CeMAP - Certificate in Mortgage Advice and Practice UK Financial Regulation Questions and Answers — Questions and Answers
Question 1: Which of the following is the primary body responsible for the prudential regulation of banks, building societies, and investment firms in the UK?
- The Financial Conduct Authority (FCA)
- The Prudential Regulation Authority (PRA) (Correct answer)
- The Financial Ombudsman Service (FOS)
- HM Treasury
Correct answer: The Prudential Regulation Authority (PRA)
The Prudential Regulation Authority (PRA), which is part of the Bank of England, is responsible for the prudential regulation and supervision of around 1,500 banks, building societies, credit unions, insurers, and major investment firms. Its primary objective is to promote the safety and soundness of these firms.
Question 2: A mortgage adviser is meeting a new client for the first time. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, when must the adviser complete identity verification?
- After the mortgage application has been submitted
- At any point before the mortgage completes
- Before the establishment of a business relationship (Correct answer)
- Only if the client is applying for a mortgage over £100,000
Correct answer: Before the establishment of a business relationship
The regulations require firms to apply customer due diligence measures, including identifying and verifying the customer's identity, before the establishment of a business relationship or carrying out an occasional transaction. This is to prevent financial crime from the outset.
Question 3: The FCA's Consumer Duty introduced a new Consumer Principle. What does this principle require firms to do?
- Guarantee a positive outcome for all customers.
- Offer the lowest possible price for their products.
- Act to deliver good outcomes for retail customers. (Correct answer)
- Treat all customers in an identical manner.
Correct answer: Act to deliver good outcomes for retail customers.
The Consumer Principle, Principle 12, requires firms 'to act to deliver good outcomes for retail customers'. This sets a higher standard than the previous principle of 'treating customers fairly' and requires firms to be proactive in ensuring customers receive good outcomes across product design, price, support, and understanding.
Question 4: A client has their mortgage application declined and is unhappy with the advice they received. They raise a formal complaint with the mortgage advice firm, but eight weeks later they have not received a final response. What is the client's next course of action?
- Wait for the firm to issue its final response, regardless of how long it takes.
- Refer the complaint directly to the Prudential Regulation Authority (PRA).
- Initiate legal proceedings against the adviser in a civil court.
- Refer the complaint to the Financial Ombudsman Service (FOS). (Correct answer)
Correct answer: Refer the complaint to the Financial Ombudsman Service (FOS).
If a firm does not resolve a complaint within eight weeks, or the client is unhappy with the final response, they have the right to refer their complaint to the Financial Ombudsman Service (FOS). The FOS is an independent body that settles disputes between consumers and financial services firms.
Question 5: The Financial Services Compensation Scheme (FSCS) provides a 'safety net' for customers of authorised financial services firms. What is the maximum level of protection it offers for deposits per person, per authorised firm?
- £50,000
- £75,000
- £85,000 (Correct answer)
- £100,000
Correct answer: £85,000
The FSCS protects deposits up to £85,000 per person, per authorised firm (or £170,000 for joint accounts). This limit applies if a bank, building society, or credit union were to fail.
Question 6: Under the UK General Data Protection Regulation (UK GDPR), which principle requires that personal data collected must be adequate, relevant, and limited to what is necessary for the purpose for which it is processed?
- Integrity and confidentiality
- Storage limitation
- Purpose limitation
- Data minimisation (Correct answer)
Correct answer: Data minimisation
The principle of 'data minimisation' states that personal data shall be adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed. A mortgage adviser should not collect more data from a client than is strictly required for the advice and application process.
