Financial Conduct Authority (FCA) UK Regulation Sample Exam

If the FCA deems a financial promotion poses an unacceptable risk to consumers, what intervention power does it have?

1. Ban the product for up to 12 months without consultation

2. Issue a warning to the firm without further action

3. Allow the promotion to continue with additional disclaimers

4. Limit the promotion to accredited investors only

The correct answer is: Ban the product for up to 12 months without consultation

The correct answer indicates that if the FCA determines a financial promotion poses an unacceptable risk to consumers, it has the authority to ban the product for up to 12 months without needing prior consultation. This power is part of the FCA's regulatory toolkit aimed at protecting consumers from potentially harmful financial products and services. The ability to impose such a ban underlines the FCA's commitment to ensuring that financial promotions do not mislead consumers or expose them to undue risks. This reflects a proactive approach in safeguarding the financial market by taking decisive action, rather than waiting for a harmful situation to evolve. By limiting the promotion of certain financial products, the FCA can prevent consumers from making poor financial decisions that could lead to significant losses. The other options do not align with the level of intervention required when a financial promotion is deemed to present unacceptable risks. Issuing a warning or allowing the promotion to continue with additional disclaimers could be insufficient to protect consumers effectively in high-risk situations. Limiting the promotion to accredited investors only is also a more moderate response than an outright ban and would not fully address scenarios where the FCA feels the inherent risk to consumers is too great.