Free CeMAP Module 1 (FSRE) Exam Flashcards

It raises new funding for an issuer when securities are first sold; later investor-to-investor trading belongs to the secondary market.

The possibility of later resale provides liquidity and helps investors value the security, even though a secondary trade does not itself raise new money for the issuer.

Money markets deal mainly in short-term funding instruments; capital markets channel longer-term debt and equity funding.

If prices rise while the cash sum stays fixed, that sum buys fewer goods and services in real terms.

Holding different assets can reduce exposure to one issuer or sector, but economy-wide market risk can affect many holdings together.

The emergency need calls for ready access and capital stability; a long-term goal may allow investment risk. One product is unlikely to fit both automatically.

Tolerance is the client’s willingness to accept uncertainty; capacity is their financial ability to absorb a loss without undermining essential goals.

A short horizon may leave too little time to recover from market losses before the money is needed.

Eligible deposits can be covered by the FSCS if an authorised deposit-taker fails, subject to its rules and limits; an investment’s market loss is not covered just because its value falls.

Life cover can provide a specified benefit on an insured death, subject to policy terms; savings are accumulated funds available under the account terms.

The principal grants authority; the agent acts within that authority on the principal’s behalf. The adviser must check what the agent is permitted to do.

It lets a donor appoint attorney(s) to help with or make specified decisions, such as property and financial affairs. The scope and effective use depend on the registered document and applicable law.

Authority can be limited by the power of attorney. Acting on an instruction outside that scope risks an unauthorised transaction.

The settlor puts assets into the trust; the trustee manages them under the trust terms; the beneficiary is the person or group intended to benefit.

The person dies without a valid will governing the relevant estate, so statutory succession rules determine who inherits; those rules differ across UK jurisdictions.

An Act supplies statutory powers and duties; Handbook rules are regulatory requirements made under the framework. Both can matter, but they have different sources and scopes.

As amended, it supplies the core statutory framework for regulated activities, authorisation, and the financial regulators’ powers.

The FCA became the main conduct regulator, while the PRA within the Bank of England became the prudential regulator for designated major firms.

The legal classification determines whether authorisation or an exemption is required and which conduct rules apply.

The FCA focuses on market conduct and consumer outcomes and prudentially supervises many solo-regulated firms; the PRA focuses on safety and soundness of firms within its remit.

Consumer protection; protecting and enhancing UK financial-system integrity; and promoting effective competition in consumers’ interests.

COBS contains conduct-of-business rules for relevant investment business; CASS addresses safeguarding and administration of client money and custody assets.

Principles set broad standards of firm behaviour; sourcebooks add more specific requirements for particular activities and situations.

It strengthens individual accountability for conduct and competence so responsibility for key decisions and customer harm cannot be obscured inside a firm.

Regulatory roles depend on the firm and activity; some firms are PRA-authorised and FCA-regulated for conduct, while others are FCA-supervised for both conduct and prudential matters.

The client’s objectives, circumstances, resources, commitments, risk position and relevant constraints, so the recommendation can be assessed against the actual need.

Priorities reveal which needs are essential or time-sensitive and help avoid recommending a solution that sacrifices a more important goal.

It is justified by the individual client’s needs and circumstances, with relevant costs, risks and alternatives considered within the service scope.

Ask the client to explain the key cost, risk or trade-off in their own words, then clarify any misunderstanding.

Explain the concern and material risks clearly, document the discussion and follow the firm’s rules; do not relabel unsuitable advice as a suitable recommendation.

An assumption such as future income or access to cash can change the conclusion; recording it lets the client and reviewer see what the advice depends on.

When relevant client circumstances, objectives, product terms or the agreed review schedule change enough to affect suitability.

The client needs to know what has and has not been assessed, so they do not mistake a limited service for comprehensive advice.

Products and services; price and value; consumer understanding; and consumer support.

Treat retail customers honestly and fairly, including when commercial incentives make a less fair action profitable.

Harm a firm can reasonably anticipate from how a product or service is designed, sold or supported; firms should identify and mitigate it rather than wait for complaints.

The firm needs to know whose needs, characteristics and objectives the product is designed to meet and distribute it accordingly.

No. Fair value compares the total price and charges with the benefits and quality received by the target customers.

To establish and verify relevant identity and understand the relationship and risk, enabling proportionate monitoring and escalation.

Follow the firm’s internal reporting procedure promptly, normally through the money-laundering reporting officer; do not alert the customer in a way that risks tipping off.

Collect personal data that is adequate, relevant and limited to what is necessary for the stated purpose, while retaining records required by law or regulation.

The Financial Ombudsman Service resolves eligible disputes with firms; the Financial Services Compensation Scheme may compensate eligible customers when a covered authorised firm fails.

£120,000 per eligible person, per UK-authorised bank, building society or credit union. Brands sharing one banking authorisation share the limit.

The client must understand the range of products and providers considered before relying on the recommendation.

Recognise possible vulnerability, use clear explanations, allow appropriate time and check understanding without assuming the client cannot decide.

The adviser may favour reward over suitability. Disclose and manage the conflict, and let the client’s needs drive the recommendation.

A technically permitted action can still produce avoidable harm or exploit a client; ethical judgement asks whether it is fair and professionally defensible.

It lets staff raise credible misconduct or risk concerns for appropriate investigation without relying on the person implicated to self-report.

Acknowledge the limit, avoid guessing, and seek qualified support or refer the matter while protecting the client from an uninformed decision.

Rules, products and client needs change; ongoing learning helps an adviser maintain competence and recognise when prior knowledge is outdated.