FRE1 — Industry, Regulation & Key Parties

What FRE1 covers

• •The FCA, PRA and Bank of England — objectives and who regulates what
• •FSMA 2000: the general prohibition, authorisation and appointed representatives
• •What makes a loan a regulated mortgage contract (MCOB scope)
• •Key parties: lenders, intermediaries, conveyancers, valuers
• •The Financial Ombudsman Service and FSCS — routes, limits and time limits
• •Money laundering: the three stages, CDD and the reporting chain
• •How lenders fund mortgages: retail deposits, wholesale markets, securitisation
• •The economic environment: Bank Rate, inflation and the housing market

3 free FRE1 practice questions

Straight from Mock Paper 1, in the real exam style — no sign-up, no paywall.

1. Q1.Which of the following correctly states the FCA's single strategic objective?

   1. ATo protect and enhance the stability of the UK financial system
   2. BTo ensure that relevant markets function well
   3. CTo secure an appropriate degree of protection for consumers
   4. DTo promote effective competition in the interests of consumers
   Reveal the answer

   B is correct. The FCA's strategic objective is ensuring relevant markets function well. Consumer protection, market integrity and competition are its three operational objectives — a favourite trap is presenting an operational objective as the strategic one. (Financial stability is the Bank of England's territory.)

2. Q2.The Prudential Regulation Authority (PRA) is best described as responsible for:

   1. AThe conduct of business of all authorised firms
   2. BThe prudential safety and soundness of banks, building societies, credit unions, insurers and major investment firms
   3. CSetting Bank Rate eight times a year
   4. DMacroprudential tools such as loan-to-income limits
   Reveal the answer

   B is correct. The PRA (part of the Bank of England) prudentially regulates deposit-takers, insurers and the largest investment firms. Conduct across all firms is the FCA's job; Bank Rate is the MPC; macroprudential tools such as the LTI flow limit belong to the FPC.

3. Q3.A recommendation to limit the proportion of new mortgage lending at high loan-to-income multiples would come from which body?

   1. AThe Monetary Policy Committee
   2. BThe Financial Policy Committee
   3. CThe Prudential Regulation Committee
   4. DHM Treasury's Debt Management Office
   Reveal the answer

   B is correct. The FPC is the Bank of England's macroprudential committee, charged with identifying and reducing systemic risk — its tools include the LTI flow limit and the countercyclical capital buffer. The MPC sets monetary policy, not lending limits.

How to pass FRE1

• ✓Learn the FCA's strategic vs operational objectives word-perfectly — swapping them is the classic trap.
• ✓Know the complaint journey cold: firm first, eight weeks, then FOS within six months.
• ✓AML questions are about process — report to the MLRO, never tip off the customer.

FRE1 exam — common questions