IFC Segregated Funds 3

Question 1

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

Accepted Answer

A life insurance license issued under provincial insurance legislation

Answer

A securities dealer license issued by a provincial securities commission

Answer

An investment dealer license granted by IIROC

Answer

A mutual fund dealer license granted by the MFDA

Question 2

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

Accepted Answer

Information Folder and Contract

Answer

Annual Information Form (AIF)

Answer

Simplified Prospectus

Answer

Statement of Additional Information

Question 3

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

Accepted Answer

The federal Insurance Companies Act and provincial insurance acts

Answer

The provincial Securities Acts

Answer

The federal Investment Funds Act

Answer

The Bank Act administered by OSFI

Question 4

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

Accepted Answer

Daily pricing and liquidity for redemptions

Answer

Maturity guarantee on net premiums

Answer

Potential creditor protection via beneficiary designation

Answer

Named beneficiary designation bypassing probate

Question 5

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

Accepted Answer

Provincial insurance regulators and life insurance councils

Answer

The Investment Industry Regulatory Organization of Canada (IIROC)

Answer

The Mutual Fund Dealers Association (MFDA)

Answer

The Office of the Superintendent of Financial Institutions (OSFI)

Question 6

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

Accepted Answer

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

Answer

The annuitant owns the contract; the contract holder receives the death benefit payout

Answer

The contract holder receives guaranteed returns; the annuitant bears investment risk

Answer

The two terms are interchangeable and refer to the same person in all contracts

Question 7

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

Accepted Answer

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

Answer

It guarantees superior investment returns compared to mutual funds

Answer

It eliminates all management fees charged to the fund

Answer

It allows the fund to invest in assets prohibited for mutual funds