IFC Exam Dumps - CISI Investment Funds in Canada Questions and Answers

 Underwriting is the process through which an individual or institution takes on financial risk for a fee. This risk most typically involves loans, insurance, or investments. In the case of securities, underwriting involves conducting research and assessing the degree of risk each applicant or entity brings to the table before assuming that risk. During the underwriting process, investment bankers raise investment capital from investors on behalf of corporations and governments issuing securities. They also help determine the company’s underlying value compared to the risk of funding its IPO. References: Underwriting: Definition and How the Various Types Work - Investopedia, The future of insurance underwriting | Deloitte Insights

Scarcity is a characteristic of investment capital that refers to the limited availability of capital relative to the demand for it. Scarcity affects the price and return of capital, as well as the allocation of capital among different issuers and sectors. When capital is scarce, issuers have to compete for it by offering higher returns or lower prices, or by adjusting their financing strategies. When capital is abundant, issuers have more access to it at lower costs or higher prices, or by diversifying their sources of capital. In this case, Raybert has a very short-term investment objective and has decided to purchase money market instruments. There are plenty of 90-day money market securities available for him to choose from, but he can only afford to purchase one. This means that the issuers of these securities are exposed to the scarcity of capital, as they have to attract Raybert and other investors with similar objectives by offering competitive rates or discounts.

References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 1: Economic Factors and Financial Markets, Section 5.1.1: Characteristics of Investment Capital1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.1.1 2

Your body language would be the most important to create an impressive first impression on your potential client. Body language is the non-verbal communication that includes your posture, gestures, facial expressions, eye contact, and physical distance. Body language can convey your confidence, enthusiasm, professionalism, and trustworthiness. According to research, body language accounts for 55% of the impact of a first impression, while tone of voice accounts for 38% and words account for only 7%. The other statements are less important than body language. Volume of your voice is part of your tone of voice, which can affect how your words are perceived by your potential client. However, volume alone is not enough to create an impressive first impression; you also need to consider your pitch, pace, and intonation. Your words are what you say to your potential client, which can include your introduction, your value proposition, and your questions. Your words are important to convey your message and establish rapport with your potential client. However, your words have less impact than your body language and tone of voice on your first impression. Tone of your voice is how you say your words, which can include your volume, pitch, pace, and intonation. Your tone of voice can influence how your potential client feels about you and your message. However, your tone of voice has less impact than your body language on your first impression. References: Unit 10: Sales Process, [The Importance Of Body Language In First Impressions]

The net asset value per unit (NAVPU) of a mutual fund is calculated by dividing the net asset value (NAV) of the fund by the number of outstanding units. The NAV is the difference between the total assets and total liabilities of the fund. Current assets and current liabilities are not relevant for the NAVPU calculation. Therefore, Great Lengths Equity Fund’s NAVPU is ($135 million - $10 million) / 11 million = $11.36.

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Overconfidence bias leads investors to overestimate their knowledge or the reliability of information, such as a “hot tip,” prompting them to act without sufficient due diligence. The feedback from the document states:

"Overconfidence is defined generally as unwarranted faith in one’s intuitive reasoning, judgements and cognitive abilities. People tend to overestimate both their predictive abilities as well as the precision of the information they have been given. For example, an investor may get a tip from a wealth advisor or read something on the Internet about an investment opportunity, and then take action (that is, make the decision to invest) based on her perceived knowledge advantage."

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MFDA Policy No. 3 requires that all written client complaints, including emails, be acknowledged in writing. The feedback from the document states:

"MFDA Policy No. 3 specifies the minimum procedures for dealing with written client complaints (including emails). All written client complaints must be acknowledged in writing."

According to the MFDA rules, a Member or an Approved Person cannot accept or act upon a general power of attorney or other similar authorization from a client in favour of the Member or Approved Person, unless the client is a spouse, parent, or child of the Approved Person and certain conditions are met. However, a Member or an Approved Person can accept a limited trading authorization from a client, which allows the Member or Approved Person to execute trades on behalf of the client, but not to engage in any discretionary trading. Therefore, Josephine can accept a limited POA from her brother, as long as she does not make any investment decisions without his consent.

References = Canadian Investment Funds Course (CIFC) - Module 1: The Financial Services Industry - Section 1.3: Know Your Client (KYC)1 and web search results from search_web(query="power of attorney and mutual fund dealers association rules")23

1: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-1.pdf

Unused RRSP contribution room is the amount of RRSP contributions that you did not deduct in previous years and are available to deduct in the current year. Unused RRSP contribution room can be carried forward to future years indefinitely, until you use it up or reach the age of 71. You can find your unused RRSP contribution room on your notice of assessment or by logging into your Canada Revenue Agency account. References: What to do with unused RRSP, PRPP or SPP contributions

According to the Canadian Investment Funds Course, capital gains distributions are the portion of the mutual fund trust’s net realized capital gains that are paid out to the unitholders. Capital gains distributions are not the same as capital gains from selling or redeeming units of the mutual fund trust, which are reported on a T5008 slip. Capital gains distributions are taxable in the year they are received, even if they are reinvested in additional units of the fund. The mutual fund trust will issue a T3 slip to report the amount and type of income that is allocated to each unitholder, including capital gains distributions. The unitholder must report this income on their tax return and pay tax on 50% of the capital gains distributions at their marginal tax rate.

Tony is employing a top-down investment approach, which is a method of selecting securities based on macroeconomic factors, such as the state of the economy, the industry trends, and the market conditions. A top-down investor starts by analyzing the big picture and then drills down to the specific sectors, regions, and companies that are expected to perform well in that environment. Tony has done an economic analysis of the various provinces and sectors of the Canadian economy and has determined that Nova Scotia and Alberta present the best prospects. He has also identified potential in the oil and gas sector. He then narrows down his selection to an oil supply firm in Medicine Hat and a drilling company in Halifax. This shows that he is using a top-down approach to choose his investments.