CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 31:

  Jack and Jill hold a mutual fund account as tenants in common.

  What conditions would apply to their account?

  Should either die, full ownership of the account would pass to the other Each would be the owner of 50% of the account's assets Either could issue trading instructions on all account assets Each would be required to provide KYC information

  A. 2 and 4
  B. 2 and 3
  C. 1 and 4
  D. 1 and 3
  A. 2 and 4

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  Explanation

  In a tenants in common account, each owner holds a pro-rata share (e.g., 50%) and can only issue instructions for their portion, with no right of survivorship. KYC information is required for both owners. The feedback from the document states: "If more than one person owns an account and it is not specifically identified as being a joint account, each owner owns a pro-rata share of the account, unless ownership is divided in another manner and noted on the account. Where an account is held as tenants in common, there is no right of survivorship and each owner, unless otherwise specified, can only give instructions with regard to the pro-rata portion of the account."

  References:

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

• Question 32:

  As it pertains to fixed-income securities, which yield metric factors in cash flows relative to ongoing bond prices rather than the initial amount invested?

  A. Earnings
  B. Current
  C. Effective
  D. Dividend
  B. Current

• Question 33:

  Terri, 30 years old, is the marketing manager at Provincial Winery with an average annual income of $60,000. Her spouse Yvette, 28 years old, is a project manager with a telecommunications firm earning $70,000 per year. You are helping them to organize their investments and are trying to assess their financial resources.

  Which of the following is the best question to ask?

  A. Do you have any children?
  B. Do you have pension plans at work?
  C. When do you need the money?
  D. What is your investment experience?
  B. Do you have pension plans at work?

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  Explanation

  One of the steps in the Know Your Client (KYC) rule is to assess the client's financial resources, which include their income, assets, liabilities, and net worth. Asking about pension plans at work is a relevant question to determine the client's sources of income and potential retirement savings. Pension plans can also affect the client's risk tolerance and investment objectives, as they may provide a stable and guaranteed income in the future. Asking about children, money needs, and investment experience are also important questions, but they relate to other aspects of the KYC rule, such as personal circumstances, time horizon, and investment knowledge.

  References:

  Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111

  Know Your Client (KYC) Definition - Investopedia

• Question 34:

  Your employer has a contributory group RRSP under which he matches employee contributions, up to a maximum of 5% of salary.

  Which of the following statements about a group registered retirement savings plan (RRSP) is CORRECT?

  A. It is more costly and time consuming to administer than traditional pension plans.
  B. If you leave your employer, your group RRSP stays with the employer.
  C. You need to wait until you file your taxes to receive your contribution tax deduction.
  D. The employer chooses the plan provider.
  D. The employer chooses the plan provider.

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  Explanation

  A group RRSP is a retirement savings plan sponsored by an employer that allows employees to contribute through regular payroll deductions and benefit from tax advantages and possible employer matching. The employer is responsible for choosing the plan provider, which is the financial institution that administers the group RRSP and offers a range of investment options for the employees to choose from. The employer may also negotiate lower fees and better services with the plan provider than what individual RRSPs can offer. Therefore, statement D is correct.

  The other statements are incorrect for the following reasons:

  Statement A: A group RRSP is less costly and time consuming to administer than traditional pension plans, as it does not require actuarial valuations, funding requirements, or regulatory filings.

  Statement B: If you leave your employer, your group RRSP does not stay with the employer. You can transfer your group RRSP to an individual RRSP or another registered plan without tax consequences, as long as there are no locked-in provisions.

  Statement C: You do not need to wait until you file your taxes to receive your contribution tax deduction. Your contributions are deducted from your gross income before tax is calculated, so you receive an immediate tax benefit on your paycheque.

  Canadian Investment Funds Course, Unit 9, Section 9.1

• Question 35:

  Suzie received a T3 for investment income earned on her investment in DEW Canadian Balanced Fund.

  In what account type is this investment held?

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

• Question 36:

  Which participant typically posts bid and ask quotations in the over-the-counter (OTC) market?

  A. Mutual fund investors
  B. Dealers
  C. Governments
  D. Transfer agents
  B. Dealers

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  Explanation

  The OTC market operates through dealers who post bid and ask quotations and facilitate trading. Retail investors do not establish market quotations. Therefore, Option B is correct.

• Question 37:

  Martine is working with Ishmail, her financial advisor, to develop her client investor profile. In her overall risk profiling, it was determined that Martine could tolerate an asset allocation of up to 70% of her portfolio. She currently has a goal of saving for a down payment for her first home, saving for her young children's education and retirement. Ishmail uses a one-fund strategy for all his client accounts - Martine would be allocated the "growth" fund to all her investments and savings under his management.

  What should be Martine's most significant risk in using this strategy at this stage?

  A. Overall cost-benefit of managed products for short-term goal funding
  B. Unsuitable allocation given to multiple goals
  C. Tax implications
  D. Fund management
  B. Unsuitable allocation given to multiple goals

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  Explanation

  Martine has multiple financial goals (short-term home purchase, medium-term education, long-term retirement). Using a single growth fund for all goals is inappropriate because growth funds are designed for long-term objectives and involve higher volatility.

  This results in unsuitable allocation across her short-, medium-, and long-term needs.

• Question 38:

  Your client earns $100,000 from employment and $10,000 from investments each year. Her bills total $95,000 annually.

  What is her discretionary income?

  A. $5,000
  B. $20,000
  C. $15,000
  D. $10,000
  C. $15,000

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  Explanation

  Discretionary income is the amount left after subtracting expenses from total income, available for savings or investments. Total income = $100,000 (employment) + $10,000 (investments) = $110,000. Subtracting $95,000 in bills gives

  $110,000 - $95,000 = $15,000. The feedback from the document states:

  "Discretionary income eligible for savings and investments is the difference between the amount of money coming in from employment and other sources and the amount of money going out to pay bills. In this example, $100,000 + $10,000 -

  $95,000 = $15,000."

  References:

  Chapter 4 - Getting to know the clientLearning Domain: The Know Your Client Communication Process

• Question 39:

  Your clients, Philip and Helen, have a disabled son, Alex, age 22. They want to set up a registered disability savings plan (RDSP) for Alex and have asked you for some information.

  Which statement is TRUE?

  A. Philip and Helen's contributions are refundable to them.
  B. There is no annual or lifetime maximum limit on contributions.
  C. Alex must quality for the disability tax credit.
  D. Philip and Helen's contributions are tax-deductible.
  C. Alex must quality for the disability tax credit.

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  Explanation

  A registered disability savings plan (RDSP) is a savings plan intended to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit (DTC). The DTC is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. To be eligible for the DTC, a person must have a severe and prolonged impairment in physical or mental functions, as defined by the Income Tax Act and as certified by a medical practitioner. Therefore, Alex must qualify for the DTC in order to be eligible for an RDSP.

  References:

  What is a registered disability savings plan (RDSP) - Canada.ca, Disability tax credit - Canada.ca

• Question 40:

  When must client complaints be acknowledged in writing?

  A. When the client has made a written complaint in any format
  B. When complaints are made repeatedly by the same client with respect to the same representative
  C. Any time the client has made a verbal or written complaint
  D. When the client has made a written complaint in letter format
  A. When the client has made a written complaint in any format

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  Explanation

  MFDA Policy No. 3 requires that all written client complaints, including emails, be acknowledged in writing.

  The feedback from the document states: "MFDA Policy No. 3 specifies the minimum procedures for dealing with written client complaints (including emails). All written client complaints must be acknowledged in writing."

  References:

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