CIC Client Communication and Disclosure 2

Question 1

Under SEC Regulation Best Interest (Reg BI), which disclosure document must broker-dealers provide to retail customers?

Accepted Answer

Form CRS (Customer Relationship Summary)

Answer

Reg BI requires broker-dealers to provide retail customers with a Form CRS summarizing the relationship and services offered.

Question 2

A client asks why their portfolio underperformed the benchmark. The investment counselor's most appropriate response is to:

Accepted Answer

Provide a written attribution analysis explaining factor-level performance drivers

Answer

Transparent attribution analysis fulfills the counselor's duty to communicate clearly and honestly about portfolio performance.

Question 3

Which of the following best describes 'informed consent' in the context of investment advisory relationships?

Accepted Answer

A client agreeing to terms after receiving full, clear disclosure of material facts

Answer

Informed consent requires the client to have received and understood all material information before agreeing to a course of action.

Question 4

An investment counselor discovers a conflict of interest after an advisory relationship has already begun. The counselor should:

Accepted Answer

Disclose the conflict promptly and obtain the client's consent to continue

Answer

Newly discovered conflicts must be disclosed promptly so the client can decide whether to continue the relationship.

Question 5

Which communication practice is specifically required when an adviser changes its fee schedule?

Accepted Answer

Notifying affected clients in writing with sufficient advance notice

Answer

Material changes to fee schedules require advance written notice to clients so they can evaluate the impact.

(CIC) Certified Investment Counselor Practice Test