Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Planning > Topic 3 - Conduct Of Business Rules > Flashcards

Topic 3 - Conduct Of Business Rules Flashcards

1
Q

What is COBS?

A

Conduct of Business Sourcebook

Part of the FCA Handbook.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is MCOB?

A

Mortgage and Home Finance Conduct of Business Sourcebook.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What ICOB

A

Insurance Conduct of Business Sourcebook

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is BCOBS?

A

The Banking Conduct of Business Sourcebook

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

In what context Sourcebooks relevant?

A

Advice to clients and customers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When and why was the latest COBS introduced?

A

November 2007 it gave firms greater flexibility to decide how to achieve regulatory outcomes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How many chapters of COBs ?

A

22

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

COBS 1 : Application

What does it do?

A

Explain the firm’s and activities COBs applies to.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

COBS 2 : Conduct of Business obligations

How must a firm act?

4 items

Info provided to clients must be?

3 items

A

A firm must act -

Honestly
Fairly
Professionally
With clients best interest in mind.

Information provided to clients must be -

Appropriate
Comprehensible
Must include costs, charges relevant investment strategies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

COBS 3: Client Categorisation

A firm must notify a new client of its categorisation. List 3 likely categories.

A

Retail client
Professional client
Eligible counterparty (ie investment firms, pension funds, unit trusts, insurance firms)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

COBS 4 : Communications with clients. (Inc financial promotions)

Stipulates communications must be …

A

Fair
Clear
Not Misleading
Comprehensible to the average reader.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does COBS 4 say about cold calling?

A

Firms must not cold call unless there is an existing relationship.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

COBS 5 : Distance Communication

What does this cover?

2 items

A

The time allowed to consumers before they are bound by contracts conducted by phone.

Information on E-commerce activities must be easily, directly and permanently accessible.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

COBS 6: information about the firm, its services and remuneration.

This means…

A

Firms must disclose costs paid by the client and any commissions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

COBS 7 : Insurance Mediation

What must a firm specify to a client taking out life insurance?

(2 items)

A

The demands and needs of that client.

If they have given advice must supply client with a suitability report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

COBS 8 : Client Agreements

In respect of retail clients what must firms enter into?

A

Written agreement setting out rights and obligations of both parties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

COBS 9: suitability (inc basic advice)

What does this deal with?

A

Personal recommendations must be suitable for the client.

Including gathering sufficient information and using pre-scripted questions.

Suitability reports must be provided.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

COBS 10: appropriateness

What does this apply to?

A

Non-advised Services - ie execution only deals

The firms must ask clients for info on knowledge and experience so it can determine whether the product or service is appropriate.

If the firm does not consider the product or service appropriate it must warn the client.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

COBS 11 : Dealing and managing

Explain what firms this affects

A

Those that execute, recieve or transmit orders on behalf of clients

OR

Manage client investment portfolios

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

COBS 12 : Investment Research

What rules does this set out?

A

Rules for managing conflicts of interest relating to the production or distribution of investment research.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

COBS 13 : preparing product information.

When preparing a recommendation what must clients be supplied with?

A

Key Features Documents or Illustrations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

COBS 14: providing information to clients

This covers given in what two instances.

A

Info given to clients at a The conclusion of a sale

OR

Variation of an existing policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

COBS 15: Cancellation

What types of products are applicable?

What is the cancellation period?

A

Life
Pension
Cash deposit NISAs
Certain non-life contracts

Cancellation period is 14 or 30 days depending on product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

COBS 16 : Reporting Info to clients

What does this cover?

A

The need to supply clients with reports on services and costs.

Including regular statements for investments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

COBS 17 : claims handling for LTCI

What is LTCI?

A

long-term care insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What are COBS 18 to 20

A

COBS 18: Specialist Regimes

COBS 19: Pensions Supplementary Provision

COBS 20: with profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

COBS 21: permitted links for long-term insurance business

What does this relate to?

A

Policies where the benefits are reliant on the value of (or income from) property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

COBS 22: restrictions on the distribution of certain regulatory capital instruments.

A

Does exactly what it says on the tin.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

MCOBS apply when?

A

Loans are taken out by individuals or trustees and subject to a charge on the borrower’s property

Property must be in UK
Residential
Immediate family must occupy at least 40 per cent (exception By to Let).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

In addition to mortgages what loans does MCOBS cover?

A

Home improvement loans
Debt consolidation loans
Equity release schemes
Consumer Buy to Let mortgages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

MCOB rules cover what four Banking activities?

