R01 Conduct rules, fit and proper and conflicts of interest: free practice questions

1. Question 1 of 5

   What is individual conduct rule 1?

   Option A: You must observe proper standards of market conductOption B: You must be open and cooperative with regulatorsOption C: You must act with integrityOption D: You must act to deliver good outcomes for retail customers

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   The answer is C: You must act with integrity

   The individual conduct rules are: 1 integrity; 2 due skill, care and diligence; 3 open and cooperative with regulators; 4 pay due regard to customers' interests and treat them fairly; 5 proper standards of market conduct; 6 deliver good outcomes for retail customers.

   Why the other options are wrong

   A

   Market conduct is rule 5.

   B

   Openness with regulators is rule 3.

   D

   Good outcomes for retail customers is rule 6.

2. Question 2 of 5

   An employee tries to manipulate a benchmark rate. Which conduct rule does this breach?

   Option A: Rule 5Option B: Rule 4Option C: Rule 6Option D: Rule 2

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   The answer is A: Rule 5

   Manipulating or attempting to manipulate a benchmark or market breaches rule 5, observing proper standards of market conduct.

   Why the other options are wrong

   B

   Rule 4 is treating customers fairly.

   C

   Rule 6 is good outcomes for retail customers.

   D

   Rule 2 is skill, care and diligence.

3. Question 3 of 5

   What does FSMA s.64B require of firms regarding the conduct rules?

   Option A: To train staff on how the conduct rules apply to themOption B: To publish details of staff conduct breaches onlineOption C: To let staff choose which conduct rules apply to themOption D: To exempt part-time staff from the conduct rules

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   The answer is A: To train staff on how the conduct rules apply to them

   Firms must train staff on how the conduct rules apply to them and notify the FCA of formal disciplinary action for conduct rule breaches.

   Why the other options are wrong

   B

   Breaches are notified to the FCA, not published.

   C

   Staff can't choose which rules apply.

   D

   Part-time staff aren't exempt.

4. Question 4 of 5

   What is the purpose of the Code of Practice for Approved Persons?

   Option A: To list the investment products approved for retail saleOption B: To set out the sales targets that approved persons should meetOption C: To replace the conduct rules in firms covered by SM&CROption D: To help judge whether conduct breaches a Statement of Principle

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   The answer is D: To help judge whether conduct breaches a Statement of Principle

   The Code describes conduct that, in the FCA's view, doesn't comply with the relevant Statements of Principle, and sets out factors to consider.

   Why the other options are wrong

   A

   It doesn't list products.

   B

   It has nothing to do with sales targets.

   C

   SM&CR firms use COCON.

5. Question 5 of 5

   What mistake does the FCA say firms often make about conflicts of interest?

   Option A: Reporting too many conflicts to the FCAOption B: Seeing conflicts too narrowly, e.g. only payOption C: Giving conflicts to the board to manageOption D: Treating far too many situations as conflicts

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   The answer is B: Seeing conflicts too narrowly, e.g. only pay

   Firms often perceive conflicts too narrowly, such as solely about pay. Senior management must address the broad spread of conflict risk, including latent and emerging conflicts.

   Why the other options are wrong

   A

   Over-reporting isn't the concern raised.

   C

   Board ownership is what the FCA expects.

   D

   The common error is being too narrow.

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