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A representative sold a client an endowment five years ago and now advises her to replace it with a new one, which he will also sell. What must he disclose about his own earnings?

RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.

  1. a) Nothing further, because the commission on the old product was disclosed when it was sold.
  2. b) Only that he will be paid, without amounts, because replacement commission is regulated.
  3. c) Only the consideration on the new product, because the old product is no longer relevant.
  4. d) The consideration on the new product, compared with what he received on the old one.Correct

Why this is the answer

On a replacement the provider must disclose any incentive, remuneration, consideration, commission, fee or brokerage received on the replacement product and, where the provider also rendered services on the terminated product, a comparison between the two. This exposes the incentive to 'churn' a client's products for fresh commission.

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