How much do you know about regulation? This week Petrina Oxshott sets an MOT test on FSA rules that affect the way you run your business
1. What is the first day that FSA statutory regulation of general insurance will apply?
a) 31 October 2004
b) 15 January 2005
c) 14 January 2005
d) 1 January 2005.
2. What are the four legal statuses that a firm may adopt in relation to the carrying out of a regulated activity?
a) Introducer, fully authorised, appointed representative, exempt
b) Introducer, approved, appointed agent, excluded
c) Wholesaler, retailer, insurer, reinsurer
d) Appointed representative, agent of insurer, agent of insured, introducer.
3. If a firm wishes to be an introducer what are the two key questions that represent the 'by way of business' test?
a) Is the person competent in the insurance that the introduced person is going to effect and are there going to be less than six introductions per year?
b) Are the introductions regular and is the introducer authorised by the FSA?
c) Does the person receive remuneration for these activities and do they pursue the activities by way of business?
d) Does the person receive remuneration and are they an appointed representative of the firm accepting the introduction?
4. Which of the following groups is exempt from direct authorisation?
a) Law Society of England & Wales, The Institute of Actuaries, The Royal Institution of Chartered Surveyors, the Institute of Chartered Accountants of Scotland
b) Institute of Actuaries, The Royal Institution of Chartered Surveyors, the Institute of Chartered Accountants of Scotland, The Law Society of England and Wales
c) Institute of Actuaries, appointed representatives of authorised firms, the Institute of Chartered Accountants in Ireland, the Law Society of Northern Ireland
d) The Law Society of England and Wales, The Institute of Chartered Accountants in England and Wales, The Institute of Actuaries, The British Institute of Bankers.
5. Which of these statements is true in relation to appointed representatives?
a) An appointed representative cannot handle money
b) An appointed representative cannot give advice
c) An appointed representative may only undertake activities for which a principal already holds permissions
d) A principal with more than three appointed representatives will be classed as a network by the FSA.
6. Which of these statements is true in relation to appointed representatives?ese
a) All individuals working for an appointed representatives firm must be approved persons
b) All appointed representatives must be registered with the FSA
c) If an appointed representative is permitted to undertake insurance mediation activity it must be registered with the FSA before the activity commences
d) Appointed representative firms are not subject to the approved persons regime.
7. If an appointed representative firm is allowed by its contract with the principal to handle client money, there is a maximum period for the appointed representative to forward money to the principal. What is that maximum?
a) The same day as receipt
b) The close of the fifth business day
c) The close of the fifth consecutive day
d) The close of the third business day.
8. Which of these is not an FSA 'permission'?
a) Advising on investments
b) Dealing in investments as an agent (Article 21)
c) Assisting in the administration and performance of a contract of insurance
d) Assisting in the settlement of claims for an authorised insurer.
9. Article 53 of the Regulated Activities Order makes advising on contracts of insurance a regulated activity. Which of these is a correct definition of the scope of persons to which advice might be given?
a) The insured and the insured's agent
b) The insured
c) The insured and potential insured
d) The insured and the potential insured and the insured's agent and the potential insured's agent.
10. Which of these statements is true?
a) Managing a claim on behalf of an insurer is a regulated activity
b) Managing any claim (for insurer or insured) is a regulated activity
c) Managing a claim on behalf of the insured is a regulated activity
d) Managing claims is not a regulated activity.
11. Article 39B of the Regulated Activities Order excludes all but one of the following as a regulated activity. Which is it?
a) Expert appraisal
b) Loss adjusting on behalf of a relevant insurer
c) Managing claims for a relevant insurer
d) Loss assessing on behalf of an insured.
12. Which of these is not an FSA training and competence commitment?
a) Advance and maintain the competence of employees
b) Ensure all staff meet the minimum FSA CPD requirements
c) Ensure that employees are competent for the functions they carry out
d) Ensure that employees are adequately supervised.
13. The FSA require an authorised firm to undertake an ongoing risk management approach to running its business. What is the key requirement?
a) That a firm restricts itself to the FSA model
b) That the approved persons understand the risks of the business and have their own plan to control and monitor risk
c) That the approved persons understand
the risks of the business and have a plan to control and monitor risk
d) That the firm bases its risk management on an approved model.
14. A customer asks you to advise his firm on business insurances. What is likely to be the most important requirement from the perspective of risk management?
a) A good quality fact find
b) A face-to-face meeting at the client's premises
c) A terms of business letter that defines what the customer means by business insurance
d) Clear policy wordings.
15. For the last five years you have held cover with XYX insurer over the phone, normally confirmed in writing within a few weeks. You ask it to insure a £1m warehouse by phone and it agrees. The warehouse burns down a few days later and it repudiates liability on the basis that your agency agreement with it stipulates that no cover can be assumed until it has confirmed it in writing. Which of the following sums up the situation?
a) A court is likely to support the notion that the practice between the parties varied the written contract, but this could be after quite some battle.
b) The ombudsman will find in favour of the insurer
c) The ombudsman will support the insured
d) The contract will prevail and you should have read the agency agreement.
16. An insurer cancels a policy mid term by giving seven days notice to the broker. The policy stipulates 30 days. The broker accepts the return premium. Which of these statements is likely to be correct? (By the way, the property burned down after 27 days)
a) The insured can insist on the 30 days' notice clause
b) The broker in accepting the premium return is the insured's agent and has accepted the offer of a variation to seven days
c) The court will decide on the facts, but in any event, the broker can expect a very tough time
d) There is no such thing as a cancellation clause. The Insurer must hold cover for the period of the policy.
17. A broker meets a solicitor at a dinner party and is asked if she can obtain a better deal on a solicitor's office policy. The broker finds that she can save 20% by switching to another insurer. Which of these is a vital responsibility on the part of the broker?
a) Check all insurers that offer office insurance
b) Check at least six insurers that offer office insurance
c) Compare the cover under the old policy and the new and identify the advantages and disadvantages to this particular solicitor
d) Ensure that she looks at all the other insurance the solicitor has.
18. A broker visits a client's cafe premises and fails to notice that there is small bar. The insurer declines a loss on the basis of non-disclosure. The insured writes to the broker holding him responsible for not asking the right questions. What should the broker do?
a) Write to the insurer and warn it about the difficult client suggesting that it puts nothing in writing as it may come up as evidence in court
b) Tell the insured that he is sorry and take full responsibility
c) Tell the insured to take a running jump
d) Write to the insured acknowledging receipt of the complaint and outlining the firms' complaints procedure and pass the matter to his professional indemnity insurer.
19. Which of these is not a controlled function under the FSA regulation of general insurance?
a) Director function
b) Non-executive director function
c) Money laundering officer function
d) The finance function.
20. Under section 64 of the FSM Act there is something that is vital for all approved persons to read and understand. What is it?
a) A statement of the commitments
b) A code of practice for approved persons
c) The ICOB rules
d) A list of controlled functions.