Financial Conduct Authority (FCA) UK Regulation Sample Exam

In what situation are a firm's actions typically subject to the FCA’s COBS 'best possible result' requirements?

1. When it is selling shares for both a buying and a selling client

2. When it receives orders from multiple clients at the same time

3. When it deals exclusively for its own account

4. When it only sells to retail clients

The correct answer is: When it is selling shares for both a buying and a selling client

A firm's actions are subject to the FCA’s COBS 'best possible result' requirements when it is selling shares for both a buying and a selling client because this scenario creates a situation where the firm must ensure fairness and act in the best interests of both clients. The best possible result requirement is designed to protect clients by ensuring that they receive the most favorable terms possible when their orders are executed. In this case, since the firm is acting between two clients with potentially conflicting interests, adhering to the 'best possible result' standard is essential to maintain trust and compliance with regulatory expectations. In other contexts, such as receiving orders from multiple clients at the same time, the firm still has an obligation to treat all clients fairly, but the specific requirement to achieve the 'best possible result' is more directly relevant when acting on behalf of clients whose orders can affect each other. When dealing exclusively for its own account, the firm's actions do not have the same direct implications for client outcomes, as it is not intermingling client orders. Selling only to retail clients does not inherently invoke the 'best possible result' obligation unless the firm is also acting on the client’s behalf in a manner where such a requirement is applicable.