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IMC Unit 1 Practice Exam: Regulation & Professionalism

IMC Test 01: Core Study Themes

This exam assesses your knowledge of the UK Financial Regulatory System, Client Categorization, and Updated 2026/27 Tax Rules.

Regulatory Safety: Always confirm record-keeping periods, such as the 6-year requirement for financial promotions of personal pension schemes, to maintain FCA compliance.
2026/27 Tax Updates: UK Gilts remain exempt from Capital Gains Tax. Note that dividend tax rates for basic and higher rate taxpayers have increased by 2% for the 2026/27 tax year, while the additional rate remains at 39.35%.
Technical Warning: To be treated as an elective professional client under MiFID II, a retail client must satisfy at least two of the three quantitative criteria, including a financial portfolio exceeding 500,000 Euros.
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Q:1Which of the following is the most likely outcome of an increase in the liquidity risk of an asset?
Q:2An additional rate taxpayer has already received dividends of 15,000 pounds in the 2026/27 tax year. He then receives a further dividend of 1,296 pounds. To the nearest pound, what is the investor's income from this further dividend after the payment of all tax due?
Q:3For how long must a firm keep records of any communicated or approved financial promotion of personal pension schemes?
Q:4The UK Stewardship Code is directed towards which group of people?
Q:5Which of the following investments are subject to Insider Dealing regulations?
(i) Gilt-edged securities
(ii) FTSE-100 Index Futures
(iii) Unit trusts.
Q:6The principal-agent problem arises when:
Q:7Which of the following is NOT a condition for a will to be valid in the UK?
Q:8A pension fund with a high proportion of its contributing members close to retirement is likely to have a high proportion of its funds invested in?
Q:9Alex is an investment adviser. She personally holds 10,000 shares of XYZ PLC. Alex believes the company has excellent prospects and decides to recommend it to her clients. She should:
Q:10When a financial adviser requires information on a client from a third party, what must the adviser receive from the client?
Case Study (Questions 11 to 15)
Hannah had a full financial review six months ago. She is meeting her adviser to review her portfolio. She holds 95,000 pounds in gilts, purchased for 87,000 pounds. She is a higher rate taxpayer. Assume she has used all available capital gains tax allowances.
Q:11-What would be the annual income tax saving if she held her entire gilt portfolio in an ISA?
Q:12With reference to income tax liability only, which of the following investments would be considered least tax efficient for Hannah?
Q:13What would be the capital gains liability if Hannah sold her gilt portfolio?
Q:14Under FCA regulations, which document is Hannah's financial adviser required to use to record any new information she provides?
Q:15Based on the information provided, what is Hannah's adviser most likely to consider the first priority?
Q:16The US regulator with authority over security-based swaps is:
Q:17Standard settlement for an equity transaction on the London Stock Exchange is:
Q:18To comply with the Conduct of Business rules for communications with a retail client, it is NOT necessary for an authorised firm to give the client:
Q:19In respect of a Lasting power of attorney (LPA) taken out in 2014, the LPA:
Q:20Under MiFID II, which of the following criteria would allow a firm to treat a retail client as an elective professional client?

Test 01 Study Summary

1. Liquidity Risk Impact Increased liquidity risk widens the bid-offer spread, as market makers demand higher compensation for the difficulty of offloading larger trade sizes.
2. Fact Find Purpose Under FCA conduct rules, a fact find is the mandatory instrument used to capture a client's holistic financial profile to ensure advice remains suitable.
3. Equity Settlement Standard settlement for London Stock Exchange equity transactions follows the T+2 convention, settling exactly two business days after the trade date.

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