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

The FCA took over responsibility for consumer credit regulation from the Office of Fair Trading (OFT) on 1 April 2014, bringing it within the FSMA regulatory framework.

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

An execution-only transaction is one where the firm acts on the client's instructions without providing advice or assessing suitability. The firm's obligations are more limited, but it must still ensure the client is eligible.

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

The duty of care requires firms to act with reasonable care and skill when dealing with customers. The Consumer Duty has reinforced and extended this concept, requiring firms to act in good faith and avoid causing foreseeable harm.

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

Churning occurs when an adviser engages in excessive trading in a client's account primarily to generate commission income rather than to benefit the client. This is a form of misconduct prohibited by the FCA.

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

The FCA requires firms to provide retail customers with clear, fair, and not misleading information about products, including key features, risks, costs, and terms, before the customer makes a decision.

CII R01 Practice Test

CII R01 Practice Test

CII R01 Consumer Protection 6