A

Lending
Admin
Advice
Arranging loans.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What firms require authorisation under MCOBs

A

Banks
Building Societies
Specialist Lenders
Mortgage intermediaries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Tell me about

Advised Sales
Execution only sales
Non-advised sales

A

Advised - mortgage sales including rate / contract changes. Vast majority. Advisor must ensure recommended product is suitable for customers.

Execution only - only allowed in limited circumstances ie borrower is a HNWI or mortgage professional

Non-advised - where a customer picks from a range of options are no longer allowed except for basic contract variations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Mortgages

What must an assessment of suitability include?

4 items

A

Which mortgage best suits client’s needs and circumstances.

Initial and ongoing affordability of the scheme for the client

Impact assessment of any possible increase in interest rates on variable-rate mortgages.

What happens if the mortgage runs past clients retirement age.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

With whom does the responsibility for confirming affordability sit?

A

The lender, even if the client has been introduced by a third party.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What are the three stages for assessing suitability of a mortgage?

A

1 Assess whether it is a suitable product for a client.

  1. Assess what type of mortgage is suitable.
  2. Selecting the best provider and mortgage to meet the clients needs.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What do the rules for interest only mortgages now state a borrower must have?

A

A credible means of repayment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

MCOB 2 Conduct of business standards - general

Says communications to clients must be …

A

Clear, fair not misleading.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

MCOB 2A

Is about MCD lenders. Who?

What does it say about staff remuneration?

A

Mortgage Credit Directive

Remuneration packages must not create a conflict of interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

MCOB 3 : Financial promotions

What is the distinction between real time and non-real time promotions?

A

Real time - by personal visit or telephone call

Non-real time - by letter, email, advert

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

MCOB 3 : Financial promotions

What regulations cover real-time promotions?

(2 items)

A

Unsolicited real-time promotions are not permitted.

Customer’s must not be contacted during unsocial hours.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

MCOB 3 : Financial promotions

What regulations cover non-real time promotions?

(5 items)

A

Must include name and contact details of the firm.

Be clear, fair and not misleading.

Comparisons must be with products that meet the same need.

Say “Your home may be repossessed if you do not keep up repayments on your mortgage”

Records must be retained for one year after last use.

43
Q

MCOB 3a

What is covered?

A

Communications with consumers in relation to home finance transactions etc

44
Q

MCOB4 :advising and selling standards

What must be disclosed at the outset?

A

Initial disclosures include:

Is advice based on the whole market, limited number of lenders or a single lender.

The way the firm gets paid must be made clear.

Details of FCA regulation and FSCS.

45
Q

MCOB 4a

Adds MCD selling standards to MCOB 4

What is added?

A

Mortgage Credit Intermediaries must provide firm’s name and geographic location, name and registration number of the arranger.

Details of complaint process and whether they have FOS access

46
Q

MCOB 5: pre-application disclosure

What must be provided at the point a personal recommendation is made and before an application is submitted to a lender?

A

Mortgage illustration.

47
Q

MCOB 5: pre-application disclosure

What must the Mortgage illustration include?

A

Annual percentage rate of charge
Amount of monthly instalment
Amount by which monthly instalment would increase for each 1 % rise in interest rates

Variations from the prescribed format are not permitted.

48
Q

MCOB 5A:

This section expands on the Mortgage illustration by stipulating what info is supplied?

A

Clear information about the product’s features and price.

49
Q

MCOB 6: Disclosure at the offer stage.

If a mortgage offer is made the lender must provide a detailed offer document.

Unless circumstances have changed what is it based on?

A

Information given in the Mortgage illustration.

It must also state -

How long the offer is valid
No right of withdrawal after mortgage completed

50
Q

MCOB 7 : Disclosure at start of contact and after sale

What must be confirmed after the first mortgage payment is made?

4 items

A

Details of -

Amounts
Dates
Methods of payments
Any related products like insurance 
What the customer should do if they fall into arrears.
51
Q

MCOB 7 : Disclosure at start of contact and after sale

What must also be confirmed after the first mortgage payment is made in respect of interest-only mortgages)

A

The responsibility of the borrower to ensure that a repayment vehicle is in place.

52
Q

MCOB 7 : Disclosure at start of contact and after sale

What must be issued annually?

3 items.

A

Statement showing-

Amount owed.
Remaining term
Reminder to check performance of any repayment vehicle.

53
Q

MCOB 7 : Disclosure at start of contact and after sale

If a change is made to monthly payment what must the client be advised?

Three items.

A

The new amount
Revised interest rate
Date of change

54
Q

MCOB 8 and 9 Equity Release.

What are equity releases?

A

Products aimed at older clients to raise money using the equity in their property.

Special rules apply to equity release in relation to advising and selling standards.

55
Q

MCOB 10: APRC

What is the APRC?

