Conduct Of Business Requirements Flashcards
Which of the three categories of investor identified in COBS is provided with the highest level of regulatory protection?
Retail clients are assumed to have the least expertise in relation to financial services and consequently require more support from the advisor.
Dealings with retail clients are more highly regulated than those with eligible counterparties or professional clients.
If a client intends to purchase an investment product on an ‘execution only’ basis, then:
A) no recommendation is provided
B) no charges will be payable
C) they can only use an independent advisor
D) they will have to complete all the paperwork themselves
A) no recommendation is provided
A restricted advisor is one who:
A) can only make recommendations based on the products of a single provider
B) has not passed all of the relevant exams to enable them to give independent advice
C) does not meet the FCA criteria to be considered ‘independent’
D) can only give basic advice on stakeholder products
C) does not meet the FCA criteria to be considered ‘independent’
A firm is keen to develop its mortgage business and has acquired a list if potential new customers from a marketing company. It plans to call the listed individuals in the evenings and at weekends. In what respects would this plan breach COBS rules on financial promotions?
As individuals are not existing customers it would constitute cold calling which is forbidden for mortgages.
Cold calling may only be made up to 9pm monday to Saturday but not Sunday.
Which of the following reflects the FCA’s rules on advisor charging?
A) advisors may minimise the upfront cost of their services to clients by charging in instalments over a number of years
B) advisor charges must be based on hourly fees
C) advisors have discretion to determine their charging structures but they must pay due regard to the best interest of the client
D) it is excepted that it is not possible to provide an estimate in advance of the chargeable hours because of the potential complexity of sole transactions
C) advisors have discretion to determine their charging structures but they must pay due regard tonthe best interest of the client
When an advisor transacts designated investment business for a client, the basis or amount of charges would normally be disclosed in which document?
A) the key features document
B) the statutory cancellation notice
C) the suitability report
D) the client agreement letter
D) the client agreement letter
For existing clients, a services and costs disclosure document (SCDD) (or equivalent used by a firm) must be provided every time an advisor carries out a new transaction for them, true or false?
False
Where there are several transactions a new SCDD is only needed where previous information provided is different.
An advisor must issue a key features or key information document and illustration prior to a sale being concluded for all of the following products except;
A) gilt-edged securities
B) life assurance
C) stakeholder pensions
D) unit trusts
A) gilt-edged securities
Key information documents must only be issued for packaged products. Gilt-edged securities are a direct investment.
How long is the cooling off period for pension policies?
A) 30 days from the date when the contract begins or from the date on which the client receives contractual terms if this is later.
B) 14 days from the date when the contract begins or from the date on which the client recieves contractual terms if this is later
C) 14 days from the date when the cancellation notice is issued
D) 30 days from the date when the cancellation notice is issued
A) 30 days from the date when the contract begins or from the date on which the client receives contractual terms if this is later.
An advisor would not be required to prepare a suitability report in respect of a recommendation for a:
A) personal pension
B) life insurance product
C) mortgage
D) unit trust
C) mortgage
Although many lenders do complete them.
Jane has cancelled a unit trust within the cancellation period but recieved less back than she invested. Why is this?
A) a withdrawal charge has been applied tonher plan
B) she invested a lump sum into a unit linked plan
C) a surrender charge has been applied tonher plan
D) she invested into a regular premium unit linked plan
B) she invested a lump sum into a unit linked plan
Which of the legal concepts studied is particularly relevant to the process of carrying out designated investment business, ie acting on the clients behalf?
The law of agency
When carrying out designated investment business, the advisor acts as the agent of the client.
What information is required for a fact find?
A) Why is it important to know the country where the person was born?
B) Why is it important to find out how many dependents a client has and their ages?
C) what does an advisor need to know in relation to a clients plans and objectives?
A) place of birth determines a persons domicile for tax purposes, which might be a consideration in relation to choice of investments.
B) number and ages of children will inform recommendations relating to protection needs, estate planning, perhaps planning school/college.
C) how client feels about current arrangements
Their objective now and in the future
Why they have certain goals and/or views
Willingness to take action in each area
Likelihood of change in their situation
Cooling off and cancellation rights for -
Life and pension policies, contracts of insurance that are or have elements of, pure protection contract or payment protection?
Investments and deposits and other insurances?
Binding mortgage offer?
Life and pension policies, contracts of insurance that are or have elements of, pure protection contract or payment protection - 30 days
Investments and deposits and other insurances? - 14 days
Binding mortgage offer? - 7 days
Cooling off periods begin from the date of contract or from when the client receives contractual terms
For how long must records be retained for the following types of business?
A) Pension transfers/opt outs and free standing additional voluntary contributions
B) life policies, pension contracts and Mifid business
C) all other products
A) indefinitely
B) 5 years
C) 3 years
