CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 301:

  A mutual fund representative meets with a young family whose net worth/level of wealth is categorized as low, but they have the potential to become wealthy. In general, the family seems susceptible to believing that market events are predictable. Also, the family has a stronger impulse to avoid losses than earn gains.

  How might the mutual fund representative effectively address each of the two biases, respectively?

  A. Moderate the first bias and adapt to the second.
  B. Conform to the first bias and moderate the second.
  C. Conform to both biases identified.
  D. Moderate both biases identified.
  A. Moderate the first bias and adapt to the second.

• Question 302:

  Justin and Yvonne both open a Registered Education Savings Plan (RESP) for their daughter Grace. They plan to regularly contribute $1,000 per year until Grace reaches the age of 17.

  Which of the following statements relating to RESP is CORRECT?

  A. Justin and Yvonne may contribute a combined lifetime maximum of $50,000 for Grace.
  B. RESPs are attractive to Justin and Yvonne because they are tax-free investment plans.
  C. There is an annual contribution limit of $2,500 that Justin and Yvonne can contribute to an RESP.
  D. Contributions made by Justin and Yvonne are eligible for a tax deduction in the year they are contributed.
  A. Justin and Yvonne may contribute a combined lifetime maximum of $50,000 for Grace.

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  Explanation

  A Registered Education Savings Plan (RESP) is a tax-advantaged savings plan that helps parents and family members save for a child's post-secondary education. The government also contributes to the plan through the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB), depending on the family income and the amount of contributions. However, there are some rules and limits that apply to RESP contributions and government grants. One of them is the lifetime contribution limit, which is the maximum amount that can be contributed to an RESP for a beneficiary from all sources. The lifetime contribution limit is $50,000 per beneficiary, regardless of how many RESPs are opened for them or who contributes to them. Therefore, statement A is correct. Justin and Yvonne may contribute a combined lifetime maximum of $50,000 for Grace to their RESP.

  The other statements are incorrect for the following reasons:

  Statement B: RESPs are not tax-free investment plans. They are tax-deferred plans, meaning that the contributions are made with after-tax dollars and the investment income earned in the plan is not taxed until it is withdrawn as an educational assistance payment (EAP) for the beneficiary. The EAPs are taxed in the hands of the beneficiary, who usually has little or no income and pays little or no tax.

  Statement C: There is no annual contribution limit for RESP contributions. However, there is an annual limit for the CESG, which is 20% of the first $2,500 contributed per beneficiary per year, up to a maximum of $500 per year. The CESG also has a lifetime limit of $7,200 per beneficiary.

  Statement D: Contributions made to an RESP are not eligible for a tax deduction in the year they are contributed. They are made with after-tax dollars and do not reduce the contributor's taxable income.

  Canadian Investment Funds Course, Unit 9, Section 9.1

• Question 303:

  What criteria does the independent review committee use to determine if a potential conflict of interest, such as interfund trading, should be approved?

  A. Will the action achieve a fair and reasonable result for the fund?
  B. Will the action contravene National Instrument 81-102?
  C. Will the action contravene a unitholder's statutory rights?
  D. Will the action require unitholder approval?
  A. Will the action achieve a fair and reasonable result for the fund?

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  Explanation

  The independent review committee approves actions involving conflicts of interest only if they achieve a fair and reasonable result for the fund. The feedback from the document states: "The Independent Review Committee will only approve actions where a conflict of interest arises if certain requirements are met, including, most importantly, the action achieves a fair and reasonable result for the fund."

  References:

  Chapter 10 - The Modern Mutual FundLearning Domain: The Modern Mutual Fund

• Question 304:

  Francis wants to redeem his US Asset Allocation Fund as he needs the money for a down payment for a home purchase. The current proceeds from the redemption are USD $27,859, and the current CAD/USD exchange rate is 0.7353.

  How much will Francis receive in Canadian dollars when he redeems the Funds? Please round your answer to the nearest dollar.

  A. $37,888
  B. $36,698
  C. $42,861
  D. $35,859
  A. $37,888

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  Explanation

  A is correct because Francis will receive $37,888 in Canadian dollars when he redeems the Funds. This is calculated by dividing the current proceeds from the redemption in US dollars by the current CAD/USD exchange rate and rounding to the nearest dollar. That is,

• Question 305:

  Jacinta is a Dealing Representative with WealthSource Partners Inc., a mutual fund dealer registered in Ontario. Jacinta meets with her friend Saabir, who is a licensed insurance agent. Saabir asks Jacinta for a list of Jacinta's clients so that Saabir can reach out to them to ensure that their insurance needs are being met.

  Which of the following statements about Jacinta sharing the list with Saabir is CORRECT?

  A. If Saabir obtains prior consent from Jacinta to use the clients' personal information for a reasonable purpose, Saabir can contact the clients to inquire about their insurance needs.
  B. If Saabir promptly discloses that he has collected the clients' personal information from Jacinta without their consent, Saabir can use the information for a new stated purpose.
  C. If Jacinta determines that there is a reasonable purpose for sharing the list with Saabir, she can disclose the information to Saabir without obtaining prior consent from the clients.
  D. If Jacinta shares the list with Saabir without obtaining the clients' prior consent, she will be in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA).
  D. If Jacinta shares the list with Saabir without obtaining the clients' prior consent, she will be in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA).

