R01 FSMA 2000 and the Financial Services Act 2012: free practice questions

1. Question 1 of 5

   Under the Financial Services and Markets Act 2000, all regulated financial services were placed under which structure?

   Option A: Self-regulating organisations overseen by the TreasuryOption B: One regulator, one ombudsman and one compensation schemeOption C: A single regulator, with complaints and compensation run by each sectorOption D: Separate regulators for banking, insurance and investments

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   The answer is B: One regulator, one ombudsman and one compensation scheme

   FSMA brought all sectors under one system: one regulator (the former FSA), one ombudsman (the Financial Ombudsman Service) and one compensation scheme (the FSCS).

   Why the other options are wrong

   A

   FSMA ended the old self-regulating organisations.

   C

   Complaints and compensation were also unified, under the FOS and FSCS.

   D

   FSMA replaced separate sector regulators with a single system.

2. Question 2 of 5

   When the FSA was disbanded under the Financial Services Act 2012, which three bodies took over regulation?

   Option A: The FPC, the PRA and the FCAOption B: The PRA, the CMA and HM TreasuryOption C: The FCA, the FOS and the FSCSOption D: The MPC, the PRA and the FCA

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   The answer is A: The FPC, the PRA and the FCA

   Regulation was split between the Financial Policy Committee (watching system-wide risk), the Prudential Regulation Authority (prudential supervision) and the Financial Conduct Authority (conduct).

   Why the other options are wrong

   B

   The CMA and Treasury didn't take over the FSA's regulatory role.

   C

   The FOS and FSCS handle complaints and compensation, not regulation.

   D

   The MPC sets interest rates; it wasn't one of the three successor bodies.

3. Question 3 of 5

   What is the role of the Financial Policy Committee?

   Option A: Watching for risks to the whole system and setting strategic directionOption B: Setting Bank Rate each month to meet the Chancellor's inflation targetOption C: Running the compensation scheme for customers of failed firmsOption D: Supervising the conduct of individual banks and financial advice firms

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   The answer is A: Watching for risks to the whole system and setting strategic direction

   The FPC, a committee within the Bank of England, identifies and acts on systemic risks to the financial system as a whole and gives strategic direction to the regulatory regime.

   Why the other options are wrong

   B

   Interest rates are set by the Monetary Policy Committee.

   C

   Compensation is paid by the FSCS.

   D

   Conduct supervision of firms is the FCA's job.

4. Question 4 of 5

   What did the Bank of England and Financial Services Act 2016 change for the PRA?

   Option A: It made the PRA fully independent of the Bank of EnglandOption B: It brought the PRA into the Bank itself, under a new committeeOption C: It merged the PRA into the FCA as a single regulatorOption D: It gave the PRA responsibility for setting interest rates

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   The answer is B: It brought the PRA into the Bank itself, under a new committee

   From 1 March 2017 the PRA became part of the Bank itself rather than a subsidiary, and the Prudential Regulation Committee replaced the PRA Board, alongside the FPC and MPC.

   Why the other options are wrong

   A

   The Act brought the PRA further into the Bank, not out of it.

   C

   The PRA and FCA remain separate regulators.

   D

   Interest rates remain the MPC's responsibility.

5. Question 5 of 5

   Which of the following is a regulated activity under FSMA?

   Option A: Giving general information about how pensions work, without a recommendationOption B: Advising a client on which investment to buyOption C: Lending money to a family member informallyOption D: Writing a newspaper article about house prices

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   The answer is B: Advising a client on which investment to buy

   Regulated activities include dealing in, arranging, managing or advising on specified investments, and using a computer-based system to give investment instructions.

   Why the other options are wrong

   A

   General information without a recommendation isn't advice.

   C

   Informal family lending isn't a regulated activity.

   D

   Journalism about house prices isn't a regulated activity.

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