CISI IoI FCA Regulation and Consumer Protection

Question 1

What are the FCA's three main statutory objectives?

Accepted Answer

Consumer protection, market integrity, and competition

Answer

Profit maximisation, market efficiency, and consumer education

Answer

Financial stability, prudential oversight, and systemic risk management

Answer

Inflation control, employment promotion, and exchange rate stability

Question 2

What is the Financial Services Compensation Scheme (FSCS) and what does it protect?

Accepted Answer

A scheme providing compensation to eligible claimants if an authorised financial firm is unable to pay claims against it, with limits depending on the type of claim

Answer

A scheme that guarantees all investment returns for retail investors

Answer

A scheme that automatically reimburses investors when markets fall more than 20%

Answer

A scheme that compensates advisers when clients default on fees

Question 3

What is the meaning of 'authorisation' under the Financial Services and Markets Act 2000 (FSMA)?

Accepted Answer

The permission granted by the FCA (and/or PRA) allowing a firm or individual to carry on regulated activities in the UK

Answer

A professional qualification required to give investment advice

Answer

An annual licence renewed by paying a fee to the FCA

Answer

A voluntary certification that signals best practice

Question 4

What is the FCA's definition of a 'retail client'?

Accepted Answer

Any client who is not a professional client or eligible counterparty — the broadest category with the highest level of regulatory protection

Answer

Only individuals with less than £10,000 to invest

Answer

Only clients who invest through a financial adviser

Answer

Clients with investment experience of less than five years

Question 5

What is the purpose of the FCA's 'appropriateness' test for non-advised sales of complex investments?

Accepted Answer

To assess whether the client has the knowledge and experience necessary to understand the risks of the complex product they are purchasing without advice

Answer

To check that a client has sufficient assets to afford the investment

Answer

To verify that the client is not politically exposed

Answer

To determine whether a client qualifies for tax relief on the investment

Question 6

What is the Financial Ombudsman Service (FOS) limit for complaints about investment firms (as of 2024)?

Accepted Answer

£375,000

Answer

£50,000

Answer

£85,000

Answer

£100,000