CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 141:

  A mutual fund sales representative is asked to make a presentation to an investment club. During the presentation, he discusses personal experiences of a questionable nature.

  What aspect of Professionalism is relevant to this situation?

  A. Conduct of personal business
  B. Personal financial dealings with clients
  C. Other personal endeavors
  D. Solicitation of client business
  C. Other personal endeavors

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  Explanation

  Discussing questionable personal experiences in a public setting can harm the representative's professional image, relating to the aspect of other personal endeavors. The feedback from the document states: "The representative must take care to ensure that any publicly visible activity in which he participates is conducted responsibly and moderately so as not to present an unfavorable public image."

  References:

  Chapter 18 - Applying Ethical Standards to What You Have LearnedLearning Domain: Ethics, Compliance and Mutual Fund Regulations

• Question 142:

  Karen works Monday to Wednesday for a member of the MFDA as a dealing representative and Thursday and Friday as a language instructor at a local college. Client orders received on Thursdays and Fridays are held until Karen returns to work the following week.

  What condition of dual employment is violated under these circumstances?

  A. The dealer must maintain procedures to address any potential conflicts of interest
  B. Karen's alternate employment must not bring the MFDA, its members, or the mutual fund industry into disrepute
  C. The dealer must maintain procedures to ensure continuous service to clients
  D. The dealer must be aware of and approve of Karen's other occupation
  C. The dealer must maintain procedures to ensure continuous service to clients

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  Explanation

  Holding client orders until the following week violates the requirement for continuous service to clients under dual employment conditions. The feedback from the document states: "A mutual fund dealing representative who works for or is sponsored by a member of the MFDA may have, and continue in, another gainful occupation, provided that the dealer establishes and maintains procedures to ensure continuous service to clients. In this example, Karen's clients are not receiving continuous service."

  References:

  Chapter 17 - Mutual Fund Dealer RegulationLearning Domain: Ethics, Compliance and Mutual Fund Regulations

• Question 143:

  One of your clients, Sheldon, is 65 years old. He has $30,000 to invest. He has a low risk profile, and an investment objective of receiving regular income. He has a time horizon of 5 years.

  Based on Sheldon's risk profile and investment objective, which of the following investment recommendations is MOST appropriate for Sheldon?

  A. ABC common shares which had a 20% annual yield during the previous 5 years.
  B. 3% Government of Canada Bonds at par, which have a maturity that coincides with Sheldon's time horizon.
  C. FEG Labour-Sponsored Fund which will give him a tax benefit.
  D. Debentures of XYZ Corporation will give Sheldon a regular income and an attractive yield.
  B. 3% Government of Canada Bonds at par, which have a maturity that coincides with Sheldon's time horizon.

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  Explanation

  Government of Canada Bonds are fixed income securities issued by the federal government that pay a fixed rate of interest (coupon) and return the principal amount (par value) at maturity. They are considered low risk investments, as they are backed by the full faith and credit of the government. They also provide regular income to investors, as they pay interest semi-annually. For Sheldon, who has a low risk profile and an investment objective of receiving regular income, 3% Government of Canada Bonds at par would be an appropriate investment recommendation, as they would match his time horizon of 5 years and provide him with a stable and predictable income stream. The other options are not suitable for Sheldon, as they involve higher risk, volatility, or complexity.

• Question 144:

  A client receives a T3 slip reporting income from a mutual fund investment.

  In which type of account is the investment most likely held?

  A. RRSP
  B. TFSA
  C. RESP
  D. Non-registered account
  D. Non-registered account

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  Explanation

  T3 slips are generally issued to report taxable income earned in non-registered accounts. Registered plans such as RRSPs, TFSAs, and RESPs do not normally generate annual T3 slips for investment income. Therefore, Option D is correct.

• Question 145:

  Which among the following BEST describes a company's retained earnings statement?

  A. a company's financial position at a specific point in time
  B. the amount of money contributed to the company by its shareholders or owners
  C. the amount of profit that is reinvested in the company
  D. the earnings and expenses of a business over a period of time
  C. the amount of profit that is reinvested in the company

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  Explanation

  A company's retained earnings statement is a financial statement that shows how the company's net income is distributed between dividends paid to shareholders and retained earnings, which are the amount of profit that is reinvested in the company. Retained earnings are part of the company's equity, and they reflect the accumulated earnings that the company has generated over its history, minus any dividends or distributions. Retained earnings can be used by the company for various purposes, such as expanding its operations, developing new products, paying off debt, or buying back shares1

  References:

  5: Types of Investments, Lesson

  3: Equity Securities, Section 5.3.4: Financial Statements

• Question 146:

  What type of benefit plan has a final benefit that is dependent on the investment returns within the plan?

  A. Career average plan
  B. Defined contribution plan
  C. Final average plan
  D. Flat benefit plan
  B. Defined contribution plan

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  Explanation

  In a defined contribution plan, the retirement benefit depends on the performance of the investments within the plan, also known as a money-purchase plan. The feedback from the document states: "In a defined contribution plan, also known as a money-purchase plan, the eventual benefits at retirement will be based on how the contributions were invested within the plan."

