2024 CIFC exam torrent CIFC Study Guide [Q48-Q65]

NO.48 Ai Fen has recently become registered to sell mutual funds with Acadian Eastern Financial, a mutual fund dealer. Ai Fen determined that with her background of being a Chartered Financial Analyst, she can help people understand the nature of investing more easily than others in her field.
Which registration category will need to be prominently noted on Ai Fen’s business card to comply with the
“holding out rule”?

Dealing Representative

Registered Representative

Investment Representative

Chartered Financial Analyst

NO.49 Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?

target date fund

bond fund

asset allocation fund

Canadian equity index fund

NO.50 In a mutual fund dealer, who is the person responsible for establishing and maintaining compliance policies and procedures as well as monitoring and assessing compliance?

the chief executive officer

the ultimate designated person

the trustee

the chief compliance officer

NO.51 On January 3, John invests $500 in the Blue Sky U.S. Equity Fund. On July 1 of the same year, he invests another $500 into the same mutual fund. Information about the net asset value per unit (NAVPU) at the time of each transaction is provided below. Given this information, what will be the value of John’s investment on December 31 of this year (please ignore transaction costs and distributions)?

$1,198

$1,216

$1,256

$1,332

NO.52 Hamid, the portfolio manager of the Trabant Canadian Equity Fund is deciding on some new investments. He has identified a retirement residence company as well as a discount clothing retailer that both seem to have good prospects and appear undervalued. What investment approach is Hamid using?

top-down

bottom-up

growth at a reasonable price

technical investing

NO.53 Yesterday, Mariana purchased mutual funds for the first time from Diablo, who is a Dealing Representative for Horizon Financial. When Mariana mentions to her friend Marcus that she just started to invest, Marcus confides that he experienced losses from mutual fund investing. Her initial feelings of excitement have now changed to worry and regret. She wished she had talked to her friend before investing and wonders if she can change her mind.
Which statement regarding the right of withdrawal applies?

The right of withdrawal is based on the securities act legislation within the jurisdiction the purchase occurred.

Before Mariana can cancel her order, she must wait two business days to pass before she can cancel her order.

How the right of withdrawal can be applied is determined by the Mutual Fund Dealers Association of Canada’s conduct rules.

The Canadian Securities Administrators have instituted national instruments regarding Mariana’s right to cancel her order.

NO.54 Which of the following could be a passively managed fund?

commodity pool

exchange traded fund (ETF)

hedge fund

labour-sponsored investment fund

Explanation
A passively managed fund is a type of investment fund that follows a predetermined strategy or rule to track the performance of a market index, such as the S&P 500, or a specific sector, such as technology or health care. A passively managed fund does not involve active decision-making by the fund manager, who simply replicates the composition and weighting of the index or sector. A passively managed fund aims to match the return and risk of the index or sector, rather than outperform it. A passively managed fund typically has lower fees and expenses than an actively managed fund, as it requires less research, trading, and oversight.
An exchange traded fund (ETF) is a type of passively managed fund that trades on a stock exchange like a common stock. An ETF holds a basket of securities that mirrors an index or sector, and its price fluctuates throughout the day based on supply and demand. An ETF allows investors to gain exposure to a diversified portfolio of securities with low costs, high liquidity, and tax efficiency.
A commodity pool is a type of investment fund that invests in futures contracts or options on commodities, such as oil, gold, or wheat. A commodity pool is usually actively managed by a commodity trading advisor (CTA), who uses various strategies to generate returns from the price movements of commodities.
A hedge fund is a type of investment fund that employs sophisticated and often aggressive strategies to achieve high returns and reduce risk. A hedge fund is usually actively managed by a hedge fund manager, who has wide discretion and flexibility to use various instruments, such as derivatives, leverage, short selling, arbitrage, etc. A hedge fund is typically available only to accredited investors who meet certain income and net worth criteria.
A labour-sponsored investment fund (LSIF) is a type of investment fund that provides venture capital to small and medium-sized Canadian businesses, while offering tax benefits to investors. An LSIF is usually actively managed by a labour union or an organization affiliated with a labour union, who selects the companies to invest in based on their potential for growth and job creation.
References: Canadian Investment Funds Course, Chapter 4: Types of Investments1

NO.55 Every February, Reginald, a Dealing Representative, feels pressured by his Manager to generate new registered retirement savings plans (RRSP) and contributions to assist the branch in meeting broader business targets. Reginald is nearing the end of February, and he has a meeting with a new client, Orel. Orel wants to open a tax-free savings account (TFSA) to develop emergency savings because he does not want to worry about his withdrawals being taxed. Reginald suggests that if Orel were to contribute to an RRSP first, then the resulting tax savings could be used to fund a new emergency account.
In relation to account suitability, what can be said about Reginald’s advice?

