Financial Conduct Authority (FCA) UK Regulation Sample Exam

Which of the following is NOT considered a specified investment under the Regulated Activities Order 2001?

1. Investment trusts

2. Commodities such as gold

3. Securities

4. Derivatives

The correct answer is: Commodities such as gold

Under the Regulated Activities Order 2001, specified investments encompass a wide range of financial instruments and products that fall under the regulatory framework outlined by the Financial Conduct Authority (FCA). Investment trusts, securities, and derivatives are all classified as specified investments because they represent types of financial instruments that are actively traded and commonly used in investment portfolios. Investment trusts are collective investment vehicles that pool investor funds to buy a diverse range of assets and are regulated as specified investments due to their public market nature. Securities cover a broad spectrum, including shares and bonds, making them an essential part of the financial market and thus included as specified investments. Derivatives, which derive their value from the performance of an underlying asset, are also classified as specified investments due to their complexity and the potential risk they pose to investors. Commodities such as gold, while they can be traded and are considered valuable assets, do not fall under the traditional definition of specified investments as outlined in the Regulated Activities Order. Instead, they are often treated as physical assets or goods. This distinction is key, as the regulatory framework focuses on financial instruments that are typically involved in more traditional investment activities, rather than commodities, which are generally categorized outside this scope.