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CeMAP Unit 2 > Topic 21 Conduct Of Business Requirements Part 2 > Flashcards

Topic 21 Conduct Of Business Requirements Part 2 Flashcards

1
Q

The FCA’S rules on Mortgage Advice are found where?

A

Mortgage & Home Finance: Conduct of Business (MCOB)

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2
Q

The implication of the EU Mortgage Credit Directive (MCD) meant what for Mortgage & Home Finance: Conduct of Business (MCOB)

A

It’s scope was extended to second charge properties in 2016

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3
Q

What is the below in relation to Mortgage & Home Finance: Conduct of Business (MCOB)

  • Lender provides credit to an individual or trustees (borrower)
  • Contract provides obligation of the borrow to repay to be secured on land
  • At least 40% of the land used is connected with a dwelling
A

What a regulated mortgage subject to MCOB must do

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4
Q

What new category of regulation did the EU’s Mortgage Credit Directive (MCD) introduce?

A

Consumer Buy to Let (CBTL)

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5
Q

Consumer Buy to Let (CBTL) are subject to the rules of Mortgage & Home Finance: Conduct of Business (MCOB) or Mortgage Credit Directive (MCD)?

A

Mortgage Credit Directive (MCD)

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6
Q

What are the rules the government has in regards to Consumer Buy to Let (CBTL)

A
  • Pre-Contract Disclosure
  • Assessing Credit Worthiness
  • Arrears Management
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7
Q

What is a Consumer Buy to Let (CBTL)?

A

A mortgage that has been entered into but it’s purpose is not for business purposes

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8
Q

Why are CBTL’s regulated & BTL not?

A

CBTL’S Mortgagor’s are deemed to have less expertise a BTL mortgagor

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9
Q

What MCOB provision is this?

Explains the scope of the rules to whom they apply & for what type of mortgage

A

MCOB 1: Application & Purpose

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10
Q

What MCOB provision is this?

  • Correct use of terminology
  • Requirement for communications with customers to be “clear, fair & not misleading”
  • Rules about payments of fees/commission & accessibility of records for inspection by the FCA
A

MCOB 2: Conduct of Business Standards: General

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11
Q

What MCOB provision is this?

  • Remuneration
  • Tying of products (making a mortgage conditional on the purchase of other products)
  • Foreign Currency Loans
  • Early Repayments
A

MCOB 2A: Mortgage Credit Directive

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12
Q

What MCOB provision is this?

Distinguishes between real time & non real time promotions

  • Unsolicited real time promotions are not permitted
  • Real time promotions must include name & contact details of the firm. Clear & not misleading
  • Must state your home will be repossessed if you do not keep up repayments of your mortgage
  • Records of non-real time promotions must be retained for 1 year after last use
A

MCOB 3A: Financial Promotions & communications with customers

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13
Q

What MCOB provision is this?

Specifies requirements relating to information that must be provided to customers for customers who make mortgage advances regulated under the Mortgage Credit Directive

A

MCOB 3B: (Mortgage Credit Directive) MCD General Information

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14
Q

What MCOB provision is this?

  • Independent advisor are not required to access all products from all providers but it must be representative of the market
  • Mortgage recommendations must be suitable for the client
  • Special requirements if the mortgage is to repay a debt
A

MCOB 4 & 4: Advertising & Selling Standards

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15
Q

What are these in relation to MCOB 4 & 4: Advertising & Selling Standards

  • Name & contact details
  • Who’s mortgages are offered
  • Details of limitations in the service
  • Details of any fees payable for mortgage advice
  • Firm’s FCA registration details
  • How to complain
  • Details of the compensation scheme
A

What is on a Initial Disclosure Document (IDD)

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16
Q

What MCOB provision is this?

Information that must be provided before a recommendation is made and before an application is submitted to a lender

  • Annual Percentage Rate of charge (APRC) which shows interest rate with fees added
  • The amount of monthly installments
  • Amount by which instalments would increase for each 1% of interest rates
A

MCOB 5 & 5A: Pre Application Disclosure

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17
Q

How must information for MCOB 5 & 5A: Pre application Disclosure be presented?

A

Via a European Standardised Information Sheet (ESIS)

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18
Q

What MCOB provision is this?

Lender must provide a detailed offer document. Offer is binding on lender can be made conditional on confirmation of certain details

  • State how long the offer is valid
  • Point out no right of withdrawal after the mortgage has drawdown & completed
  • Include tariff of charges
A

MCOB 6 & 6A: Disclosure at the offer stage

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19
Q

At the disclosure at the offer stage how long is the period of reflection

A

At least 7 days

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20
Q

What MCOB provision is this?

