1. Describe What a Portfolio Manager Is
Q1: What is the primary responsibility of a portfolio manager?
A. To provide financial planning advice
B. To advise clients on appropriate investments based on their circumstances and objectives
C. To monitor stock market trends
D. To sell financial products to clients
Answer: B. To advise clients on appropriate investments based on their circumstances and objectives
Explanation: A portfolio manager focuses on making investment recommendations or decisions tailored to each client’s needs and goals.
Q2: A portfolio manager typically works with which of the following types of clients?
A. Only individual investors
B. Both individual and institutional investors
C. Only institutional investors
D. Only high-net-worth individuals
Answer: B. Both individual and institutional investors
Explanation: Portfolio managers can work with a range of clients, including individual and institutional investors.
Q3: Which of the following is NOT a responsibility of a portfolio manager?
A. Risk management
B. Selecting securities for client portfolios
C. Conducting legal audits for clients
D. Asset allocation
Answer: C. Conducting legal audits for clients
Explanation: Portfolio managers do not conduct legal audits. They focus on investment decisions and risk management.
Q4: How do portfolio managers decide on investments for their clients?
A. Based on market trends
B. Based on clients' individual circumstances and investment objectives
C. Based on their own financial goals
D. Based on firm recommendations
Answer: B. Based on clients' individual circumstances and investment objectives
Explanation: Portfolio managers tailor investments to match their clients’ financial goals, risk tolerance, and time horizon.
Q5: What is a key skill required for portfolio managers?
A. Marketing skills
B. Communication with shareholders
C. Knowledge of asset allocation strategies
D. Public relations expertise
Answer: C. Knowledge of asset allocation strategies
Explanation: Portfolio managers must understand asset allocation to create diversified portfolios that meet clients' objectives.
Q6: Portfolio managers make decisions on behalf of their clients. This means they have:
A. Discretionary authority
B. Non-discretionary authority
C. Legal oversight
D. Limited trading capacity
Answer: A. Discretionary authority
Explanation: Portfolio managers often have discretionary authority, allowing them to make investment decisions without client approval for each trade.
Q7: Which type of analysis is most often used by portfolio managers when making investment decisions?
A. Technical analysis
B. Fundamental analysis
C. Historical analysis
D. Legal analysis
Answer: B. Fundamental analysis
Explanation: Portfolio managers typically use fundamental analysis to evaluate the financial health and potential of investments.
Q8: What should a portfolio manager prioritize when managing client investments?
A. Their firm's profitability
B. The client's best interest
C. Market trends
D. Regulatory requirements
Answer: B. The client's best interest
Explanation: A portfolio manager has a fiduciary duty to act in the client’s best interest.
Q9: Which of the following is an investment objective a portfolio manager might consider?
A. Profit maximization
B. Risk aversion
C. Growth
D. All of the above
Answer: D. All of the above
Explanation: Portfolio managers balance client objectives such as growth, risk aversion, and profit maximization when making investment decisions.
Q10: Which professional designation is commonly held by portfolio managers?
A. Certified Financial Planner (CFP)
B. Chartered Financial Analyst (CFA)
C. Chartered Accountant (CA)
D. Certified Public Accountant (CPA)
Answer: B. Chartered Financial Analyst (CFA)
Explanation: The CFA designation is widely recognized for portfolio managers due to its rigorous focus on investment analysis and portfolio management.
2. Identify and Explain Various Dealer, Advisor, and Individual Registration Categories in Canada
Q1: Which of the following is NOT a dealer registration category in Canada?
A. Investment dealer
B. Exempt market dealer
C. Mutual fund dealer
D. Private equity dealer
Answer: D. Private equity dealer
Explanation: Private equity dealer is not a recognized dealer category under Canadian registration categories.
Q2: What is the registration category for individuals who sell mutual funds in Canada?
A. Dealing representative
B. Investment dealer
C. Advising representative
D. Mutual fund dealer
Answer: A. Dealing representative
Explanation: Dealing representatives are registered individuals who sell products such as mutual funds on behalf of their firm.
Q3: Which registration category must an individual meet to provide discretionary portfolio management services?
A. Dealing representative
B. Advising representative
C. Exempt market dealer
D. Mutual fund dealer
Answer: B. Advising representative
Explanation: Advising representatives are registered to provide portfolio management and investment advice to clients.
Q4: Which designation is typically required for registration as a portfolio manager in Canada?
