Free CISI Corporate Finance Regulation practice questions

Not quite. The answer is D.

The Financial Policy Committee is the Bank of England committee charged with financial stability. It identifies and monitors risks that threaten the system rather than a single firm, such as a lending boom across the banking sector, and acts to remove or reduce them: it can make recommendations to the FCA and the PRA and can give them directions on specific action. The Monetary Policy Committee decides the Bank's base interest rate to meet the inflation target and has no power to direct the regulators. The Prudential Regulation Committee takes the Bank's decisions as the PRA, whose focus is the safety and soundness of individual firms, so it is not the body that directs both regulators. The Treasury Select Committee is a parliamentary committee; parliamentary committees scrutinise reports such as the FCA's annual report rather than directing the regulators.

Not quite. The answer is A.

Under the Certification Regime the regulators do not approve the staff concerned. The firm itself must assess whether each person is fit and proper for the certification function and, if it is satisfied, give the person a certificate saying so. Regulatory approval by the FCA or PRA is the route for senior managers, not for certification staff, so the regulators do not carry out this assessment. A professional body may award qualifications that some customer-facing roles require, but it does not assess fitness and propriety for the firm. A previous employer may know about the person's past conduct, but the assessment for a role at another firm is not its to make.

Not quite. The answer is D.

The principle that the board is reviewed every year, looking at its composition, its diversity and how well its members work together, with individual reviews of whether each director still contributes effectively, belongs to the composition, succession and evaluation section, which also covers appointments and succession planning. Division of responsibilities covers the chair's leadership of the board, including constructive board relations, the balance of executive and non-executive directors and the board's resources, but not a yearly review of how the board performs. Audit, risk and internal control also deals with effectiveness, but that of the audit functions, internal and external, and of the risk management and internal controls that the board oversees and reviews, not the board's own performance. Remuneration governs pay policy and how directors' and senior managers' pay is set, even where pay is linked to performance.

Not quite. The answer is B.

The Pensions Regulator's statutory objectives include protecting the benefits of occupational pension scheme members and reducing the risk of compensation claims on the Pension Protection Fund. These objectives are general, so they apply when the sponsoring employer is taken over just as at other times. The Pension Protection Fund is the compensation fund whose claims the Regulator tries to reduce, not the body given that objective; the Takeover Panel is concerned with fair treatment of the offeree's shareholders; and the Competition and Markets Authority assesses a merger's effect on competition.

Not quite. The answer is B.

The FCA maintains the Official List under its statutory listing responsibilities. The London Stock Exchange operates markets and determines admission to trading on its venues. The Financial Reporting Council sets the UK corporate governance and stewardship codes and oversees audit and corporate reporting, and the Prudential Regulation Authority is the prudential regulator of banks, insurers and certain major investment firms; neither of them maintains the Official List.

Not quite. The answer is D.

The statutory remedy has two parts: the investor may recover the money or property it handed over under the agreement, and may claim compensation for loss suffered by parting with it. The provider's entire profit is not the measure, because compensation is for the investor's own loss rather than an account of what the provider gained. Compensation alone is too narrow, since recovering the transferred property is a separate right that sits alongside it. Recovery does not depend on proof of loss; loss matters only to the compensation claim.

Not quite. The answer is A.

For corporate finance business that is neither MiFID business nor its third-country equivalent, COBS 18.3 gives a closed list of the COBS provisions that apply. That list includes the client's best interests rule, which requires honest, fair and professional conduct that serves the client's best interests, but it leaves out the adviser charging rules, the rules on describing the breadth of advice and the suitability report rules, so none of those three applies to this business. COBS 18.3 also treats all three as disapplied, or unlikely to be relevant, for MiFID corporate finance business. Under the current FCA Handbook, optional exemption business also falls outside that closed list and has a separate table of its own; the firm here carries on none of it.

Not quite. The answer is A.

The Listing Rules require a listed company in a category the Code covers to put a corporate governance report in its annual report and accounts, explaining how it has applied the Code's Principles and whether every Provision has been complied with, with the reasons for any departure. The notice calling the AGM is a different document, a separate yearly governance return to the FCA is not what the rules require, and a circular to shareholders sent whenever the arrangements change would not replace the report in the annual report and accounts.

Not quite. The answer is C.

Under section 6(b) of the Code's Introduction, a person with any doubt about whether a step it proposes complies with the Takeover Code must consult the Panel Executive before acting, and legal or other professional advice is no substitute for that consultation. A second legal opinion is still only professional advice; a Practice Statement is informal guidance that the Executive publishes on how it interprets and applies the Code in particular circumstances, not a ruling on the bidder's own proposal; and the courts are where the Panel can seek enforcement of the Code, so a court declaration cannot take the place of consulting the Executive in advance.

Not quite. The answer is A.

Where an issuer appoints two sponsors on a transaction, neither is released from its obligations by the other's appointment, so both sponsors are responsible for meeting the sponsor duties on that transaction. The lead sponsor is not responsible on its own, because leading on dealings with the FCA divides the work without moving the other sponsor's regulatory responsibility onto it; the issuer is wrong because the sponsor duties fall on the sponsors it appoints, while the issuer keeps its own obligations under the UK Listing Rules; and the reporting accountant is wrong because it is not a sponsor, so the sponsor duties do not apply to it.