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

12b-1 fees create a conflict of interest that must be disclosed to clients as a material fact under the fiduciary standard.

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

An IPS establishes strategic guidelines and constraints, not specific tactical security selections.

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

A tombstone ad provides basic factual details of a completed or pending offering and is exempt from full prospectus delivery requirements.

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

Redirecting account communications requires documented client authorization to protect privacy and regulatory compliance.

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 172 and the SEC's electronic delivery guidance allow prospectus delivery via electronic means when clients have consented.

(CIC) Certified Investment Counselor Practice Test