CIC - Certified Investment Counselor Ethical Business Practices Questions and Answers

Question 1

A Certified Investment Counselor (CIC) learns of material nonpublic information about a company whose stock is held in many client portfolios.
According to the CFA Institute Standards of Professional Conduct, which of the following actions is the most appropriate?

Accepted Answer

Maintain the current client positions and refrain from any trading based on the information.

Answer

Immediately sell the stock from all client accounts to avoid potential losses.

Answer

Share the information with colleagues so the firm can make a collective decision.

Answer

Purchase additional shares for accounts that are underweight in the security.

Question 2

Which of the following BEST describes the fiduciary duty of a Certified Investment Counselor (CIC)?

Accepted Answer

A legal and ethical obligation to act in the best interest of the client, placing the client's interests above their own.

Answer

A commitment to provide investment advice that is suitable for the client's risk tolerance.

Answer

The responsibility to generate the highest possible returns for the client, regardless of risk.

Answer

An agreement to follow the client's instructions, even if they are not in the client's best interest.

Question 3

A CIC is creating a new marketing brochure for their firm. According to the IAA Standards of Practice, all communications with clients and the public must be:

Accepted Answer

Accurate, balanced, and not misleading.

Answer

Approved by a government regulatory body before distribution.

Answer

Focused primarily on the firm's historical investment performance.

Answer

Guaranteed to produce specific investment outcomes.

Question 4

An investment counselor is offered an all-expenses-paid luxury trip by a mutual fund company whose funds the counselor frequently recommends to clients. Accepting this offer could create a conflict of interest that compromises the counselor's:

Accepted Answer

Independence and objectivity.

Answer

Diligence and reasonable basis.

Answer

Confidentiality of client information.

Answer

Duty to seek best execution.

Question 5

A client with a very low risk tolerance insists on investing a significant portion of their retirement portfolio in a highly volatile technology startup. The Certified Investment Counselor has explained the risks extensively, but the client is adamant. What is the most ethical course of action for the CIC?

Accepted Answer

Execute the trade as instructed but document the client's insistence and the counselor's opposing recommendation.

Answer

Refuse to make the trade and terminate the client relationship if the disagreement persists.

Answer

Invest a smaller portion than the client requested as a compromise.

Answer

Follow the client's order without question, as the final decision rests with them.

Question 6

Under the Investment Advisers Act of 1940, registered investment advisers are required to adopt a Code of Ethics. Which of the following is a mandatory provision of this code?

Accepted Answer

Provisions requiring 'access persons' to report their personal securities holdings and transactions.

Answer

A requirement for pre-clearance of all personal political contributions.

Answer

A schedule of maximum fees the adviser can charge for services.

Answer

A policy guaranteeing the confidentiality of all client information under all circumstances.

A Certified Investment Counselor (CIC) learns of material nonpublic information about a company whose stock is held in many client portfolios.According to the CFA Institute Standards of Professional Conduct, which of the following actions is the most appropriate?

A Certified Investment Counselor (CIC) learns of material nonpublic information about a company whose stock is held in many client portfolios.
According to the CFA Institute Standards of Professional Conduct, which of the following actions is the most appropriate?