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  Explanation

  The correct answer is D. If Jacinta shares the list with Saabir without obtaining the clients' prior consent, she will be in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA is the federal privacy law for private-sector organizations in Canada. It sets out the ground rules for how businesses must handle personal information in the course of their commercial activity. One of the key principles of PIPEDA is consent. This means that organizations must obtain meaningful consent from individuals before collecting, using, or disclosing their personal information, unless an exception applies. Consent must be obtained for the original purpose of collecting the information, and for any new purpose that arises later. Consent can be express or implied, depending on the sensitivity of the information and the reasonable expectations of the individual.

  In this scenario, Jacinta's clients' personal information is sensitive, as it relates to their financial situation and investment goals. Jacinta's clients would not reasonably expect that their information would be shared with Saabir, who is not affiliated with WealthSource Partners Inc., for the purpose of marketing insurance products. Therefore, Jacinta must obtain express consent from her clients before disclosing their information to Saabir. If she does not, she will violate PIPEDA and risk legal action from her clients or from the Office of the Privacy Commissioner (OPC).

• Question 306:

  An established securities house in Quebec offers several investment products, including mutual funds and various securities (e.g., bonds and stocks). An administrative employee has brought forward a potential fund trading violation by a registered employee.

  Immediately following the employee's report what action is most likely to occur?

  A. CIRO will investigate as a CSA.
  B. AMF will investigate as a CSA.
  C. AMF will investigate as a SRO.
  D. CIRO will investigate as a SRO.
  D. CIRO will investigate as a SRO.

• Question 307:

  Xian-Li believes she is a sophisticated investor. She has constructed her own portfolio and has had some success. She does not believe in studying a company's details such as earnings, expenses, or assets. She is more concerned with patterns in a company's stock price over time. She believes patterns form and can be used to predict future movements in the market.

  How does Xian-Li evaluate the companies in her portfolio?

  A. fundamental analysis
  B. flowchart analysis
  C. technical analysis
  D. value analysis
  C. technical analysis

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  Explanation

  Technical analysis is the method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Xian-Li is using technical analysis to evaluate the companies in her portfolio.

• Question 308:

  Pacari is a Dealing Representative with Cavalry Investments, a mutual fund dealer. Pacari's client, Darsha, is a long-time customer and an elderly widow. Darsha depended on her husband, for financial decisions before he passed. Pacari has also noticed that Darsha's capacity seems to be declining over the years. Luckily, with Pacari's help, Darsha has been managing her finances well. However, Darsha's daughter has been getting involved recently and has even tried to enter trades without Darsha's authorization. Pacari is particularly concerned about the last transaction for Darsha's account: a very large redemption. Pacari fears that Darsha has become a victim of financial exploitation and he raises his concerns with his dealer Cavalry.

  Which of the following statements about how Cavalry may proceed is CORRECT?

  A. Cavalry can place a permanent hold on Darsha's account and disallow all future transactions.
  B. Cavalry must place a temporary hold on Darsha's account to disallow all transactions for the account.
  C. Cavalry can place a temporary hold on Darsha's account to temporarily disallow the redemption.
  D. Cavalry must proceed with the redemption because temporary and permanent holds are not permitted.
  C. Cavalry can place a temporary hold on Darsha's account to temporarily disallow the redemption.

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  Explanation

  Cavalry can place a temporary hold on Darsha's account to temporarily disallow the redemption if they have reasonable grounds to believe that Darsha is being financially exploited or that she lacks mental capacity to make financial decisions.

  This is in accordance with the guidance issued by the Mutual Fund Dealers Association of Canada (MFDA) on how to deal with vulnerable clients. A temporary hold can be placed for up to 15 business days, which can be extended for another 15 business days if necessary. During this time, Cavalry must conduct an internal review of the matter and contact Darsha and any trusted contact person or legal representative to resolve the situation. Cavalry cannot place a permanent hold on Darsha's account without her consent or a court order. Cavalry is not required to place a temporary hold on Darsha's account, but it is an option available to them to protect their client's interests.

  References:

  What We Heard Report: Financial Crimes and Harms Against Seniors, MFDA Bulletin #0859-P - Guidance on Vulnerable Clients

• Question 309:

  Which of the following best describes a Dealing Representative's obligation to act ethically?

  A. Following only the minimum legal requirements
  B. Placing the firm's interests ahead of the client's interests
  C. Conducting business according to both the letter and spirit of the rules
  D. Recommending only guaranteed investments
  C. Conducting business according to both the letter and spirit of the rules

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  Explanation

  Ethical conduct requires more than simple compliance with regulations. It involves acting according to both the letter and the spirit of the rules while treating clients fairly and honestly. Following only minimum legal requirements does not fully satisfy ethical obligations. Therefore, Option C is correct.

• Question 310:

  Sandra presently participates in her employer-sponsored defined contribution pension plan (DCPP).

  As contributions continue to be made into her plan, what can she expect?

  A. Retirement benefits will be based on a prescribed formula that can be referenced from the plan's terms and conditions.
  B. The employer will solely make contributions to her DCPP based on a prescribed formula noted within her plan.
  C. Her available registered retirement savings plan (RRSP) contribution room will be reduced by what is being contributed to her plan.
  D. To ensure she has savings at retirement, the employer will choose stable investments to grow her retirement savings.
  C. Her available registered retirement savings plan (RRSP) contribution room will be reduced by what is being contributed to her plan.

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  Explanation

  A defined contribution pension plan (DCPP) is a type of retirement savings plan where the employer and/or employee make contributions to an individual account for the employee. The retirement benefits depend on the amount of contributions and the investment returns. Contributions to a DCPP reduce the employee's available registered retirement savings plan (RRSP) contribution room, which is the maximum amount that can be contributed to an RRSP each year without tax penalties.