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IMC Unit 1 Practice Exam: Market Infrastructure

Q: Under MiFID II, which criteria allows a retail client to be treated as an elective professional client?

Retail clients must meet at least two of the three quantitative tests: portfolio size, trading frequency, and professional experience.

Q: What is the primary advantage for a gilt-edged market maker using an inter-dealer broker?

Inter-dealer brokers allow market makers to execute large positions anonymously, hiding their strategy from competitors.

Q: Sebastian is dealing shares across multiple accounts with only partial fills. How should he allocate these according to CFA Standards?

CFA Standard III(B) requires fair and equitable allocation, typically achieved through pro rata distribution.

Q: Investment advice firms can use dealing commission to pay for:

Under current rules, commissions are strictly for research; firms must fund operational systems like execution platforms directly.

IMC Test 05: Core Study Themes

This exam reviews MiFID II Categorization, CMA Merger Thresholds, and FCA Supervision.

Client Classification: To be treated as an elective professional client, retail clients must pass two of the three MiFID II quantitative tests: (1) Portfolio > €500,000, (2) 10 significant trades/quarter, or (3) Professional experience in the financial sector for at least one year.

Market Infrastructure: The Bank of England supervises systemic infrastructure like central counterparties and payment systems, prioritizing UK financial stability.

Regulatory Duty: Systematic Internalizers (SIs) execute client orders outside of regulated markets or multilateral trading facilities (MTFs) using their own capital.

Edited by: Test-Questions.com

Last Updated: March 09, 2026

Q:1Under MiFID II, which criteria allows a retail client to be treated as an elective professional client?

Working in finance for seven months with a 250,000 euro portfolio

Portfolio of 500,000 euro with ten trades per quarter for one year

Ten significant trades per quarter for four quarters and a portfolio exceeding 500,000 euro

Total personal wealth exceeding 25 million euro

Q:2What is the primary advantage for a gilt-edged market maker using an inter-dealer broker?

Ability to strip securities

Anonymity of trade

Preferential tax rates

DMO special arrangements

Q:3Sebastian is dealing shares across multiple accounts with only partial fills. How should he allocate these according to CFA Standards?

By highest commission paid

Pro rata based on order size

Randomly

To best-performing accounts first

Q:4Investment advice firms can use dealing commission to pay for:

Connectivity services

Provision of original research

Execution management systems

None of the above

Q:5What legal document grants a person the authority to manage ... [Show Full Question 5]

Discretionary authority

Letter of authority

Letter of probate

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Q:6What is the minimum UK turnover for a target company to trigger a Competition ... [Show Full Question 6]

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80 million pounds

90 million pounds

100 million pounds

Q:7Which investment is most appropriate for a client needing ... [Show Full Question 7]

Mid-cap equities

Commodity futures

Commercial property

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Q:8What action is NOT part of the FCA's ... [Show Full Question 8]

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Banning unsuitable products

Banning misleading promotions

Prosecuting misleading statements

Q:9An investment firm wishing to add safeguarding assets ... [Show Full Question 9]

Notify the FCA only

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Apply for a new Part 4A permission

Set up a new subsidiary

Q:10Which statement regarding client categorisation ... [Show Full Question 10]

Retail clients cannot be treated as professionals without assessment

Professional clients cannot be treated as eligible counterparties without assessment

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Professionals can request to be treated as retail

Q:11How long must an investment firm retain records ... [Show Full Question 11]

Three years

Five years

Six years

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Q:12What document is mandatory for retail ... [Show Full Question 12]

Key facts document

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Simplified prospectus

Prospectus

Q:13A systematic internaliser ... [Show Full Question 13]

On a regulated market or MTF

On a regulated market only

On an MTF only

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Q:14If a donor gives away an asset but continues ... [Show Full Question 14]

Potentially exempt transfer

Chargeable lifetime transfer

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Tax exempt transfer

Q:15Which body oversees the systemic infrastructure of ... [Show Full Question 15]

Financial Conduct Authority

Prudential Regulation Authority

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HM Treasury

Q:16Which is least likely to lead a firm to close ... [Show Full Question 16]

Increased fund deficit

Increased disclosure requirements

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Increased longevity of members

Q:17What is most suitable for meeting recurring expenses ... [Show Full Question 17]

Equities

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Long-term corporate bonds

Interest rate futures

Q:18Which combination allows a company to be treated ... [Show Full Question 18]

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Balance sheet of 11 million euro and turnover of 50 million euro

Turnover of 45 million euro and own funds of 1 million euro

Turnover of 25 million euro and balance sheet of 45 million euro

Q:19Which factor would least likely exempt a company ... [Show Full Question 19]

Offering securities to 100 persons

Offering shares representing 8 percent of an existing class

Minimum consideration per investor of 70,000 euro

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Q:20The FCA's Proactive Firm Supervision ... [Show Full Question 20]

Annual assessment based on firm size

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Fixed cohorts assessed every three years

Assessment only after significant breaches

Test 05 Study Summary

1. CASS Compliance Adding regulated activities, such as safeguarding client assets, requires a formal application for a variation of permission to the FCA.

2. Supervision Model The FCA's proactive supervision involves continuous assessment of a firm's business model and its specific risk profile.

3. Pension Records Records relating to pension transfers and opt-outs must be maintained indefinitely to ensure long-term consumer protection.

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