CIC Professional Qualifications and Integrity 5 — Questions and Answers
Question 1: A CIC holder is transitioning to a competitor firm. Which of the following actions regarding client data would violate professional standards?
- Informing clients of the career move during standard outreach
- Copying client account records to solicit them at the new firm without authorization (Correct answer)
- Updating the credentialing body with the new employer contact information
- Completing outstanding client obligations before the departure date
Correct answer: Copying client account records to solicit them at the new firm without authorization
Taking proprietary client data to solicit at a new firm is a breach of confidentiality and likely violates both professional standards and law.
Question 2: The CIC designation's ethics code applies to a holder's conduct:
- Only during business hours and in professional settings
- Only when managing assets above a regulatory threshold
- In all professional activities, including advice given informally to family or friends (Correct answer)
- Only when the holder explicitly identifies themselves as a CIC
Correct answer: In all professional activities, including advice given informally to family or friends
Professional ethics obligations follow the designee into all investment-related conduct, not just formal client engagements.
Question 3: A prospective CIC candidate is asked on the application whether they have ever been the subject of a regulatory investigation. The candidate was investigated but not charged. They should:
- Answer 'No' since they were not formally charged
- Disclose the investigation fully, noting its outcome (Correct answer)
- Leave the question blank and attach a note
- Disclose only if the investigation is still open
Correct answer: Disclose the investigation fully, noting its outcome
Applications require disclosure of investigations regardless of outcome; non-disclosure of a closed investigation is itself a misrepresentation.
Question 4: Which of the following is a key characteristic that distinguishes a fiduciary standard from a suitability standard in investment counseling?
- A fiduciary may only recommend index funds
- A fiduciary must act in the client's best interest and disclose all material conflicts (Correct answer)
- A suitability standard applies only to institutional clients
- A fiduciary is exempt from compensation disclosure requirements
Correct answer: A fiduciary must act in the client's best interest and disclose all material conflicts
The fiduciary standard mandates prioritizing client interests and full conflict disclosure, going beyond simply recommending suitable products.
Question 5: A CIC holder notices that a junior colleague is consistently omitting risk disclosures in client presentations to close sales faster. The holder's most appropriate response is to:
- Ignore it as it is outside their supervisory responsibility
- Privately coach the colleague and, if the behavior continues, escalate to compliance (Correct answer)
- Report it immediately to regulators without first addressing it internally
- Adopt the same practice since it appears effective
Correct answer: Privately coach the colleague and, if the behavior continues, escalate to compliance
CIC holders should first attempt to correct the behavior and escalate internally if it persists, balancing collegial responsibility with compliance obligations.
Question 6: An investment counselor with the CIC designation sets up an outside business activity (OBA) managing a family friend's funds for a nominal fee. What is the required professional step?
- No action needed since the fee is nominal
- Disclose the OBA to the employer and obtain required approvals per firm policy and regulatory rules (Correct answer)
- Register the OBA only if annual compensation exceeds $10,000
- Document the arrangement in a personal file without employer notification
Correct answer: Disclose the OBA to the employer and obtain required approvals per firm policy and regulatory rules
Outside business activities must be disclosed to the employer and approved per firm compliance policies and applicable regulations, regardless of fee size.
Question 7: When a CIC holder's personal financial difficulties — such as significant debt — become known, the primary professional concern is that they:
- May no longer meet 'fit and proper' financial soundness criteria, requiring disclosure to the credentialing body (Correct answer)
- Must immediately liquidate all client accounts to avoid conflict
- Are automatically disqualified from managing retirement accounts
- Must reduce their client fee schedule proportionally
Correct answer: May no longer meet 'fit and proper' financial soundness criteria, requiring disclosure to the credentialing body
Significant personal financial difficulties can affect a designee's 'fit and proper' status and must be disclosed to the credentialing body for evaluation.
CIC Professional Qualifications and Integrity 5
A CIC holder is transitioning to a competitor firm.
Which of the following actions regarding client data would violate professional standards?