What is a restriction that a mutual fund manager must follow?
Correct Answer: B
Question 107
What obligation dues an IA have when communicating information about a preliminary prospectus to prospective investors?
Correct Answer: D
Investment advisors (IAs) are required to record the names and addresses of all individuals who have requested and received a preliminary prospectus. This ensures compliance with securities regulations and provides a record for follow-ups and potential disclosures related to the offering. * A. The IA must ensure a proxy is mailed: Proxy voting is related to shareholder meetings, not the prospectus distribution. * B. The IA must provide a greensheet: A greensheet is used internally by investment firms, not distributed to clients. * C. The IA must make a tombstone advertisement: Tombstone advertisements are created by the issuer, not the IA. Reference:CSC Volume 1, Chapter 12, "Preliminary Prospectus - IA Obligations" explains the compliance requirements during prospectus distribution.
Question 108
Which asset allocation technique is used to shift the portfolio away from its policy mix to take advantage of market opportunities?
Correct Answer: B
Question 109
Why are inverse exchange-traded funds effective in declining markets?
Correct Answer: D
Question 110
Tom sold some bonds in his RRSP and used the total $100,000 in proceeds to buy a 75% guaranteed segregated fund. Three years later, Tom died. At the time of his death, the market value of the segregated fund was $700,000. Assuming no interim withdrawal on market value reset, what is the death benefit payable from this investment?
Correct Answer: C
Key Concepts: A segregated fund with a guaranteed death benefit ensures that the investor (or their estate) receives at least a certain percentage of the initial investment in case of death. This percentage is applied to the original investment amount, and if the market value of the segregated fund at the time of death is lower than this guaranteed amount, the insurance company pays the shortfall. Step-by-step Explanation: * Initial Investment in the Segregated Fund: Tom invested $100,000 into a segregated fund with a 75% death benefit guarantee . * Guaranteed amount = 75% × $100,000 = $75,000 . * Market Value at the Time of Death: The market value of the segregated fund is $70,000 at the time of Tom ' s death. * Shortfall Calculation: The guaranteed amount ($75,000) is greater than the market value ($70,000). * Shortfall = $75,000 - $70,000 = $5,000 . * Death Benefit Payable: Since the segregated fund guarantees at least $75,000, the insurance company will pay the shortfall of $5,000 to the estate. The answer: * Option A ($0): Incorrect; there is a shortfall between the guaranteed amount and the market value, so a payout will occur. * Option B ($70,000): Incorrect; this is the market value, not the shortfall amount. * Option C ($30,000): Incorrect; this value does not align with the 75% guarantee calculation. * Option D ($5,000): Correct; this is the shortfall amount payable as the death benefit. References to Canadian Securities Course Exam 2 Study Materials: * Volume 2, Chapter 22 - Segregated Funds * Explains death benefit guarantees in segregated funds and how the shortfall is calculated. * Volume 2, Chapter 24 - Canadian Taxation * Highlights how RRSP investments, such as segregated funds, are treated upon the investor ' s death. * Volume 2, Chapter 26 - Working with the Retail Client * Discusses estate planning considerations, including the role of segregated funds in ensuring financial protection.
