CIFC Operations and Process Management 3

Question 1

What is the role of a custodian in a mutual fund structure?

Accepted Answer

To safeguard the fund's portfolio assets and settle trades

Answer

The custodian holds the fund's portfolio securities and cash, ensuring safekeeping and settling portfolio trades on behalf of the fund.

Question 2

A mutual fund's management expense ratio (MER) includes which of the following?

Accepted Answer

Management fees, operating expenses, and applicable taxes

Answer

The MER includes management fees, operating expenses (including trailer fees), and applicable taxes such as HST, but not trading commissions.

Question 3

Under MFDA rules, how long must a dealer retain client account records?

Accepted Answer

7 years

Answer

MFDA rules generally require that client account records be retained for a minimum of 7 years.

Question 4

What is an 'in-kind' redemption in the context of mutual funds?

Accepted Answer

Redeeming units and receiving portfolio securities instead of cash

Answer

An in-kind redemption means the fund distributes actual portfolio securities to the redeeming unitholder rather than converting assets to cash first.

Question 5

Which of the following best describes a 'systematic withdrawal plan' (SWP)?

Accepted Answer

Regular automatic redemptions of a fixed dollar amount or number of units from a client's fund holdings

Answer

An SWP allows clients to receive regular automatic payments by redeeming a fixed amount or number of units from their mutual fund investment.

(CIFC) Canadian Investment Funds Course Practice Test