Before the first payment is made the lender must confirm

  • Details amounts, dates & methods of payment
  • Details of any related products such as insurance
  • (Interest only) borrow’s responsibility to ensure a repayment vehicle is in place
  • what a customer should do if they fall into arrears
A

MCOB 7 & 7A: Disclosure at the start of contract & after sale

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21
Q

What should the annual statements show according to MCOB 7 & 7A: Disclosure at the start of contract & after sale?

A
  • Amount owed & remaining term
  • What type of mortgage it is
  • (Interest Only) check the performance of the repayment vehicle
  • Interest, fees or other payments since the last statement
  • Any changes to tariffs since last statement
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22
Q

If a customer was to change interest rate or a lenders variable rate changed what must the lender do?

A

Contact the customer to inform them of changes

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23
Q

What MCOB provision is this?

FCA’s training & competence rules anyone giving advice on equity release must hold a specialist qualification

A

MCOB 8 & 9 Equity Release - advising & selling standards and products disclosure

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24
Q

What MCOB provision is this?

Annual Percentage Rate (APR)

A

MCOB 10

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25
Q

What MCOB provision is this?

Annual Percentage Rate of charge

A

MCOB 10A

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26
Q

What MCOB provision is this?

Lender must have a responsible lending policy & must have taken into consideration customers ability to repay the mortgage

A

MCOB 11 & 11A Responsible Lending

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27
Q

What MCOB provision is this?

  • Excessive charges are not permitted. ERC’s must be approximation of costs incurred by the lenders.
  • Arrears charges must be an approximation of additional administration as a result of borrower being in arrears
A

MCOB 12: Charges

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28
Q

What MCOB provision is this?

  • Trying to reach an agreement on how to repay the arrears, taking into account the borrowers circumstances
  • Liaising with third party sources of advice
  • Not putting unreasonable pressure on customers in arrears
  • Repossessing a property only when other reasonable measures have failed
  • Only applying arrears charges that are a reflection of the costs of the work involved in dealing with the arrears
A

MCOB 13: Arrears & Repossessions

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29
Q

Customers in arrears must be given the following information within how many days of the lender being aware of the arrears?

  • Money Helper information sheet “Problems with paying for your mortgage”
  • Missed payments & total of arrears including any charges incurred
  • Outstanding debt
  • Any further charges that may be occurred until arrears are cleared
A

15 working days

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30
Q

What are the 2 levels of service that can be provided to mortgage customers according to MCOB?

A
  1. Advice
  2. Execution Only
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31
Q

What are the only situations that Execution Only can be used in the respect of a mortgage according to MCOB?

A
  • Business borrowing
  • High net worth individuals
  • Mortgage professionals
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32
Q

The FCA defines a vulnerable customer on the basis of the financial arrangements they are considering they are?

A
  • People buy a property using statutory right to buy
  • Those entering a sale & rent back arrangement
  • Equity Release applicants
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33
Q

When it is determined whether a mortgage is suitable what questions should the adviser ask?

A
  • Which mortgage type is most suitable?
  • what interest rate is suitable?
  • Over how long a term should the mortgage run?
  • What costs are involved & are they affordable?
34
Q

What ICOB provision is this?

Covers rules for firms that deal with retail & commercial customers for sales of non-investment insurance products

  • Insurance distribution activities
  • Effecting & carrying out contracts of insurance
  • Managing the underwriting capacity of a Lloyds syndicate as a management agent at Lloyds
  • Communicating of a financial promotion
A

ICOBs 1: Application

35
Q

What ICOB provision is this?

Categorisation of clients

  • Policyholders (anyone entitled to make a claim)
  • Customers (Prospective policyholders)
A

ICOBS 2: General Matters

36
Q

According to ICOBS 2: General Matters how are customers further categorised?

A
  1. Consumers
  2. Commercial Customers
37
Q

True or False

ICOBS 2: General Matters also covers the below

  • Communications (Must be clear & fair)
  • Inducements ( managing conflicts of interest fairly
  • Record Keeping
  • “Exclusion of liability” (firm must not seek to exclude or restrict liability)
A

True

38
Q

What ICOB provision is this?

  • A firm must provide a customer with distance marketing information before the conclusion of a distance consumer contract
  • Identity of the firm & purpose of the call must be clear at the beginning of any telephone communications
  • Contractual obligations must be committed to a customer during the pre-contractual phase
  • Term & Conditions must be committed in writing before the conclusion of a distance contract
  • The consumer is entitled to receive a copy T’s & C’s in hard copy on request
  • Prices advertised must be clear & unambiguous
  • Unsolicited commercial communications sent by email must be clearly identifiable
A

ICOBS 3: Distance Communications

39
Q

ICOBS 3 also covers the below but what do they relate to?

