Practice Test Geeks(IFC) International Firestop Council Premier Certificate Practice Test
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Mutual Fund Fees and Services Flashcards

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Read the first 7 Mutual Fund Fees and Services flashcards as text

  1. A mutual fund charges a 2% short-term trading fee on redemptions made within 90 days of purchase. What is the primary purpose of this fee?

    Answer: To discourage frequent trading that can harm long-term investors

    Short-term trading fees are designed to discourage market timing and frequent trading, which raises transaction costs and can disadvantage long-term investors.

  2. Under the 'no-load' purchase option, how does a fund dealer typically earn compensation?

    Answer: By collecting trailer fees paid by the fund company from the MER

    No-load funds do not charge sales commissions, but dealers still receive ongoing trailer fees embedded in the fund's MER as compensation for servicing clients.

  3. A DSC fund allows clients to redeem up to 10% of their units annually without triggering a DSC fee. This provision is commonly called:

    Answer: The 10% free redemption right

    Most DSC fund companies offer a 10% free redemption right, allowing clients to redeem up to 10% of their holdings annually without incurring DSC charges.

  4. Which of the following services is most commonly offered by mutual fund companies through a dealer's account platform?

    Answer: Systematic investment plans (SIPs) for regular automatic contributions

    Systematic investment plans allow clients to make regular automated contributions to their mutual funds, making investing disciplined and convenient.

  5. The fund facts document must be delivered to a client:

    Answer: Before or at the point of sale of the mutual fund

    Regulations require that the Fund Facts document be delivered to the client before or at the point of sale so they can make an informed investment decision.

  6. A client is invested in a mutual fund with a 1.00% management fee. The total MER is 2.25%. What accounts for the difference?

    Answer: Operating expenses, taxes, and other fund costs beyond the management fee

    The MER includes the management fee plus operating expenses (legal, audit, administration), taxes (GST/HST), and other fund costs, which together exceed the base management fee.

  7. Which scenario correctly describes how a fund-of-funds structure can affect fees?

    Answer: Investors may effectively pay fees at both the top fund level and the underlying fund level

    In a fund-of-funds structure, investors bear the MER of the top fund plus the MERs of the underlying funds, potentially resulting in layered fees.