All RE5 questions
Ethics Misconduct Consumer Protection
A representative persuades a client to cancel a sound investment policy and replace it with a similar new one, mainly so the representative can earn fresh commission, even though the switch does not benefit the client. What is this practice called?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) Churning.Correct
- b) Prudent financial planning.
- c) Customer due diligence.
- d) Tipping off.
Why this is the answer
Churning is the unethical replacement of products to generate commission rather than to serve the client's interests — a clear breach of the suitability and replacement rules. It is the opposite of sound planning, and is unrelated to due diligence or tipping off.
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