CII R01 Consumer Protection 6

Question 1

What is the FCA's approach to consumer credit regulation?

Accepted Answer

The FCA regulates consumer credit under FSMA, having taken over from the OFT in 2014

Answer

Consumer credit is not regulated by the FCA

Answer

Consumer credit is regulated by local councils

Answer

Consumer credit is only regulated for amounts over £25,000

Question 2

What is an 'execution-only' transaction?

Accepted Answer

A transaction where the firm carries out a client's instructions without giving advice or assessing suitability

Answer

A transaction that can only be executed by the firm's CEO

Answer

A transaction that must be completed within one business day

Answer

A transaction involving only equity securities

Question 3

What is the 'duty of care' concept as applied by the FCA?

Accepted Answer

The obligation for firms to act with reasonable care and skill in their dealings with customers

Answer

A legal duty to make profits for shareholders

Answer

A duty to report all customer activities to the FCA

Answer

A requirement to provide free services to vulnerable customers

Question 4

What is 'churning' in the context of financial services consumer protection?

Accepted Answer

Excessive trading in a client's account to generate commission for the adviser

Answer

Frequently switching customers between accounts for the firm's benefit

Answer

The process of closing dormant accounts

Answer

Transferring client assets between subsidiaries

Question 5

What does the FCA require regarding 'product disclosure' for retail customers?

Accepted Answer

Firms must provide clear, comprehensible information about products including risks, costs, and terms before the customer commits

Answer

No disclosure is required for retail customers

Answer

Disclosure is only required for products over £10,000

Answer

Firms can choose what information to disclose

Question 6

How does the Consumer Duty differ from the previous Treating Customers Fairly (TCF) initiative?

Accepted Answer

The Consumer Duty is a binding regulation with an enforceable standard and higher expectations than TCF

Answer

They are identical in all respects

Answer

TCF was stricter than the Consumer Duty

Answer

The Consumer Duty only applies to banks while TCF applied to all firms