Recommending an investment solution that addresses two needs is putting Reginald’s client’s interest first

Based on Orel’s stated need, recommending an RRSP contribution is unsuitable.

Reginald is putting the client’s interest first by informing Orel why he should change his purpose for investing.

By convincing Orel to contribute an RRSP, instead of a TFSA, Reginald has put his client’s interest first.

NO.56 Iliana owns 1,000 participating preferred shares in the First Canadian Bank. Which of the following features are characteristic of her investment?

Iliana has the right to purchase more preferred shares in the company before common shareholders.

Iliana is able to vote at the annual general meeting and elect members of the board of directors.

Iliana can convert her preferred shares to common shares at a fixed price and within a specified time period.

Iliana has a right to share in the bank’s net profits over and above the specified dividend rate.

NO.57 Yesterday, Mariana who is new to investing and purchased mutual funds for the very first time. She shared her excitement with her good friend, Julius. However, after Julius learned about her investment, he admits that he had a bad experience with mutual fund investing and that he lost money. Mariana regrets not talking to Julius prior to making her decision. Her feelings of enthusiasm have changed to fear. She is wondering if it is too late to change her mind and cancel her purchase order.
Which statement regarding the right of withdrawal is CORRECT?

The right of withdrawal for investors can be different depending on which province (or territory) the fund was purchased within.

The Canadian Securities Administrators (CSA) created legislation that addresses the right of withdrawal for investors.

The Mutual Fund Dealers Association of Canada (MFDA) have written conduct rules regarding the right of withdrawal.

Mariana has to wait two business after her purchase order has been settled to exercise the right of withdrawal.

NO.58 Which of the following best describes implied needs of your clients?

They are needs reflected by statements made by clients regarding problems and dissatisfactions.

They are statements made by you showing readiness to solve a client’s problem.

They are statements made by clients expressing the desire for lower commissions.

They are statements of wants and needs made by clients.

NO.59 What role do investment dealers play in the Canadian and global financial markets?

They are contributors to a company’s profits.

They are contributors to an investor’s earnings.

They assist with the exchange of capital for a financial instrument.

By underwriting financial instruments, they raise capital for investors.

NO.60 Kerry’s total income this past year was $100,000 and she claimed a tax deduction of $2,000. When the tax return is filed, what would be the federal tax payable when applying the following federal tax rates?
(Round to the closest whole dollar for the final answer.)

$17,472

$18,754

$24,000

$25,480

NO.61 You are meeting a potential client, William, for the first time. He is a high net worth individual and you are keen to get his business. Which of the following would you consider the most important to create an impressive first impression on your potential client?

your body language

volume of your voice

your words

tone of your voice

NO.62 Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients. Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?

Dakota can make telemarketing calls to clients who are listed on the National Do Not Call List

Dakota can send promotional emails to clients who have opted into Harvest Wealth’s Do Not Call List

Dakota can send promotional emails to clients who have opted in to receive commercial electronic messages (CEMs).

Dakota can make telemarketing calls to clients who have opted in to receive commercial electronic messages (CEMs).

NO.63 Quinton, a Dealing Representative, meets with his client Banji. Banji’s Know Your Client (KYC) indicates that her risk profile is “medium”. Banji currently has $35,000 in her account which is invested 50% in the Middleton Balanced Fund and 50% in the Hector Growth Fund. She tells Quinton that she would like to contribute an additional $10,000 to purchase the Prospect Labour-Sponsored Fund. Which of the following statements about Banji’s proposed transaction is CORRECT?

Quinton can proceed with the purchase of the Prospect Labour-Sponsored Fund because it is suitable for Banji based on her current KYC.

Quinton should update Banji’s risk profile to “high” so that he can proceed with the purchase of the Prospect Labour-Sponsored Fund.

Quinton should not proceed with the purchase of the Prospect Labour-Sponsored Fund because it is not suitable for Banji based on her current KYC.

Quinton must provide Banji with full disclosure about the risks so that he can proceed with the purchase of the Prospect Labour-Sponsored Fund.

NO.64 Pierre buys a call option on a stock. What is the implication of this transaction?

Pierre has the right to buy the stock if he exercises the option.

Pierre is obligated to sell the stock if the option is exercised.

Pierre has the right to sell the stock if he exercises the option.

Pierre is obligated to buy the stock if the option is exercised.

NO.65 A client has $950,000 in his RRSP account and $550,000 in his non-registered account held in nominee name with Tradewell Mutual Funds.
In the event of his dealer, Tradewell Mutual Funds declaring insolvency, what is the total amount the client be eligible to receive from the Mutual Fund Dealers Association of Canada Investor Protection Corporation (IPC)?

The client will not be eligible for any coverage.

The client will be eligible for coverage of $950,000.

The client will be eligible for coverage of $1,500.000.

The client will be eligible for coverage of $550,000.

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