R01 Ethical dilemmas and scenarios: free practice questions

1. Question 1 of 5

   What creates an ethical dilemma?

   Option A: A product that has performed poorlyOption B: A customer who refuses to pay a feeOption C: A rule that the firm has clearly and knowingly brokenOption D: A tension between two or more sets of values

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   The answer is D: A tension between two or more sets of values

   Dilemmas come from tension between values, such as personal, corporate, professional or social values. Either two values conflict, or one has to be put ahead of another.

   Why the other options are wrong

   A

   Poor performance isn't an ethical dilemma.

   B

   A fee dispute isn't in itself an ethical dilemma.

   C

   A clear breach is a compliance failure, not a dilemma.

2. Question 2 of 5

   Which of these are recognised ways to test an option when resolving a dilemma? 1. Discuss it with a trusted colleague 2. Picture how someone you respect outside the firm would see it 3. Imagine explaining it to family and friends over dinner

   Option A: 1 and 3 onlyOption B: 2 and 3 onlyOption C: 1 and 2 onlyOption D: 1, 2 and 3

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   The answer is D: 1, 2 and 3

   All three help: talk it through with a trusted colleague, view it through the eyes of someone you look up to, and ask whether you'd be happy to put your name to it in front of family and friends.

   Why the other options are wrong

   A

   Seeing it through a respected outsider's eyes also helps.

   B

   Consulting a trusted colleague also helps.

   C

   The 'dinner table' test also helps.

3. Question 3 of 5

   A prospective client tells an adviser about a large land sale that isn't yet public. A relative who is a journalist would love the story. What should the adviser do?

   Option A: Share it, provided that it won't affect any company's share priceOption B: Share it, if other firms in the market would normally do the sameOption C: Keep it confidential unless the client gives informed consentOption D: Share it, since the person hasn't yet bought anything from the firm

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   The answer is C: Keep it confidential unless the client gives informed consent

   Information given in confidence must be kept confidential, whether or not the person has become a client. It can't be passed on, or used for personal gain, without the person's prior and informed consent.

   Why the other options are wrong

   A

   Confidentiality isn't limited to price-sensitive information.

   B

   What other firms do doesn't decide your duty.

   D

   Confidentiality applies to prospective clients too.

4. Question 4 of 5

   A prospect hints that they'll give an adviser a large piece of business in exchange for expensive sports tickets. What is the most appropriate action?

   Option A: Buy the tickets, as they cost less than the commissionOption B: Ignore the hint and carry on with the proposalOption C: Report the incident to the firm's compliance officerOption D: Ask a product provider to supply tickets in return for business

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   The answer is C: Report the incident to the firm's compliance officer

   The prospect has asked for a bribe. Providing tickets risks prosecution under bribery law, and ignoring it isn't enough because the incident should be reported, even if not acted on.

   Why the other options are wrong

   A

   That would be paying a bribe.

   B

   Turning a blind eye isn't enough; the request should be reported.

   D

   That would also be bribery, with a conflict of interest.

5. Question 5 of 5

   An adviser hears that another branch is meeting tough targets by moving clients from critical illness cover to cheaper, narrower cover. What is the most important first step?

   Option A: Tell the regional manager the targets are too highOption B: Ask a colleague how to sell more without riskOption C: Raise the concern with the firm's compliance departmentOption D: Keep quiet, as it's only a rumour

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   The answer is C: Raise the concern with the firm's compliance department

   Possible current customer detriment comes first. Compliance can investigate and, if needed, tell the FCA and put things right. Raising concerns about targets matters too, but it's about future risk.

   Why the other options are wrong

   A

   Worth doing, but it addresses future risk rather than possible current harm.

   B

   This addresses only your own sales, not the possible harm.

   D

   Ignoring possible customer harm isn't ethical.

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