U2: T21 - CONDUCT OF BUSINESS REQUIREMENTS II Flashcards
Ella and Martin’s daughter, Lydia, is in the first year of her three‐year university degree; she is currently in halls of residence but will need to rent accommodation privately next year. Ella and Martin are planning to buy a four‐bedroom house in the university town; Lydia will be able to live there until she completes her degree, and they will get rental income on the other rooms.
If they apply for a mortgage to buy the property, will it qualify as a consumer buy to let?
No – although Lydia will be living in the house initially, Ella and Martin’s primary motivation in purchasing the property is as a business investment. Additionally, if they buy a four‐bedroom house, Lydia will presumably be occupying less than 40 per cent of the property.
The Standards of Lending Practice do not apply to mortgages. What is the regulation that covers mortgages?
Mortgages are regulated under the Mortgages and Home Finance Sourcebook (MCOB).
A mortgage arranged for which of the following mortgagors would not be a regulated mortgage?
a) Terry and Angel, who are joint borrowers buying their first home.
b) Laszlo and Yuri, who are creating a mortgage in their capacity as trustees.
c) John, who is a sole borrower, trading up to a bigger property.
d) Décor Plus, which is a public limited company.
Answer is D)
The mortgage arranged for Décor Plus would not be a regulated mortgage.
Which of the following methods of obtaining new business is not permitted for a regulated mortgage?
a) Cold calling.
b) Mortgage introducers.
c) Radio advertising.
d) TV advertising.
Answer is A)
Cold calling, because it is an unsolicited real‐time promotion.
Maurice wants to use the equity in his property by arranging a lifetime mortgage. He wants exactly the same product that his brother has and does not want to waste time considering other options.
Why would it not normally be possible for Maurice to proceed on an execution‐only basis, even though he knows exactly what he wants?
Execution‐only transactions are permitted only for business borrowers, high‐net‐worth individuals and mortgage professionals. Even if Maurice were a high‐net‐worth client, it would not be possible to carry out the transaction on an execution‐only basis because it is not possible to opt out of advice for an equity release scheme such as a lifetime mortgage.
Which of the following statements is untrue in relation to the offer document that is produced following a mortgage application?
a) It must contain details of the monthly payments.
b) It must state how long the offer is valid for.
c) It must explain how the customer can withdraw from the contract once the mortgage is completed.
d) It must be accompanied by an up‐to‐date tariff of charges.
Answer is C)
This statement is untrue because it is not possible for a customer to withdraw from the contract once the mortgage is completed.
When assessing affordability for a mortgage application, which of the following is regarded as committed expenditure?
a) Repayments on a personal loan.
b) Council tax.
c) Water bills.
d) Costs of travel to work.
Answer is A)
Repayments on a personal loan. The others are examples of basic essential expenditure.
To ensure that there is no danger of misrepresenting the policy benefits, an adviser must always provide the product information published by the product provider and allow the customer to make their purchasing decision on the basis of that information.
True or false?
False.
ICOBS 6 requires firms to ensure customers are given appropriate information about a policy; what is appropriate may vary depending on the customer’s knowledge, experience and ability, and the complexity of the product.
Eva has just taken out an income protection policy. If she changes her mind and decides she no longer wants this policy, what cancellation rights does she have?
Eva may cancel her policy within 30 days as it is a protection policy.
The Standards of Lending Practice are an example of self‐regulation.
True or false?
True
A customer who wishes to buy a stakeholder pension product may receive:
a) focused advice.
b) generic advice.
c) information only.
d) basic advice.
d) Basic advice may be provided for stakeholder products.
What is the key difference between focused advice and simplified advice?
Focused advice is provided when the customer has set parameters for the areas they wish to discuss. Simplified advice is provided when the adviser sets out specific areas of a customer’s needs for which they are providing advice.
Which of the following is true regarding the Payments Services Directive?
a) Banks do not have to give third‑party providers access to accounts in order to carry out transactions.
b) Payments are not covered by the Directive if one of the payment service providers is outside the European Economic Area.
c) In cases not involving fraud or negligence, the maximum a payer can be obliged to pay for an unauthorised payment is €150.
d) Payment service providers must respond to complaints within 15 working days of receipt.
d) Payment service providers must respond to complaints within 15 working days of receipt.
Jane’s adviser has explained that they will only provide advice on pensions for her. This is an example of:
a) basic advice.
b) focused advice.
c) simplified advice.
d) generic advice.
c) simplified advice.
What type of advice is ‘limited form of advice that applies to stakeholder products.’
A) Basic Advice
B) Focused Advice
C) Simplified Advice
D) Generic Advice
A) Basic Advice
Basic advice is a limited form of advice that applies to stakeholder products. It is focused on one or more specific client needs; it does not involve an analysis of the client’s circumstances that are not directly relevant to those needs. It involves the use of a set of scripted questions to establish whether a stakeholder product within the firm’s range is suitable for the customer.