A. CIM (Chartered Investment Manager)
B. CFP (Certified Financial Planner)
C. CPA (Chartered Professional Accountant)
D. CA (Chartered Accountant)
Answer: A. CIM (Chartered Investment Manager)
Explanation: The CIM designation is one of the key requirements for becoming a registered portfolio manager in Canada.
Q5: What is the role of an Ultimate Designated Person (UDP) in a registered firm?
A. To supervise compliance activities
B. To oversee the firm's day-to-day operations
C. To approve client investment decisions
D. To handle legal representation for clients
Answer: B. To oversee the firm's day-to-day operations
Explanation: The UDP is responsible for ensuring that the firm adheres to its regulatory and compliance responsibilities.
Q6: What category does a restricted portfolio manager fall under?
A. Dealer category
B. Individual registration category
C. Advisor category
D. Institutional category
Answer: C. Advisor category
Explanation: A restricted portfolio manager is part of the advisor category but may have limitations on the scope of advice they can provide.
Q7: Which registration category allows a firm to deal in exempt securities without a prospectus?
A. Mutual fund dealer
B. Exempt market dealer
C. Investment dealer
D. Portfolio manager
Answer: B. Exempt market dealer
Explanation: Exempt market dealers are allowed to deal in securities that do not require a prospectus under certain conditions.
Q8: Which individual registration category is responsible for providing financial advice but cannot provide discretionary management?
A. Associate advising representative
B. Advising representative
C. Dealing representative
D. Chief compliance officer
Answer: A. Associate advising representative
Explanation: Associate advising representatives assist advising representatives but do not have full discretionary authority.
Q9: Which of the following is a responsibility of a Chief Compliance Officer (CCO)?
A. Developing investment strategies
B. Overseeing the firm's compliance with regulatory requirements
C. Conducting client portfolio reviews
D. Managing the firm's proprietary accounts
Answer: B. Overseeing the firm's compliance with regulatory requirements
Explanation: The CCO ensures the firm adheres to all regulatory and compliance standards.
Q10: What is the role of a dealing representative in a firm?
A. To provide investment advice
B. To recommend and execute trades for clients
C. To monitor regulatory updates
D. To manage portfolio allocation
Answer: B. To recommend and execute trades for clients
Explanation: Dealing representatives are responsible for recommending and executing trades on behalf of clients.
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3. Describe the Regulatory Environment in Canada
Q1: Which organization works to harmonize securities regulations across Canadian provinces and territories?
A. Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
B. Canadian Securities Administrators (CSA)
C. Office of the Superintendent of Financial Institutions (OSFI)
D. Investment Industry Regulatory Organization of Canada (IIROC)
Answer: B. Canadian Securities Administrators (CSA)
Explanation: The CSA is responsible for coordinating and harmonizing securities regulation across the provinces and territories of Canada.
Q2: Which of the following is TRUE about the regulatory environment in Canada?
A. Canada has a national securities regulator.
B. Each province and territory regulates securities individually.
C. Securities regulation is handled by FINTRAC.
D. IIROC governs mutual funds directly.
Answer: B. Each province and territory regulates securities individually.
Explanation: Canada does not have a national securities regulator; each province and territory regulates securities independently.
Q3: Self-regulatory organizations (SROs) play a key role in the Canadian regulatory environment. Which of the following is an example of an SRO?
A. Financial Consumer Agency of Canada (FCAC)
B. Investment Industry Regulatory Organization of Canada (IIROC)
C. Bank of Canada
D. Canadian Securities Administrators (CSA)
Answer: B. Investment Industry Regulatory Organization of Canada (IIROC)
Explanation: IIROC is a self-regulatory organization responsible for overseeing investment dealers and trading activity in Canadian debt and equity markets.
Q4: Who primarily oversees the securities regulation in Canada?
A. Provincial and territorial securities commissions
B. Federal government
C. Canadian Securities Administrators (CSA)
D. IIROC
Answer: A. Provincial and territorial securities commissions
Explanation: Provincial and territorial securities commissions regulate the securities industry within their jurisdictions.
Q5: What is the purpose of the Canadian Securities Administrators (CSA)?
A. To create tax policies for financial markets
B. To monitor economic performance
C. To harmonize securities regulations across Canada
D. To regulate banks and financial institutions
Answer: C. To harmonize securities regulations across Canada
Explanation: The CSA works to ensure consistent securities regulations across all provinces and territories.
Q6: Which of the following is NOT a responsibility of IIROC?
