LIBF CeMAP (Certificate in Mortgage Advice and Practice) — All Questions

The Financial Conduct Authority (FCA) derives its powers principally from:

• a.The Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012✓
• b.The Data Protection Act 2018
• c.The Consumer Credit Act 1974 alone, together with the voluntary lending codes issued by the trade associations
• d.The Mortgage Credit Directive

FSMA 2000, as amended by the Financial Services Act 2012, established the FCA and sets out its objectives and rule-making powers. The other statutes address specific areas such as credit, mortgages and data protection, but do not constitute the FCA.

Which of the following is one of the FCA's three operational objectives under FSMA 2000?

• a.Guaranteeing every lender a profit
• b.Fixing mortgage interest rates
• c.Setting house prices
• d.Securing an appropriate degree of protection for consumers✓

The FCA's three operational objectives are consumer protection, market integrity, and promoting effective competition in the interests of consumers, supporting its single strategic objective that markets function well (FSMA 2000, ss.1B-1E).

Under the FCA's Consumer Duty, in force from 31 July 2023, firms must:

• a.Apply the Duty only to wholesale market counterparties
• b.Treat all customers identically regardless of their needs
• c.Act to deliver good outcomes for retail customers✓
• d.Prioritise shareholder returns over customer outcomes

The Consumer Duty introduced Principle 12, requiring firms to act to deliver good outcomes for retail customers, with detailed rules in PRIN 2A and four outcomes: products and services, price and value, consumer understanding, and consumer support. It sets a higher standard than the earlier Treating Customers Fairly framework.

If an authorised mortgage adviser gives negligent advice and later becomes insolvent, an eligible consumer's claim may be protected by the Financial Services Compensation Scheme (FSCS) up to:

• a.£50,000
• b.There is no protection for advice claims
• c.£170,000
• d.£85,000✓

The FSCS protects eligible claims for home-finance advice and arranging up to £85,000 per person per firm (raised from £50,000 in April 2019). It is the compensation scheme of last resort when an authorised firm cannot meet claims made against it.

A customer who is dissatisfied with how a mortgage firm has handled their complaint, and who cannot resolve it with the firm, may refer it to the:

• a.Bank of England
• b.HM Land Registry
• c.Financial Services Compensation Scheme
• d.Financial Ombudsman Service✓

The Financial Ombudsman Service (FOS) resolves unresolved complaints between consumers and financial firms. Its service is free to consumers and its decisions are binding on the firm if the consumer accepts them. The FSCS, by contrast, pays compensation when an authorised firm has failed.

Before advising on regulated mortgage contracts, a firm must generally:

• a.Be authorised by the FCA, or act as an appointed representative of an authorised firm✓
• b.Hold a banking licence from the Bank of England
• c.Obtain planning permission
• d.Register only with HM Land Registry and the local trading standards office before giving any advice

Advising on and arranging regulated mortgage contracts is a regulated activity under FSMA 2000, so a firm must be FCA-authorised or act as an appointed representative of an authorised principal that accepts responsibility for its regulated activities.