Financial Conduct Authority (FCA) UK Regulation Sample Exam

When approving a financial promotion for an overseas bank, what must the communication to UK retail clients include?

1. The level of fees applicable

2. The credentials of the overseas bank

3. Extent of UK compensation scheme arrangements

4. The duration of the investment

The correct answer is: Extent of UK compensation scheme arrangements

The communication to UK retail clients regarding an overseas bank's financial promotion must include details about the extent of UK compensation scheme arrangements. This is crucial because retail clients need to understand the level of protection afforded to them in the event that the bank fails or cannot meet its obligations. The Financial Services Compensation Scheme (FSCS) provides a safety net for British depositors, which is an essential aspect of consumer protection in the financial services industry. Including this information ensures that clients are adequately informed about the risks involved when dealing with foreign institutions that may not be covered by the same regulatory framework or compensation schemes offered to domestic banks. This helps clients make informed decisions by understanding the implications for their deposits and investments. While other information, such as fees, credentials, and investment duration, may also be relevant for clients, the primary focus of the requirement in this context is to inform retail clients about the security and recourse available through UK compensation schemes, particularly when engaging with overseas banks. This emphasis on consumer protection aligns with the overall regulatory goals of the FCA, which seeks to ensure that retail clients are treated fairly and understand the risks associated with their financial products.