FSC 522 FSC522 The Regulatory Framework Quiz Interpreting financial services compliance legislation, professionalism, the Code and good conduct

Question one: Two years ago you helped a client with a small portfolio of investments. The only activity since the initial set up is a $20 monthly contribution to a managed fund, paid by automatic payment. The current value of the portfolio is $23,445.

Today you have a review meeting with the client. The client explains that he would like to inject a further $29,000 into the portfolio spread around various shares and bonds.

Which action meets your obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009?

• Carry out ongoing due diligence, refuse to finish the transaction, and send a confidential report to the Financial Markets Authority
• Exercise enhanced due diligence, process the transaction, and send a suspicious activity report to the New Zealand Police Financial Intelligence Unit within 3 working days.
• Explain to the client that the transaction cannot be processed because it is inconsistent with the way the relationship has been conducted.
• Perform standard due diligence, process the transaction, and keep a confidential record for audit by the New Zealand Police.

Question two: In what way does the Consumer Guarantees Act apply to the financial services industry?

It guarantees the quality of the people working for a financial services provider.

It guarantees that a financial service is fit for a particular purpose.

It makes it illegal to mislead a customer about a product's terms and conditions.

It provides an assurance that the product provider is financially sound.

Question three: Match the principle of professionalism with the relevant adviser behaviour.

You may use an option only once.

• Lydia updates her CPD plan every year. (pick one) Fairness.Competence.Respect.Timely and thorough.Confidentiality.

• Mike actively listens to clients and shows interest in what they say. (pick one) Fairness.Competence.Respect.Timely and thorough.Confidentiality.

• Gillian responds to client voice messages within 24 hours. (pick one) Fairness.Competence.Respect.Timely and thorough.Confidentiality.

• Pieter treats all customers equally. (pick one) Fairness.Competence.Respect.Timely and thorough.Confidentiality.

Question four: Nazir is a sophisticated investor with a large portfolio of investments. You have helped him manage his portfolio for many years.

He seeks your advice on purchasing shares in XYZ Limited. First you point out key information in the product disclosure statement. Then you agree that investing around 1,000 shares in the company would be a suitable addition to his portfolio.

Have you met your obligations under Standard 4 of the Code of Professional Conduct for Financial Advice Services to ensure the client understands your advice?

• No, you should have reconfirmed his investor profile before providing any advice.
• Yes, because he has been investing for more than five years.
• No, you should have explained the risks associated with investing in the share market.
• Yes, the steps you have taken are reasonable in the circumstances.

Question five: Standard 9 of the Code of Professional Conduct for Financial Advice Services covers keeping competence, knowledge and skill up-to-date.

Suki is a financial adviser. Which statement correctly explains her obligations under Standard 9?

• Every three years, complete a course of study to ensure she remains up-to-date with the regulatory framework for financial advice in New Zealand.
• At least annually, plan for and progressively complete learning activities designed to ensure she maintains the competence, knowledge and skill for the advice she gives.
• Review her expertise annually, and ensure she maintains the capabilities for the advice she gives.
• Undertake 10 hours of structured professional training each year.