CeMAP 1 Clients, Disclosure & Advice Standards Practice Questions
Clients, Disclosure & Advice Standards makes up 4 of every 40 questions on a Tigertest CeMAP 1 practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on LIBF's FSRE (CeMAP Module 1) syllabus for FRE1 and FRE2. Original questions; case studies written as single questions. Not affiliated with LIBF or Walbrook Institute London.
1. Under COBS, which client category receives the most regulatory protection?
- A.Elective professional
- B.Retail client
- C.Professional client
- D.Eligible counterparty
Answer: B. Retail clients get the full protection of conduct rules. Professional clients and eligible counterparties are assumed to need less.
2. A large bank dealing with another bank is most likely to be classed as:
- A.A vulnerable customer
- B.An insistent client
- C.A retail client of the bank
- D.An eligible counterparty
Answer: D. Eligible counterparties, such as banks and investment firms dealing with each other, receive the least protection under the conduct rules.
3. To call its investment advice 'independent', a firm must base it on:
- A.A fair analysis of the whole market
- B.The client's favourite brands
- C.A panel of three chosen providers
- D.Products from its own group only
Answer: A. Since the RDR, independent advice must be unbiased and unrestricted. Advice from a limited range of products or providers is restricted.
4. A mortgage adviser who recommends only from a panel of selected lenders must make clear that the service is:
- A.Free of any conflict
- B.Regulated by the PRA
- C.Limited to that panel
- D.Independent of the market
Answer: C. MCOB requires firms to disclose the scope of their service, so the customer knows whether it covers the whole market or a limited range.
5. Under MCOB, a firm may describe its mortgage service as 'independent' only if it considers a broad range of the market and:
- A.Deals with one lender only
- B.Advises on second charges only
- C.Offers a fee-paying option
- D.Takes only lender commission
Answer: C. MCOB 4.3 links 'independent' to a whole-of-market range plus the choice of paying by fee instead of relying only on lender payments.
6. When a firm gives mortgage advice, MCOB requires it to recommend a mortgage that is:
- A.The most suitable in its range
- B.The one paying it most
- C.The client's first choice
- D.The cheapest on the whole market
Answer: A. MCOB 4.7A requires an advised sale to be of a product that is appropriate to the customer's needs and circumstances and the most suitable of those the firm has available within the scope of its service.
7. A client buys a pure protection life policy. How long do they normally have to cancel it?
- A.60 days
- B.7 days
- C.14 days
- D.30 days
Answer: D. COBS gives 30 days to cancel life and pure protection policies and personal pensions. Most other investment contracts have 14 days.
8. Under MCOB, after receiving a binding mortgage offer the customer has a reflection period of at least:
- A.3 days
- B.7 days
- C.14 days
- D.30 days
Answer: B. Since the Mortgage Credit Directive changes in 2016, the customer gets at least seven days to compare and reflect, which they may waive by accepting sooner.
9. The mortgage illustration a customer receives before applying, required under MCOB, is the:
- A.Statement of Professional Standing
- B.European Standardised Information Sheet
- C.Key Facts Illustration
- D.Standard European Consumer Credit Information
Answer: B. The ESIS sets out the loan's key features and costs in a standard format so customers can compare offers. It fully replaced the older Key Facts Illustration in March 2019.
10. The FCA's guidance on vulnerable customers names four drivers of vulnerability. Which is one?
- A.Home ownership
- B.Long employment
- C.High income
- D.Low resilience
Answer: D. The four drivers are health, life events, resilience and capability. Any customer can become vulnerable through these.
Practice all 20 clients, disclosure & advice standards questions, and the rest of the 200-question bank, in the free CeMAP 1 training sets. Questions you miss come back until you have mastered them.
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