[Q131-Q152] Full CIFC Practice Test and 225 Unique Questions, Get it Now!

NEW QUESTION 131
Louis is the portfolio manager for Quattro Fund. The mandate of the mutual fund is to invest in a combination of cash, fixed income, and equity securities; however, Louis has the ability to adjust the portfolio according to market conditions. If Louis feels that interest rates will fall, he could invest the whole portfolio in equities. If he feels the market is too high, he could take profits and sit totally in cash. What type of mutual fund is Quattro Fund?

Canadian equity fund

balanced fund

commodity pool

asset allocation fund

NEW QUESTION 132
Beatrice is looking for comprehensive information regarding the analysis of financial statements and fund management expenses as it relates to her current mutual fund investment.
Which document would provide the information she is looking for?

Annual Information Form

Fund Facts

Simplified Prospectus

Management Reports of Fund Performance

NEW QUESTION 133
One of your clients, Fernando, is approaching 71 years of age and has a few questions regarding life income funds (LIFs).
Which of the following statements about LIFs is TRUE?

Fernando may make contributions to his LIF if he continues working.

Fernando is free to withdraw any amount from his LIF above the minimum amount.

Fernando can transfer money from his registered retirement savings plan (RRSP) to a LIF.

Fernando can transfer money from his locked-in retirement account (LIRA) to a LIF.

NEW QUESTION 134
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).

NEW QUESTION 135
Throughout the year, the Redwood Global Equity Fund generated the following outcomes:
. $1.00 per unit of interest income from Canadian treasury bills
. $2.50 per unit of dividend income from foreign corporations
. $7.75 per unit of capital gains from the sale of Canadian corporations
. $6.50 per unit of capital gains from the sale of foreign corporations
. $2.00 per unit of capital losses from the sale of foreign corporations Given that the Redwood Global Equity Fund is structured as a mutual fund trust, which of the following statements is true?

Redwood can flow the foreign dividends to unitholders, who can then take advantage of the dividend gross-up and tax credit mechanism.

Unitholders will receive $12.25 per unit of net capital gains from Redwood, of which only 50% is subject to tax.

Redwood can distribute the $2.00 per unit of capital losses to unitholders, who can then use them to offset their capital gains.

Since Redwood pays the tax on foreign income, it does not distribute dividend or capital gains income from foreign sources to unitholders.

Explanation
This statement is true because a mutual fund trust can distribute its net income and net realized capital gains to its unitholders, and avoid paying tax at the fund level. The unitholders then report their share of the fund’s income and capital gains on their tax returns, and pay tax according to their marginal tax rates. In this case, Redwood has generated $14.25 per unit of capital gains from the sale of Canadian and foreign corporations, and $2.00 per unit of capital losses from the sale of foreign corporations. Therefore, its net capital gains are
$12.25 per unit ($14.25 – $2.00), which it can distribute to its unitholders. The unitholders will only include
50% of the net capital gains in their taxable income, as per the inclusion rate for capital gains in Canada1. The other 50% is tax-free.
The other statements are false because:
* A. Redwood cannot flow the foreign dividends to unitholders, who can then take advantage of the dividend gross-up and tax credit mechanism. This mechanism only applies to dividends received from Canadian corporations that are eligible for the enhanced dividend tax credit or the ordinary dividend tax credit2. Foreign dividends are treated as foreign income, and are subject to withholding tax by the source country and income tax by Canada3.
* C. Redwood cannot distribute the $2.00 per unit of capital losses to unitholders, who can then use them to offset their capital gains. A mutual fund trust can only distribute its net income and net realized capital gains, not its capital losses4. However, a mutual fund trust can carry forward its capital losses indefinitely and use them to reduce its taxable capital gains in future years5.
* D. Redwood does not pay the tax on foreign income, and it does distribute dividend or capital gains income from foreign sources to unitholders. A mutual fund trust pays tax on its foreign income only if it does not distribute it to its unitholders in the same year it is earned. However, most mutual fund trusts distribute all or most of their foreign income to their unitholders, as they want to avoid paying tax at the fund level and maintain their status as a mutual fund trust.
References:
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.3: Taxation of Mutual Funds, page 7-10
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.2: Taxation of Investment Income, page 7-4
* Foreign Income – Canada.ca
* Mutual Fund Trusts – Canada.ca
* Capital Losses and Deductions – Canada.ca
* Taxation of Foreign Income – IFSE Institute
* Mutual Fund Trusts – IFSE Institute