A. Monitoring trading activity
B. Overseeing investment dealers
C. Regulating mutual funds
D. Ensuring market integrity
Answer: C. Regulating mutual funds
Explanation: IIROC oversees investment dealers and trading but does not directly regulate mutual funds.
Q7: What is the role of a provincial securities commission in Canada?
A. Setting monetary policy
B. Overseeing market regulation in their jurisdiction
C. Establishing tax laws for investments
D. Harmonizing regulations across provinces
Answer: B. Overseeing market regulation in their jurisdiction
Explanation: Provincial securities commissions are responsible for regulating securities markets within their own jurisdictions.
Q8: Which of the following is an example of how the CSA achieves regulatory harmonization?
A. Enforcing national policies
B. Creating the Investment Canada Act
C. Establishing national instruments that apply across all provinces and territories
D. Regulating the banking sector
Answer: C. Establishing national instruments that apply across all provinces and territories
Explanation: The CSA creates national instruments, such as National Instrument 31-103, to harmonize securities regulation across provinces.
Q9: What is the regulatory body that oversees banks and financial institutions in Canada?
A. IIROC
B. Office of the Superintendent of Financial Institutions (OSFI)
C. Canadian Securities Administrators (CSA)
D. Financial Consumer Agency of Canada (FCAC)
Answer: B. Office of the Superintendent of Financial Institutions (OSFI)
Explanation: OSFI is responsible for regulating banks and financial institutions in Canada.
Q10: How do provincial and territorial regulators collaborate on securities regulation?
A. By delegating authority to the federal government
B. By creating individual regulations in isolation
C. Through the Canadian Securities Administrators (CSA)
D. By outsourcing to international organizations
Answer: C. Through the Canadian Securities Administrators (CSA)
Explanation: The CSA coordinates the efforts of provincial and territorial regulators to create consistent securities regulations across Canada.
4. Identify CIRO-Managed Account Rules Regarding Documentation and Approval Process
Q1: What document must a client sign before a managed account can be approved?
A. Managed account agreement
B. Investment policy statement
C. Client account mandate
D. Trading authorization form
Answer: A. Managed account agreement
Explanation: A managed account agreement must be signed by the client before the account can be approved.
Q2: Which of the following is a responsibility of the dealer member’s designated supervisor for managed accounts?
A. Selecting the investment strategy
B. Ensuring the client understands the investment risks
C. Accepting the managed account agreement
D. Executing trades on behalf of the client
Answer: C. Accepting the managed account agreement
Explanation: The designated supervisor must accept the managed account agreement to ensure it aligns with the client’s objectives and firm policies.
Q3: In a CIRO-managed account, what information must be clearly indicated in the managed account agreement?
A. The dealer member's profit margins
B. The client’s investment objectives
C. The historical performance of the account
D. The account manager’s fee structure
Answer: B. The client’s investment objectives
Explanation: The managed account agreement must clearly state the client's investment objectives.
Q4: What must a dealer member provide to the client in relation to managed accounts?
A. A copy of the dealer member’s compensation plan
B. A list of preferred investments
C. A copy of the procedures for the fair allocation of investment opportunities
D. A statement of conflicts of interest
Answer: C. A copy of the procedures for the fair allocation of investment opportunities
Explanation: The dealer member must provide the client with a copy of its procedures to ensure fair allocation of investment opportunities among managed accounts.
Q5: Which of the following is required for the approval of a managed account?
A. A financial audit of the client’s other accounts
B. The client’s signed managed account agreement
C. An analysis of market trends
D. A background check on the account manager
Answer: B. The client’s signed managed account agreement
Explanation: A signed managed account agreement is required for account approval.
Q6: What role does the designated supervisor for managed accounts play in the approval process?
A. They execute trades for the client
B. They approve the managed account agreement
C. They oversee the client’s tax planning
D. They provide advice on portfolio construction
Answer: B. They approve the managed account agreement
Explanation: The designated supervisor is responsible for reviewing and accepting the managed account agreement.
Q7: What must the managed account agreement reflect regarding the client?
A. Their historical trading behavior
B. Their financial goals and investment objectives
C. Their favorite stocks and bonds
D. Their preferred account manager
Answer: B. Their financial goals and investment objectives
Explanation: The agreement must align with the client’s specific investment objectives and financial goals.
Q8: What documentation ensures that investment opportunities are allocated fairly among clients in managed accounts?
