Professional Ethics and Standards Flashcards

Under CIFC standards, what is the primary obligation of a mutual fund salesperson when a client's investment objectives conflict with a suitable product recommendation?

Answer: Prioritize the client's best interests over personal gain

CIFC ethics require that client interests always take precedence over the salesperson's personal financial gain.

Which of the following best describes 'churning' in the context of mutual fund sales?

Answer: Excessive trading in a client's account to generate commissions

Churning is the unethical practice of excessive trading primarily to generate commissions rather than serve the client's interests.

A registrant discovers that their firm has made an error that harmed a client financially. What is the ethical course of action?

Answer: Disclose the error to the client and work to resolve it promptly

Ethical standards require prompt disclosure of errors to clients and taking steps to remedy any resulting harm.

What does 'know your product' (KYP) require a mutual fund representative to do?

Answer: Understand the features, risks, and costs of the products they recommend

KYP requires representatives to have sufficient product knowledge to assess suitability and explain risks and costs to clients.

Under Canadian securities regulations, when must a registrant update a client's Know Your Client (KYC) information?

Answer: When there is a significant change in the client's circumstances or at least every 2 years

KYC information must be kept current; updates are required when significant life changes occur or on a regular periodic basis.

Which of the following scenarios represents a breach of confidentiality by a mutual fund representative?

Answer: Discussing a client's portfolio details with an unauthorized third party

Sharing client information with unauthorized parties violates the confidentiality obligations owed to clients under privacy laws and professional standards.

What is the purpose of 'gatekeeper' responsibilities in the context of CIFC ethics?

Answer: To ensure registrants identify and report suspicious activity to help prevent financial crime

Gatekeeper responsibilities require registrants to be vigilant about suspicious activity and report it appropriately to combat money laundering and other financial crimes.