NEW QUESTION 136
Which of the following statements describes a feature of the Home Buyers’ Plan (HBP)?

To qualify- as a first-time home buyer you or your spouse must never have previously owned a home

Once you are required to repay the amounts back to your RRSP. any missed or incomplete payments are subject to tax.

A qualifying home must be purchased by December 31 of the year of withdrawal.

If you have a spouse or common-law partner, each of you can withdraw up to JE50.000 from your registered retirement savings plans (RRSPs).

NEW QUESTION 137
Nelson is a Dealing Representative with True Wealth Advisors Inc., a mutual fund dealer. Nelson follows proper procedures related to his firm’s Relationship Disclosure Information (RDI). Which of the following CORRECTLY describes how Nelson is permitted to evidence that he satisfied his RDI obligation?

Nelson may retain a copy of the RDI in the client file with detailed notes to confirm that he provided and explained the RDI to the client.

Nelson may deliver the RDI to clients who request it and keep detailed notes of the clients who were provided with the RDI.

Nelson can formalize his relationship under the RDI using a Letter of Engagement that specifies duties, responsibilities, and level of service.

Nelson can record detailed notes which confirm that he provided and explained the Fund Facts to the client within 2 days of the RDI.

NEW QUESTION 138
Jehona is a Dealing Representative with Vista Wealth Investments Inc., a mutual fund dealer in Ontario and Nova Scotia. Jehona has reviewed her client Sokol’s account and wants to adjust the holdings andre-balance the portfolio. Which of the following statements about Jehona’s permitted activities is CORRECT?

If Sokol has siqned a Limited Authorization Form, Jehona can process the trades in the account without Sokol’s pre-approval.

If Jehona wants to execute trades for Sokol’s account, Sokol must provide his specific authorization before the trades are entered.

If Sokol has qiven Jehona discretionary tradinq authority, Jehona can process trades in the account without Sokol’s pre-approval.

If Jehona wants to execute the trades without Sokol’s pre-approval, Sokol must first appoint Jehona as his Power of Attorney.

NEW QUESTION 139
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.

NEW QUESTION 140
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?

ABC common shares which had a 20% annual yield during the previous 5 years.

3% Government of Canada Bonds at par, which have a maturity that coincides with Sheldon’s time horizon.

FEG Labour-Sponsored Fund which will give him a tax benefit.

Debentures of XYZ Corporation will give Sheldon a regular income and an attractive yield.

NEW QUESTION 141
Sheldon is a 25 year old graphic designer. He has just started working and saves regularly. Apart from his regular salary he also earns extra money from freelancing after office hours and during weekends. His earnings from his freelance work are sufficient for meeting his living expenses. He saves the entire amount of his salary. He has heard about lifecycle funds but has come to you for additional information.
Which of the following statement about lifecycle funds is TRUE?

As Sheldon gets older, the life cycle asset allocation changes from more risky to less risky.

All lifecycle funds start with equal allocations to cash, fixed income and equities before being re-balanced.

The asset allocation of a lifecycle fund is set based on the age demographic of its unitholders and remains the same for the time frame of the lifecycle fund.

Investor income is the only basis for changing the asset allocation of a lifecycle mutual fund.

NEW QUESTION 142
Felipe is a Dealing Representative who is developing a non-registered investment solution for Laryssa. Felipe is debating between recommending either mutual fund trusts or mutual fund corporations. He wants to recommend an investment that reduces Laryssa’s exposure to taxation.
Which feature may influence his recommendation?