A. The investment mandate
B. The managed account policy
C. The firm’s fair allocation procedures
D. The portfolio performance review
Answer: C. The firm’s fair allocation procedures
Explanation: Fair allocation procedures ensure that investment opportunities are distributed equitably among clients with managed accounts.
Q9: Who is responsible for ensuring that the client’s managed account is aligned with their investment objectives?
A. The account manager
B. The designated supervisor
C. The client’s financial planner
D. The board of trustees
Answer: B. The designated supervisor
Explanation: The designated supervisor ensures that the managed account aligns with the client’s investment objectives.
Q10: What must a dealer member provide to the client in addition to the managed account agreement?
A. A copy of the firm’s procedures for fair allocation
B. The account manager’s resume
C. The historical performance of all managed accounts
D. A list of approved securities
Answer: A. A copy of the firm’s procedures for fair allocation
Explanation: The dealer member must provide the client with a copy of the firm’s fair allocation procedures.
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5. Outline the Various Investment Practices the Canadian Securities Administrators (CSA) Regulates
Q1: What does the term "high closing" refer to in the context of CSA regulations?
A. Artificially inflating a stock’s price at the end of the trading day
B. Closing a mutual fund before market hours
C. Setting a price ceiling for a security
D. Preventing the trade of securities at high prices
Answer: A. Artificially inflating a stock’s price at the end of the trading day
Explanation: "High closing" refers to the practice of artificially inflating a stock’s price during the final minutes of trading to manipulate its market price.
Q2: Which of the following investment practices is regulated by the CSA to prevent insider trading?
A. Market timing
B. High closing
C. Late trading
D. Fair dealing
Answer: C. Late trading
Explanation: Late trading occurs when an order is placed after the market closes but is executed at that day’s closing price, which is considered illegal and is regulated by the CSA.
Q3: What is "market timing" in the context of CSA regulations?
A. Timing trades based on earnings reports
B. Trading securities based on time-zone differences
C. Buying and selling stocks at market close
D. Predicting market fluctuations using technical analysis
Answer: B. Trading securities based on time-zone differences
Explanation: Market timing refers to taking advantage of time-zone differences to profit from events affecting foreign markets before those markets open.
Q4: Which of the following is regulated under the CSA’s client privacy requirements?
A. Prohibiting the sharing of client information without consent
B. Preventing the disclosure of stock prices
C. Protecting corporate financial data
D. Monitoring insider trading practices
Answer: A. Prohibiting the sharing of client information without consent
Explanation: The CSA requires firms to protect client privacy by prohibiting the sharing of client data without explicit consent.
Q5: How does the CSA regulate "soft dollar arrangements"?
A. By limiting the use of client assets in soft dollar transactions
B. By monitoring price manipulations
C. By mandating the disclosure of soft dollar arrangements to clients
D. By restricting foreign currency transactions
Answer: C. By mandating the disclosure of soft dollar arrangements to clients
Explanation: Soft dollar arrangements, where brokerage services are paid for using client commissions, must be disclosed to clients under CSA regulations.
Q6: What does the CSA regulate to ensure fairness in the trade of securities on the internet?
A. Client access to investment products
B. The accuracy and transparency of online trading platforms
C. The timing of electronic orders
D. The geographical location of online traders
Answer: B. The accuracy and transparency of online trading platforms
Explanation: The CSA ensures fairness in online trading by regulating the transparency and accuracy of trading information on internet-based platforms.
Q7: Under CSA regulations, what must investment firms provide to clients regarding their fairness policy?
A. The firm's profit margins
B. Information on how investment opportunities are distributed fairly
C. Detailed quarterly financial statements
D. A list of approved market trading hours
Answer: B. Information on how investment opportunities are distributed fairly
Explanation: The CSA requires firms to disclose how they ensure fair treatment of clients, especially regarding the allocation of investment opportunities.
Q8: What is the role of the CSA in regulating "late trading"?
A. Approving late trading requests from clients
B. Prohibiting trades after market hours at that day’s closing price
C. Ensuring that late trades meet client objectives
D. Offering discounts on late trades to institutional investors
Answer: B. Prohibiting trades after market hours at that day’s closing price
Explanation: The CSA prohibits the illegal practice of late trading, which allows traders to benefit unfairly from after-hours market movements.
Q9: Which of the following is a key regulation the CSA enforces related to client privacy?
