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10 exam-style R01 questions. See your score instantly, then use the cheat sheet below to fill the gaps.
Markets & participants
Short-term borrowing/lending (under 1 year). Instruments: Treasury bills, CDs, commercial paper.
Primary = new issues.
Secondary = existing securities traded (e.g. LSE).
New gilts issued by Debt Management Office (DMO). Subsequent trading on the London Stock Exchange.
A bank with its own portfolio management team provides a discretionary management service.
Priority order of financial needs
Key product knowledge — exam favourites
| Scenario | Correct product / answer | Key reason |
|---|---|---|
| Income if unable to work | Income protection insurance | Max benefit ~65% of pre-incapacity earnings. Upper limit = moral hazard. |
| Reducing life cover need tailing off by age 40 | Family income benefit | Pays a regular income stream, better matching the reducing need. |
| Critical illness — prohibitively expensive premium | Reviewable premium basis | Immediately reduces premium while maintaining same cover level. |
| Pension commencement lump sum despite cash deposits | Tax efficient to do so | PCLS is tax-free. |
| Loan consolidation may NOT help | Consistent history of overspending | Consolidation doesn't fix the underlying behavioural cause. |
| Adviser won't advise if client won't disclose income | Record on fact-find that client refused | Record refusal and continue — do NOT refuse all advice. |
ISA rules — exam-tested figures
Law of contract — essential elements
Business structures & liability
| Structure | Personally liable? | Key point |
|---|---|---|
| Sole trader / self-employed | Yes — unlimited liability | All personal assets at risk |
| Partnership (general) | Yes — joint & several liability | Partners personally liable |
| Limited Liability Partnership (LLP) | No — limited to investment | Must be registered at Companies House |
| Limited company (Ltd / PLC) | No — separate legal entity | Shareholders' liability limited to share value |
Insolvency — order of priority
Trusts
| Trust type | Beneficiaries known? | Trustee discretion? | Key feature |
|---|---|---|---|
| Absolute (bare) trust | Yes — fixed & named | No | Beneficiary can demand assets at 18 |
| Discretionary trust | Not necessarily | Yes — full discretion | Used when beneficiaries not yet certain |
| Interest in possession trust | Yes | Limited | Beneficiary entitled to income; capital goes elsewhere |
| Body | Role |
|---|---|
| Competition and Markets Authority (CMA) | Competition & markets investigation. Reports go to HM Treasury. |
| The Pensions Regulator (TPR) | Regulates workplace pension schemes |
| Information Commissioner's Office (ICO) | Data protection enforcement |
| Payment Systems Regulator (PSR) | Regulates payment systems |
FCA structure & internal bodies
| Body | Role |
|---|---|
| Regulatory Decisions Committee (RDC) | Keeps investigation and recommendation functions separate from decisions/statutory notices. Set up by FSMA 2000. |
| Upper Tribunal | Independent — appeals against FCA enforcement go here. |
| Practitioner Panel | Represents industry. FCA must consider recommendations but has NO obligation to amend rules. |
| Consumer Panel | Represents consumer interests. |
Senior Managers & Certification Regime (SM&CR)
Market abuse & penalties
Client categorisation
| Category | Who qualifies? | Key rules |
|---|---|---|
| Retail clients | All clients who are neither professional nor eligible counterparties | Highest protection. Consumer Duty applies fully. |
| Professional clients (per se) | Banks, investment firms, insurers, large corporates | Reduced protections. Can elect to be retail. |
| Eligible counterparties (per se) | EU/UK governments, central banks, credit institutions | Minimal protection. UK pension fund = NOT per se ECP. |
Complaint handling — key timings
Financial Services Compensation Scheme (FSCS)
| Product type | FSCS limit |
|---|---|
| Deposits (savings/cash) — from 1 Dec 2025 | £120,000 |
| Joint deposit accounts | £120,000 each (£240,000 jointly) |
| Investments (S&S ISA, investment bonds) | £85,000 |
| Insurance policies | 90% of claim (no upper limit on long-term) |
| Temporary high balances (e.g. property sale) | £1,400,000 for up to 6 months |
Suitability reports — when required?
| Situation | Suitability report required? |
|---|---|
| Recommended products (unit trust, investment bond) | Yes — must include disadvantages |
| Execution-only personal pension | No |
| Pension transfers | Yes, always |
| Regulated mortgage contract | Not required |
| Friendly society policy | Always required |
Cancellation rights
| Product | Cancellation period |
|---|---|
| Life assurance / Personal pension plan | 30 days |
| Cash ISA / Stocks & shares ISA / unit trust / OEIC | 14 days |
| Enterprise Investment Scheme / Junior ISA | No statutory right |
Primary purpose: to obtain the client's views and opinions. NOT to quantify assets, secure trust, or create commitment.
