CIFC CIFC Client Account Management and KYC 1 — Questions and Answers
Question 1: What does KYC stand for in the context of Canadian investment fund sales?
- Know Your Client (Correct answer)
- Keep Your Capital
- Key Yield Calculation
- Know Your Competitor
Correct answer: Know Your Client
KYC stands for Know Your Client, the regulatory obligation to collect sufficient information about a client before making investment recommendations.
Question 2: Which of the following is a primary component of a KYC profile for a mutual fund investor?
- Client's social media activity
- Client's investment knowledge and risk tolerance (Correct answer)
- Client's employer's financial statements
- Client's credit card spending history
Correct answer: Client's investment knowledge and risk tolerance
A KYC profile must include the client's investment knowledge, risk tolerance, time horizon, and financial situation to ensure suitable recommendations.
Question 3: Under MFDA rules, how often must a registrant update a client's KYC information at minimum?
- Every 6 months
- Every 5 years
- Annually or when material changes occur (Correct answer)
- Only at account opening
Correct answer: Annually or when material changes occur
MFDA rules require registrants to update KYC information annually or whenever a material change occurs in the client's circumstances.
Question 4: What is the purpose of the New Account Application Form (NAAF) in mutual fund account opening?
- To authorize the advisor's compensation
- To collect KYC information and establish the client relationship (Correct answer)
- To register the fund with regulators
- To calculate the management expense ratio
Correct answer: To collect KYC information and establish the client relationship
The NAAF collects all required KYC details — personal information, financial situation, investment objectives, and risk tolerance — to establish a compliant client record.
Question 5: A client states she is 68 years old, retired, and needs income within 2 years. Which time horizon category best applies?
- Long-term (10+ years)
- Medium-term (5–10 years)
- Short-term (under 3 years) (Correct answer)
- Speculative
Correct answer: Short-term (under 3 years)
Because the client needs to access funds within 2 years, a short-term time horizon is appropriate and should influence product suitability assessments.
Question 6: What must a registrant do if a client refuses to provide KYC information?
- Proceed with the account using estimated data
- Accept a partial KYC and note it on file
- Decline to open the account or make a recommendation (Correct answer)
- Refer the client to a competitor
Correct answer: Decline to open the account or make a recommendation
Without adequate KYC information, the registrant cannot determine suitability and must decline to open the account or provide investment recommendations.
CIFC CIFC Client Account Management and KYC 1
What does KYC stand for in the context of Canadian investment fund sales?