A. Clients must disclose personal information to access investment products
B. Firms must maintain the confidentiality of client data
C. Only institutional clients are subject to privacy rules
D. The CSA does not regulate client privacy
Answer: B. Firms must maintain the confidentiality of client data
Explanation: The CSA enforces strict client privacy requirements to ensure that personal and financial data are protected.
Q10: Which investment practice is regulated by the CSA to prevent market manipulation?
A. Soft dollar arrangements
B. High closing
C. Market timing
D. Client risk profiling
Answer: B. High closing
Explanation: The CSA regulates high closing to prevent manipulation of stock prices at the end of the trading day.
6. Explain the Compliance Requirements of FINTRAC
Q1: What is the primary focus of FINTRAC?
A. Monitoring tax fraud
B. Detecting and preventing money laundering and terrorist financing
C. Regulating the insurance industry
D. Setting investment standards for financial institutions
Answer: B. Detecting and preventing money laundering and terrorist financing
Explanation: FINTRAC’s main role is to detect and prevent money laundering and terrorist financing.
Q2: What must firms report to FINTRAC regarding large cash transactions?
A. Any transaction exceeding $5,000
B. Any transaction involving physical cash exceeding $10,000
C. Any electronic transfer above $15,000
D. Any foreign exchange transaction
Answer: B. Any transaction involving physical cash exceeding $10,000
Explanation: FINTRAC requires firms to report cash transactions of $10,000 or more, or related transactions that add up to $10,000 within 24 hours.
Q3: What type of transaction must be reported to FINTRAC if it raises suspicion of money laundering?
A. Any international transaction over $50,000
B. Any transaction involving suspicious behavior, regardless of amount
C. Any transaction in a foreign currency
D. Any trade involving bonds
Answer: B. Any transaction involving suspicious behavior, regardless of amount
Explanation: Suspicious transactions must be reported to FINTRAC, even if the amount does not meet the reporting threshold.
Q4: FINTRAC requires firms to verify a client’s identity through which method?
A. Verifying their credit score
B. Obtaining government-approved photo identification
C. Checking previous employment history
D. Using their social security number
Answer: B. Obtaining government-approved photo identification
Explanation: Firms must verify a client’s identity using government-issued photo identification, such as a passport or driver’s license.
Q5: What must a firm report to FINTRAC when a client sends or receives a SWIFT MT 103 message for $10,000 or more outside of Canada?
A. A suspicious transaction report
B. A terrorist property report
C. An electronic funds transfer report
D. A currency transaction report
Answer: C. An electronic funds transfer report
Explanation: FINTRAC requires firms to report electronic funds transfers of $10,000 or more sent or received outside Canada.
Q6: What must be reported to FINTRAC if a firm finds that a client’s property is linked to terrorist activity?
A. A suspicious transaction report
B. A terrorist property report
C. A tax evasion report
D. A legal notice
Answer: B. A terrorist property report
Explanation: Firms are required to file a terrorist property report with FINTRAC if they identify assets owned or controlled by a terrorist group.
Q7: Which of the following must be reported to FINTRAC as part of large cash transaction reporting?
A. A client’s credit history
B. The source of the cash
C. The client’s nationality
D. The account’s investment returns
Answer: B. The source of the cash
Explanation: Firms must report the source of the cash and other relevant information when filing a large cash transaction report with FINTRAC.
Q8: How long do firms have to report a suspicious transaction to FINTRAC?
A. Immediately
B. Within 24 hours
C. Within 30 days
D. Within 90 days
Answer: B. Within 24 hours
Explanation: Firms must report suspicious transactions to FINTRAC within 24 hours of identifying them.
Q9: What does FINTRAC require firms to do in terms of maintaining client records?
A. Only keep records for high-value clients
B. Maintain a signed account application and verify identity
C. Store only electronic records of the account
D. Keep records for three months after the account is opened
Answer: B. Maintain a signed account application and verify identity
Explanation: FINTRAC requires firms to keep a signed account application for each client and verify their identity through a government-issued photo ID.
Q10: What is a key compliance requirement that firms must meet under FINTRAC’s guidelines?
A. Ensure clients invest in government bonds
B. Report terrorist financing and suspicious transactions
C. Provide tax reports for international clients
D. Offer currency exchange services to clients
Answer: B. Report terrorist financing and suspicious transactions
Explanation: Firms must report suspicious transactions and terrorist financing activities to FINTRAC as part of their compliance obligations.
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7. Outline Some of the Investment Management Industry’s Best Practices
Q1: What does the term "best execution" refer to in the context of investment management best practices?
