Question # 1 Which of the following qualifies as personal information under the Personal Information
Protection and Electronic Documents Act (PIPEDA)? A. employee's business address
B. employee's name
C. employee's credit record
D. employee's business telephone number
Click for Answer
C. employee's credit record
Answer Description Explanation : According to the Personal Information Protection and Electronic Documents
Act (PIPEDA), personal information is any factual or subjective information, recorded or
not, about an identifiable individual. This includes information in any form, such as age,
name, ID numbers, income, ethnic origin, or blood type. However, PIPEDA also specifies
some exceptions to the definition of personal information, such as business contact
information. Business contact information is any information that is used for the purpose of
communicating or facilitating communication with an individual in relation to their
employment, business or profession. This includes the employee’s name, position name or
title, work address, work telephone number, work fax number or work electronic address.
Therefore, an employee’s business address and business telephone number are not
considered personal information under PIPEDA. An employee’s name could be considered
personal information if it is not used for business purposes, but it is not clear from the
question whether that is the case. An employee’s credit record is clearly personal
information under PIPEDA, as it reveals sensitive information about the individual’s
financial situation and history.
Question # 2 The portfolio manager of the High Income Fund has 90% of the mutual fund invested in
bonds. What is a reason for holding bonds in a mutual fund portfolio? A. Bonds provide regular interest income which can be flowed out directly to investors.
B. Bonds produce regular capital gain payments which result in preferential tax treatment
for unitholders.
C. Coupon payments paid by bonds from large Canadian corporations are eligible for
preferential tax treatment.
D. To increase the dividend yield and credit quality of the mutual fund
Click for Answer
A. Bonds provide regular interest income which can be flowed out directly to investors.
Answer Description Explanation : One of the main reasons for holding bonds in a mutual fund portfolio is to
generate regular interest income, which can be distributed to the investors as cash or
reinvested in more units of the fund. Bonds are debt securities that pay a fixed or variable
rate of interest, called the coupon, to the bondholders until the maturity date, when the
principal amount is repaid. The interest income from bonds can provide a steady source of
cash flow for the fund and its investors, especially in low-interest-rate environments or
when other sources of income, such as dividends or capital gains, are scarce or uncertain.
Question # 3 Pacari is a Dealing Representative with Cavalry Investments, a mutual fund dealer.
Pacari’s client, Darsha, is a long-time customer and an elderly widow. Darsha depended on her husband, for financial decisions before he passed. Pacari has also noticed that
Darsha’s capacity seems to be declining over the years. Luckily, with Pacari’s help, Darsha
has been managing her finances well. However, Darsha’s daughter has been getting
involved recently and has even tried to enter trades without Darsha’s authorization. Pacari
is particularly concerned about the last transaction for Darsha’s account: a very large
redemption. Pacari fears that Darsha has become a victim of financial exploitation and he
raises his concerns with his dealer Cavalry. Which of the following statements about how
Cavalry may proceed is CORRECT? A. Cavalry can place a permanent hold on Darsha's account and disallow all future
transactions.
B. Cavalry must place a temporary hold on Darsha's account to disallow all transactions for
the account.
C. Cavalry can place a temporary hold on Darsha's account to temporarily disallow the
redemption.
D. Cavalry must proceed with the redemption because temporary and permanent holds are
not permitted.
Click for Answer
C. Cavalry can place a temporary hold on Darsha's account to temporarily disallow the
redemption.
Answer Description Explanation : Cavalry can place a temporary hold on Darsha’s account to temporarily
disallow the redemption if they have reasonable grounds to believe that Darsha is being
financially exploited or that she lacks mental capacity to make financial decisions. This is in
accordance with the guidance issued by the Mutual Fund Dealers Association of Canada
(MFDA) on how to deal with vulnerable clients. A temporary hold can be placed for up to 15
business days, which can be extended for another 15 business days if necessary. During
this time, Cavalry must conduct an internal review of the matter and contact Darsha and
any trusted contact person or legal representative to resolve the situation. Cavalry cannot
place a permanent hold on Darsha’s account without her consent or a court order. Cavalry
is not required to place a temporary hold on Darsha’s account, but it is an option available
to them to protect their client’s interests.
Question # 4 On January 2nd of this year Evan purchased 500 preferred shares of Ingram Ltd. The preferred shares have a par value of $25 per share and a quarterly dividend of $0.98 per share. They also give Evan the option to sell the shares back to Ingram at par value any time from now until September 1st two years from now. What type of preferred shares does Evan own? A. retractableB. convertibleC. participatingD. redeemable
Click for Answer
A. retractable
Answer Description Explanation:
Question # 5 Jasmine purchases a 1-year, $10,000 face value strip bond for $9,600. At maturity, when
Jasmine receives $10,000, which of the following statements is CORRECT? A. Jasmine realizes a capital dividend of S400.
B. Jasmine realizes a taxable dividend of $400.
C. Jasmine realizes a taxable capital gain of $400.
D. Jasmine realizes interest income of $400.
Click for Answer
D. Jasmine realizes interest income of $400.
Answer Description Explanation : Jasmine realizes interest income of $400 because she bought a strip bond,
which is a bond that has its principal and coupon payments separated and sold individually. Jasmine bought the principal-stripped bond, also known as a zero-coupon bond, which
pays no interest until maturity. The difference between the purchase price and the face
value at maturity is considered interest income and is taxable in the year it is received.
Question # 6 Douglas, aged 73, won a lottery prize of $100,000 last week. Today he contacted Vincent,
his Dealing Representative, with instructions to contribute the winnings to his registered
retirement income fund (RRIF) account.
Which of the following statement about RRIF is CORRECT? A. Deposits to RRIFs cannot be withdrawn for 5 years.
B. Deposits into RRIFs are not permitted.
C. Deposits to a RRIF entitle Douglas to a tax deduction.
D. Withdrawals from a non-qualifying RRIF are not taxable.
Click for Answer
B. Deposits into RRIFs are not permitted.
Answer Description Explanation : A RRIF is a retirement income option that allows you to withdraw income
from the savings accumulated under your RRSP. You cannot contribute new amounts to a
RRIF. You can only transfer funds from your RRSP or another RRIF to your RRIF.
Question # 7 Francis wants to redeem his US Asset Allocation Fund as he needs the money for a down payment for a home purchase. The current proceeds from the redemption are USD $27,859, and the current CAD/USD exchange rate is 0.7353.
A. $37,888
B. $36,698
C. $42,861
D. $35,859
Click for Answer
A. $37,888
Question # 8 Karen’s know your client (KYC) profile corresponds to someone who has a long time
horizon, is comfortable with risk and volatility, and is primarily interested in growth. She
watches the daily movements of the Toronto Stock Exchange (TSX) and wants a mutual
fund that will closely match what she sees.
What kind of mutual fund would be BEST for her? A. Canadian small capitalization equity fund
B. Canadian equity index fund
C. Canadian dividend fund
D. Canadian bond fund
Click for Answer
B. Canadian equity index fund
Answer Description Explanation : A Canadian equity index fund is a type of mutual fund that invests in stocks
that track a Canadian equity market index, such as the S&P/TSX Composite Index or the
S&P/TSX 60 Index. These indices measure the performance of the largest and most liquid
companies listed on the Toronto Stock Exchange (TSX). A Canadian equity index fund
aims to replicate the returns of the index it follows, before fees and expenses. Therefore,
this type of fund would be best for Karen, who has a long time horizon, is comfortable with
risk and volatility, and is primarily interested in growth. She also wants a mutual fund that
will closely match what she sees on the TSX.
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