A

Annual Percentage Rate of Charge.

MCOB10 describes how this is calculated to let customers compare rates across providers.

56
Q

MCOB 11: Responsible lending

What must lenders put in place?

What must lenders be able to demonstrate?

A

A responsible lending policy.

That they have taken into consideration a customer’s ability to pay when making an offer.

57
Q

MCOB 12 Charges

What isn’t permitted?

A

Excessive charges.

58
Q

MCOB 12 Charges

How should early repayment fees and arrears charges be calculated?

A

Early repayment fees must be a reasonable approximation of cost

Arrears charges must be a reasonable approximation of the cost of additional administration due to a borrower being in arrears

59
Q

MCOB 13 arrears and repossessions

How should firms deal with customers in mortgage arrears or mortgage shortfall debts.

Explain what this means in practice.

A

Fairly.

Try to reach agreement on how to repay the arrears.

Take into account the borrowers circumstances

Liaise with third party sources of advice.

Not putting unreasonable pressure on customers in arrears.

Only repossess when all reasonable measures have failed.

60
Q

MCOB 13 arrears and repossessions

Customers in arrears should be given what information within 15 working days of becoming aware of arrears.

A

FCA information sheet on what to do when in arrears

Details of the missed payments

The total arrears including charges incurred

The outstanding debt

Any further charges if the arrears aren’t cleared.

61
Q

ICOBS was introduced following what?

A

The EU Directive on Insurance Mediation

Implemented in January 2005

The regulation of insurance providers and intermediaries.

62
Q

Firms and individuals working in what areas are covered by ICOBS?

5 areas of business

3 roles within a business

A 
General insurance 
Protection 
Critical illness 
Long-term care
Permanent health insurance

Those who -

Sell
Administer
Advise

63
Q

ICOBS 1: application of the rules

The activities regulated by these rules include:

4 activities of insurance firms.

A

Insurance Mediation

Effecting and carrying out contracts of insurance

Underwriting capacity of a Lloyd’s syndicate

Communicating or approving a financial promotion

64
Q

ICOBS 2: General rules

Name two categories of client (second split into two types)

A

Policyholders (those who can make a claim)

Customers (those who take out insurance)

  • consumers (people acting outside their profession)
  • commercial customers (all non consumers)
65
Q

ICOBS 2: General rules

What is covered?

4 rules

A

Communications must be clear, fair, not misleading)

Inducements (avoiding conflicts of interest)

Record keeping

Exclusion of liability (a firm must not seek to exclude or restrict liability unless it is reasonable to do so).

66
Q

ICOBS 3 Distance Communications

EU Distance Marketing Directive includes 5 provisions-

A

A firm must provide a consumer with Distance marketing information before the conclusion of a Distance consumer contract.

Identity of firm, purpose of the call, made clear at start of telephone call

Contractual obligations must be communicated in writing during pre-contractual phase

T and Cs communicated before the conclusion of a Distance contract

Consumer to get T and Cs on request.

67
Q

ICOBS 3 Distance Communications

E-commerce activities- what must a firm make easily, directly, and permanently accessible

4 items

A

Name

Address

Details of the firm

PRA/FCA register number

68
Q

ICOBS 3 Distance Communications

Prices advertised must be?

2 items

A

Clear and unambiguous

Indicate whether relevant taxes are included.

69
Q

ICOBS 4 info about firm, it’s services and remuneration

What info must be supplied to a customer

5 items

A

Name and address

That it is on PRA/FCA register

Whether it has 10% or more of an insurance undertaking

Whether a reinsurer has more than 10%

Complaints process and FOS details

70
Q

ICOBS 4 info about firm, it’s services and remuneration

Prior to the conclusion of a contract an insurance Mediation firm must tell the consumer what information about how they arrived at their recommendation?

A

It gives advice after a fair analysis of the market

Or

Under contractual obligation to only do business with a limited number of insurers

Or

Neither

71
Q

ICOBS 4 info about firm, it’s services and remuneration

A firm must provide details of…

A

Fees other than premiums

An intermediary’s commission

72
Q

What are IDD and CIDDs?

A

Initial Disclosure Document

Combined Initial Disclosure Document

73
Q

ICOBS 5 identifying client needs and advising.

What should a firm ensure a n resection of client needs?

6 items

A

That the customer will be able to claim on the policy.

Customers should be informed if parts of the cover don’t apply.

The firm must explain the customer’s requirement to disclose all material facts.

The firm must specify their understanding of a client’s needs as part of their advice

Needs clearly communicated in writing.

Firm must ensure the suitability of its advice.

74
Q

ICOBS 6 Product information

What must information given to a customer be?

A

Appropriate so that they can make an informed choice about the arrangements proposed.