  References:

  Chapter 6 - Tax and Retirement PlanningLearning Domain: The Know Your Client Communication Process

• Question 147:

  Which of the following qualifies as personal information under the Personal Information Protection and Electronic Documents Act (PIPEDA)?

  A. employee's business address
  B. employee's name
  C. employee's credit record
  D. employee's business telephone number
  C. employee's credit record

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  Explanation

  According to the Personal Information Protection and Electronic Documents Act (PIPEDA), personal information is any factual or subjective information, recorded or not, about an identifiable individual. This includes information in any form, such as age, name, ID numbers, income, ethnic origin, or blood type. However, PIPEDA also specifies some exceptions to the definition of personal information, such as business contact information. Business contact information is any information that is used for the purpose of communicating or facilitating communication with an individual in relation to their employment, business or profession. This includes the employee's name, position name or title, work address, work telephone number, work fax number or work electronic address. Therefore, an employee's business address and business telephone number are not considered personal information under PIPEDA. An employee's name could be considered personal information if it is not used for business purposes, but it is not clear from the question whether that is the case. An employee's credit record is clearly personal information under PIPEDA, as it reveals sensitive information about the individual's financial situation and history. 1: PIPEDA in brief - Office of the Privacy Commissioner of Canada 2

• Question 148:

  A dealing representative explains the past performance of a mutual fund to a potential client, discussing the annual simple returns and compound returns that the fund had earned. She concluded by indicating she expects the fund's NAVPU was likely to rise at similar rates in the future, given the economic outlook.

  What unacceptable selling practice has occurred?

  A. Representatives cannot comment upon the economic outlook
  B. Representatives cannot discuss a fund's past performance
  C. Representatives cannot quote a future purchase price
  D. Representatives cannot promise NAVPU will increase by any amount
  D. Representatives cannot promise NAVPU will increase by any amount

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  Explanation

  Promising that a mutual fund's NAVPU will increase by a certain amount is an illegal and unacceptable selling practice, as it implies guaranteed future performance. The feedback from the document states: "There are a number of sales practices that are clearly illegal or otherwise unacceptable to securities regulators. A dealing representative may not make promises that the NAVPS or NAVPU of a fund will achieve a certain level or increase by any amount."

  References:

  Chapter 17 - Mutual Fund Dealer RegulationLearning Domain: Ethics, Compliance and Mutual Fund Regulations

• Question 149:

  Kendrick is a newly registered Dealing Representative for Oak Solid Financial. He has been assigned the task of contacting existing clients where there has been no record of consultation within the last 12 months. The first person he sees on his list is a client named Chandra Ruffino. He double-checks if her phone number is on the Do Not Call List (DNCL) registry.

  Which of the following statements apply?

  A. If Chandra is on the DNCL registry, Kendrick is still eligible to contact the client of Oak Solid Financial.
  B. If Chandra has been on the DNCL registry for 18 months, then Kendrick is not allowed to contact her.
  C. If Chandra is on the DNCL, then Kendrick can only contact her if she is specifically his client.
  D. If Chandra had closed her account within the last 12 months and registered herself on the DNCL, then Kendrick cannot call her.
  A. If Chandra is on the DNCL registry, Kendrick is still eligible to contact the client of Oak Solid Financial.

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  Explanation

  The Do Not Call List (DNCL) is a national registry of personal telephone numbers that consumers can register to reduce the number of unsolicited telemarketing calls they receive. Telemarketers are required to subscribe to the DNCL and avoid calling the numbers on the list, unless they have an exemption. One of the exemptions is for existing business relationships, which means that a telemarketer can call a consumer who has purchased a product or service from them or their employer within the last 18 months, or who has made an inquiry or application within the last six months. Therefore, Kendrick is still eligible to contact Chandra, who is an existing client of Oak Solid Financial, even if she is on the DNCL registry. However, Kendrick must respect Chandra's right to request that he stop calling her and remove her number from his contact list.

  Canadian Investment Funds Course, Chapter 1: The Canadian Financial Services Industry1, National Do Not Call List - Canada.ca2

• Question 150:

  How can specialty mutual funds mitigate some of the risks associated with the product?

  A. Reduce risk by holding securities with high market betas
  B. Increase diversification by holding securities with low correlation
  C. Increase returns through derivative market strategies
  D. Reduce volatility by investing in fewer sectors
  B. Increase diversification by holding securities with low correlation

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  Explanation

  Specialty funds are narrowly focused and often risky on their own. However, when combined with other asset classes, they can add diversification benefits, especially if their returns have a low correlation with other portfolio holdings.

  Holding high beta securities increases risk.

  Using derivatives may increase returns but not reduce risk.

  Fewer sectors = higher concentration risk.

  Therefore, risk mitigation comes from low-correlation diversification.