unit 1; U3.1 A Dividends are normally paid half-yearly. B Dividends are not subject to capital gains tax. C Stamp duty reserve tax is payable on purchase of shares, not on dividends. D Correct. Tax will be paid on dividend income if it exceeds an individual's dividend allowance of £1,000 (2023/24). 12 C Unit 1; U3.1 A Debentures are usually secured on company assets whereas loan stocks are unsecured. B Debentures are usually secured on company assets whereas loan stocks are unsecured. C Correct. Debentures are secured on company assets whereas loan stocks are unsecured. D Debentures are usually secured on company assets whereas loan stocks are unsecured. August 2023 Page 30 of 45  UK Financial Regulation (UKFRl_§pecimen Paper A Q13 B Unit 1; U3.1 A PIBS are issued by building societies. B Correct. PIBS are issued by building societies. C PIBS are issued by building societies; companies would issue corporate bonds. D PIBS are issued by building societies; local authorities issue local authority bonds. Q14 A Unit 1; U3.2 A Correct. An investment trust is a company whose sole purpose is to invest in other companies. B An investment trust is a company whose sole purpose is to invest in other companies. C An investment trust is a company whose sole purpose is to invest in other companies. D An investment trust is a company whose sole purpose is to invest in other companies. Q15 D Unit 1; U3.2 A The ability of an investment trust to borrow (gearing) is considered favorable in a rising market. B The ability of an Investment Trust to borrow (gearing) is considered favorable in a rising market. C The ability of an Investment Trust to borrow (gearing) is considered favorable in a rising market. D Correct. The ability of an Investment Trust to borrow (gearing) is considered favorable in a rising market. Q16 B Unit 1; U3.2 A A reversionary bonus is declared regularly; a terminal bonus may be payable on maturity. B Correct. A reversionary bonus is declared regularly, normally annually. Once attached, it cannot be removed. C A reversionary bonus is not pre-set; it is dependent on investment performance. D A reversionary bonus is declared regularly. Q17 C Unit1;U5.4 A Entitlement to state benefits will need to be taken into consideration. B Affordability is a relevant factor when giving advice. C Correct. Level of remuneration should have no effect on the advice given. D Timescale will have to be considered when deciding on suitability. Q18 C Unit 1; U3.3 A The normal minimum pension is 55. Clive's mortgage term will be for a minimum of 28 years. B The normal minimum pension is 55. Clive's mortgage term will be for a minimum of 28 years. C Correct. The normal minimum pension is 55. Clive's mortgage term will be for a minimum of 28 years. D The normal minimum pension is 55. Clive's mortgage term will be for a minimum of 28 years. 019 A Unit 1; U3.3 A Correct. The interest rate will have an upper fixed limit. B The interest rate will have an upper fixed limit. Even if the Bank of England's base rate is higher than this figure, the interest rate will not rise above the limit. C The interest rate will have an upper fixed limit. Below this limit, interest will be variable, not fixed. D The interest rate will have an upper fixed limit. There will not be a discount to the variable rate. August 2023 Page 31 of 45  UK Financial Regulation (UKFR) Specimen Paper A Q20 C Unit 1; U3.4 A This is the £3,600 figure netted down. B This is the maximum if earning £3,600 or less. C Correct. Sue's earnings are less than the annual allowance of £60,000 so she can contribute 100% of her earnings. D This is the 2023/24 annual allowance for tax-relieved pension contributions that applies to people earning £60,000 and above. Q21 B Unit 1; U3.5 A A mortgage protection assurance policy reduces the amount of cover it provides over time. It is therefore a type of decreasing term assurance. B Correct. A mortgage protection assurance policy reduces the amount of cover it provides over time. It is therefore a type of decreasing term assurance. C A mortgage protection assurance policy reduces the amount of cover it provides over time. It is therefore a type of decreasing term assurance. D A mortgage protection assurance policy reduces the amount of cover it provides over time. It is therefore a type of decreasing term assurance. Q22 B Unit 1; U4.4 A Diversification reduces risk by spreading the investment across a range of companies/sectors. B Correct. Diversification reduces risk by spreading the investment across a range of companies/sectors. C Diversification reduces risk by spreading the investment across a range of companies/sectors. D Diversification reduces risk by spreading the investment across a range of companies/sectors. Q23 C Unit 1; U4.3 A A cap and collar rate would not typically allow these features. B A fixed rate mortgage will automatically not permit these features. C Correct. Flexible products permit overpayments, underpayments and payment holidays within pre-set limits. D A variable rate is unlikely to offer underpayments and payment holidays as 'standard.' Q24 C Unit 1; U4.5 