Free CISI practice questions

Not quite. The answer is B.

Providing information on the underlying companies and their annual general meetings is one of a custodian's core activities, carried out alongside holding the assets in safekeeping, arranging settlement of purchases and sales, collecting the income the assets pay and reporting regularly to the client. A third-party administrator undertakes investment administration for other firms that outsource it so that they can fix their costs and concentrate on their own core business. A stockbroker arranges and executes trades in financial instruments for its clients and earns its money from the commission charged on those transactions. A platform is the online service through which an adviser views and analyses a client's portfolio and buys and sells investments for it.

Not quite. The answer is B.

Under the Adviser Charging rules an individual wishing to operate as a retail investment adviser must hold a valid statement of professional standing from a body accredited by the FCA, such as the Chartered Institute for Securities and Investment. The statement confirms an appropriate qualification, the annual programme of continuing professional development, compliance with the conduct requirements and agreement to adhere to a code of ethics. The FCA sets the framework and publishes the appropriate qualification tables, but it issues no statement to any individual adviser. Senior management at the employing firm attests annually that certified staff remain fit and proper, which is the Certification Regime rather than the statement of professional standing. The Prudential Regulation Authority confines its certification interest to material risk takers and issues no such statement.

Not quite. The answer is D.

Gilts are auctioned by the Debt Management Office, an executive agency of HM Treasury, so primary issuance sits outside the central bank. Issuing banknotes for England and Wales is a Bank responsibility, and Bank Rate is decided by the Monetary Policy Committee, which sits inside the Bank. Acting as lender of last resort to solvent but illiquid banks is also its own function.

Not quite. The answer is B.

The party receiving inflation pays a fixed sum compounded at the rate agreed at the outset and takes in the movement of the price index across the whole term, with only the difference between the two changing hands at maturity. Where the index ends below where it started, the inflation leg is worth less than nothing while the fixed leg still has to be met, so ABC plc, as the inflation receiver, makes a payment to its counterparty. Nothing in the swap floors the inflation leg at zero, so ABC plc does not simply come away with no payment, and this is where the swap parts company with those index linked bonds whose redemption value is floored at par. Receiving the difference turns the cash flow round and pays the wrong side of the trade. The notional is only the figure on which both legs are worked out, and it is never exchanged by either party.

Not quite. The answer is B.

Self-certification is open to someone who has been a director of a company with an annual turnover of at least £1 million in the past two years. Simply holding shares in such a company is the closest miss, because the route turns on having held the office of director rather than on owning a stake. Net assets of £250,000 and income of £100,000 belong to the certified high net worth tests instead, and there the main home is left out of the net assets figure and the income counted is the individual's own rather than a partner's.

Not quite. The answer is A.

When money may be called on at short notice, access governs the choice: a fixed-rate or term account commits the deposit for an agreed period, with interest usually credited at the end and a penalty charged for withdrawing early, while a notice account requires a set period of notice before funds are released. The answer pointing to the headline interest rate is wrong because the best-paying accounts are normally the ones that lock the money up, which is precisely what Rachel cannot accept. The answer about monthly crediting confuses compounding, which is what the annual equivalent rate exists to express, with the terms on which capital can be withdrawn. The answer pointing to the type of provider is wrong because banks, building societies and credit unions are all principal deposit takers, and all of them offer instant-access accounts.

Not quite. The answer is D.

The planner owns the client relationship and the recommendation, so responsibility cannot be passed down with the drafting work. The paraplanner carries out research and analysis but does not face the client or sign off the advice. The compliance officer monitors and oversees the firm's systems rather than approving individual recommendations, and the provider is responsible only for its own product.

Not quite. The answer is D.

Credit, market and liquidity risks sit at the heart of the sector because they underpin core transactions such as mortgage lending and corporate bond issuance. Strategic and reputational risk arise as internal and external drivers rather than from the transactions themselves. Enterprise risk is a reporting overlay that brings the other risk types together, and fintech and cyber risk are emerging considerations rather than the core transactional group.

Not quite. The answer is B.

A principles-based approach acts as guidance on how firms and individuals are expected to act, with compliance judged on outcomes rather than a precise rulebook. A rules-based approach requires strict adherence to detailed rules, while thematic and relationship-based are supervisory techniques rather than drafting approaches.

Not quite. The answer is D.

Government sets the tone and the high-level direction; HM Treasury implements it and holds oversight of the regulatory framework. The FCA is the strongest runner-up, since it writes and enforces the conduct rules candidates meet most often, but it operates inside the framework rather than owning it. The Bank's role here runs to monetary policy and financial stability.

Not quite. The answer is A.

FSMA's third limb is handling the proceeds of crime, and it bites whenever a firm deals with property representing the benefit of someone else's criminal conduct. Fraud or dishonesty is the near neighbour, but that limb looks at the offence by which value was obtained in the first place, not at what is subsequently done with the proceeds. Dealing with a designated person's funds is a sanctions breach, which sits outside the FSMA definition altogether, and misuse of market information is the market abuse limb.

Not quite. The answer is C.

The rate applied to a deposit may be fixed or variable. A variable rate moves because it is set by reference to an underlying benchmark interest rate or index, and that benchmark changes periodically with the market. What an individual bank pays to fund itself is a matter for its own pricing rather than the mechanism that makes a variable rate variable. Compounding interest more frequently than once a year produces an effective or annual equivalent rate, which describes how interest is applied rather than whether the rate itself moves. Deposit rates are not set by reference to the general level of prices, which is a separate matter taken into account when the real return is worked out.

Not quite. The answer is C.

A forward commits the buyer to take delivery of a set quantity of an asset on a future date at a price fixed when the contract is agreed. The spot price ruling on the delivery date is the uncertainty that the forward removes, so it has no bearing on what the buyer pays. A forward is a private contract between two parties, so there is no clearing house setting its price at the close of trading, and nothing is revised on a daily basis in the way that a futures position is marked to market.

Not quite. The answer is A.

An advantage of having a large number of funders instead of one or a few key investors is that large investors may have different ideas and seek to influence how the business is run, so a diverse source of funding may help to diffuse pressure from such investors. Spreading the equity across many small backers is therefore what reduces investor pressure. Brand loyalty is the most tempting wrong answer, because it moves in the opposite direction: start-ups may convert their fans and customers into investors precisely to enhance brand loyalty, and small investors can be turned into brand ambassadors.

Not quite. The answer is A.

A scheme of arrangement is the Part 26 procedure for a compromise or arrangement with its members or creditors that the court sanctions, and one of its uses is splitting a company into separate businesses; it needs no financial difficulty. A Part 26A restructuring plan is open only to a company facing actual or likely financial difficulties that threaten its ability to continue as a going concern, which this company does not face. A company voluntary arrangement is a compromise with the company's creditors rather than its members, and it takes effect on their approval without being sanctioned by the court. A reduction of capital cancels or repays share capital by special resolution, with court confirmation where that route is used; it is a capital procedure, not a compromise with members.