Pass the IFSE Institute Investments & Banking CIFC Questions and answers with CertsForce

The element of the Know Your Client (KYC) information that Malik has been able to learn is Charlotte’s risk preference. KYC information is a collection of personal and financial information that registered firms and individuals must obtain from their clients before providing any investment advice or services. KYC information helps registered firms and individuals understand their clients’ needs, goals, risk tolerance, time horizon, and personal circumstances, as well as comply with regulatory obligations such as suitability, disclosure, and reporting. One of the components of KYC information is risk preference, which is a measure of how much risk an investor is willing to take on in their portfolio. It reflects the investor’s attitude, personality, and emotional factors that influence their investment decisions. Risk preference can be classified into three categories: risk-seeking, risk-averse, or risk-neutral. Based on Charlotte’s statement that she does not know much about trading ETFs, but she wants to invest in ETFs, and that she feels fortunate to have this money and that she’s not worried about losing it because she never planned on having any of it, Malik can infer that Charlotte has a high-risk preference or a risk-seeking attitude. This means that Charlotte is willing to take on more risk in exchange for higher potential returns, even if it means losing some or all of her money. Therefore, option C is correct regarding what element of KYC information Malik has been able to learn. The other options are not correct regarding what element of KYC information Malik has been able to learn. Option A is false because risk profile is not an element of KYC information; rather, it is an outcome of KYC information that summarizes the investor’s overall suitability for different types of investments based on their KYC information. Option B is false because risk capacity is not an element of KYC information; rather, it is a measure of how much risk an investor can afford to take on in their portfolio based on their financial situation and goals. Option D is false because risk tolerance is not an element of KYC information; rather, it is a measure of how much risk an investor can handle in their portfolio without losing sleep or changing their plans. References: [Know Your Client (KYC) | IFIC], [Know Your Client (KYC) | GetSmarterAboutMoney.ca], [Risk Preference | Investopedia]

Your client, James, would like to work beyond the normal retirement age. He comes to you for advice on his registered retirement savings plan (RRSP). What are the rules regarding terminating an RRSP?

James must terminate the plan by the end of the year he turns 65.

James must terminate the plan by the end of the year he turns 67.

James must terminate the plan by the end of the year he turns 70.

James must terminate the plan by the end of the year he turns 71.

Answer: D

According to the Canadian Investment Funds Course, an RRSP is a retirement savings plan that allows individuals to defer taxes on their contributions and investment income until they withdraw the funds. However, an RRSP cannot be held indefinitely and must be terminated by the end of the year the annuitant turns 71. At that point, the annuitant has three options to withdraw the funds from the RRSP:

Make a lump-sum withdrawal, which is subject to withholding tax and income tax.

Convert the RRSP to a registered retirement income fund (RRIF), which provides a steady stream of income with a minimum amount that must be withdrawn each year.

Purchase an annuity, which offers a guaranteed income for life or for a specified period.

References: 1: Canadian Investment Funds Course - IFSE Institute 2 (Unit 9: Retirement)

 Moving the DEF Bond Fund to the RRSP would be more tax-efficient than moving any of the other funds. This is because bond funds generate interest income, which is fully taxable at the investor’s marginal tax rate in a non-registered account. By moving the bond fund to an RRSP, Darryl can defer paying taxes on the interest income until he withdraws it from the RRSP. Moving the GHI Global Equity Fund to the RRSP (B) would not be tax-efficient, as global equity funds generate foreign income and dividends, which are subject to foreign withholding taxes in an RRSP. Moving $20,000 from each of the three funds to the RRSP © would not be tax-efficient, as it would trigger capital gains taxes on all three funds in proportion to their returns. Moving the ABC Canadian Equity Fund to the RRSP (D) would not be tax-efficient, as Canadian equity funds generate Canadian dividends, which are eligible for a dividend tax credit in a non-registered account. By moving the Canadian equity fund to an RRSP, Darryl would lose this tax advantage and pay taxes on the dividends at his marginal tax rate when he withdraws them from the RRSP. References: Canadian Investment Funds Course (CIFC) | IFSE Institute

