CIC - Certified Investment Counselor Professional Qualifications and Integrity Questions and Answers

Question 1

A Certified Investment Counselor's (CIC) firm enters into a written agreement to pay a cash fee to a local accounting firm for referring new advisory clients.
To comply with the Investment Advisers Act of 1940, the CIC's firm must ensure all of the following conditions are met EXCEPT:

Accepted Answer

The accounting firm is also a registered investment adviser.

Answer

The client receives a written disclosure document describing the referral arrangement.

Answer

A written agreement exists between the CIC's firm and the accounting firm.

Answer

The CIC's firm receives a signed and dated acknowledgment from the client confirming receipt of the disclosure documents.

Question 2

Under the safe harbor of Section 28(e) of the Securities Exchange Act of 1934, an investment adviser is permitted to use client commissions, or 'soft dollars,' to pay for which of the following?

Accepted Answer

Third-party research reports analyzing economic trends.

Answer

Office rent and administrative staff salaries.

Answer

Computer hardware used for general office tasks.

Answer

Membership dues for professional organizations.

Question 3

A core tenet of professional integrity for a Certified Investment Counselor is maintaining professional competence. Which of the following actions BEST demonstrates an ongoing commitment to this principle?

Accepted Answer

Regularly participating in continuing education programs covering market trends, ethics, and regulatory updates.

Answer

Passing the initial certification exams required to earn the CIC designation.

Answer

Publishing a monthly market commentary newsletter for clients and prospects.

Answer

Holding a senior management position within an advisory firm.

Question 4

An advisory firm's performance presentation to a prospective client highlights the returns of its top five performing accounts from the past year, describing them as 'examples of our strategic success.' The firm manages over 500 accounts in that same strategy. This practice directly violates the principles of fair representation and full disclosure emphasized by which of the following?

Accepted Answer

The Global Investment Performance Standards (GIPS).

Answer

The Securities Act of 1933.

Answer

The Investment Company Act of 1940.

Answer

The Employee Retirement Income Security Act (ERISA).

Question 5

According to the Investment Advisers Act of 1940's 'Books and Records' Rule (Rule 204-2), a registered investment adviser must make and keep true, accurate, and current records of all of the following EXCEPT:

Accepted Answer

Audio recordings of all telephone conversations with clients.

Answer

A journal of all cash receipts and disbursements.

Answer

A memorandum of each securities order given by the adviser.

Answer

A copy of each written agreement entered into with a client.

Question 6

A Certified Investment Counselor has the authority to vote proxies for client accounts. In a contentious board of directors election for a company held in client portfolios, the counselor's firm has a significant business relationship with one of the candidates. To fulfill their fiduciary duty, the counselor's primary obligation is to:

Accepted Answer

Vote the proxies in a manner solely consistent with the best economic interest of the clients.

Answer

Abstain from voting to avoid any appearance of a conflict of interest.

Answer

Vote in a manner that supports the firm's business relationship.

Answer

Poll the clients to determine how they would like their shares to be voted.

A Certified Investment Counselor's (CIC) firm enters into a written agreement to pay a cash fee to a local accounting firm for referring new advisory clients.To comply with the Investment Advisers Act of 1940, the CIC's firm must ensure all of the following conditions are met EXCEPT:

A Certified Investment Counselor's (CIC) firm enters into a written agreement to pay a cash fee to a local accounting firm for referring new advisory clients.
To comply with the Investment Advisers Act of 1940, the CIC's firm must ensure all of the following conditions are met EXCEPT: