100% Pass Quiz CISI - Authoritative IFC Latest Exam Answers
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100% Pass Quiz 2025 Authoritative IFC: Investment Funds in Canada (IFC) Exam Latest Exam Answers
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CISI Investment Funds in Canada (IFC) Exam Sample Questions (Q191-Q196):
NEW QUESTION # 191
Ai Fen has recently become registered to sell mutual funds with Acadian Eastern Financial, a mutual fund dealer. Ai Fen determined that with her background of being a Chartered Financial Analyst, she can help people understand the nature of investing more easily than others in her field.
Which registration category will need to be prominently noted on Ai Fen's business card to comply with the
"holding out rule"?
Answer: A
Explanation:
The holding out rule is a regulatory requirement that prohibits registered individuals from using any title or designation other than their registration category when dealing with clients or potential clients. The purpose of this rule is to prevent misleading or confusing representations about the qualifications, roles, and responsibilities of registered individuals. According to Section 4.4 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), individuals who are registered to sell mutual funds must use the title "dealing representative" when holding out to clients or potential clients.
Therefore, Ai Fen must prominently note "dealing representative" on her business card to comply with the holding out rule. The other options are not valid registration categories for selling mutual funds. Option B is a generic term that does not specify the type of securities that can be sold. Option C is a registration category for individuals who trade securities on behalf of an investment dealer. Option D is a professional designation that does not indicate registration status. References: [Holding Out Rule], [Registration Categories],
[Registration Requirements, Exemptions and Ongoing Registrant Obligations]
NEW QUESTION # 192
What is the step in the financial planning process that includes a discussion of a client's household budget?
Answer: C
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
Discussing a client's household budget is part of identifying their financial situation and constraints, a key step in the financial planning process. The feedback from the document states:
"The household budget is part of the discussions related to identifying financial problems and constraints." Reference:Chapter 4 - Getting to know the clientLearning Domain:The Know Your Client Communication Process
NEW QUESTION # 193
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?
Answer: A
Explanation:
A life income fund (LIF) is a type of registered retirement income fund (RRIF) that can be used to hold locked-in pension funds as well as other assets for an eventual payout as retirement income. A LIF cannot be withdrawn in a lump sum and has minimum and maximum withdrawal amounts each year. A LIF can only be funded by transferring money from a locked-in retirement account (LIRA) or another LIF. Therefore, D is the correct answer. References: Life Income Fund (LIF): Definition and How Withdrawals Work - Investopedia, Retraite Quebec - Characteristics of an LIF
NEW QUESTION # 194
Robin is preparing for a client meeting. She is gathering information about a mutual fund that she would like to recommend to her client. Which of the following documents would be considered sales communication?
Answer: D
Explanation:
Sales communication is any written or electronic communication that is intended to promote the sale of a mutual fund, or to influence a person to buy or sell a mutual fund. Sales communication includes any advertisement, brochure, report, newsletter, or other material that is distributed to existing or potential clients.
A marketing brochure is an example of sales communication, as it is designed to inform and persuade clients about the features and benefits of a mutual fund. A prospectus, a fund facts, and an annual information form are not considered sales communication, as they are legal documents that provide essential information about a mutual fund, such as its investment objectives, strategies, risks, fees, and performance. These documents are required by securities regulators and must be delivered to investors before or after they purchase a mutual fund.
References = Canadian Investment Funds Course, Unit 7: The Regulatory Environment, Lesson 2: Sales Communication, Section 7.2.1: Definition and Scope of Sales Communication1; CIFC prepkit, Chapter 7: The Regulatory Environment, Question 7.2.1 2
NEW QUESTION # 195
Davis invested in a tactical asset allocation fund in his non-registered investment account. Distributions from the mutual fund are paid directly to Davis and not reinvested. Assuming a federal marginal tax rate of 26%, dividend gross-up rate of 38% and federal dividend tax credit rate of 15%, which type of distribution would result in the lowest amount of tax payable?
Answer: D
Explanation:
An eligible dividend is a type of dividend that is paid by a Canadian corporation that meets certain criteria and is eligible for the enhanced dividend tax credit. The dividend tax credit reduces the amount of tax payable on dividends by providing a credit against the tax liability. An eligible dividend has a higher gross-up rate and a higher dividend tax credit rate than a non-eligible dividend, which means that it results in a lower effective tax rate. A capital dividend is a type of dividend that is paid from the capital gains realized by a corporation and is tax-free to the shareholder. However, a tactical asset allocation fund is unlikely to pay capital dividends, as they are usually reserved for private corporations. A capital gain is the profit from selling an asset at a higher price than its purchase price. Only 50% of the capital gain is taxable, which means that it has a lower effective tax rate than interest income, which is fully taxable. However, a capital gain distribution from a mutual fund is not the same as a capital gain from selling the mutual fund units. A capital gain distribution is paid when the fund realizes a capital gain from selling its underlying assets, and it is taxable in the year it is received, regardless of whether the shareholder sells the fund units or not. Therefore, it does not benefit from the deferral of tax that occurs when the shareholder sells the fund units at a later date. An interest distribution is paid when the fund earns interest income from its underlying assets, such as bonds or money market instruments. Interest income is fully taxable at the marginal tax rate, which means that it has the highest effective tax rate among the four types of distributions.
To compare the amount of tax payable for each type of distribution, we can use the following formula:
Tax=(Distribution×Gross#up)×MarginalTaxRate#(Distribution×Gross#up)×DividendTaxCreditRate For simplicity, we assume that Davis receives $100 of each type of distribution and that he does not have any other income or deductions. We also ignore any provincial taxes or credits. Using the formula, we can calculate the tax payable for each type of distribution as follows:
* Capital Dividend:Tax=(100×0)×0.26#(100×0)×0=0
* Capital Gain:Tax=(100×0.5)×0.26#(100×0.5)×0=13
* Eligible Dividend:Tax=(100×1.38)×0.26#(100×1.38)×0.15=10.14
* Interest:Tax=(100×1)×0.26#(100×1)×0=26
Therefore, an eligible dividend would result in the lowest amount of tax payable, followed by a capital gain, a capital dividend, and an interest distribution.
:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.2: Taxation of Investment Income, page 7-41 Eligible Dividends Definition - Investopedia2 Capital Dividend Definition - Investopedia3 Capital Gain Distribution Definition - Investopedia4
NEW QUESTION # 196
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