Financial Conduct Authority (FCA) UK Regulation Sample Exam

When do the FCA's Conduct of Business Sourcebook rules apply to a trader dealing on their own personal account?

1. When they work for a UK firm and buy UK or international shares

2. When they operate outside UK jurisdiction

3. Only when they trade exclusively in derivatives

4. When they are not employed by any firm

The correct answer is: When they work for a UK firm and buy UK or international shares

The correct answer is based on the principles of regulatory oversight and the responsibilities associated with trading activities under the FCA’s Conduct of Business Sourcebook (COBS). The rules are designed to ensure fair treatment of customers and market integrity. When a trader deals on their own personal account while being employed by a UK firm, they are still subject to the standards and obligations set forth by the FCA, even if the trading involves international shares. This is because their actions can impact market fairness and client trust in the firm they represent. In contrast, scenarios where a trader operates outside of UK jurisdiction or is not employed by a firm do not attract the same level of regulatory oversight under the COBS, as these situations typically fall outside the scope of the FCA’s jurisdiction. Additionally, trading exclusively in derivatives does not uniquely invoke COBS rules; rather, the application of these rules is broader and includes various trading types. Thus, the conduct of business rules firmly apply within the context of a trader’s employment with a UK firm while managing personal investment activities.