1
INVESTMENT FUNDS IN CANADA Questions
and Correct Answers
A mutual fund sales representative is under pressure to meet certain sales
objectives. However, he consistently ignores these quotas when making client
recommendations. Which standard of conduct has he followed?
a) The obligation to keep client information confidential.
b) Provision of appropriate cautions for potentially unsuitable investments.
c) The maintenance of a high standard of professional knowledge.
d) The obligations to put the client's interests first.
Ans✅✅: d) The obligations to put the client's interests first.
FEEDBACK : Priority of Client's Interest: The client's interest must be
the foremost consideration in all business dealings. In situations where
you may have an interest that competes with that of the client, the
client's interest must be given priority.
Indicate the required timeframe for prior notification to a client of a new or
increased charge to their account.
a) 30 days.
b) 90 days.
c) 60 days.
d) 120 days.
Ans✅✅: c) 60 days.
FEEDBACK : Rule 2.4.3 - 60 days prior written notice must be given to
clients for any new or increased operating charges in their accounts;
Pretest - Stuvia US
,2
A mutual fund sales representative is interviewing a 35-year old, single client,
with extremely low risk tolerance. The client's stated investment objective is to
save for his retirement in 25 years. He has few retirement assets. The
representative determines that an asset allocation of 60% equities, 30% fixed
income and 10% near-cash would be appropriate given his age and objectives,
but the client refuses and wishes only to invest in near-cash investments. What
course of action would be most appropriate for the representative to takes?
a) Advise the client to invest primarily in near-cash to match his risk tolerance.
b) Refuse to continue the relationship unless the client accepts the 60/30/10
recommendation.
c) Explain the risks involved with both a 60% equity allocation, and a zero
equity allocation.
d) Reassure the client that a 60% equity allocation in a well-diversified portfolio
carries little risk.
Ans✅✅: c) Explain the risks involved with both a 60% equity
allocation, and a zero equity allocation.
FEEDBACK : You must make a concerted effort to know the client—-to
understand the financial and personal status and aspirations of the
client. You will make recommendations for the client to invest funds in
mutual funds that reflect, to the best of your knowledge, these
considerations. Having provided sound advice, you will be above reproach
for potentially unsuitable purchases and sales of securities for a client
if the client does not heed your advice.
What are non-registered persons permitted to do with regards to mutual
funds?
a) Provide recommendation on mutual funds.
b) Assist the client with the completion of order forms.
c) Hand out a mutual fund prospectus.
d) Accept a completed order form for the purpose of forwarding it to a
registered salesperson for processing.
Pretest - Stuvia US
, 3
Ans✅✅: d) Accept a completed order form for the purpose of forwarding
it to a registered salesperson for processing.
FEEDBACK : A non-registered salesperson cannot perform any act in
furtherance of a trade. There are several tasks that non-registered
people may do with regards to mutual fund transactions. They can accept
redemption requests for the purpose of processing the redemption by a
registered sales representative, they can accept a completed order form
for the purpose of forwarding it to a registered salesperson for
processing, they can provide basic information to current unit holders
regarding their current holdings, such as NAVPU, number of units held,
distributions given, but only if it does not solicit additional sales.
They can also refer clients to a registered sales representative.
Outside Quebec, indicate the required timeframe for a dealer to notify the
relevant securities administrator of the termination of a salesperson's
employment.
a) 1 business day.
b) 10 business days.
c) 30 days.
d) 5 business days.
Pretest - Stuvia US
INVESTMENT FUNDS IN CANADA Questions
and Correct Answers
A mutual fund sales representative is under pressure to meet certain sales
objectives. However, he consistently ignores these quotas when making client
recommendations. Which standard of conduct has he followed?
a) The obligation to keep client information confidential.
b) Provision of appropriate cautions for potentially unsuitable investments.
c) The maintenance of a high standard of professional knowledge.
d) The obligations to put the client's interests first.
Ans✅✅: d) The obligations to put the client's interests first.
FEEDBACK : Priority of Client's Interest: The client's interest must be
the foremost consideration in all business dealings. In situations where
you may have an interest that competes with that of the client, the
client's interest must be given priority.
Indicate the required timeframe for prior notification to a client of a new or
increased charge to their account.
a) 30 days.
b) 90 days.
c) 60 days.
d) 120 days.
Ans✅✅: c) 60 days.
FEEDBACK : Rule 2.4.3 - 60 days prior written notice must be given to
clients for any new or increased operating charges in their accounts;
Pretest - Stuvia US
,2
A mutual fund sales representative is interviewing a 35-year old, single client,
with extremely low risk tolerance. The client's stated investment objective is to
save for his retirement in 25 years. He has few retirement assets. The
representative determines that an asset allocation of 60% equities, 30% fixed
income and 10% near-cash would be appropriate given his age and objectives,
but the client refuses and wishes only to invest in near-cash investments. What
course of action would be most appropriate for the representative to takes?
a) Advise the client to invest primarily in near-cash to match his risk tolerance.
b) Refuse to continue the relationship unless the client accepts the 60/30/10
recommendation.
c) Explain the risks involved with both a 60% equity allocation, and a zero
equity allocation.
d) Reassure the client that a 60% equity allocation in a well-diversified portfolio
carries little risk.
Ans✅✅: c) Explain the risks involved with both a 60% equity
allocation, and a zero equity allocation.
FEEDBACK : You must make a concerted effort to know the client—-to
understand the financial and personal status and aspirations of the
client. You will make recommendations for the client to invest funds in
mutual funds that reflect, to the best of your knowledge, these
considerations. Having provided sound advice, you will be above reproach
for potentially unsuitable purchases and sales of securities for a client
if the client does not heed your advice.
What are non-registered persons permitted to do with regards to mutual
funds?
a) Provide recommendation on mutual funds.
b) Assist the client with the completion of order forms.
c) Hand out a mutual fund prospectus.
d) Accept a completed order form for the purpose of forwarding it to a
registered salesperson for processing.
Pretest - Stuvia US
, 3
Ans✅✅: d) Accept a completed order form for the purpose of forwarding
it to a registered salesperson for processing.
FEEDBACK : A non-registered salesperson cannot perform any act in
furtherance of a trade. There are several tasks that non-registered
people may do with regards to mutual fund transactions. They can accept
redemption requests for the purpose of processing the redemption by a
registered sales representative, they can accept a completed order form
for the purpose of forwarding it to a registered salesperson for
processing, they can provide basic information to current unit holders
regarding their current holdings, such as NAVPU, number of units held,
distributions given, but only if it does not solicit additional sales.
They can also refer clients to a registered sales representative.
Outside Quebec, indicate the required timeframe for a dealer to notify the
relevant securities administrator of the termination of a salesperson's
employment.
a) 1 business day.
b) 10 business days.
c) 30 days.
d) 5 business days.
Pretest - Stuvia US
