CeMAP 1 Practice Test

CeMAP 1 The FCA, PRA & the Handbook Practice Questions

The FCA, PRA & the Handbook makes up 5 of every 40 questions on a Tigertest CeMAP 1 practice test. Here are 10 of the 25 questions on it, each with the answer and the reason.

Updated 2026-11-10 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. 1. The FCA's strategic objective is to ensure that the relevant markets:

   • A.Pay lower taxes
   • B.Function well
   • C.Grow every year
   • D.Have fewer firms

   Answer: B. Under FSMA the FCA's strategic objective is that relevant markets function well. It is supported by three operational objectives.

2. 2. Which is one of the FCA's three operational objectives?

   • A.Collecting stamp duty
   • B.Approving the Budget
   • C.Setting Bank Rate
   • D.Protecting consumers

   Answer: D. The operational objectives are consumer protection, protecting the integrity of the UK financial system and promoting effective competition in consumers' interests.

3. 3. The PRA's general objective is to promote:

   • A.The safety and soundness of its firms
   • B.Competition between mortgage brokers
   • C.Fair treatment in mortgage advice
   • D.Lower prices for retail consumers

   Answer: A. The PRA focuses on firms not failing in a way that harms the system. Fair treatment of customers is the FCA's job.

4. 4. Which firm is regulated by both the PRA and the FCA?

   • A.An independent financial adviser
   • B.A credit broker
   • C.A building society
   • D.A mortgage broker

   Answer: C. Deposit-takers such as banks and building societies are dual-regulated: prudentially by the PRA and for conduct by the FCA. Brokers and advisers are FCA solo-regulated.

5. 5. FSMA 2023 gave the FCA and PRA a new secondary objective relating to:

   • A.Running deposit guarantees
   • B.Pension tax relief rules
   • C.UK competitiveness and growth
   • D.Setting the UK inflation target

   Answer: C. The secondary international competitiveness and growth objective asks both regulators to support the UK economy's growth, as long as their primary objectives come first.

6. 6. Principles-based regulation means firms are expected to:

   • A.Meet broad outcomes, not only rules
   • B.Write their own laws and rules
   • C.Ignore any guidance from the FCA
   • D.Follow only the detailed written rules

   Answer: A. High-level principles set the standard and firms decide how to meet it, so compliance with the letter of a rule is not enough if the outcome is poor.

7. 7. Under section 19 of FSMA, carrying on a regulated activity in the UK without authorisation or exemption is:

   • A.Permitted for a trial period
   • B.Allowed for small firms
   • C.A civil matter only
   • D.A criminal offence

   Answer: D. Section 19 sets the general prohibition. Breaching it is a criminal offence, and agreements made in breach may be unenforceable against the customer.

8. 8. A firm that the FCA authorises receives a:

   • A.Consumer credit licence from the OFT
   • B.Part 4A permission
   • C.Banking licence from HM Treasury
   • D.Certificate from the Bank of England

   Answer: B. Authorisation gives a Part 4A permission under FSMA listing the regulated activities the firm may carry on. The OFT no longer licenses credit firms.

9. 9. An appointed representative can carry on regulated activities without its own authorisation because:

   • A.It deals only in cash payments
   • B.Its principal takes responsibility
   • C.It holds an FCA exemption certificate
   • D.It is too small to need regulating

   Answer: B. An appointed representative acts under a contract with an authorised principal, which is responsible for its regulated activities and their oversight.

10. 10. Before authorising a firm, the FCA checks it meets the minimum standards called the:

    • A.Conduct Rules
    • B.Statements of Principle
    • C.Principles for Businesses
    • D.Threshold Conditions

    Answer: D. The Threshold Conditions in COND, such as adequate resources, suitability, effective supervision and a viable business model, must be met at authorisation and at all times after.