Professional Ethics and Standards Flashcards

A mutual fund representative receives a gift from a client worth $500. According to CIFC ethical standards, what should the representative do?

Answer: Report it to their compliance department and follow firm policy on gifts

Gifts above nominal value must be disclosed to compliance, as they can create conflicts of interest that undermine objectivity.

Under CIFC standards, what obligation does a registrant have when they become aware of a colleague engaging in unethical conduct?

Answer: Report the conduct through appropriate internal or regulatory channels

Professional responsibility includes reporting known unethical or illegal conduct through proper compliance or regulatory channels.

What is 'front running' in securities markets?

Answer: Trading on personal account ahead of executing known client orders to profit

Front running is an illegal practice where a registrant trades for their own account based on advance knowledge of pending client orders.

Which regulatory body is primarily responsible for overseeing mutual fund dealers in Canada?

Answer: Canadian Investment Regulatory Organization (CIRO)

CIRO (formerly MFDA) is the self-regulatory organization that oversees mutual fund dealers and their representatives in Canada.

A client asks their representative to execute a transaction that the representative believes is unsuitable. After explaining the concerns, the client insists on proceeding. What is the most appropriate course of action?

Answer: Obtain the client's acknowledgment of the suitability concerns and document it, then consider firm policy

When a client insists on an unsuitable trade, the representative should document the client's acknowledgment of the risks and follow firm policy, which may permit execution with proper notation.

What does the term 'material non-public information' (MNPI) refer to in securities regulation?

Answer: Information that is not yet public and could significantly affect a security's price if disclosed

MNPI is information not available to the public that a reasonable investor would consider important in making an investment decision.

Which principle underlies the suitability obligation for mutual fund representatives under CIFC guidelines?

Answer: Recommendations must align with the client's financial situation, risk tolerance, and investment objectives

Suitability requires that recommendations be appropriate for each individual client based on their specific financial profile and goals.