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FRM Part II · FRM Exam Part II · Case Study: Investor Protection and Compliance Risks in Investment Activities

A regional securities regulator states that its mandate is to ensure that retail clients buying investment products receive fair treatment, clear disclosure and recommendations that suit their circumstances. Which regulatory objective does this most directly describe?

The objective described is investor protection. Fair treatment, clear disclosure and suitable recommendations for retail clients are conduct-focused safeguards designed to prevent mis-selling and information asymmetry, rather than goals related to monetary policy, capital standards or payment settlement.

  1. AInvestor protectionCorrect
  2. BMonetary policy transmission
  3. CCapital adequacy harmonisation
  4. DPayment system finality

Explanation

Fair treatment, disclosure and suitability of recommendations for retail clients are the core elements of investor protection. The other options concern central bank policy, bank capital standards and settlement, none of which address conduct toward clients.

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