Mutual Fund Compliance Overview

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Questions and Answers

Which category of registration does the National Instrument 31-103 establish for mutual fund dealers?

Trading Representative

Investment Representative

Dealing Representative (correct)

Financial Representative

What is the required timeframe for reporting any material changes to CIRO by mutual fund dealers?

5 business days (correct)

7 business days

10 business days

3 business days

Which of the following statements is true regarding Carl's solicitation of new mutual fund business?

Sales representatives must be registered in every province to make unsolicited calls.

There are specific requirements for soliciting non-clients in Quebec. (correct)

Unsolicited calls to non-clients are only allowed in Ontario.

Unsolicited calls are permitted without restrictions in Quebec.

What is a key requirement for anyone selling securities, including mutual funds?

They must be registered with the relevant securities regulator. Signup and view all the answers

What does National Instrument 31-103 primarily focus on?

Regulatory compliance and registration categories Signup and view all the answers

What is required to ensure clients understand the provided information?

Written advice and acknowledgment. Signup and view all the answers

In the context of mutual fund regulations, what is expected from sales representatives when making unsolicited calls?

They must comply with specific provincial regulations. Signup and view all the answers

Which of the following must not be included in the registration process as per National Instrument 31-103?

Sales volume history Signup and view all the answers

Which topic should the branch compliance officer discuss with sales representatives?

Forward pricing of mutual funds. Signup and view all the answers

What is a common topic during sales staff training sessions organized by the branch compliance officer?

Collecting and transmitting orders. Signup and view all the answers

Which is not a responsibility of mutual fund dealers regarding their clients?

Offering legal representation Signup and view all the answers

Which scenario is considered a material change in client information?

A change of securities in the account. Signup and view all the answers

When does the two-business day right of withdrawal begin?

When the fund facts are provided to the client. Signup and view all the answers

What should be included in the written disclosure provided to clients?

Acknowledgment of client’s understanding. Signup and view all the answers

Which of the following represents a best practice for validating client understanding?

Combining written disclosures with verbal confirmations. Signup and view all the answers

Why is it critical for compliance officers to focus on forward pricing?

It is essential for regulatory compliance. Signup and view all the answers

What is required from all owners of a joint mutual fund account?

Identical time frames and objectives Signup and view all the answers

What aspect does Know Your Client (KYC) information focus on when opening a corporate account?

The corporation itself Signup and view all the answers

Why might some mutual fund dealers not open accounts for minors?

Minors can legally void contracts Signup and view all the answers

What percentage of a new mutual fund sales representative's trades must be reviewed daily by the branch compliance officer?

100% Signup and view all the answers

How frequently should client information be reviewed according to CIRO rules in Ontario?

Every 12 months Signup and view all the answers

What is the retention period for account documentation after an account is closed?

7 years Signup and view all the answers

What must be shown by the branch compliance officer regarding reviews of trades by new representatives?

Evidence of ongoing meaningful review Signup and view all the answers

Which of the following statements is NOT true regarding investment accounts for minors?

Minors are allowed to open accounts without restrictions. Signup and view all the answers

Which activity can a non-registered sales staff member legally perform?

Receive redemption requests to forward to a registered sales representative for processing. Signup and view all the answers

What constitutes a prohibited activity for a non-registered sales staff member?

Advising clients about what securities to buy, hold, or sell. Signup and view all the answers

How long is the branch compliance officer required to review all new sales representatives’ trading accounts?

6 months. Signup and view all the answers

Under the National Instrument 31-103, what is the primary factor determining the need for registration?

Being in the business of trading or advising in securities. Signup and view all the answers

Which statement is incorrect regarding the activities of non-registered sales staff?

They can provide specific investment advice to clients. Signup and view all the answers

What type of information can non-registered sales staff provide to clients?

General information about mutual fund features and operations. Signup and view all the answers

What key change did the introduction of NI 31-103 bring regarding registration triggers?

From a trade trigger to a business trigger. Signup and view all the answers

Which of the following is a responsibility of a branch compliance officer?

Reviewing compliance with conflict-of-interest regulations. Signup and view all the answers

What is the primary restriction placed on sales representatives regarding advertising their registration with securities commissions?