An income statement is a financial report that shows the earnings and expenses of a business over a period of time, such as a month, a quarter, or a year. It also shows the net income or net loss of the business, which is the difference between the total revenues and the total expenses. An income statement helps investors and creditors evaluate the profitability, performance, and risk of a business. The other options are not accurate descriptions of an income statement. Option A describes retained earnings, which are part of the equity section of the balance sheet. Option B describes contributed capital, which is also part of the equity section of the balance sheet. Option D describes the balance sheet, which is another financial statement that shows the assets, liabilities, and equity of a business at a specific point in time. References: Income Statement - Definition, Explanation and Examples, Income Statement: How to Read and Use It - Investopedia, How to Prepare an Income Statement | HBS Online

According to the Registered Investments (RIs) - Canada.ca, you must inform the regulatory authorities of any material or significant changes to your personal circumstances, such as a change of name, address, or employment status. You must also report any disciplinary actions, criminal charges, or civil lawsuits that may affect your suitability as a registrant. Failing to do so may result in suspension or revocation of your registration.

This answer is correct because according to FINRA Rule 3270, a registered representative must notify their firm in writing of any outside business activity (OBA) that involves compensation or the reasonable expectation of compensation from another person, or that may be viewed by customers or the public as part of the member’s business. However, if the OBA does not involve any of these factors, then the notification is not required. In this case, Reagan’s role as the Chief Revenue Officer of a charitable organization may not involve any compensation or any connection to her securities business, especially if none of her colleagues from the charity become clients. Therefore, she is not required to inform her dealer of this outside activity.

References = Outside Business Activities and Private Securities Transactions, Selling Away in Securities: Understanding FINRA Rule 3270

Gross domestic product (GDP) is a measure of the total economic activity in a country. It is calculated by adding up the market value of all the final goods and services produced within a country’s borders in a given period of time, usually a year or a quarter. Final goods and services are those that are sold to the end users, such as consumers, businesses, or the government, and are not used as inputs for further production. For example, a loaf of bread sold to a consumer is a final good, but the flour used to make the bread is not. The market value of goods and services is the price that buyers are willing to pay for them in the market. This reflects the value added by the producers at each stage of production and avoids double counting. For example, if a farmer sells wheat for $10 to a miller, who then sells flour for $20 to a baker, who then sells bread for $30 to a consumer, the value added at each stage is $10, $10, and $10, respectively. The total value added is $30, which is equal to the market value of the final good (bread). Therefore, GDP only includes the market value of final goods and services and excludes intermediate goods and services.

References: Canadian Investment Funds Course, Unit 4, Section 4.1; 5; 6; 7; 8

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. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Unit 9, Lesson 1

 A material conflict of interest is a situation where a Dealing Representative or their firm has an interest that could reasonably be expected to affect the exercise of their professional judgment or influence their actions or recommendations. A Dealing Representative must identify, disclose, and manage any material conflicts of interest in the best interest of their clients. Oscar has properly addressed the material conflict of interest arising from the higher MER by reporting it to his dealer, disclosing it to his client, and explaining how it is in the client’s best interest. The other scenarios do not demonstrate proper management of material conflicts of interest.

References: Canadian Investment Funds Course, Chapter 8: Suitability and Know Your Client1

Current yield and effective yield are two ways of measuring the total return for money market funds. Current yield reflects the income earned on a money market fund for the most recent 14 day period, annualized. Effective yield incorporates the compounding effect of reinvesting the income earned on a money market fund over a year. Both current yield and effective yield are displayed in the performance reports of money market funds, as they provide different information to investors.

References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 4: Money Market Instruments, Section 5.4.3: Total Return for Money Market Funds1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.4.3 2

This is the net asset value per unit (NAVPU) for the Marigold Canadian Dividend Fund for July 6. The NAVPU is calculated by dividing the net asset value (NAV) of the fund by the number of units outstanding. In this case, the NAVPU is $8.25 ($45,668,900 / 5,564,443).

The NAV is the value of a fund’s assets minus the value of its liabilities. The value of assets is the value of all the securities in the portfolio, plus any cash and cash equivalents, plus any accrued income for the day. The value of liabilities is the value of all short-term and long-term liabilities, plus any accrued expenses for the day. The NAV is usually expressed on a per-share or per-unit basis, which is the NAVPU.

The NAVPU is the price at which investors can buy or sell units of the fund. It is determined at the end of each trading day based on the closing market prices of the portfolio’s securities. The NAVPU can change daily depending on the performance of the securities in the fund and the fund’s expenses.