Financial Conduct Authority (FCA) UK Regulation Sample Exam

Under the personal account dealing rules, what must a firm ensure when placing a personal deal?

1. It does not conflict with the interests of its clients

2. It maximizes the firm's profit

3. It complies with client preferences

4. It follows industry best practices

The correct answer is: It does not conflict with the interests of its clients

The requirement for a firm under the personal account dealing rules is primarily concerned with ensuring that personal trades do not conflict with the interests of its clients. This obligation stems from the principle that a firm must act in the best interests of its clients and maintain the integrity of its relationship with them. When a firm engages in personal account dealing, it must take steps to prevent scenarios where the personal interests of its employees could adversely affect the treatment of clients or lead to market manipulation. A firm must have policies and procedures in place to identify and manage any potential conflicts of interest that might arise from personal trading activities. This involves careful oversight to ensure that any personal trading does not exploit confidential information or take advantage of clients’ positions, thereby safeguarding client trust and ensuring fairness in the markets. While maximizing the firm's profit, complying with client preferences, and following industry best practices are important business considerations, they do not specifically address the primary concern of avoiding conflicts of interest which is essential in the context of personal account dealing.