CIC IAA Standards of Practice 4

Question 1

Under IAA Standards, which best describes the 'know your client' obligation at the start of an advisory relationship?

Accepted Answer

Gathering comprehensive information about financial situation, risk tolerance, objectives, and relevant personal circumstances

Answer

IAA Standards require comprehensive client fact-finding covering financial situation, goals, risk tolerance, time horizon, tax status, and other relevant personal circumstances.

Question 2

An adviser learns a long-standing client has developed cognitive decline. What does IAA Standards guidance suggest?

Accepted Answer

Contact a trusted contact person on file if available and potentially alert compliance

Answer

IAA guidance recommends reaching out to a designated trusted contact and involving compliance when cognitive decline raises concerns about a client's vulnerability.

Question 3

IAA Standards state that an adviser's written compliance policies must be reviewed:

Accepted Answer

At least annually and updated when regulatory changes or business changes require it

Answer

IAA Standards require at least annual review of compliance policies and prompt updates when regulatory or business changes necessitate revision.

Question 4

A client's investment policy statement (IPS) allows equity allocations between 50% and 70%. Markets surge and the equity portion rises to 78%. Under IAA Standards, the adviser should:

Accepted Answer

Rebalance promptly to bring the portfolio within the agreed policy range

Answer

When a portfolio drifts outside the parameters agreed in the IPS, IAA Standards require the adviser to rebalance promptly to honor the agreed risk framework.

Question 5

Which scenario violates IAA Standards regarding gifts and entertainment from third parties?

Accepted Answer

Accepting paid airfare and a week's lodging at a luxury resort from a fund company seeking allocation

Answer

Accepting lavish travel and lodging from a vendor seeking business creates a conflict that impairs independence and violates IAA Standards on gifts and benefits.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC IAA Standards of Practice 4