CIC - Certified Investment Counselor Fiduciary Duty and Responsibilities Questions and Answers

Question 1

A Certified Investment Counselor (CIC) is managing a portfolio for a new client.
The counselor's firm has a proprietary mutual fund that has historically underperformed its benchmark, but generates higher fees for the firm than other available options.
Recommending this fund to the client would primarily be a breach of which fiduciary duty?

Accepted Answer

The duty of loyalty

Answer

The duty of best execution

Answer

The duty of care

Answer

The duty of prudence

Question 2

Under the Investment Advisers Act of 1940, the fiduciary duty owed by an investment adviser to a client is comprised of which two primary components?

Accepted Answer

Duty of Care and Duty of Loyalty

Answer

Duty of Confidentiality and Duty of Prudence

Answer

Duty of Suitability and Duty of Best Execution

Answer

Duty of Disclosure and Duty of Integrity

Question 3

A CIC is advising a client on their retirement portfolio. The counselor performs a thorough analysis of the client's risk tolerance, time horizon, and financial goals. Based on this, the counselor constructs a well-diversified portfolio using low-cost index funds and monitors it regularly. This approach is a clear demonstration of adherence to which of the following principles?

Accepted Answer

The prudent investor rule

Answer

The market timing principle

Answer

The suitability rule only

Answer

The capital preservation mandate

Question 4

Which of the following actions would be considered a violation of a Certified Investment Counselor's fiduciary duty of care?

Accepted Answer

Failing to conduct due diligence on a complex investment product before recommending it.

Answer

Disclosing a potential conflict of interest to a client before executing a trade.

Answer

Rebalancing a client's portfolio to maintain the agreed-upon asset allocation.

Answer

Charging a reasonable, fully-disclosed asset-based management fee.

Question 5

A CIC discovers a highly attractive, but limited, investment opportunity. The counselor has several clients for whom the investment would be suitable. To comply with the fiduciary duty of loyalty, what is the MOST appropriate course of action?

Accepted Answer

Allocate the investment pro-rata among all suitable clients in a fair and equitable manner.

Answer

Offer the entire opportunity to the largest and most profitable client.

Answer

Allocate the opportunity to their own personal account first, then to clients.

Answer

Wait to see which client contacts them first about new opportunities.

Question 6

An investment counselor's fiduciary responsibility to a client is established by which of the following?

Accepted Answer

The nature of the advisory relationship and federal law, such as the Investment Advisers Act of 1940.

Answer

The firm's marketing materials and brand reputation.

Answer

An informal verbal agreement to provide helpful financial tips.

Answer

The performance of the client's portfolio relative to a benchmark.