Socially responsible investment approach = more limited diversification opportunities — restricts the investment universe.
Helps client understand impact of charges on the fund. NOT financial strength of provider, inflation, or volatility.
FCA's Principles for Businesses
| # | Principle | Exam relevance |
|---|---|---|
| 1 | Integrity | Act with integrity |
| 2 | Skill, care and diligence | Competence requirement |
| 3 | Management and control | Systems & controls |
| 4 | Financial prudence | Have adequate financial resources — NOT about client debt or excessive risk marketing |
| 5 | Market conduct | Proper standards of market conduct |
| 6 | Customers' interests | Act in best interests of customers |
| 7 | Communications with clients | Fair, clear, not misleading |
| 8 | Conflicts of interest | Manage conflicts fairly |
| 9 | Customers: relationships of trust | Take reasonable care to ensure suitability |
| 10 | Clients' assets | Adequate protection of client assets |
| 11 | Relations with regulators | Deal openly with regulators |
| 12 | Consumer Duty | Act to deliver good outcomes for retail clients |
Emily's earnings fell to £25,000 but policy covers £30,000. Considering only FCA Statements of Principle:
✓ Inform Emily she may be paying for cover on which she cannot claim.
✗ Do NOT cancel/replace.
Harriet (homemaker) paying £500/month, no earnings for 3 years.
✓ Recommend she reduces contributions (only £2,880/yr relief available with no earnings).
✗ Do NOT report to HMRC.
Right action = best outcomes for the greatest number.
Duty-based ethics. Some actions are inherently right or wrong regardless of outcome.
Focuses on character of the person — honesty, courage, fairness.
Income tax
FSCS & FOS limits
Pensions 2025/2026
CGT & IHT 2025/2026
| Tax | Rate / Amount |
|---|---|
| CGT — basic rate (non-residential) | 18% |
| CGT — higher/additional rate (all assets) | 24% |
| CGT annual exemption — individuals | £3,000 |
| IHT nil rate band | £325,000 |
| IHT residence nil rate band | £175,000 |
| IHT death rate | 40% |
| IHT annual exemption per donor | £3,000 |
ISA limits & other key allowances
R01 is considered one of the more challenging Diploma units because it covers a broad range of regulatory content — the FCA, Consumer Duty, ethical frameworks, complaints, and financial crime. The pass mark is 65% and the exam is 50 questions in 60 minutes. Most candidates need 3–6 weeks of focused revision, particularly if they don't work in a compliance role.
The most heavily tested areas in R01 are: the FCA's regulatory framework and objectives (LO1), Consumer Duty and the four outcomes (LO4), complaints handling and the Financial Ombudsman Service (LO7), money laundering and financial crime (LO10), and ethical principles including the CII Code of Ethics (LO11). Questions on Consumer Duty have increased significantly since 2023.
Most candidates spend 40–70 hours preparing for R01. If you work in financial services and already have day-to-day exposure to FCA rules and compliance, you may need less. If you're new to the industry, budget closer to 70 hours. The most effective approach is to combine reading the CII learning materials with regular timed practice questions — not just re-reading notes.
The R01 pass mark is 65% — you need to answer at least 33 out of 50 questions correctly. There is no negative marking, so you should always attempt every question. The exam is multiple choice with four options per question and is sat at a Pearson VUE test centre.
The most effective R01 revision strategy is: (1) read through each learning outcome once to understand the concepts, (2) do timed practice questions immediately after each topic — don't wait until the end, (3) review every question you get wrong and understand why, (4) do at least two full 50-question mock exams under timed conditions before booking your real sitting. Candidates who only read notes without doing questions consistently underperform.
Yes. R01 is entirely multiple choice — 50 questions, four options each, one correct answer. You have 60 minutes. The exam is computer-based and sat at a Pearson VUE centre. You receive your result immediately after completing the exam.
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