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Code of Conduct Adhere to the specific Codes of Conduct
Which of the following is the clearest example of 'churning' that the replacement rules are designed to prevent?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) Repeatedly replacing a client’s policies mainly to generate new commission, with little or no benefit to the client.Correct
- b) Replacing a policy after a documented analysis shows the new product genuinely better meets the client’s needs.
- c) Keeping a suitable existing policy in place and simply reviewing it annually.
- d) Declining to replace a policy because replacement would harm the client.
Why this is the answer
Churning is unnecessary replacement driven by commission rather than client benefit. The replacement rules (analysis, disclosure of actual and potential implications, reporting of long-term replacements) exist to deter exactly that; a properly justified replacement is legitimate.
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