A The open-market option allows an individual to move the fund at retirement in order to purchase the best available annuity/access the most advantageous benefit structure. B The open-market option allows an individual to move the fund at retirement in order to purchase the best available annuity/access the most advantageous benefit structure. C Correct. The open-market option allows an individual to move the fund at retirement in order to purchase the best available annuity or access the most advantageous benefit structure. D The open-market option allows an individual to move the fund at retirement in order to purchase the best available annuity/access the most advantageous benefit structure. Q25 B Unit 1; U4.7 A Life offices' underlying funds are currently deemed to be taxed at 20% on gains. B Correct. Life offices' underlying funds are currently deemed to be taxed at 20% on gains. C Life offices' underlying funds are currently deemed to be taxed at 20% on gains. D Life offices' underlying funds are currently deemed to be taxed at 20% on gains. August 2023 Page 32 of 45  UK Financial Regulation (UKFR) Specimen Paper A 26 D Unit 1; U5.3 A When deciding on investments, accessibility, existing holdings and tax position are all factors that need to be considered. B When deciding on investments, accessibility, existing holdings and tax position are all factors that need to be considered. C When deciding on investments, accessibility, existing holdings and tax position are all factors that need to be considered. D Correct. When deciding on investments, accessibility, existing holdings and tax position are all factors that need to be considered. Unknown future changes in circumstances cannot be considered. 27 B Unit 1; U5.5 A Once features and benefits have been explained, the adviser should invite customer questions to confirm understanding. B Correct. The adviser should explain product features and how these benefit the client. C Explaining features and benefits will cover some of the FCA's requirements, but not all. D The relevant cancellation rights do need to be explained, but this is unlikely to be an advantage of explaining both features and benefits. 28 A Unit 1; U5.3 A Correct. Protection for dependents against the eventuality of death or illness of an income provider is normally a priority for young families. B Protection for dependents against the eventuality of death or illness of an income provider is normally a priority for young families. Few young families have lump sums to invest. C Protection for dependents against the eventuality of death or illness of an income provider is normally a priority for young families. A young family may be interested in retirement planning but would generally lack the available income to do so. D Protection for dependents against the eventuality of death or illness of an income provider is normally a priority for young families. Few young families have the available income to make savings. 29 B Unit 1; U5.2 A How a client feels about current arrangements is a soft fact. B Correct. The balance of a bank account is a hard fact. C A client objective is a soft fact. D A client objective is a soft fact. 30 A Unit 1; U6.1 A Correct. The agreement of all trustees is required. B Martin is the settlor of the trust. The term testator applies to wills. C It is the trustees who are required to obtain investment advice. D The trustees take legal ownership of the property. 31 B Unit1;U6.1 A Letters of administration relate to administrators who are appointed where someone dies intestate. B Correct. The grant of probate gives the executors named in a will the legal authority to act. C The executors are appointed in the will but grant of probate creates legal authority to act. D The executors are appointed in the will but grant of probate creates legal authority to act. August 2023 Page 33 of 45  UK Financial Regulation (UKFR) Specimen Paper A Q32 B Unit 1; U6.2 A Although some partnerships are limited liability, most do not have a separate legal entity and partners are responsible for losses. There are no shareholder dividends. B Correct. Although some partnerships are limited liability, most do not have a separate legal entity and partners are responsible for losses. C Although some partnerships are limited liability, most do not have a separate legal entity and partners are responsible for losses. There are no shareholders. D Although some partnerships are limited liability, most do not have a separate legal entity and partners are responsible for losses. The losses will not be written off. Q33 B Unit 1; U6.3 A Ratification takes place where, if an agent exceeds his authority, the principal can, if he chooses, agree after the event to what the agent has done. B Correct. Ratification takes place where, if an agent exceeds his authority, the principal can, if he chooses, agree after the event to what the agent has done. C Ratification takes place where, if an agent exceeds his authority, the principal can, if he chooses, agree after the event to what the agent has done. D Ratification takes place where, if an agent