Products and Trading Flashcards
7 cards from real IFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Products and Trading flashcards as text
Which of the following is a key regulatory requirement for mutual fund dealers in Canada under MFDA rules?
Answer: Suitability assessment must be conducted before recommending any mutual fund
MFDA registrants must assess the suitability of any mutual fund recommendation relative to the client's KYC information and investment objectives.
A 'systematic withdrawal plan' (SWP) for a mutual fund investor means:
Answer: Regular redemptions of a fixed amount or percentage from the fund
An SWP allows investors to automatically redeem a set dollar amount or percentage of their fund holdings at regular intervals to generate income.
Which statement correctly describes the tax treatment of capital gains distributions from Canadian mutual funds?
Answer: They are reported as capital gains in the investor's hands even if reinvested
Capital gains distributions retain their character and are reported as capital gains in the investor's hands, subject to the 50% inclusion rate.
An 'arbitrage-free' price for an ETF means that:
Answer: The ETF's market price equals the NAV of its underlying basket of securities
When designated brokers can arbitrage any price difference between the ETF and its underlying holdings, the market price converges to NAV.
What type of risk is most associated with investing in a global equity mutual fund denominated in Canadian dollars?
Answer: Currency risk from fluctuations between CAD and foreign currencies
A global equity fund holds foreign assets, so changes in exchange rates between the Canadian dollar and foreign currencies directly affect returns.
Which feature distinguishes a 'T-series' mutual fund from a standard mutual fund series?
Answer: T-series funds pay regular tax-efficient cash distributions by returning capital
T-series (or T-class) funds distribute a fixed monthly cash amount largely as return of capital, making distributions more tax-efficient for investors in non-registered accounts.
Under NI 81-102, how frequently must an open-end mutual fund stand ready to redeem units from investors?
Answer: On any day the fund calculates its NAV (typically every business day)
NI 81-102 requires open-end mutual funds to accept redemption orders and process them at NAV on each day the fund prices its units, ensuring daily liquidity.