Segregated Funds Flashcards

What license must a representative hold to legally sell segregated funds in Canada?

Answer: A life insurance license issued under provincial insurance legislation

Because segregated funds are insurance products, representatives must be licensed to sell life insurance under provincial insurance legislation, not a securities license.

What disclosure document for segregated funds is analogous to a mutual fund's Fund Facts?

Answer: Information Folder and Contract

Segregated funds use an Information Folder and insurance Contract for client disclosure rather than a simplified prospectus, reflecting the insurance regulatory framework.

Under which legislative framework are segregated funds in Canada primarily governed?

Answer: The federal Insurance Companies Act and provincial insurance acts

Segregated funds fall under the federal Insurance Companies Act and corresponding provincial insurance legislation because they are issued by life insurance companies.

Which of the following is NOT a feature that distinguishes segregated funds from mutual funds?

Answer: Daily pricing and liquidity for redemptions

Both segregated funds and mutual funds offer daily pricing and redemption; the features unique to segregated funds are maturity guarantees, potential creditor protection, and beneficiary designations.

Which organization provides oversight of life insurance agents who sell segregated funds in Canada?

Answer: Provincial insurance regulators and life insurance councils

Life insurance agents selling segregated funds are regulated by provincial insurance regulators and life insurance councils, consistent with the provincial insurance licensing framework.

What is the key distinction between the 'contract holder' and the 'annuitant' in a segregated fund?

Answer: The contract holder owns the contract and controls investment decisions; the annuitant is the person whose life determines contract terms

The contract holder owns the insurance contract and directs investment choices, while the annuitant is the individual whose life events (death or reaching a specified age) trigger the contract's guarantee provisions.

How does the separate account structure of a segregated fund protect policyholders?

Answer: It ensures fund assets are held apart from the insurer's general assets, protecting them if the insurer becomes insolvent

Segregated fund assets are held in a separate account distinct from the insurance company's general assets, meaning policyholders' investments are not exposed to the insurer's creditors in an insolvency.