CeMAP 1 Principles, Consumer Duty & Conduct Practice Questions
Principles, Consumer Duty & Conduct 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. How many Principles for Businesses are there in the FCA Handbook?
- A.11
- B.12
- C.8
- D.10
Answer: B. There are 12 Principles. Principle 12, the Consumer Duty, was added from 31 July 2023.
2. Principle 12, the Consumer Duty, requires a firm to:
- A.Offer the cheapest product
- B.Remove all risk for customers
- C.Maximise returns for shareholders
- D.Act to deliver good outcomes
Answer: D. Principle 12 sets a higher standard than treating customers fairly: firms must act to deliver good outcomes for retail customers.
3. Which is one of the Consumer Duty's three cross-cutting rules?
- A.Avoid causing foreseeable harm
- B.Guarantee investment returns
- C.Never charge customers a fee
- D.Advise on every product it sells
Answer: A. The cross-cutting rules are to act in good faith, avoid causing foreseeable harm and enable and support customers to pursue their financial objectives.
4. Which is one of the four Consumer Duty outcomes?
- A.Speed of sale
- B.Market share
- C.Price and value
- D.Profit and growth
Answer: C. The four outcomes are products and services, price and value, consumer understanding and consumer support.
5. Under the price and value outcome, a firm must make sure:
- A.It never changes its prices
- B.Its prices match its competitors
- C.The price is fair for the benefits
- D.Its price is the lowest available
Answer: C. Fair value means the total price is reasonable compared with the benefits the customer gets. A product need not be the cheapest to give fair value.
6. Under the consumer support outcome, cancelling a product or switching provider should be:
- A.No harder than buying it
- B.Allowed after a year only
- C.Handled by the FCA
- D.Possible only by letter
Answer: A. Firms must not put up unreasonable barriers, sometimes called sludge practices, to cancelling, switching or complaining.
7. Which Principle requires a firm to manage conflicts of interest fairly?
- A.Principle 11
- B.Principle 1
- C.Principle 4
- D.Principle 8
Answer: D. Principle 8 covers conflicts of interest, between the firm and customers and between customers. Principle 11 covers relations with regulators.
8. Principle 11 requires a firm to:
- A.Observe proper market conduct standards
- B.Be open and cooperative with regulators
- C.Hold enough capital at all times
- D.Keep client money safe and separate
Answer: B. Firms must be open with the FCA and tell it about anything it would reasonably expect notice of. Capital is Principle 4 and client assets Principle 10.
9. Which Principle requires a firm to maintain adequate financial resources?
- A.Principle 9
- B.Principle 4
- C.Principle 2
- D.Principle 6
Answer: B. Principle 4 is financial prudence. Principle 2 is skill, care and diligence, and Principle 9 concerns suitable advice where customers rely on judgement.
10. Under UK MAR, which is a form of market abuse?
- A.Buying shares on public news
- B.Holding shares for years
- C.Selling shares at a loss
- D.Spreading false rumours
Answer: D. Market manipulation, including disseminating misleading information, is market abuse, as are insider dealing and unlawfully disclosing inside information.
Practice all 20 principles, consumer duty & conduct 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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