Which FCA principle requires firms to arrange adequate protection for clients’ assets?

• A. Clients assets: Firm must arrange adequate protection for clients' assets
• B. Theoretical ex-rights price
• C. Dividend yield
• D. The forward rates formula

Answer: (A)

The question is testing a firm’s obligations to protect clients’ assets. This is a fundamental regulatory requirement: firms must arrange adequate protection for client money and custody assets. In practice, this means money is held in segregated client accounts and not commingled with the firm’s own funds, assets are safeguarded with approved custodians, and there are robust records and reconciliations to prevent misappropriation. This protection helps ensure clients are not exposed to losses if a firm encounters difficulties or fails.

The other items are unrelated to safeguarding client assets. They are financial metrics or formulas (ex-rights price, dividend yield, forward rates) and do not describe regulatory protections for client money or custody assets.