Financial Conduct Authority (FCA) UK Regulation Sample Exam

Which of the following claimants would warrant compensation by the Financial Services Compensation Scheme?

1. Individual investors only

2. The trustee of a personal pension fund

3. Corporate clients only

4. Unregulated firms

The correct answer is: The trustee of a personal pension fund

The Financial Services Compensation Scheme (FSCS) provides compensation to individuals and certain entities when financial services firms fail and cannot meet their obligations. The scheme is designed to protect consumers and ensure their savings and investments are safeguarded in specific circumstances. The trustee of a personal pension fund can make a claim under the FSCS because they are acting on behalf of individuals who are part of that pension scheme. In such a case, the trustee's role is to manage the assets for the benefit of the beneficiaries of the pension fund, which typically includes individual investors. This ensures that if the underlying financial services firm involved in the personal pension fund fails, the compensation scheme can step in to protect those individuals’ interests. In contrast, individual investors and corporate clients might receive compensation under different circumstances, but the key here is the specific role of the trustee in managing personal pensions. Unregulated firms do not fall within the FSCS's protective provisions, and thus claims from such entities would not be eligible for compensation. Therefore, the trustee of a personal pension fund is the claimant that warrants compensation through the FSCS, given their fiduciary duty to protect the interests of the pension beneficiaries.