  • Name & address
  • Details of the firm
  • Status disclosure statement (confirmation it is on the FCA’S register
A

E-commerce activities

40
Q

What ICOB provision is this?

  • It’s Identity, address & whether it is an insurance intermediary or undertaking
  • Whether it provides a personal recommendation about insurance products offered
  • Details for making complaints or redress procedures
A

ICOBS 4: Information about the firm, it’s services & remuneration

41
Q

The below is what in relation to ICOBS 4: Information about the firm, it’s services & remuneration

  • That it is included in the FCA’S register & ways of identifying this
  • Whether it has a direct or indirect holding of at least 10% or capital or voting rights in an insurance undertaking
  • Whether a given insurance undertaking has direct or indirect holding of 10% or more of the voting rights of capital in the firm
  • Whether it is representing the customer or acting for on behalf of the insurer
A

Information an insurance intermediary must provide to a customer

42
Q

The below is what in relation to ICOBS 4: Information about the firm, it’s services & remuneration

  • Give a personal recommendation on the basis of a fair & personal analysis
  • Is under a contractual obligation to conduct insurance distribution exclusively with one or more insurance undertakings
  • Neither of the above
A

Information that must be provided if an insurance intermediary proposes an insurance contract before the end of the initial contract

43
Q

When an insurance company proposes or advises a contract of insurance. It does not have to provide the customer with a list of the companies it conducts insurance business with?

True or False

A

False

It must provide this to the customer

44
Q

The below is what in relation to ICOBS 4: Information about the firm, it’s services & remuneration

  • A person recommendation but not on the basis of fair & personal analysis
  • Other advice on the basis of a fair analysis of the market
  • Other advice not on the basis of a fair analysis of the market
  • Just information
A

If an insurance intermediary has given information before the end of an initial contract it must state that is giving the above

45
Q

An insurance intermediary does not have to disclose any commission it receives if a commercial customer request it?

True or False

A

False

It does have to

46
Q

What ICOB provision is this?

  • Firm must take responsible steps to ensure a customer buys a policy from which they can claim benefits
  • If a firm finds part of the cover does not apply they should inform the customer so that they can make an informed decision
  • Firm should explain the duty not to misrepresent information
  • Prior to the conclusion of a contract a firm must specify on the basis of the information obtained from the customer their needs
  • Statement of demands must be communicated to the customer clearly
  • Firm must take responsible steps to ensure the suitability of it’s advice
A

ICOBS 5: Identify Client needs & advising

47
Q

What ICOB provision is this?

States a firm must take responsible steps to ensure that ensure a customer is given appropriate information about a policy so they can make an informed decision

  • Knowledge, expertise & ability of a typical customer for the policy
  • Policy terms, benefits, exclusions, limitations, conditions & duration
  • Policy’s complexity
  • Whether the policy is purchased in connection with other products & services
  • Distance Communication information
  • Whether the same information has been provided to customers previously
A

ICOBS 6: Product Information & 6A: Product Specific Rules

48
Q

What is an Insurance Product Information Document (IPID)?

A

Document that needs to be provided by a firm to a customer

49
Q

All the below are what in relation to a pure protection contact?

  • Name of the Insurance undertaking & it’s legal form
  • Address off it’s head office
  • Definition of each benefit & option
  • Contract term
  • Means of terminating the contract
  • Means of payment & duration of premiums
  • Tax arrangements for benefits under the policy
  • Cancelling information
  • Arrangements for handling complaints
A

Information a firm must provide to a customer before a contact is concluded

50
Q

What is Guaranteed Asset Protection (GAP)?

A

Insurance covering a policy holder in the even of total loss to a vehicle

51
Q

Guaranteed Asset Protection (GAP) is covered under which ICOB rule?

A

ICOB 6A: Product-specific rules

52
Q

In relation to ICOBS 7: Cancellation. The below below is what?

  • Travel policies of less than 1 month
  • Policies the performance of which is fully completed
  • Pure protection policies of 6 months or less (not distance contracts)
  • pure protection policies effected by the trustees of an occupational pension scheme or employers for the benefit of employees
  • General Insurance (not distance contracts or payment protection contract) sold by an intermediary
  • Connected contract which is not a distance contract
A

Right to cancel insurance does not apply

53
Q

Within how many days must an insurance company return premiums when they receive a cancellation notice?

A

30 Days

54
Q

In relation to ICOBS 8: Claims Handling what is the below?

  • Non-disclosure of a material fact
  • Non-negligent misrepresentation of a material fact
  • Breach of a condition of contract unless circumstances of claim are connected to the breach
A

What a claim would be rejected for if it was considered unreasonable

55
Q

Banking: Conduct of Business compliments what in the European Economic Area?

A

Payment Service Regulations

56
Q

What BCOBS provision is this?

