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CeMAP 1 (Unit two) > Topic 20 (Conduct of business requirements I) > Flashcards

Topic 20 (Conduct of business requirements I) Flashcards

1
Q

What is the Conduct of Business Sourcebook COBS?

A

Conducts rules for investment firms, banks and building societies

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2
Q

What is the Mortgage and home finance sourcebook MCOB?

A

Rules governing the protection of advice relating to mortgages and home finance including equity release

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3
Q

What is the Insurance conduct of business sourcebook ICOBs?

A

Rules governing the provision of advice on general insurance and protection products

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4
Q

What are the 3 types of client?

A
  1. Eligible counter-parties - Includes government central banks and financial institutions. Due to the assumed level of knowledge, clients in this category receive the lowest level of investor protection
  2. Professional clients - Includes all the bodies that would otherwise be eligible counter-parties, except for the fact they require a higher level of service
  3. Retail clients - Provides the highest level of investor protection and comprises customers who do not fall into the other 2 categories (most customers fall into this category)
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5
Q

What are the 2 different categories of advisor?

A
  1. Independent advisors

2. Restricted advisors

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6
Q

What is independent advice?

A

Advice on a certain area based on comprehensive and fair analysis of the relevant market and provided unbiased, unrestricted advice

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7
Q

What are panels?

A

Don’t prohibit/restrict a firm wishing to be independent, should be reviewed/updated regularly and it must be broad to make personal recommendations

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8
Q

What are specialists?

A

Advisors who specialise in certain areas and they must meet the independence rule in every recommendation

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9
Q

What is restricted advice?

A

A personal recommendation to a retail client in relation to a retail investment product which isn’t independent or basic advice

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10
Q

what is basic advice?

A

Providing advice on stakeholder products

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11
Q

What is execution only business?

A

A transaction executed by a firm upon the specific instruction of a client where the firm does not give advice on investments relating to the merits of the transaction and in relation the rules on the assessment of appropriates don’t apply

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12
Q

What is qualified investment advice?

A

Where an advisor makes a recommendation based on a full analysis of customers need and circumstances

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13
Q

What is simplified advice?

A

Where a streamlined or automated process is used to gather the personal and financial information on which advice is given

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14
Q

What is an insistent customer?

A

Where an advisor provides advice to a client but the client wishes to carry out a transaction that contravenes the advice given

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15
Q

What was introduced for non-advised sales?

A

MiFID introduced an appropriates test

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16
Q

What is a financial promotion?

A

An invitation or inducement to engage in investment activity

17
Q

What are the 2 different types of financial promotion?

A
  1. Real-time financial promotion (non-written) = personal visits and telephone conversations
  2. Non real-time financial promotions (written) = Newspapers, advertisements and internet
18
Q

What are the features of unsolicited promotions (cold calls)

A
  • permitted to certain investments
  • not permitted for high volatility funds
  • not permitted for mortgage contracts
  • can’t be made in unsociable hours
  • must check the recipient is happy with the call
  • caller must give a contact point
19
Q

What are the two codes for ASA (Advertising standards authority)?

A
  1. Broadcast advertising

2. Non-broadcast advertising, sales, promotions and direct marketing

20
Q

What are the 4 requirements that all advertisements must be?

A
  1. Legal
  2. Decent
  3. Honest
  4. Truthful
21
Q

What are the rules relating to advisor charges?

A

Advisors have discretion to determine their charging structures but they must pay due regard to the best interest of the client

22
Q

Before business is discussed, what must the advisor do?

A

Disclose certain information about themselves and the services they provide

23
Q

What is SCDD? (Services and costs disclosure document)

A

Provides a format for required disclosure information

- The SCDD isn’t obligatory and firms can develop their own disclosure material provided it meets FCA requirements

24
Q

When is a written client agreement required?

A

If a firm is carrying on designated investment business

25
Q

What is designated investment business?

A

When a firm deals in investment assets directly on behalf of the client

26
Q

What factors should an advisor consider when making a recommendation?

A
  • Meets current and likely future needs
  • Is affordable
  • Is consistent with the customers risk profile
  • Is flexible
27
Q

What is Attitude to risk?

A

The extent to which a customer can cope with the lack of guarantees in respect of capital values and their feelings on fluctuating returns/income levels

28
Q

What is Tolerance of risk?

A

The extent to which a customers finances could cope with a loss of capital or income

29
Q

What is a suitability report?

A
  • Explains the clients finance, attitude to risk and priorities
  • Should be clear, concise and written in english
30
Q

What are suitability reports not required for?

A

Mortgage advice

31
Q

What is the purpose of product disclosure?

A

To enable the client to make an informed decision about wether to proceed

32
Q

What are key information documents (KID)?

A

Must be provided if a customer is buying a packaged retail and insurance based investment product (PRIIP)

33
Q

What is PRIIP?

A

An investment where the amount repayable to the retail investor is subject to risk and fluctuation as a result of exposure to reference values or the performance of assets

34
Q

What is the cooling off period?

A

When a client buys a regulated packaged or insurance product, they have the right to change their mind and withdraw from the contract within a specified period

35
Q

What is the cooling off period for life/pension policies and contracts of insurance?

A

30 days

36
Q

What is the cooling off period for investments, deposits and other insurances`/

A

14 days

37
Q

what is the cooling off period for binding mortgage offers?

A

7 days

CeMAP 1 (Unit two) (9 decks)

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