R01 Client categories, disclosure, cancellation and vulnerability: free practice questions
5 free questions on Client categories, disclosure, cancellation and vulnerability, part of learning outcome 7 (The advice framework). Pick an answer to check it, or open the answer to see why each option is right or wrong.
Question 1 of 5
Which category of investment client receives the greatest protection under FCA rules?
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The answer is B: Retail client
Retail clients get the most protection and disclosure, and the Consumer Duty applies to them. Professional clients and eligible counterparties get less.
Why the other options are wrong
A
Eligible counterparties get the least protection.
C
Professional clients get less protection than retail clients.
D
Elective professional clients give up retail protections.
Question 2 of 5
Under ICOBS, who is a 'consumer'?
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The answer is A: A natural person acting outside their trade or profession
A consumer is any natural person acting outside their trade or profession, including someone acting as trustee of a family trust. A commercial customer is anyone who isn't a consumer.
Why the other options are wrong
B
Companies are commercial customers.
C
Commercial customers are the other category.
D
The definition isn't limited to life cover or by age.
Question 3 of 5
When must a client agreement normally be given to a retail client?
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The answer is A: Before business is done, or straight after if done at a distance
A retail client must receive a client agreement before business is conducted, or immediately afterwards if distance communication (e.g. telephone) prevented this. Professional clients get one within a reasonable period.
Why the other options are wrong
B
A year is far too late.
C
There's no investment threshold.
D
It's required, not on request.
Question 4 of 5
When can a firm rely on information provided by its client?
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The answer is D: Unless the firm knows it's manifestly out of date or inaccurate
A firm can rely on client information unless it knows it's manifestly out of date, inaccurate or incomplete.
Why the other options are wrong
A
No statutory declaration is required.
B
Reliance is generally allowed.
C
There's no one-week rule.
Question 5 of 5
A client cancels a single premium unit trust investment within the cancellation period after prices have fallen. What can the provider deduct from the refund?
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The answer is B: Any fall in unit prices, if the notice was sent correctly
The provider can deduct any shortfall (market loss since allocation) on single payment life policies, pension contracts, unit trusts and OEICs, provided it sent the cancellation notice at the correct time.
Why the other options are wrong
A
Adviser fees aren't deducted as cancellation charges.
C
A shortfall can be deducted in these cases.
D
There's no standard 10% fee.
Practise all 17 Client categories, disclosure, cancellation and vulnerability questions
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