UK financial regulation (FCA & MCOB)

Which body is the statutory regulator responsible for the conduct of firms providing regulated mortgage advice in the UK?

• A The Financial Conduct Authority (FCA) ✓
• B The Bank of England
• C The Prudential Regulation Authority (PRA)
• D The Financial Ombudsman Service (FOS)

Answer: The FCA is the conduct regulator for retail financial services, including regulated mortgage advice. The PRA prudentially regulates larger firms, while the FOS resolves complaints rather than supervising conduct.

Which FCA sourcebook sets out the detailed conduct rules for firms carrying out regulated mortgage activities?

• A COBS (Conduct of Business Sourcebook)
• B ICOBS (Insurance Conduct of Business Sourcebook)
• C MCOB (Mortgages and Home Finance: Conduct of Business) ✓
• D SYSC (Senior Management Arrangements, Systems and Controls)

Answer: MCOB contains the conduct rules specific to regulated mortgage contracts and home finance. COBS covers investments and ICOBS covers general insurance.

What is the primary purpose of the FCA's 'Treating Customers Fairly' principle in mortgage advice?

• A To guarantee customers the lowest possible interest rate
• B To ensure fair outcomes for consumers are central to a firm's culture and conduct ✓
• C To remove the firm's obligation to assess affordability
• D To allow firms to prioritise commission over client interests

Answer: Treating Customers Fairly requires firms to embed fair consumer outcomes in their culture and processes. It does not guarantee specific rates and does not reduce affordability or suitability obligations.

Under the FCA's regulatory framework, what does the term 'regulated mortgage contract' generally require?

• A A loan to a company secured on commercial premises
• B A loan to an individual secured by a first legal charge on land at least 40% of which is used as a dwelling by the borrower or a related person ✓
• C Any unsecured personal loan above a set amount
• D A loan secured on a buy-to-let property let to an unconnected tenant

Answer: A regulated mortgage contract is broadly a loan to an individual or trustee secured by a first charge on land where at least 40% is used as a dwelling by the borrower or a close family member. Most standard buy-to-let lending falls outside this definition.

Which of the following is a key aim of the FCA's Consumer Duty as applied to mortgage firms?

• A To set fixed maximum interest rates for all lenders
• B To require firms to act to deliver good outcomes for retail customers ✓
• C To abolish the need for suitability assessments
• D To transfer all regulatory responsibility to intermediaries

Answer: The Consumer Duty requires firms to act to deliver good outcomes for retail customers, raising the standard above merely not causing harm. It does not set rates or remove suitability duties.

What is the role of the Financial Ombudsman Service (FOS) in the mortgage sector?

• A To set the regulatory rules that mortgage firms must follow
• B To provide an independent service for resolving unresolved complaints between consumers and firms ✓
• C To authorise firms to carry out regulated mortgage activities
• D To compensate consumers when an authorised firm becomes insolvent

Answer: The FOS independently resolves complaints that a firm has not resolved to the consumer's satisfaction. Authorisation is an FCA function and compensating customers of failed firms is the role of the FSCS.