Free CISI Corporate Finance Regulation Practice Questions

Sample Practice Questions

Try these 10 sample questions from the CISI Corporate Finance Regulation practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Which body identifies and takes action against systemic risks to UK financial stability?

   1. A.Financial Policy CommitteeCorrect answer: A
   2. B.Financial Conduct Authority
   3. C.Financial Reporting Council
   4. D.Financial Ombudsman Service

   Explanation: The manual states: "reduce systemic risks". The FPC identifies and monitors risks to UK financial-system stability. FCA conduct supervision, FRC reporting standards and FOS complaints resolution are different functions.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 1 section 1.1.2

2. 2Under the client's best interests rule, how must a firm conduct designated investment business for a retail client?

   1. A.Honestly, fairly and professionallyCorrect answer: A
   2. B.According to the issuer's interests alone
   3. C.According to the intermediary's revenue target
   4. D.According to the lowest compliance cost

   Explanation: The manual states: "honestly, fairly and professionally". The rule centres on client interests; issuer, revenue or cost priorities cannot replace it.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 2 section 2.1.1

3. 3A company departs from a UK Corporate Governance Code provision because another arrangement better suits its circumstances. What does comply or explain require?

   1. A.Prior approval by the company's broker
   2. B.An explanation in its annual reportCorrect answer: B
   3. C.Automatic delisting from the market
   4. D.A separate court order for each departure

   Explanation: The manual states: "explain in its annual report". Departure calls for an explanation, not automatic delisting or universal advance permission.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 3 section 1.2

4. 4Which UK body issues and administers the Takeover Code?

   1. A.Financial Reporting Council
   2. B.Financial Ombudsman Service
   3. C.Pensions Regulator
   4. D.Panel on Takeovers and MergersCorrect answer: D

   Explanation: The manual states: "issue and administer the City Code". The Panel administers the Code; the other bodies oversee reporting, complaints or pensions.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 4 section 1.1

5. 5For shares to meet the general listing transferability requirement, what is required?

   1. A.Transfer only with unanimous shareholder consent
   2. B.Transfer only to existing shareholders
   3. C.Free transferabilityCorrect answer: C
   4. D.Transfer only through the company secretary

   Explanation: The manual states: "Securities must be freely transferable.". Freely transferable securities satisfy the general requirement; shareholder or officer approval restrictions do not.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 5 section 1.1.6

6. 6Which regulatory objective is specifically associated with the PRA's prudential supervision of banks?

   1. A.Resolving individual customer disputes
   2. B.Promoting bank safety and soundnessCorrect answer: B
   3. C.Approving corporate takeover prices
   4. D.Preparing company accounting standards

   Explanation: The manual states: "the PRA promotes the safety and soundness". Its prudential objective concerns regulated firms, unlike dispute resolution, bid pricing or accounting standards.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 1 section 1.1.4

7. 7Which principle addresses a firm's obligation to maintain adequate financial resources?

   1. A.Integrity
   2. B.Financial prudenceCorrect answer: B
   3. C.Market conduct
   4. D.Relations with regulators

   Explanation: The manual states: "Financial prudence – a firm must maintain adequate financial resources.". Financial prudence concerns adequate resources, distinct from integrity, conduct and regulatory cooperation.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 2 section 1.4

8. 8Under the UK Corporate Governance Code, what should non-executive directors contribute?

   1. A.Managing the company's day-to-day business
   2. B.Preparing the external auditor's independent opinion
   3. C.Constructive challenge and holding management to accountCorrect answer: C
   4. D.Acting as the company's executive leadership team

   Explanation: The manual states: "hold management to account". Non-executives challenge and oversee management; they do not replace day-to-day executives or external auditors.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 3 section 1.2.2

9. 9Which authority investigates whether a merger could restrict competition?

   1. A.Competition and Markets AuthorityCorrect answer: A
   2. B.Financial Ombudsman Service
   3. C.Financial Reporting Council
   4. D.Pension Protection Fund

   Explanation: The manual states: "investigating mergers that could restrict competition". Competition effects are the CMA's remit, not complaints, financial reporting or pension compensation.

   Reference: CISI Corporate Finance Regulation learning manual — Chapter 4 section 1.1.3

10. 10An issuer appoints two sponsors on a transaction. What happens to each sponsor's obligations?

    1. A.They are divided automatically into equal halves
    2. B.Only the first sponsor remains responsible
    3. C.They pass to the company's external auditor
    4. D.Each sponsor remains responsible for complianceCorrect answer: D

    Explanation: The manual states: "does not relieve either of the appointed sponsors". Multiple appointments do not dilute each sponsor's duties.

    Reference: CISI Corporate Finance Regulation learning manual — Chapter 5 section 1.2.2