Financial Conduct Authority (FCA) UK Regulation Sample Exam

The FCA's COBS rules apply to?

1. Only UK based firms

2. All firms operating in the EU

3. A UK investment management company managing a pension fund for a Berlin based company

4. Only retail firms and customers

The correct answer is: A UK investment management company managing a pension fund for a Berlin based company

The FCA's Conduct of Business Sourcebook (COBS) rules are designed to ensure that firms operate within a framework that promotes fair treatment of customers and encourages high standards of conduct. These rules primarily apply to firms that are regulated by the FCA within the UK, as well as certain activities conducted by UK-based firms outside the UK. In the case of a UK investment management company managing a pension fund for a Berlin-based company, the FCA's COBS rules would still apply. This is because the firm is based in the UK and is providing investment management services, making it subject to UK regulations. The nature of the client (even if they are based in another country, such as Germany) does not exempt the firm from complying with COBS rules. The UK firm's regulatory obligations continue based on its location and the services it provides. This understanding illustrates the FCA's broader reach in terms of enforcing its rules on firms that are under its jurisdiction, regardless of where their clients are located, as long as the services provided stem from a UK-registered entity.