A. Achieving the highest possible returns for the client
B. Executing trades at the best possible price given prevailing market conditions
C. Selling assets at a high premium
D. Selecting the best-performing mutual funds for clients
Answer: B. Executing trades at the best possible price given prevailing market conditions
Explanation: Best execution refers to the obligation of investment firms to execute client trades at the most favorable terms available, taking into account price, speed, and overall execution quality.
Q2: Which of the following is an example of maintaining proper records, as per industry best practices?
A. Storing client statements only for high-net-worth clients
B. Keeping detailed records of all trades and transactions
C. Storing client investment records in digital format only
D. Only recording profitable trades
Answer: B. Keeping detailed records of all trades and transactions
Explanation: Best practices in investment management include maintaining detailed and accurate records of all transactions, ensuring transparency and accountability.
Q3: What should investment firms do when a client’s investment objectives change?
A. Maintain the current portfolio without changes
B. Adjust the portfolio to align with the new objectives
C. Offer new securities without client input
D. Ignore the change until the client confirms it twice
Answer: B. Adjust the portfolio to align with the new objectives
Explanation: When a client’s investment objectives change, the portfolio should be rebalanced to align with the new goals, as per best practices.
Q4: In the case of a trading error, what is considered best practice for an investment firm?
A. Cover up the mistake to avoid client dissatisfaction
B. Immediately correct the error and inform the client
C. Only report the error to internal supervisors
D. Leave the error uncorrected if it benefits the client
Answer: B. Immediately correct the error and inform the client
Explanation: Best practice dictates that any trading errors should be rectified promptly and transparently, with clear communication to the client.
Q5: What is a conflict of interest in investment management, and how should it be addressed?
A. A situation where the firm benefits more than the client, addressed by full disclosure
B. A minor difference of opinion, handled internally
C. A pricing discrepancy that benefits the client
D. An internal audit issue, addressed by revising compliance procedures
Answer: A. A situation where the firm benefits more than the client, addressed by full disclosure
Explanation: A conflict of interest arises when a firm's or advisor's interests could potentially interfere with client interests. Best practice is to disclose these conflicts to clients fully and promptly.
Q6: Personal trading by investment professionals should be handled in which of the following ways to comply with best practices?
A. No disclosure is required as long as the trades are profitable
B. Full disclosure to clients, with restrictions on trading related to client accounts
C. Trading freely as long as the trades benefit the firm
D. Only disclosing trades if they involve high-risk securities
Answer: B. Full disclosure to clients, with restrictions on trading related to client accounts
Explanation: Best practices require full disclosure of personal trading and may impose restrictions to prevent conflicts of interest with client accounts.
Q7: How should client confidentiality and privacy be handled under investment management best practices?
A. Sharing client information with other departments to improve service
B. Ensuring strict confidentiality of client data and disclosing it only with explicit consent
C. Storing client information publicly for transparency
D. Offering client data to third parties as part of service packages
Answer: B. Ensuring strict confidentiality of client data and disclosing it only with explicit consent
Explanation: Best practices mandate that client data must be kept confidential and only disclosed with the client's explicit consent.
Q8: When dealing with non-public information, what is considered a best practice in investment management?
A. Using the information for personal gain
B. Sharing it with select clients
C. Avoiding any trading based on non-public information
D. Delaying trades until the information becomes public
Answer: C. Avoiding any trading based on non-public information
Explanation: Trading on non-public information (insider trading) is illegal and unethical. Best practice is to avoid trading based on such information.
Q9: Fair dealing, as part of industry best practices, means that an investment firm should:
A. Prioritize high-net-worth clients over others
B. Ensure that all clients are treated equally and fairly, regardless of size or status
C. Selectively offer investment opportunities to certain clients
D. Only deal fairly with clients who bring in significant revenue
Answer: B. Ensure that all clients are treated equally and fairly, regardless of size or status
Explanation: Fair dealing means treating all clients fairly, providing equal access to investment opportunities and services.
Q10: What are “soft dollar arrangements,” and how should they be managed according to best practices?
A. They refer to paying fees using client funds, and should be fully disclosed to the client
B. They involve using profits from investments to pay client fees
C. They are payments made in foreign currency to overseas clients
D. They are hidden fees, and should be eliminated
Answer: A. They refer to paying fees using client funds, and should be fully disclosed to the client
Explanation: Soft dollar arrangements involve paying for brokerage services using client commissions, and transparency with clients is key to adhering to best practices.
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