Financial Management Discussion Questions: Consumer Protection and Hedge Funds - Assignment Example

Financial Management Discussion Questions: Consumer Protection and Hedge Funds Discussion Consumer Protection The Truth in Lending Act commonly abbreviated as TILA is a legislation that protects and individual from unfair or inaccurate credit card practices and credit card billing. The laws demand that all lenders provide loan cost information so that any borrower can comparatively shop for loans in the lending market. Specifically, loans covered by the TILA, the borrower or client have a right to a recession that allows for a duration of three days to reevaluate and withdraw from the loan process without incurring any cost.

The provision is strategic in protecting clients against the high-pressure sales tactics that unscrupulous traders or lenders may use on the customer. However, TILA does not specify to the Bank the amount of interest it should charge or make the bank decide to grant a consumer some loan. In terms of home purchase or a home refinancing plan, there is a significant variation that exists. As much as the legislation protects the lender and grant the right to cancel a mortgage refinance or a home equity loan, there are certain limitations that need clarification.

Here, the law does not protect the home purchaser but it protects an individual who has some share of equity in the home. Specifically, the right of rescission applies in the following circumstance; Mortgage refinances, cash-out refinance, home equity loans and home equity line of credit. However, the act fails to cover loans that are made to purchase a house, any loans business loans or loans involving properties that are not a primary residence. These exceptions create a significant difference when applying TILA for home purchase and home refinancing loans.

Discussion 2: What is Hedge Fund Hedge funds are alternative investment through the use of pooled funds that nay use a number of strategies to gain an active return for investors (www.sec.gov, 2012). It is a fund that can take both short and long positions. It encourages an investor to use arbitrage, sell and buy undervalued securities, trade bonds or options and invest in any opportunity in a market where there are foreseen gains at lower risks. However, there are situations where hedge funds can apply and where they cannot apply.

Hedge funds are specific to portfolios. The are relevant where a client needs to take a short position in securities. When a customer wants to venture into bets regarding falling prices and position that benefit from hiking valuations, he may use hedge fund options. In addition, they may use borrowed cash to leverage and increase returns. However, in a scenario where a client wants to invest in an equity or debt of an emerging market that has high inflation and volatile growth rate, the clients is prohibited from short selling.

Therefore, effective hedging options are unavailable for any client in such as a case. In conclusion, it is very vital for an individual to comprehend his or her scenario of investment and take advantage of the available appropriate hedge fund options. ReferencesBureau of Consumer Protection. (2015). United States.Consumer Financial Protection Bureau. (2012) (p. 3). Washington, DC. Retrieved from http://www.consumerfinance.gov/f/201207_cfpb_bulletin_marketing_of_credit_card_addon_products.pdfSisti, G. (2015). It’s hedge funds that should ‘get no respect’.

 MarketWatch. Retrieved 7 May 2015, from http://www.marketwatch.com/story/its-hedge-funds-that-should-get-no-respect-2014-06-02www.sec.gov,. (2012). U.S Securities and Exchange Commissions. Retrieved 7 May 2015, from http://www.sec.gov/answers/hedge.htm;http://www.sec.gov/news/speech/2012/spch051112nc.htm