Topic 8 - Regulation and the buying process Flashcards
When a firm shows the annual percentage rate of charge (APRC) in a representative example for a non-real-time financial promotion, the firm must reasonably expect the APRC to apply to:
at least 51% of those who respond to the advert and take out a contract.
all those with a satisfactory credit record who respond to the advert and take out a contract.
all those who respond to the advert and take out a contract.
A - The lender must reasonably expect the APRC to apply to at least 51% of those who respond to the advert and take out a contract. This does not prevent the lender charging a different rate for some borrowers, as long as the majority who respond receive the example rate.
Which of the following are requirements for initial disclosure information on a new mortgage? Select all that apply.
A - A list of all lenders whose products the firm offers if it does not offer an unlimited service.
B - The exact fee the firm will charge and when it will be payable.
C - Details of appropriate mortgage products.
D - An assessment of the appropriateness of alternative finance options.
E - The exact amount of any commission the firm will be paid by the lender.
A&E - The firm must state the exact fee if it known, but can provide an indication of how the fees would work if an exact figure is not yet known. There is no requirement to provide any product details at this stage, because no advice has been given. The client must be made aware of potential alternative options but there is no requirement to assess their appropriateness.
Which of the following statements are true of execution-only? Select all that apply.
A - A firm can offer execution-only as a standard service.
B - Execution-only may be provided at the customer’s request.
C - Records of execution-only sales must be kept for 12 months from the start of the contract.
D - Execution-only is permitted when there is no interactive dialogue between the firm and the customer during the sale.
E - Those not permitted to proceed on an execution-only basis may reject the advice given and opt for another product
B,D&E - A firm cannot offer execution-only as a standard service, but it may do so at the customer’s request if the customer is not in a category prohibited from making that choice. Records of execution-only sales must be kept for 36 months.
When advising on an MCD regulated mortgage, the lender or intermediary must provide the customer with:
a suitability report outlining the product details and reasons for the recommendation.
an adequate explanation of the recommended product.
a key features illustration (KFI) explaining how the product works.
B - Suitability reports do not apply to mortgages. KFIs are given as part of the pre-application requirements for regulated (non-MCD) mortgages.
When assessing an applicant’s income, a lender:
must obtain evidence of income from an independent source.
can allow the applicant to certify their income as correct.
can rely on evidence of income from the customer.
A - Self-certification is no longer allowed. The lender cannot accept evidence of income from the applicant.
Karen is about to complete an application for a £100,000 MCD regulated mortgage recommended by Jeremy, a mortgage intermediary. Jeremy will receive a procuration fee of 0.5% from the lender. With regard to the fee, Jeremy must provide Karen with a:
key features illustration that shows the exact amount of the fee.
European Standardised Information Sheet that shows the exact amount of the fee.
European Standardised Information Sheet that states the fee will be more than £250.
B - Jeremy must provide disclosure information using a European Standardised Information Sheet because the mortgage is an MCD regulated mortgage (MCOB 5A). Key features illustrations are for regulated mortgages. The exact fee must be disclosed.
Argos Mortgages Ltd offers MCD regulated mortgages, but wishes to use key features illustrations (KFIs) rather than the European Standardised Information Sheet (ESIS). It is true to say that Argos Mortgages Ltd:
can continue to issue the standard KFI.
cannot use a KFI for MCD regulated mortgages.
must provide an ESIS top-up if it issues a KFI
B - The information provided for an MCD regulated mortgage must follow a prescribed format through an ESIS.
For how long from the date of a customer’s mortgage application must a firm keep a record of a key features illustration or a European Standardised Information Sheet?
One year.
Three years.
Five years.
One year.
Which of the following statements apply to an offer document for an MCD regulated mortgage? Select all that apply.
A - The document must use an FCA-prescribed format.
B - The offer is subject to a seven-day reflection period for the client.
C - The offer cannot be withdrawn by the lender under any circumstances.
D - The document must state the period for which the offer is valid.
E - The document must state what would happen if the customer did not go ahead with the mortgage.
F - The document must state the type, amount and maturity date of any investment vehicles used to repay the mortgage.
B,D&E - There is no prescribed format for the offer document, but certain key information is required. Although described as a binding offer, there are circumstances where the lender can withdraw the offer. The document must confirm the customer’s repayment strategy, but that does not require details of any investment.
MCOB 7 covers the disclosure requirements at the start of a new mortgage contract. At what point must the required information be provided to the borrower?
On execution of the mortgage deed.
Within 14 days of the execution of the mortgage deed.
Before the first mortgage payment is made.
Before the first mortgage payment is made.
Which of the following is true in all circumstances in relation to unsolicited real‑time financial promotions?
They cannot be made at an unsocial hour.
They can be made to any person who is on the company’s mailing list.
Contact cannot be made on an unlisted telephone number.
They can only be made to existing customers.
They can only be made to existing customers.
Alex is his firm’s marketing manager and he has just withdrawn a marketing mailshot, which will not be used again. For how long must his firm keep a copy of the mailshot?
6 months.
12 months.
36 months.
60 months.
12 months.
For how long must a firm keep a record of an execution‑only sale?
One year.
Two years.
Three years.
Five years.
Three years.
An HNW customer can proceed on an execution‑only basis if the firm has evidence that the customer meets the criteria, and has selected the product they require or has rejected advice given. True or false?
True
If there is no suitable product for a customer from within the range available, the adviser can recommend the closest fit from those available. True or false?
False. The adviser must not recommend any product if there are none in the range offered that meet the client’s needs and circumstances.