exceeds his authority, the principal can, if he chooses, agree after the event to what the agent has done. Q34 A Unit 1; U6.4 A Correct. Where a property is held on a joint tenancy basis and one party dies, the deceased's share of the property automatically transfers to the survivor. B Where a property is held on a joint tenancy basis and one party dies, the deceased's share of the property automatically transfers to the survivor. C Where a property is held on a joint tenancy basis and one party dies, the deceased's share of the property automatically transfers to the survivor. D Where a property is held on a joint tenancy basis and one party dies, the deceased's share of the property automatically transfers to the survivor. Q35 C Unit 1; U6.5 A A lasting power of attorney must be registered at the Office of the Public Guardian. B Once in force, a lasting power of attorney can only be revoked by the Court of Protection. C Correct. An ordinary power of attorney will cease when the donor loses mental capacity; a lasting power of attorney remains effective upon mental incapacity. D An ordinary power of attorney will cease when the donor loses mental capacity; a lasting power of attorney remains effective upon mental incapacity. Q36 A Unit 1; U6.6 A Correct. Under normal circumstances, a bankruptcy order will remain in force for 12 months. B Under normal circumstances, a bankruptcy order will remain in force for 12 months. C Under normal circumstances, a bankruptcy order will remain in force for 12 months. D Under normal circumstances, a bankruptcy order will remain in force for 12 months. August 2023 Page 34 of 45  UK Financial Regulation (UKFR) Specimen Paper A Q37 C Unit 1; U7.1 A An individual will be automatically resident in the UK if they are present in the UK for at least 183 days in a tax year. Bella's stay is just below this limit. B An individual will be automatically resident in the UK if they are present in the UK for at least 183 days in a tax year. Although Dmitri is here for more than 183 days, his stay is spread over two tax years and will not exceed the 183 days per tax year rule. C Correct. An individual will be automatically resident in the UK if they are present in the UK for at least 183 days in a tax year. Luigi's stay will exceed this in the current tax year. D An individual will be automatically resident in the UK if they are present in the UK for at least 183 days in a tax year. Sandra's stay is well below this limit. Q38 B Unit 1; U7.2 A No tax is deducted at source on dividend payments. B Correct. No tax is deducted at source on dividend C payments. No tax is deducted at source on dividend payments. D No tax is deducted at source on dividend payments. Q39 D Unit 1; U7.2 A It is the amount of the redundancy payment, not the current tax status, which initially determines liability. B Previous redundancy payments are discounted. C The offer of alternative employment does not impact once redundancy is declared. D Correct. If a redundancy payment exceeds £30,000 it is liable to be taxed.. : Q40 C Unit 1; U7.3 A Only chattels valued at £6,000 or less are exempt from CGT. B Unlike a principal residence, a second home will not be exempt from CGT. C Correct. Foreign currency (for private use) is exempt from CGT. D Listed shares are not exempt from CGT. Q41 A Unit 1; U7.3 A Correct. An investor in unit trusts is potentially liable for CGT on gains. B Gilts are exempt from CGT. C NS&I products are exempt from CGT. D ISAs are exempt from CGT. Q42 C Unit 1; U7.3 A Capital allowances are used by companies to reduce corporation tax payable. B The costs of acquisition, enhancement and disposal can all be taken into account to reduce the amount of a taxable gain. C Correct. The costs of acquisition, enhancement and disposal can all be taken into account to reduce the amount of a taxable gain. D Maintenance costs cannot be taken into account to reduce the amount of a taxable gain. Q43 A Unit 1; U7.6 A Correct. On purchase of shares, SDRT of 0.5% of market value must be paid. B On purchase of shares, SDRT of 0.5% of market value must be paid. C On purchase of shares, SDRT of 0.5% of market value must be paid. D On purchase of shares, SDRT of 0.5% of market value must be paid. August 2023 Page 35 of 45  UK Financial Regulation (UKFR) Specimen Paper A 44 C Unit 1; U7.8 A A self-employed person normally pays Class 2 contributions (flat rate) and Class 4 contributions (based on profits). Class 1 contributions are made by employees and employers. B A self-employed person normally pays Class 2 contributions (flat rate) and Class 4 contributions (based on profits). Class 3 contributions are voluntary. C Correct. A self-employed person normally pays Class 2 contributions (flat rate) and Class 4 contributions (based on profits). D A self-employed person normally pays Class 2 contributions (flat rate) and Class 4 contributions (based on profits). Class 3 contributions are voluntary. 45 C Unit 1; U7.9 A Child Benefit will only be payable once the child is born. B Income Support is designed to help those on a lower income and who are working less than 16 hours per week. C Correct. Maternity Allowance is to help working women who are pregnant but who cannot claim SMP (in this case because Mandy is self-employed). D Mandy cannot claim SMP as she is not an employee. 46 C Unit 1; U7.4 A A fixed rate of 20% can apply to chargeable lifetime transfers in excess of the nil rate band. B A fixed rate of 20% can apply to chargeable lifetime transfers in excess of the nil rate band. C Correct. A fixed rate of 20% can apply to chargeable lifetime transfers in excess of the nil rate band. D A fixed rate of 20% can apply to chargeable lifetime transfers in excess of the nil rate band. 47 C Unit 1; U7.5 A A company will pay quarterly instalments of corporation tax where its profit is more than £1.5m per year. B A company will pay quarterly instalments of corporation tax where its profit is more than £1.5m per year. C Correct. A company will pay quarterly instalments of corporation tax where its profit is more than £1.5m per year. D A company will pay quarterly instalments of corporation tax where its profit is more than £1.5m per year. 48 B Unit 1; U8.1 A Real growth is growth above the increase in inflation. B Correct. Real growth is growth above the increase in inflation. C Real growth is growth above the increase in inflation. D Real growth is growth above the increase in inflation. 49 A Unit 1; U8.2 A Correct. An arrangement fee is most likely to be charged on a fixed-rate mortgage, but not on a SVR mortgage B A broker fee would be payable if a broker is used irrespective of the type of mortgage arranged. C A higher lending charge applies at certain loan-to-value level, and is not applied with reference to the interest rate option used. D A valuation fee would be charged on both mortgages. August 2023 Page 36 of 45  UK Financial Regulation (UKFR) Specimen Paper A 50 B Unit 1; U8.2 A A variable rate mortgage does not normally carry an arrangement fee. B Correct. A variable rate mortgage is beneficial if interest rates fall. C Unlike a fixed rate (or capped) mortgage, a variable rate mortgage does not allow accurate budgeting. D It is not possible in advance to accurately predict how repayments will compare to other products. August 2023 Page 37 of 45  UK Financial Regulation (UKFR) Specimen Paper A Answers and Justifications Unit 2: UKFS 01 D Unit 2; K1.1 A The specialist sourcebooks include arrangements for professional firms such as accountants and solicitors. B The specialist sourcebooks include arrangements for professional firms such as accountants and solicitors. C The specialist sourcebooks include arrangements for professional firms such as accountants and solicitors. D Correct. The specialist sourcebooks include arrangements for professional firms such as accountants and solicitors. 02 B Unit 2; K1.1 A The FCA is responsible for the Financial Ombudsman Service. B Correct.The FCA is responsible for the Financial Ombudsman Service. C The FCA is responsible for the Financial Ombudsman Service. D The FCA is responsible for the Financial Ombudsman Service. 03 D Unit 2; K1.3 A It is a requirement under outcome 6 that consumers must not face unreasonable barriers when switching product or provider, making a claim, or complaining. B It is a requirement under outcome 6 that consumers must not face unreasonable barriers when switching product or provider, making a claim, or complaining. C It is a requirement under outcome 6 that consumers must not face unreasonable barriers when switching product or provider, making a claim, or complaining. D Correct. This is a requirement under outcome 6. 04 A Unit 2; K1.2 A Correct. Acting to avoid situations that could lead to risks for the business is not a specific requirement for those carrying out a senior management function. B Appropriate disclosure of information of which the regulator would reasonably expect notice is a key principle for those carrying out a senior management function. C Taking reasonable steps to ensure that the business of the firm for which she is responsible complies with relevant regulatory requirements and standards is a key principle for those carrying out a senior management function. D Taking reasonable steps to ensure that the business of the firm for which she is responsible is organised so that it can be controlled effectively is a key principle for those carrying out a senior management function. August 2023 Page 38 of 45  UK Financial Regulation (UKFR) Specimen Paper A 05 C Unit 2; K1.4 A There is no requirement for systems and controls to be agreed by the FCA before implementation. B There is no requirement for systems and controls to be notified to customers. C Correct. It is a requirement that systems and controls should be regularly reviewed. D There is no agreed industry standard, although the systems and controls must be appropriate to the business. 06 B Unit 2; K1.5 A Those in an ancillary role need not be vetted/ approved or certified. B Correct. Those performing a senior management role are individually vetted and approved by the FCA/ PRA. C Those in 'significant harm' functions are certified by their employer. D Those in 'significant harm' functions are certified by their employer. 07 B Unit 2; K1.6 A Market abuse is separated into two aspects, insider dealing and market manipulation. B Correct.Market abuse is separated into two aspects, insider dealing and market manipulation. C Market abuse is separated into two aspects, insider dealing and market manipulation. D Market abuse is separated into two aspects, insider dealing and market manipulation. 08 C Unit 2; K1.2 A To act with due skill, care and diligence is one of the 11 Principles for Businesses. B To act with integrity is one of the 11 Principles for Businesses. C Correct. While it is important for a firm to have a clear chain of responsibility, this is not one of the 11 Principles for Businesses. D To observe proper standards of market conduct is one of the 11 Principles for Businesses. 09 D Unit 2; K2.4 A All schemes must give notification of any changes to important information. B A scheme must inform the regulator as soon as possible if there is a funding problem. C All schemes must make regular returns to the regulator. D Correct. There is no requirement to provide details of every transfer out. 10 D Unit 2; K2.5 A Consumers have a right to clear and honest information before they buy. B Consumers have a right to be supplied with goods and services that are fit for purpose. C Consumers have a right to get what they have paid for. D Correct. There is no automatic right to pay a fair price that reflects market rates. 11 B Unit 2; K2.1 A This is not covered by MiFID. B Correct. Underwriting the issue of any of the specified financial instruments falls under the scope of MiFID. C Life assurance advice is not covered by MiFID. D Mortgage advice is not covered by MiFID. August 2023 Page 38 of 45  UK Financial Regulation (UKFR) Specimen Paper A 12 B Unit 2; K3.1 A External auditors are particularly concerned with reviewing a firm's published financial statements and accounts. B Correct. External auditors are particularly concerned with reviewing a firm's published financial statements and accounts. C External auditors are particularly concerned with reviewing a firm's published financial statements and accounts. D External auditors are particularly concerned with reviewing a firm's published financial statements and accounts. 13 D Unit2; U1.2 A Capital adequacy risk is the risk that a business lacks the financial resources to continue without placing the assets of its customers at risk. B There is no specific category of internal risk. C Liquidity risk is the risk that a business lacks access to sufficient financial resources to meet its obligations as they fall due. D Correct. Operational risk is that arising from the way a business is run and managed. 14 D Unit 2; U1.3 A Flexible portfolio firms are supervised by a mixture of targeted supervisory work and programmes of education and communication. B Flexible portfolio firms are supervised by a mixture of targeted supervisory work and programmes of education and communication. C Flexible portfolio firms are supervised by a mixture of targeted supervisory work and programmes of education and communication. D Correct. Flexible portfolio firms are supervised by a mixture of targeted supervisory work and programmes of education and communication. 15 B Unit2; U1.3 A The charges levied on the client should reflect the service provided. B Correct.The charges levied on the client should reflect the service provided. C The charges levied on the client should reflect the service provided. D The charges levied on the client should reflect the service provided. 16 B Unit2;U1.4 A Variation of a firm's permissions may involve removal or restriction of one of the firm's regulated activities. B Correct. Variation of a firm's permissions may involve removal or restriction of one of the firm's regulated activities. C Variation of a firm's permissions may involve removal or restriction of one of the firm's regulated activities. D Variation of a firm's permissions may involve removal or restriction of one of the firm's regulated activities. 17 A Unit 2; U2.1 A Correct. B This is not a requirement. C Approval from the FCA rather than the PRA is required. D There is no conduct and ethics test. August 2023 Page 39 of 45  UK Financial Regulation (UKFR) Specimen Paper A 18 D Unit 2; U2.1 A Engaging customers to drive competition is a way in which the FCA seeks to promote competition. B Ensuring there are no undue barriers preventing new providers entering the market is a way in which the FCA seeks to promote competition. C Preventing any single firm from dominating the market is a way in which the FCA seeks to promote competition. D Correct. Whilst the FCA is eager to see product innovation, it will not apply a light-touch approach to regulation. 19 C Unit 2; U3.1 A Direct offer financial promotions are not subject to different record keeping requirements. B Direct offer financial promotions are not subject to different approval requirements. C Correct. Direct offer financial promotions must contain the name of the conduct regulator, the FCA. D Direct offer financial promotions can be sent to any customer who has not opted out of receiving marketing. 20 A Unit 2; U3.1 A Correct. There must be a warning that past performance is not necessarily a reliable indicator of future performance. B There must be a warning that past performance is not necessarily a reliable indicator of future performance. C There must be a warning that past performance is not necessarily a reliable indicator of future performance. D There must be a warning that past performance is not necessarily a reliable indicator of future performance. 21 A Unit 2; U2.2 A Correct. Employees are expected to maintain competence primarily through continuing professional development. B It is unusual for learning courses to be imposed for maintaining competence, although this often occurs for new products, etc. C In-house tutorials are normally only available in larger institutions. They are not appropriate across the board. D Regular testing does take place in larger organisations but it is the end product rather than the process. 22 D Unit 2; U2.3 A Even when acting under supervision, an adviser must have passed the regulation and ethics module before giving advice. B An adviser must have passed the regulation and ethics module of the level 4 qualification before giving advice under supervision, regardless of the level of investments. C An adviser must have passed the regulation and ethics module of the level 4 qualification before giving advice under supervision. D Correct. An adviser must have passed the regulation and ethics module of the level 4 qualification before giving advice under supervision, in all circumstances. August 2023 Page 40 of 45  UK Financial Regulation (UKFR) Specimen Paper A Q23 A Unit 2; U2.2 A Correct. Training and competence records must be kept for a minimum of three years after an employee has left the firm or ceased carrying out regulated activities. B Training and competence records must be kept for a minimum of three years after an employee has left the firm or ceased carrying out regulated activities. C Training and competence records must be kept for a minimum of three years after an employee has left the firm or ceased carrying out regulated activities. D Training and competence records must be kept for a minimum of three years after an employee has left the firm or ceased carrying out regulated activities. Q24 C Unit 2; U2.3 A Not all employees must pass an appropriate examination. B There is no specific time limit set by the regulator for new entrants to gain competence, although a firm may wish to set its own standards. C Correct. Ongoing competence must be monitored. D Records of assessment criteria must be kept for a minimum of three years after an employee has left the firm. Q25 B Unit 2; U3.3 A The adviser is not obliged to provide 'out-of-hours' contact details, even for designated investment business. The adviser should provide a client agreement B Correct. The document given to the client when carrying out designated investment business is the client agreement. t C A suitability letter is provided for sales of life assurance, pension, collective investment and pensions transfer business. The document given to a client when carrying on designated ,. investment business is a client agreement. D The IDD and menu have been replaced by the SCDD. For designated investment business, the adviser is obliged to provide an additional document, the client agreement. Q26 D Unit 2; U3.11 A This is not subject to FCA regulation under MCOB. B This is not subject to FCA regulation under MCOB. C This is not subject to FCA regulation under MCOB. D Correct. This is subject to FCA regulation under MCOB. 027 B Unit 2; U3.11 A An ESIS detailing the APRC must be provided when giving mortgage advice (MCOB 5A). B Correct.An ESIS detailing the APRC must be provided when giving mortgage advice (MCOB 5A). C An ESIS detailing the APRC must be provided when giving mortgage advice (MCOB 5A). D An ESIS detailing the APRC must be provided when giving mortgage advice (MCOB 5A). 028 C Unit 2; U3.11 A A tariff of charges should be issued at the offer stage (MCOB 6). B A tariff of charges should be issued at the offer stage (MCOB 6). C Correct. A tariff of charges should be issued at the offer stage (MCOB 6). D A tariff of charges should be issued at the offer stage (MCOB 6). August 2023 Page 41 of 45  UK Financial Regulation (UKFR) Spedmen Paper A 29 B Unit 2; U3.11 A David would not need to take a further examination to advise on a buy-to-let mortgage. However, to be able to give equity release advice, an adviser requires further qualification eg Certificate in Regulated Equity Release. B Correct. To be able to give equity release advice, an adviser requires further qualification eg Certificate in Regulated Equity Release. C David would not need to take a further examination to advise on further advances. However, to be able to give equity release advice, an adviser requires further qualification eg Certificate in Regulated Equity Release. D David would not need to take a further examination to advise on second charges. However, to be able to give equity release advice, an adviser requires further qualification eg Certificate in Regulated Equity Release. 30 D Unit 2; U3.12 A If a customer cancels, the insurance company must return any sums paid to it within 30 days. B If a customer cancels, the insurance company must return any sums paid to it within 30 days. C If a customer cancels, the insurance company must return any sums paid to it within 30 days. D Correct. Level term assurance is a pure protection contract so, if a customer cancels, the insurance company must return any sums paid to it within 30 days. 31 D Unit 2; U3.2 A A firm authorised to conduct investment business is normally an eligible counterparty. B A firm authorised to conduct investment business is normally an eligible counterparty. C A firm authorised to conduct investment business is normally an eligible counterparty. D Correct. A firm authorised to conduct investment business is normally an eligible counterparty. 32 B Unit 2; U3.4 A Under the MiFID definition it may be able to describe its advice as independent. B Correct. This would be a form of restricted advice. C Under the MiFID definition it may be able to describe its advice as independent. D The use of a panel does not preclude advice being described as independent. 33 A Unit 2; U3.4 A Correct. Independent advice must be based on a sufficient range of relevant products on the market that are sufficiently diverse to meet the client's objectives. B Independent advice must be based on a sufficient range of relevant products on the market that are sufficiently diverse to meet the client's objectives. This need not cover all areas of financial advice. C Independent advice must be based on a sufficient range of relevant products on the market that are sufficiently diverse to meet the client's objectives. This maybe on just one particular area, rather than all of a client's needs. D Independent advice must be based on a sufficient range of relevant products on the market that are sufficiently diverse to meet the client's objectives. August 2023 Page 42 of 45  UK Financial Regulation _{_l.J_KFR) Specimen Paper A Q34 B Unit 2; U3.4 A Independent advisers must make recommendations based on a sufficient range of relevant products that are sufficiently diverse to meet a client's objectives. This must not be restricted to products of a host employer. B Correct. Independent advisers must make recommendations based on a sufficient range of relevant products that are sufficiently diverse to meet a client's objectives. C Independent advisers must make recommendations based on a sufficient range of relevant products that are sufficiently diverse to meet a client's objectives, but the most suitable product will not necessarily be the cheapest. D Independent advisers must make recommendations based on a sufficient range of relevant products that are sufficiently diverse to meet a client's objectives. The most suitable product will not necessarily be the cheapest, not must they be tied to selling the products of a host employer. Q35 A Unit 2; U3.6 A Correct. B It is primarily based on mathematical models and algorithms. C It minimises human intervention. D This is used to analyse customer behaviour on a website, not to provide advice. Q36 A Unit 2; U3.8 A Correct.Commission can be paid for pure protection products including IPI and term assurance. B As this has an investment element, commission cannot be paid. C Commission cannot be paid. D Commission cannot be paid. Q37 D Unit 2; U3.5 A For a life policy, a suitability report must be sent before the contract is concluded. B For a life policy, a suitability report must be sent before the contract is concluded. C For a life policy, a suitability report must be sent before the contract is concluded. D Correct. For a life policy, a suitability report must be sent before the contract is concluded. Q38 B Unit 2; U3.7 A With an 'execution-only' transaction, there is no requirement to provide advice or make any recommendations. The responsibility lies with the customer. B Correct. With an 'execution-only' transaction, there is no requirement to provide advice or make any recommendations. The responsibility lies with the customer. C With an 'execution-only' transaction, there is no requirement to provide advice or make any recommendations. The responsibility lies with the customer. D With an 'execution-only' transaction, there is no requirement to provide advice or make any recommendations. The responsibility lies with the customer. Q39 C Unit 2; U4.2 A It is 25%. B It is 25%. C Correct. D It is 25%. August 2023 Page 43 of 45  UK Financial Regulation (UKFR) Specimen Paper A Q40 D Unit 2; U3.9 A Where a single-premium unit-linked investment has fallen in value during the cancellation period, the customer may find that the refund has been adjusted to take account of the fall. No fees or charges can be taken. B Where a single-premium unit-linked investment has fallen in value during the cancellation period, the customer may find that the refund has been adjusted to take account of the fall. No fees or charges can be taken. C Where a single-premium unit-linked