Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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Fund Structuring & Legal Frameworks Flashcards

7 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Fund Structuring & Legal Frameworks flashcards as text

  1. A fund manager wants to establish a vehicle where investors have limited liability but the fund can be treated as a partnership for U.S. tax purposes. Which structure best satisfies both requirements?

    Answer: Limited Liability Company (LLC) electing partnership taxation

    An LLC electing pass-through partnership taxation provides limited liability to all members while avoiding entity-level taxation.

  2. Under the Investment Company Act of 1940, a fund relying on Section 3(c)(1) is limited to how many beneficial owners?

    Answer: 100

    Section 3(c)(1) exempts funds with no more than 100 beneficial owners from registering as investment companies.

  3. Which document in a limited partnership fund structure governs the rights and obligations of the general partner and limited partners?

    Answer: Limited Partnership Agreement (LPA)

    The LPA is the binding legal contract that sets out management authority, economics, distributions, and partner rights.

  4. A Cayman Islands exempted limited partnership (ELP) is commonly used for offshore funds primarily because:

    Answer: It is subject to Cayman Islands corporate income tax at 0%

    Cayman ELPs benefit from a zero-tax environment, making them attractive for offshore fund structuring.

  5. What is the principal purpose of a 'master-feeder' fund structure?

    Answer: To pool capital from multiple feeder funds into one investment vehicle for efficiency

    Master-feeder structures aggregate capital from onshore and offshore feeder funds into a single master fund to achieve economies of scale.

  6. A fund's 'side pocket' mechanism is used to:

    Answer: Segregate illiquid or hard-to-value investments from the main portfolio

    Side pockets isolate illiquid investments so redemptions and subscriptions are based only on the liquid portfolio.

  7. Under U.S. securities law, Regulation D Rule 506(b) permits a private fund to sell securities to up to how many non-accredited but sophisticated investors?

    Answer: 35

    Rule 506(b) allows sales to up to 35 non-accredited investors who meet a sophistication standard, alongside unlimited accredited investors.