U3: T8 - REGULATION & THE BUYING PROCESS Flashcards
What is the difference between solicited and unsolicited promotions to customers?
Solicited contact is made by the firm at the request of the customer.
Unsolicited contact is initiated by the firm; unsolicited telephone contact is known as a ‘cold call’.
Can you remember the FCA criteria
for a borrower to be classed as an HNW customer?
a) Minimum annual net income of £300,000, or minimum net assets of £3m.
b) Minimum annual net income of £3m, or minimum net assets of £300,000.
c) Minimum annual net income of £30,000, or minimum net assets of £3m.
A) The FCA defines an HNW customer as one with a minimum annual net income of £300,000, or minimum net assets of £3m.
Can you recall the criteria that define a professional customer?
a) For how long must they have worked recently in the home finance sector?
b) What must their professional position require?
c) Of what must the firm reasonably believe they are capable?
a) At least a year.
b) Knowledge of the product or service to be arranged.
c) Understanding the risks involved in the proposed arrangements.
Can you recall the key difference that distinguishes a regulated mortgage for business purposes from a regulated mortgage for a personal borrower?
a) One of the purposes of the loan, remortgage or further advance is to raise additional money for the use of a small business.
b) The sole purpose of the loan, remortgage or further advance is to raise additional money for the use of a small business.
c) The sole purpose of the loan, remortgage or further advance is to raise additional money for the use of a large business.
b) The sole purpose of the loan, remortgage or further advance is to raise additional money for the use of a small business.
Which of the following is most likely to be able to arrange a mortgage on an execution‐only basis without receiving qualified advice?
a) Richard, who is an experienced mortgage adviser and wishes to arrange a further advance on his own property.
b) Shannon, who wants to buy her flat under a statutory right‐to‐buy scheme.
c) Niall, whose wife died last month and is seeking to relocate closer to his children.
a) Richard because he would be classified as a professional customer.
Shannon must be given advice because she is exercising a statutory right to buy.
Niall is potentially a vulnerable customer as a result of his recent bereavement and the adviser would need to assess Niall’s circumstances sensitively.
Which of the following is true in all circumstances in relation to unsolicited real‐time financial promotions?
a) They can only be made to existing customers.
b) They cannot be made at an unsocial hour.
c) Contact cannot be made on an unlisted telephone number.
d) They can be made to any person who is on the company’s mailing list.
a) is correct.
b) is untrue, in that calls can be made at an unsocial hour if the customer had previously agreed,
c) is untrue, in that a call can be made on an unlisted number if the customer has agreed beforehand,
d) is untrue, in that being on a mailing list is not the same as being an existing customer.
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?
a) 6 months.
b) 12 months.
c) 36 months.
d) 60 months.
b) 12 months
For how long must a firm keep a record of an execution‐only sale?
a) One year.
b) Two years.
c) Three years.
d) Five years.
c) 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.
Examples of the APRC shown in a financial promotion must be ‘representative’. This means that a specified percentage of those who respond to the promotion and those who enter into the contract advertised would be charged the quoted APRC.
What is the percentage?
a) 45 per cent.
b) 51 per cent.
c) 75 per cent.
b) 51 per cent.
If a recommendation is made over the telephone, an illustration must be sent to the customer within:
a) five business days.
b) seven business days.
c) five calendar days.
d) seven calendar days.
a) five business days.
Lenders cannot make provisional offers to borrowers in relation to MCD regulated mortgages.
True or false?
False.
An offer of advance can be provisional, but once all due diligence has been completed the final offer for an MCD regulated mortgage is binding.
Chen has applied for a further advance on his MCD regulated mortgage. Once he receives an offer from the lender, how long will he have to think about whether to accept it, according to MCOB 6A?
No reflection period & offer is not binding.
MCOB 6A sets out a requirement for a seven‐day reflection period once a binding offer is made for an MCD regulated mortgage but as Chen is applying to vary the terms of an existing MCD regulated mortgage, neither the requirement for a binding offer nor the seven‐day reflection period apply.
The offer document must include details of the amount and dates of the initial and subsequent repayments due.
True or false?
False.
This information must be provided before the first payment is made on a new mortgage, a further advance or a variation to the terms of a mortgage.
Define Financial Promotion?
An invitation or inducement to engage in an investment activity, which includes mortgages.
What is a non real-time financial promotion?
Any promotion that does not include interactive dialogue – SMS, email, faxes, letters, adverts, etc.
What is a real-time financial promotion?
Any promotion made through a telephone or face‐to‐face conversation, or other interactive dialogue.
True or false. Competitor comparisons are only permitted on a like‐for‐like basis and must not disparage or discredit the competitor, or take unfair advantage of the competitor’s reputation.
True
How long must a firm keep record of non-real time credit promotions?
12 months
Unsolicited calls are only allowed when?
When the firm has an existing customer relationship with the recipient. It could be argued that these are not true cold calls at all.
What times are real-time calls not allowed to be made?
Not on a Sunday
Not between 9pm and 9am
Real time financial promotions can be made to unlisted telephone numbers. True or false?
False
The Content of a real-time promotion must be what 3 things?
Fair, clear and not misleading
‘Marketing of mortgages’ is included in what section of MCOB?
MCOB 3A
‘Initial Disclosure’ is included in what section of MCOB?
MCOB 4 and 4A
Lifetime mortgages are included in MCOB 4 and 4A. True or false?
False.
Note that lifetime mortgages are not included under the MCOB 4 and 4A requirements because they have their own MCOB rules.
Initial disclosure information must be provided in what medium?
A durable medium.
Durable medium is defined in the FCA Handbook as: “paper; or any instrument which enables the recipient to store information addressed personally to the recipient in a way accessible for future reference and for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored” (FCA, no date).
When providing a service to a firm there are how many types of service you can provide to a customer?
3
What are the 3 types of service you can provide to a customer?
‘Unlimited’
‘Limited Range’
‘Single Provider’