investment has fallen in value during the cancellation period, the customer may find that the refund has been adjusted to take account of the fall. No fees or charges can be taken. D Correct. Where a single-premium unit-linked investment has fallen in value during the cancellation period, the customer may find that the refund has been adjusted to take account of the fall. No fees or charges can be taken. Q41 A Unit 2; U3.10 A Correct. A key features document will be required where advice is being given on a packaged product. It will not be required for a direct investment such as gilts. B A key features document will be required where advice is being given on a packaged product (eg life assurance, pension policies, unit trusts/ OEICs). C A key features document will be required where advice is being given on a packaged product (eg life assurance, pension policies, unit trusts/ OEICs). D A key features document will be required where advice is being given on a packaged product (eg life assurance, pension policies, unit trusts/ OEICs). Q42 B Unit 2; U4.1 A Property is defined as assets of every kind, tangible or intangible, including legal documents. It is not restricted to cash assets. B Correct. Property is defined as assets of every kind, tangible or intangible, including legal documents. C Property is defined as assets of every kind, tangible or intangible, including legal documents. D Property is defined as assets of every kind, tangible or intangible, including legal documents. Q43 D Unit 2; U4.6 A The annual report is to review any problems and strengthen controls, monitor activities and reduce deficiencies. This complies with the Joint Money Laundering Steering Group's guidelines. B The annual report is to review any problems and strengthen controls, monitor activities and reduce deficiencies. This complies with the Joint Money Laundering Steering Group's guidelines. C The annual report is to review any problems and strengthen controls, monitor activities and reduce deficiencies. This complies with the Joint Money Laundering Steering Group's guidelines. D Correct. The annual report is to review any problems and strengthen controls. This complies with the Joint Money Laundering Steering Group's guidelines. Q44 B Unit 2; U4.8 A The Financial Action Task Force was set up to assist international initiatives to combat money laundering. B Correct. The Financial Action Task Force was set up to assist international initiatives to combat money laundering. C The Financial Action Task Force was set up to assist international initiatives to combat money laundering. D The Financial Action Task Force was set up to assist international initiatives to combat money laundering. August 2023 Page 44 of45  UK Financial Regulation (UKFR) Specimen Paper A Q45 D Unit 2; U4.4 A Money laundering requirements may create financial exclusion because not everyone will have the necessary identification. B Money laundering requirements may create financial exclusion because not everyone will have the necessary identification. C Money laundering requirements may create financial exclusion because not everyone will have the necessary identification. D Correct. Money laundering requirements may create financial exclusion because not everyone will have the necessary identification. Q46 C Unit 2; U5.2 A Firms should try to resolve complaints within eight weeks. B Firms should try to resolve complaints within eight weeks. C Correct.Firms should try to resolve complaints within eight weeks. D Firms should try to resolve complaints within eight weeks. Q47 B Unit 2; U5.3 A A complaint should be made to a firm before it is referred to the Ombudsman. B The Ombudsman's ruling is binding upon the firm & the client. C Correct. The Ombudsman's ruling is binding upon the firm not the clients. D The FOS is funded by a general levy and case fees. The Ombudsman will start charging case fees from the 26th complaint onward each year. Q48 B Unit 2; U5.4 A Compensation from the FSCS is based on the amount held. B Correct. Compensation is limited to £85,000 per person, so John would have received £82,000 in respect of the joint account with Bank A and £80,000 in respect of the account with Bank B. C The FSCS would pay John the same amount in respect of each account. D The FSCS would pay £85,000 in respect of each account. Q49 A Unit 2; U6.1 A Correct. Information about correspondence addresses is not classed as sensitive data. B Information about an individual's mental health will be classed as sensitive data. C Information about an individual's political persuasion will be classed as sensitive data. D Information about an individual's religious beliefs will be classed as sensitive data. Q50 D Unit 2; U6.2 A Significant breached of personal data should be reported to the Information Commissioner. B Significant breached of personal data should be reported to the Information Commissioner. C Significant breached of personal data should be reported to the Information Commissioner D Correct. Significant breached of personal data should be reported to the Information Commissioner August 2023 Page 45 of 45