Applies to firms that accept deposits from banking customers in the UK and activities connected with accepting deposits

A

BCOBS 1: Application

57
Q

What BCOBS provision is this?

Firms need to pay due regard to information needs of customers while communicating financial promotions to them

A

BCOBS 2: Communications with banking customers & financial promotions

58
Q

What BCOBS provision is this?

Details rules applying to marketing or providing an additional product (linked to current or savings account) for which a fee is payable

A

BCOBS 2A: Restrictions on marketing or providing an additional product for which a fee is payable

59
Q

What BCOBS provision is this?

Applies to firms that carry out distance marketing activities from UK establishment with or for a customer in the UK

A

BCOBS 3: Distance Communication &; e-commerce

60
Q

What BCOBS provision is this?

Firm must provide or make available to banking customers appropriate information about a retail banking service & any deposits made to that retail service

A

BCOBS 4: Information to be communicated to banking customers & statements of account

61
Q

What BCOBS provision is this?

Retail banking service must provide a prompt, efficient & fair service. Also provide communications or financial promotions from time to time. Also involves customers wishing to move and dormant accounts

A

BCOBS 5: Post-sale requirements

62
Q

What BCOBS provision is this?

Sets out a customers rights to cancel in various circumstances and when there are no rights to cancel

A

BCOBS 6: Cancellation

63
Q

What BCOBS provision is this?

Firm is required to publish information about provision of personal current accounts & Business accounts

A

BCOBS 7: Information about current account services

64
Q

What BCOBS provision is this?

Firm must provide a cost calculator tool or overdraft eligibility tool to provide alerts to personal current account holder about account usage

A

BCOBS 8: Tools for personal account customers

65
Q

What regulations cover most payments services?

A

Payment Service Regulations (PSR’s)

66
Q

What is a payment account?

A

Account on which access to funds is not restricted

67
Q

What currencies are covered by Payment Service Regulations (PSRs)?

A

Euro and Sterling

68
Q

The below firm are all what?

  • Banks
  • Building Societies
  • e-money issuers
  • Money Remitters
  • Non-bank card issuers
  • Non bank merchant acquirers
A

Payment Service Regulations (PSRs) applies to them

69
Q

The Payment Service Regulations (PSRs) introduced a new class of regulated firms called?

A

Payment Institutions (PIs)

70
Q

What do Payment Institutions (PIs) do?

A
  • Process payment by card, credit transfer or direct debit
  • Issue or acquire payment instructions & remit money
71
Q

Payment Institutions (PIs) are regulated by who?

A

Prudential Regulation (PRU)

72
Q

What is a Money Remitter?

A

Payment service provider that accepts funds for payment without the payee or the payer holding an account with them

73
Q

What are Non-Bank Merchant Acquirers?

A

Financial institution other than a bank that processes credit or debit card payments

74
Q

The following aims are the objective of who?

  • Increased competition in the payments industry
  • Brings into scope new types of payment service
  • Enhance customer protection
  • Extend the reach of the directive
A

Payment Service Directive (PSD2)

75
Q

What are the new groups of the Payment Service Directive (PSD2)

A
  1. Market efficiency & integration
  2. Consumer protection
  3. Competition & choice
  4. Security
76
Q

The below is what in relation to Payment Service Regulation (PSR2)?

  • Payments sent or received where one of the Payment Service Provider (PSP) is located outside the EEA as are payments in non-EEE currencies
  • Amount a payer is obliged to pay has reduced from 150 to 50 euros
  • PSD 2 bans surcharging for payment instructions covered by intercharge fee regulation & payment services covered by SEPA
  • PSP must respond to complaints within 15 working days of receipt
A

Increased customer rights

77
Q

The below are what in relation to Payment Service Regulation (PSP 2)?

  • Account Information Service Provider (AISP) is defined as “ online service to provide consolidated information on one or more payment accounts held by the payment service user
  • Payment Initiation Service Provider (PISP) enable customers to carry out Person to person (P2P) via online banking portals
  • PSD2 introduces Account Servicing Payment Service Provider (AS PSP) to distinguish where the customers payment account is held
A

The types of Third-party provider roles

78
Q

Payment System Regulator is a subsidiary of who?

A

The FCA

79
Q

The Payment Service Regulator (PSR) has the authority to do what?

A
  • Over requirements regarding system rules
  • Give directions to participants in designated payment systems
80
Q

These are what in relation to Payment Service Regulation (PSR)?

  • Require access to designated payment systems for a payment service provider
  • Vary agreements relating to designated payment systems (fees & charges)
  • Requires owners of payment systems to dispose of their interests in them
A

Other rules the Payments Systems Regulator (PSR) has

CeMAP Unit 2 (9 decks)

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