REAA - FNSFMK515 - Written Questions v1.1

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FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Written Questions Page | 1 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Question 1 List at least four financial products that are covered under ASIC’s regulatory framework. There are multiple financial products which are covered as part of ASIC’s regulatory framework: 1. derivatives, 2. general and life insurance, 3. superannuation, 4. carbon units and 5. deposit accounts Question 2 What are the three main elements that the Corporations Act 2001 imposes? The three main elements of the Corporations Act 2001 impose: 1. A single licensing regime for financial sales, advice and dealings in relation to financial products. 2. Consistent and comparable financial product disclosure and 3. A single authorization procedure for financial exchanges and clearing and settlement facilities. Question 3 What costs does an organisation applying for an AFS Licence must consider? Below costs should be considered while applying for an AFS license: 1. Obtaining license costs 2. Ongoing costs / financial audits to maintain the organization 3. Dispute resolution schemes membership and 4. Insurance costs Question 4 For which organisations does APRA provide the most relevant regulatory documents? If an organization provides financial products, such as authorized deposit taking institutions, life or general insurance companies or superannuation funds, the most Page | 2 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions relevant regulatory documents can be sourced via APRA and accessed at www.apra.gov.au Question 5 Which Codes of practice is relevant to the following: Mortgage brokers MFAA or FBAA Codes of Practice Banks Banking Code of Practice Financial Planners FPA Code of Practice Life Insurers Life Insurance Code of Practice Question 6 According to RG 105, Responsible Managers must meet one of the five options for demonstrating appropriate knowledge and skills. a) List the five skills component options (i.e. experience) registered in the ASIC Regulatory Guide. Below are the five skills component options registered in the ASIC Regulatory Guide: Option 1: Relevant industry or APRA standard / Three years relevant experience over the past five years Option 2: Individual assessment/ Five years relevant experience over the past eight years Option 3: University degree and short industry course/ Three years relevant experience over the past five years Option 4: Industry-specific or product-specific diploma (or higher)/ Three years relevant experience over the past five years Option 5: Other demonstration of knowledge and skills b) Pick one of these skills component. Which knowledge component (i.e. qualifications, training) will the Responsible Manager need to meet to comply with the RG 105.47 requirement? Page | 3 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

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FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Relevant Industry and APRA standard, a wide range of relevant and adopted standards for the knowledge component are accepted by Industry and APRA for the responsible manager to meet the comply with the RG105.47 requirements. The onus is on you to demonstrate the relevance of a standard to your responsible manager’s role. Your responsible manager must also have three years relevant experience over the past five years. Question 7 Responsible corporations must self-regulate themselves to prevent, detect and correct breaches of legal and regulatory obligations. a) What department needs to be established within the organisation to respond to its regulations and licence conditions and execute procedural requirements? A compliance department needs to be established within the organization to respond to its regulations and license conditions and execute procedural requirements. b) What are the five areas of responsibility that this department will oversight? Compliance department has these 5 areas of responsibility:  Identification (of risks),  Prevention (protect the organisation from those risks),  Monitoring and detection (report effectiveness of the Prevention process),  Resolution (of compliance difficulties), and  Advisory (on rules and controls). Question 8 What are the implications of the MFAA Code of Practice section 9.1 on a mortgage broker’s Privacy Management Process? Members must at all times keep information, that has been provided by a Customer, confidential and secure and only disclose information as required by law, the MFAA Disciplinary Rules or as authorized by the Customer. Page | 4 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Question 9 List the general obligations of a financial services officer and what do these general obligations relate to. Financial services officers have a general obligation to provide efficient, honest and fair financial services. Their general obligations relate to:  conduct and disclosure  the provision of your financial services  the competence, knowledge and skills of your responsible managers  the training and competence of your financial advisers and authorised representatives  ensuring your financial advisers and authorised representatives comply with the financial services laws  compliance, managing conflicts of interest and risk management  the adequacy of your financial, technological and human resources, and  your dispute resolution and compensation arrangements (if your clients include retail clients). Question 10 a) What forms does an AFS Licensee need to lodge with ASIC each financial year? All AFS licensees are required to have in place arrangements to ensure compliance with license obligations. Each financial year, AFS Licensees are required to lodge an FS70 (Australian financial services licensee profit and loss statement and balance sheet) and FS71 (audit report) or FS76 (annual compliance certificate) forms with ASIC. b) List three records that a mortgage broker is expected by ASIC to keep when providing credit assistance. ASIC has recommended that brokers keep records of the following:  a copy of the responsible lending assessment, which may be provided to the consumer, or the documents and information that would be used to prepare the assessment if it is requested;  a copy of the credit guide that was provided to the consumer;  information provided to the credit provider as part of the application process; Page | 5 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Question 11 Explain in your own words what is the Capacity Disclosure for an Authorised Representative of an AFSL. Capacity Disclosure for an Authorised Representative of an AFSL means that all stationery, business documents, letters and emails must make it clear that the authorised representative is acting in the capacity as an authorised representative of the licensee. Thus, an authorized representative is advised to disclose in all documents their authorized representative number issued by ASIC, their name and AFS licence number and the capacity in which financial services are being provided. Question 12 a) List the six principles of contract law that a financial contract must met to be valid. Below are the six principles of contract law that a financial contract must met to be valid: 1. Agreement: one party must make a clear offer, and the other party must accept it. 2. Consideration: Consideration is the exchange of promises by the parties to the contract or agreement 3. Intention: Each person, on entering a contract, must intend to be bound by it 4. Capacity: Both parties in a contract must have the necessary mental capacity to understand what they are doing 5. Genuine Consent: Both parties agree to the contract of their own free will 6. Legality: All of the parts of, or the subject matter of the contract must be legal b) Explain why the Unfair Contract Term Regime has been extended to capture insurance contracts. In 2020, as a result of Recommendation 4.7 of the Royal Commission and the Treasury Laws Amendment Act , the UTC Regime was extended under ASIC Act to capture insurance contracts. Under Recommendation 4.7, the provisions should be amended to provide a definition of the ‘main subject matter’ of an insurance contract as the terms of the contract that describe what is being insured. The duty of the utmost good faith Page | 6 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

