CIFC CIFC Client Account Management and KYC 2 — Questions and Answers
Question 1: What is the 'suitability' obligation for mutual fund registrants in Canada?
- Ensuring the fund has the lowest fees available
- Ensuring recommended investments are appropriate for the client's KYC profile (Correct answer)
- Ensuring all clients hold the same diversified portfolio
- Ensuring the fund is listed on a Canadian exchange
Correct answer: Ensuring recommended investments are appropriate for the client's KYC profile
Suitability requires that any recommended investment aligns with the client's objectives, risk tolerance, time horizon, and financial situation collected during KYC.
Question 2: Which account type allows a Canadian investor to hold mutual funds with tax-sheltered growth and tax-deductible contributions?
- TFSA
- RESP
- RRSP (Correct answer)
- Non-registered account
Correct answer: RRSP
An RRSP (Registered Retirement Savings Plan) provides a tax deduction on contributions and tax-sheltered growth until withdrawal.
Question 3: A client wants to save for their child's post-secondary education. Which registered account is most appropriate?
- RRSP
- TFSA
- RESP (Correct answer)
- LIRA
Correct answer: RESP
A Registered Education Savings Plan (RESP) is specifically designed for education savings and attracts Canada Education Savings Grants (CESG).
Question 4: What does the term 'beneficial owner' mean in the context of client accounts?
- The registrant who manages the account
- The individual who ultimately owns and benefits from the assets in the account (Correct answer)
- The fund company that issued the securities
- The custodian holding the assets
Correct answer: The individual who ultimately owns and benefits from the assets in the account
The beneficial owner is the person who has the real economic interest in the assets, even if the account is held in another name.
Question 5: Under anti-money laundering (AML) rules, which of the following triggers enhanced due diligence for a client?
- Opening a TFSA account
- Being identified as a Politically Exposed Person (PEP) (Correct answer)
- Investing in a balanced fund
- Having a time horizon over 10 years
Correct answer: Being identified as a Politically Exposed Person (PEP)
Politically Exposed Persons (PEPs) require enhanced due diligence under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Question 6: What is the maximum annual TFSA contribution limit concept (as set periodically by the federal government)?
- 18% of previous year's earned income
- A fixed annual dollar amount indexed and set by the government each year (Correct answer)
- $5,000 regardless of income
- 10% of net worth
Correct answer: A fixed annual dollar amount indexed and set by the government each year
The TFSA annual limit is a fixed dollar amount set by the federal government, which has varied over time from $5,000 to $10,000 depending on the year.
CIFC CIFC Client Account Management and KYC 2
What is the 'suitability' obligation for mutual fund registrants in Canada?