CSI Updated IFC Exam Questions and Answers by elif

A mutual fund trust structure allows the fund to avoid taxation by distributing its income to unitholders. The feedback from the document states:

" The most common structure for mutual funds in Canada is the open-end trust. The trust structure allows a fund itself to avoid taxation. Any interest, dividends and capital gains income, net of the fund’s fees, expenses and capital losses, if passed to its unitholders each calendar year, will allow the trust to avoid being taxed on its income. "

According to the MFDA Rules, a Dealing Representative must not accept any purchase orders from a client until the Branch Manager or other designated person has reviewed and approved the New Client Application Form (NCAF) for the client. This is to ensure that the Dealing Representative has obtained and verified all the necessary information about the client, such as identity, investment objectives, risk tolerance, financial situation, and suitability of investments. The review and approval of the NCAF must be completed before any trades are executed for the client, unless there are exceptional circumstances that justify a delay. In this case, Quintin should have waited for Lupita’s approval of the NCAF before placing the purchase order for Reginald.

 1: MFDA Rules as at December 31, 2021 - MFDA 2 (Rule 2.2.4)

Liquid alternative funds (liquid alts) are designed to offer more flexibility in using short sales, leverage, and derivatives compared to traditional mutual funds, but with less freedom than hedge funds. The feedback from the document states:

" Liquid alts, also known as alternative mutual funds, were recently introduced into Canada, and are allowed greater use of short sales, leverage, and derivatives compared to regular mutual funds, but not to the same extent as hedge funds. "

Mutual fund orders placed after the market closes are processed using the next business day ' s net asset value per unit (NAVPU). Since Derek submitted his sell order at 8:00 p.m. EST on Friday, January 6 (after the close of the markets), his proceeds will be based on the NAVPU for Monday, January 9, the next business day.