CIC IAA Standards of Practice 5

Question 1

Under IAA Standards, what distinguishes a 'recommendation' that triggers suitability analysis from general investment education?

Accepted Answer

A recommendation is reasonably viewed as suggesting a specific action tailored to the client

Answer

A communication rises to a recommendation—triggering suitability obligations—when it could reasonably be understood as advice to take a specific action suited to that client.

Question 2

An adviser has discretionary authority over a client's account. IAA Standards require the adviser to:

Accepted Answer

Exercise discretion within the scope of the client's investment policy and best interest

Answer

Discretionary authority must be exercised within the boundaries of the client's IPS and consistently with their best interest, not used to exceed the agreed mandate.

Question 3

When IAA Standards address 'independence and objectivity,' what specific pressure must advisers resist?

Accepted Answer

Compensation arrangements, relationships, or other pressures that compromise unbiased advice

Answer

IAA Standards on independence and objectivity focus on resisting financial incentives, relationships, and external pressures that could bias investment recommendations.

Question 4

A client's tax situation changes significantly mid-year. Under IAA Standards, the adviser's obligation is to:

Accepted Answer

Proactively consider the tax change's impact on the investment strategy and communicate with the client

Answer

IAA Standards require advisers to respond proactively to material changes in a client's circumstances, including tax changes that affect portfolio strategy.

Question 5

Under IAA Standards, soft-dollar arrangements are permissible only if:

Accepted Answer

The research or services obtained benefit the clients whose commissions generated the soft dollars

Answer

Soft-dollar arrangements are acceptable under IAA Standards when the research and brokerage services obtained directly benefit the clients whose trades generate the commissions.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC IAA Standards of Practice 5