Distributions from mutual fund corporations are not taxable to investors.

Mutual fund trusts can only distribute capital gains and Canadian dividends.

Capital losses may be distributed from mutual fund corporations.

Any income received by a mutual fund corporation is distributed in the form of either capital gains or Canadian dividends.

NEW QUESTION 143
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?

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.

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.

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.

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).

NEW QUESTION 144
While assessing the suitability of an investment recommendation as a Dealing Representative, which statement applies to the “Client’s Interest First” standard?

Presenting a fund’s historical investment performance to anticipate a mutual fund’s future rate of return.

Clarifying for clients the costs and fees associated with mutual funds and how they impact investment performance.

The use of a risk-based approach when determining which mutual fund to recommend to the client.

Accurately document Know Your Client information (KYC) so there is evidence to support a recommendation.

NEW QUESTION 145
What is the national self-regulatory organization (SRO) for investment dealers?

The National Securities Commission

The Mutual Fund Dealers Association of Canada

The Canadian Securities Administrators

The Investment Industry Regulatory Organization of Canada

NEW QUESTION 146
Which of the following Dealing Representatives has CORRECTLY fulfilled their suitability obligation?

Clarence determines that the Absolute Alternative Fund is suitable for all of his clients. Clarence believes that all investors need alternative funds in order to be properly diversified.

Kiri recommends the Conservative Bond Fund to his client, Myrtle. The fund generates income and Myrtle’s investment objective is “income” on her Know Your Client (KYC) form.

Li Ming recommends the Venturex Labour-Sponsored Fund to her client, Park. While Park has low tolerance and capacity for risk, Li Ming provides detailed disclosure which explains the fund’s risks.

Roderik determines that the model portfolio he has developed will be suitable for all of his clients. Roderik has included investments with both income and growth to appeal to all investors.

NEW QUESTION 147
Jabir begins the registration process with his new dealer Prosper Wealth Inc. Jabir is excited about his new career and eager to start calling clients, opening new accounts, and selling investments. Which of the following CORRECTLY describes when Jabir will be eligible to open new client accounts and sell investments?

Upon employment with the dealer

Upon registration application by the dealer

Upon passing the proficiency course

Upon formal confirmation from the regulator

NEW QUESTION 148
Which of the followings describes segregated funds?

Segregated funds have high returns, high management fees, and cannot be redeemed until the maturity date of the contract.

Segregated funds flow through capital losses to investors because the investors are the owners of the underlying fund.

Segregated funds offer some protection of the capital invested but there is an added cost for the protection.

Segregated funds are subject to securities regulation because they are distributed by mutual fund dealing representatives.

NEW QUESTION 149
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?

bond fund

Canadian equity index fund

asset allocation fund

target date fund

NEW QUESTION 150
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

NEW QUESTION 151
Pierre wants to discuss the merits of a specific mutual fund with his Dealing Representative, Simone. There are no trailer fees associated with this fund. Simone is familiar with the mutual fund that Pierre is referring to, which is not offered by her dealer. They schedule an appointment to further discuss his investment portfolio.
Which behaviour from Simone is ethical?

Simone’s ability to keep her knowledge current on competitors’ investment offerings shows that she is putting her client’s interest first.

Knowing Pierre does not like that her dealer’s funds have trailer fees, she chooses not to discuss the relationship between trailer fees and MER while making comparisons.

When comparing her dealer’s own mutual funds to the one Pierre discovered, Simone emphasizes the importance of similar net rates of return and minimizes the significance of management expense ratios (MERs).

While comparing Fund Facts of the different mutual funds, Simone points out that not only are the fund management expenses different but so are the investor profiles for each fund.

NEW QUESTION 152
You are meeting a new client, Steven, and you are trying to determine his level of understanding of different investments. Which question would give you the most information regarding your client’s familiarity with investing?

Do you want to minimize taxes from your investments?

What rate of return do you expect from investing?

Do you understand the relationship between risk and return?

Do you have the resources to invest for the long-term?