Financial Conduct Authority (FCA) UK Regulation Sample Exam

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Which type of order must a client provide when there is a conflict of interest, according to SYSC?

  1. A clear verbal mandate

  2. A written confirmation of their wishes

  3. An email accepting the firm’s proposal

  4. A signed waiver of rights

The correct answer is: A written confirmation of their wishes

When there is a conflict of interest, a written confirmation of the client’s wishes is essential according to SYSC (Senior Management Arrangements, Systems and Controls) regulations. This requirement is grounded in the necessity for firms to maintain transparency and proper documentation regarding the decisions made by clients in situations where their interests may not align with those of the firm. A written confirmation serves as tangible proof that the client has been informed about the potential conflict and has given clear instructions on how they wish to proceed. This documentation not only helps in protecting the interests of the clients but also serves as a safeguard for the firm against any claims of mismanagement or inadequate disclosure in the event of a dispute. It emphasizes the importance of having a clear and traceable record of the client’s intentions, which can be crucial if any issues arise in the future related to the conflict of interest. Other forms of communication, such as verbal mandates or emails, may not provide the same level of clarity and accountability as a written confirmation would.