CIFC CIFC Mutual Fund Sales and Distribution 1

Question 1

What is a deferred sales charge (DSC) in the context of mutual fund sales?

Accepted Answer

A declining redemption fee charged to the investor if units are sold within a set period

Answer

A DSC (back-end load) is a fee paid by the investor upon redemption, which decreases over a set schedule until it reaches zero if units are held long enough.

Question 2

What is a trailer fee (trailing commission) in mutual fund distribution?

Accepted Answer

An ongoing annual fee paid by the fund company to the advisor for servicing the client

Answer

A trailer fee is an annual service commission paid by the fund company to the dealer/advisor as long as the client holds the fund, compensating for ongoing service.

Question 3

Under CIFC principles, what does 'no-load' mean when describing a mutual fund?

Accepted Answer

There is no sales commission charged to the investor at purchase or redemption

Answer

A no-load fund does not charge a front-end or back-end sales commission, meaning the full investment amount goes directly into the fund.

Question 4

Which distribution channel sells mutual funds exclusively through licensed advisors at a dealer firm?

Accepted Answer

Advisor channel (full-service dealer)

Answer

The advisor channel (also called full-service dealer channel) distributes funds through licensed mutual fund advisors who provide personalized recommendations.

Question 5

A client invests $10,000 in a front-end load fund with a 3% sales charge. How much is actually invested in the fund?

Accepted Answer

$9,700

Answer

With a 3% front-end load, the sales charge of $300 is deducted from the $10,000 investment, leaving $9,700 actually invested in the fund.

(CIFC) Canadian Investment Funds Course Practice Test

(CIFC) Canadian Investment Funds Course Practice Test

CIFC CIFC Mutual Fund Sales and Distribution 1