CIC Client Communication and Disclosure 3

Question 1

An investment counselor fails to disclose that they receive 12b-1 fees from a mutual fund they recommend. This most likely violates:

Accepted Answer

The fiduciary duty to disclose all material conflicts of interest

Answer

The suitability standard only

Answer

ERISA contribution limits

Answer

FINRA margin requirements

Question 2

Which element is NOT typically required in a written investment policy statement (IPS) delivered to a client?

Accepted Answer

Specific individual stock picks for the next quarter

Answer

Investment objectives and time horizon

Answer

Risk tolerance parameters

Answer

Liquidity needs and constraints

Question 3

When is a 'tombstone' advertisement typically used in the securities industry?

Accepted Answer

To provide limited factual information about a securities offering without soliciting buyers

Answer

To announce the death of a registered investment adviser

Answer

To disclose the termination of a client relationship

Answer

To advertise past performance results prominently

Question 4

A client requests that all communications be sent to their spouse's email address. The counselor should:

Accepted Answer

Obtain written authorization from the client before redirecting communications

Answer

Comply immediately without documentation

Answer

Decline, as communications must always go directly to the account owner

Answer

Report the request to the compliance department as suspicious

Question 5

Which SEC rule governs the delivery of prospectuses in electronic format?

Accepted Answer

Rule 172 and the SEC's e-delivery guidance

Answer

Rule 482

Answer

Rule 15c2-12

Answer

Rule 10b-5

Question 6

A client's investment counselor uses social media to post performance results. Under SEC advertising rules, the counselor must:

Accepted Answer

Include required disclosures and ensure results are presented fairly without cherry-picking

Answer

Only post gross returns to simplify the message

Answer

Obtain FINRA approval for each post before publishing

Answer

Limit posts to educational content with no performance data

Question 7

A counselor switches a client from a fee-based account to a commission-based account. What is the primary disclosure obligation?

Accepted Answer

The counselor must disclose how the compensation structure change affects the client's costs and the adviser's incentives

Answer

No disclosure is needed if the client's returns improve

Answer

Only the back-office operations team needs to be notified

Answer

Disclosure is required only if the client is a qualified purchaser