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FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions contained in section 13 of the Insurance Contracts Act should operate independently of the unfair contracts terms provisions. Question 13 In your own words, describe the agency relationship and explain why this relationship can lead to compliance issues. Agency relationship can lead to compliance issues when there’s a conflict in priorities between principle and the agent. An agent may act in a way that is contrary to the best interests of the principal . Logically, the principal cannot constantly monitor the agent’s actions. The risk that the agent will shirk a responsibility, make a poor decision, or otherwise act in a way that is contrary to the principal’s best interest can be defined as agency costs . Additional agency costs can be incurred while dealing with problems that arise from an agent's actions. Question 14 In the principal-agent relationship, why is the fiduciary duty important? In the principal-agent relationship, the fiduciary duty is very important. The fiduciary duty prevents the Agent from acting in a manner that:  conflicts with the interests of the Principal; and  causes the Agent to gain an undisclosed, personal benefit by virtue of their position as Agent. Question 15 List three internal control monitoring procedures that can be tailored to an organisation. Below are some internal control monitoring procedures that can be tailored to an organisation: • Implement independent verifications, such as reconciliations, by personnel of different levels on a timely basis. • Perform walkthroughs of the transaction recording processes to verify all required steps are taken. • Schedule an internal audit Page | 7 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions Question 16 In your own words, describe the difference between a financial product and a financial instrument. A financial product maintains a direct relationship between the owner and the provider, for example a bank account, an insurance contract or a credit card. Whereas, a financial instrument is an asset which holds capital and can be traded in financial markets. Examples of a financial instrument are cheques, shares, stocks, bonds. Question 17 Define what is an agency agreement. The principal-agent relationship, also called agency, is an arrangement in which one entity legally appoints another to act on its behalf. If there is a legal contract drawn between the Principal and the agent then it is called an agency agreement. Question 18 According to ASIC Regulatory Guide 209 Credit Licensing: Responsible lending conduct - Record Keeping to demonstrate compliance with your obligation. Why is it of utmost importance to keep adequate records of your inquiries made and verification steps taken, and the information you have relied on in your assessment? According to ASIC regulatory Guide 209.263, it is utmost important to keep records to demonstrate compliance with your obligations. A failure to keep a Page | 8 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

FNSFMK515 – Comply with financial services regulation and industry codes of practice (Release 1) Written Questions record of inquiries made and verification steps taken, and the information you have relied on in your assessment, may make it difficult for you to adequately demonstrate that you have complied with your obligations. Question 19 What security features would a mortgage broker look for if using digital tools to complete work tasks, store data and access information? Financial Services provider must ensure that they and their service providers are regulated by the Privacy Act and take all reasonable steps to protect data from misuse, loss, modification, exposure or interference. Access to data must be restricted through locks, passwords, firewalls, and routers if digital tools are used to complete work tasks, store data and access information. Page | 9 of 9 © Real Estate Academy Australia Version 1.1 – January 2022 RTO 32426

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