R01 Authorisation, exemptions and appointed representatives: free practice questions

1. Question 1 of 5

   Under s.19 FSMA, what is the maximum penalty on indictment for breaching the general prohibition?

   Option A: Ten years' imprisonment and/or an unlimited fineOption B: Fourteen years' imprisonment onlyOption C: Two years' imprisonment and/or an unlimited fineOption D: A fine of up to £5,000 only

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   The answer is C: Two years' imprisonment and/or an unlimited fine

   Carrying on a regulated activity without being authorised or exempt breaches the general prohibition. On indictment it carries up to two years' imprisonment and/or an unlimited fine.

   Why the other options are wrong

   A

   Ten years applies to insider dealing and misleading statements.

   B

   Fourteen years applies to the main POCA money laundering offences.

   D

   The penalty isn't limited to a small fine.

2. Question 2 of 5

   What is the effect of an 'exclusion' under the regulated activities regime?

   Option A: It bans a named person from working in financial servicesOption B: It removes the FSCS protection for that firm's customersOption C: It reduces the capital the firm is required to holdOption D: It makes an otherwise regulated activity unregulated

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   The answer is D: It makes an otherwise regulated activity unregulated

   Exclusions, such as the introducer and overseas persons exclusions, turn otherwise regulated activities into unregulated ones, so a firm relying on one doesn't need authorisation for that activity.

   Why the other options are wrong

   A

   Banning someone is a prohibition order.

   B

   Exclusions aren't about FSCS protection.

   C

   Exclusions don't concern capital requirements.

3. Question 3 of 5

   Which of these is a designated professional body (DPB)?

   Option A: The Chartered Insurance Institute (CII)Option B: The Royal Institution of Chartered SurveyorsOption C: The Financial Ombudsman Service (FOS)Option D: The Personal Finance Society

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   The answer is B: The Royal Institution of Chartered Surveyors

   DPBs include the three law societies, the four accountancy bodies, the Institute of Actuaries, the Royal Institution of Chartered Surveyors and the Council for Licensed Conveyancers.

   Why the other options are wrong

   A

   The CII is a professional body for insurance and financial planning, but not a DPB.

   C

   The FOS resolves complaints; it isn't a DPB.

   D

   The PFS isn't a designated professional body.

4. Question 4 of 5

   Natalia's portfolio loses 50% in a stock market crash. Is she entitled to compensation from her adviser?

   Option A: Only if the advice breached FSMA or FCA rulesOption B: Yes, any loss over 20% must be compensatedOption C: No, because advisers are never liable for adviceOption D: Yes, because the FSCS guarantees investment values

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   The answer is A: Only if the advice breached FSMA or FCA rules

   A firm must compensate loss caused by advice that breached the rules, but a fall in value due to market movements doesn't in itself give rise to compensation.

   Why the other options are wrong

   B

   There's no automatic compensation threshold.

   C

   Firms are liable for advice that breaches the rules.

   D

   The FSCS doesn't guarantee investment values.

5. Question 5 of 5

   An appointed representative wants more than one principal. Which statement is correct?

   Option A: Investment ARs can have one principal; insurance ARs any numberOption B: Only investment ARs are allowed to have more than one principalOption C: Any type of AR can have up to three principals at the same timeOption D: Mortgage ARs can have only one principal for all mortgage business

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   The answer is A: Investment ARs can have one principal; insurance ARs any number

   An investment AR can have only one principal. Mortgage ARs can have separate principals for different classes of business, and insurance ARs can have any number. Multiple principals need a multi-principal agreement with a lead principal handling complaints.

   Why the other options are wrong

   B

   It's the other way round: investment ARs are limited to one.

   C

   There's no general limit of three.

   D

   Mortgage ARs can have different principals for different classes, such as equity release.

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