75
Q

ICOBS 6 Product information

After the inception of the policy what should be issued?

3 items

A

Evidence of cover

The price of the policy separate from other elements of the package.

Whether the policy is compulsory.

76
Q

ICOBS 6 Product information

Who’s responsibility is it to provide information at inception if a policy?

A

Intermediary but insurer must provide intermediary with adequate information to complete this.

77
Q

ICOBS 6 Product information

What information must be disclosed precontract?

2 items

A

Complaints process

Right to cancel

78
Q

ICOBS 6 Product information

Before a “pure protection” contract is concluded a firm must provide what information to the customer…

9 items

A

Name of the insurance undertaking

Address of head office

Definition of each benefit and option

Contract term

How to terminate contract

Payment method

Duration of premiums

Tax arrangements

Complaint process

79
Q

ICOBS 6a

Deals with a GAP product.

A

Guaranteed Asset Protect

It is used in car finance schemes

80
Q

ICOBS 7 cancellation

When does the client have the right to cancel without giving a reason?

3 items

A

30 days for insurance that includes pure protection

14 days other contracts of insurance

Firms are free to offer more favourable cooling off periods.

81
Q

ICOBS 7 cancellation

When does the right to cancel not apply?

5 items

A

Travel policies of less than one month

Policies that are completed

Pure protection less than 6 months (except distance contracts)

Pure protection policies via pension schemes or employers.

General insurance sold by an unauthorised person

82
Q

ICOBS 7 cancellation

On receipt of cancellation notice an insurer must …

2 items

A

Terminate the contract

Return the premiums

83
Q

ICOBS 8 : Claims handling

How must claims be handled?

4 items

A

Promptly

Fairly

Policyholder must provide reasonable guidance to help the policyholder make a claim.

The firm cannot unreasonably reject a claim.

84
Q

ICOBS 8 claims handling

Rejection of a claim is considered unreasonable if …

3 items

A

For non-disclosure of a material fact that the policyholder could not reasonably have expected to have to disclose

Non-negligent misrepresentation of a material fact.

Breach of a condition of the contract unconnected to the claim.

85
Q

When did BCOBS and PSR come into effect

A

1 November 2009

86
Q

What is TCF now called?

A

Fair Treatment of Customers

87
Q

BCOBS 1 Application

What activity does BCOBS apply to?

A

Accepting deposits from banking customers of an institution based in the UK

88
Q

BCOBS 2 : Communications with Banking customers and financial promotions.

What does this chapter require of a firm?

A

The information needs of banking customers.

Communications must be clear, fair and not misleading

89
Q

BCOBS 2A optional additional products

This relates when?

A

Products linked to current or savings accounts for which a fee is payable.

90
Q

BCOBS 3 Distance comms and e-commerce

Contains many of the provisions of the Distance Marketing Directive. Who does this apply to?

A

Firms carrying out distance marketing from uk to clients in EEA.

91
Q

BCOBS 4 Information to be communicated to banking customers and statements.

A

Title says it all

92
Q

BCOBS 5 post sale requirements

a firm must provide a service to retail clients that is what?

A

Prompt
Efficient
Fair to a banking customer

Including customers in financial difficulties.

93
Q

BCOBS 6 cancellation

What does this chapter set out?

A

When a customer has the right to cancel

When there are no rights.

94
Q

What does PSRs stand for?

A

Payment Services Regulations

95
Q

PSRs what accounts are covered?

A

Accounts on which payments can be made. Ie not Fixed Deposits.

96
Q

What period does the PSRs apply?

A

From info provided before a transaction

Until

Payment is made

AND

All remedial actions arising from the payment are completed

97
Q

PSRs affect what firms

A

Those providing payment services including …

Banks

Building Societies

E-money issuers

Money remitters

Non bank payment card issuers

Non-bank merchant acquirers

98
Q

Describe the PSR

A

payment systems regulator

Competition focused regulator for payment services

Launched 2015

Subsidiary of FCA

99
Q

What is the purpose of the PSR?

A

Make payments work well for those who use them.

100
Q

What are the objectives of the PSR?

A

Promote competition and innovation

Make systems work in the interests of end user strategy

101
Q

What does PSR oversee?

A

All domestic payment systems designated by HM Treasury.

102
Q

What 2 general powers does PSR have?

A
  • Authority over system rules

- Authority to give directions

103
Q

What 3 specific powers does PSR have?

A

Can gain access to a payment system

May Vary agreements relating to payment systems

May order owners of payment systems to sell them.

104
Q

What 2 enforcement powers does PSR have?

A

Publish details of compliance failure

Impose financial penalties

Financial Planning (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions