Friday Five Focus on Regulation – 5 Questions in 5 Minutes – 5 Dec 2025

Friday Five Focus on Regulation – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Regulation; this is useful as you prepare for either of the CII’s R01 or CF1 exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT! These questions relate to examinable tax year 2025/26, examinable by the CII until 31 August 2026.

1. What does the ‘general prohibition’ rule within s.19 of the Financial Services and Markets Act 2000 (FSMA) refer to?
   1. The fact that intermediaries are generally restricted to certain activities.
   2. It is an offence for someone to carry out a regulated activity unless the person is authorised or exempt.
   3. The Financial Conduct Authority will seek to stop unauthorised individuals working within the financial services sector.
   4. The powers granted to the Financial Conduct Authority by the FMSA in relation to authorising individuals.

2. If the Financial Conduct Authority (FCA) has a concern under the threshold conditions that a person has ‘close links’ this is to
   1. establish if the person has any connection or bias.
   2. ensure they will not prevent the FCA’s effective supervision of the person.
   3. understand any professional connections the firm has.
   4. ensure the person/firm has adequate support systems in place.

3. Good business ethics make good business sense because
   1. by demonstrating ethical awareness, a firm displays a breadth of knowledge.
   2. it usually translates into wealthier customers being attracted to the firm.
   3. a strong ethical culture helps build trust and confidence among consumers.
   4. it always leads to higher rates of commission.

4. If a person applies to the regulator for direct authorisation, this is called applying for part
   1. 3 permission.
   2. 4A permission.
   3. 6A permission.
   4. 2 permission.

5. In the event of any breaches of the Financial Conduct Authority’s Principles for Businesses, what must the compliance officer do?
   1. Inform the Financial Conduct Authority and implement remedial action to prevent a reoccurrence.
   2. Rectify the situation immediately and pay back any losses suffered within 24 hours.
   3. Document the breach and cascade to all relevant staff as a learning exercise.
   4. Discipline the member of staff concerned but allow the matter to otherwise go unnoticed.

Answers

1. B; See R01 Study Text, Chp 7; Rationale: The ‘general prohibition’ rule within s.19 of the FSMA states that it is a criminal offence to carry out regulated activities unless the person is authorised or exempt.
2. B; See R01 Study Text, Chp 6; Rationale: All regulated firms must satisfy the ‘threshold conditions’ in order to retain their part 4A permission (required to carry out regulated activities). One of these conditions is effective supervision. If a person is deemed to have ‘close links’ with another person, they need to ensure this will not prevent the FCA’s effective supervision of that person.
3. C; See R01 Study Text, Chp 11; Rationale: Good business ethics make good business sense, as ultimately, they help to build trust and confidence among consumers, increasing their engagement with the firm and products. It does not lead to higher commission rates (although it may lead to increased revenue through, for example, client retention or attracting new customers). ‘Good business ethics’ does not refer to selling ethical products. Good ethics attracts all kinds of customers: the wealthy and the not-so-wealthy.
4. B; See R01 Study Text, Chp 5; Rationale: If a person or firm wishes to carry out regulated activities, they must apply to the relevant regulator for a part 4A permission for authorisation.
5. A; See R01 Study Text, Chp 10; Rationale: In the event of any breaches of the FCA principles for business, by a firm or individual, the compliance officer must inform the FCA and implement actions to prevent further breaches.

Grab the resources you need!

If you’re working through these regulation-focused questions with ease, it’s a good indicator that you’re ready for more structured exam practice. Our CII R01 E-Mocks follow the format and feel of the real exam, helping you test your knowledge under realistic conditions. Start with the free taster to see how well you stack up.

Know someone else studying for R01? Share this quiz with them and help make their revision a little easier.