Sales representatives are allowed to state their registration only in British Columbia and Alberta. Signup and view all the answers

How many professional development units must Quebec dealing representatives complete within a two-year period?

30 PDUs, divided equally among general subjects, compliance, and sector-specific needs. Signup and view all the answers

What is the supervision requirement for a branch compliance officer regarding new accounts for a representative registered for 120 days?

Approval must occur before or within one business day after trading activities in the account. Signup and view all the answers

In which provinces are sales representatives permitted to indicate that they are registered with a securities commission?

British Columbia and Alberta. Signup and view all the answers

What specific areas do the continuing education requirements of 30 PDUs for Quebec dealing representatives cover?

General subjects, compliance with standards, and sector-specific knowledge. Signup and view all the answers

What is the minimum number of client files a BCO must review monthly after the first 90-day period?

At least 5 individual files or 10% of all client files. Signup and view all the answers

Which of the following is NOT part of the PDUs requirements for Quebec dealing representatives?

10 PDUs focused on personal investment strategies. Signup and view all the answers

What is a distinct characteristic of Abbad's investment style compared to Lamia's?

Abbad has more investment experience and prefers short-term strategies. Signup and view all the answers

Study Notes

Branch Compliance Officer Responsibilities

Ensure that clients understand disclosures by providing written disclosures and obtaining written acknowledgement from the client.
Regularly review forward pricing of mutual funds in briefing sessions with sales representatives.
Oversee sales staff training sessions that cover collecting and transmitting orders.
Identify material changes in client information, such as the addition of new securities to a client's account.

Mutual Fund Industry Regulation

Mutual fund dealers must provide the fund facts document and amendments to the client before or at the time a fund purchase is accepted, initiating the two-business day right of withdrawal period.
Individuals selling securities, including mutual funds, or providing investment advice must be registered with the securities regulator in the jurisdiction where the client resides.
National Instrument 31-103 addresses registration categories, proficiency qualifications, registration requirements, and compliance requirements.
Mutual fund dealers that are members of CIRO must report any material changes within five business days.

Registration Requirements

Sales representatives are prohibited from advertising that they are registered or have approval from a securities regulator, with the exception of British Columbia and Alberta.
Quebec dealing representatives must complete 30 professional development units (PDUs) every two years, consisting of 10 PDUs in general subjects, 10 PDUs in compliance, ethics, or professional practice, and 10 PDUs in each sector for which they hold a certificate.
During the first 90 days following registration, the branch compliance officer (BCO) must approve all new accounts before any trading activity in the account and review 5 individual files or 10% of all client files handled by the salesperson each month.
During the subsequent 90-day period, the BCO must approve new accounts before or within one business day of any trading activity in the account.

Account Opening

For joint mutual fund accounts, all parties must have identical time frames, investment objectives, and risk profiles.
The Know Your Client (KYC) information obtained for opening a corporate account relates to the corporation itself.
Some mutual fund dealers do not accept accounts for minors because minors can repudiate their contracts, including mutual fund orders.
All trades made by new sales representatives must be reviewed by the BCO.
Client information should be reviewed at least annually in Ontario and every 12 to 24 months in Quebec.

Sales Representatives Supervision

Non-registered sales staff can receive redemption requests to forward to a registered sales representative for processing.
Non-registered sales staff cannot advise clients about which securities to buy, hold, or sell.
The BCO reviews all new sales representatives' trading accounts for the first six months following their registration to ensure compliance with conflict-of-interest requirements.
A dealer member must retain closed account documentation for seven years (five years in Quebec).
Non-registered employees can advise customers that the financial institution has a mutual fund dealer subsidiary that sells mutual funds.
Non-registered employees can refer customers to sales representatives, mutual fund dealer branches, or telephone communications systems involved in mutual fund transactions.
The BCO must be able to demonstrate ongoing, meaningful reviews of trades made by new sales representatives rather than just initial reviews.

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Description

Test your knowledge on the responsibilities of a Branch Compliance Officer and the regulations governing the mutual fund industry. This quiz addresses critical compliance tasks, necessary disclosures, and the importance of client acknowledgment. Prepare to navigate the essentials of mutual fund regulations effectively.