Podcast
Questions and Answers
What is the primary responsibility of a branch compliance officer in relation to sales representatives?
What is the primary responsibility of a branch compliance officer in relation to sales representatives?
- To maximize sales revenue
- To develop sales strategies
- To supervise the activities of sales representatives (correct)
- To train non-registered sales staff
Which of the following duties does NOT fall under the supervision of sales practices?
Which of the following duties does NOT fall under the supervision of sales practices?
- Distributing sales advertisements (correct)
- Describing fees and loads
- Monitoring unacceptable sales practices
- Supervising client account performance reporting
Why is it important to use standard performance data when displaying mutual fund performance?
Why is it important to use standard performance data when displaying mutual fund performance?
- To comply with advertising regulations
- To ensure the performance data is easily understandable
- To provide comparable information across different funds (correct)
- To increase client retention rates
Which activity is prohibited for non-registered sales staff?
Which activity is prohibited for non-registered sales staff?
What sort of conflicts of interest must be disclosed in the sales process?
What sort of conflicts of interest must be disclosed in the sales process?
Which of the following is NOT a responsibility of registered sales staff regarding order activities?
Which of the following is NOT a responsibility of registered sales staff regarding order activities?
What best defines fiduciary responsibility in the context of mutual fund sales representatives?
What best defines fiduciary responsibility in the context of mutual fund sales representatives?
What are soft-dollar arrangements in mutual fund sales?
What are soft-dollar arrangements in mutual fund sales?
What is the maximum time frame for calculating the total return prior to the advertisement date for mutual funds?
What is the maximum time frame for calculating the total return prior to the advertisement date for mutual funds?
In discussing mutual fund rankings, which statement is true regarding the accompanying documentation?
In discussing mutual fund rankings, which statement is true regarding the accompanying documentation?
Which of the following must a sales representative avoid discussing if a mutual fund has been in existence for less than one year?
Which of the following must a sales representative avoid discussing if a mutual fund has been in existence for less than one year?
What is the disclosure requirement regarding past performance during a sales presentation?
What is the disclosure requirement regarding past performance during a sales presentation?
What was the simple average return over the 10-year period provided?
What was the simple average return over the 10-year period provided?
For a money market fund that is less than a year old, which of the following may be disclosed?
For a money market fund that is less than a year old, which of the following may be disclosed?
Which year in the provided data had the highest return?
Which year in the provided data had the highest return?
What does the geometric or compound average return represent in the context of this mutual fund data?
What does the geometric or compound average return represent in the context of this mutual fund data?
Which scenario would require the sales representative to provide full information about the mutual fund?
Which scenario would require the sales representative to provide full information about the mutual fund?
How many years did the fund experience a positive return according to the past performance data?
How many years did the fund experience a positive return according to the past performance data?
What is the maximum time frame within which all new accounts for new sales representatives must be approved?
What is the maximum time frame within which all new accounts for new sales representatives must be approved?
What is the minimum percentage of trades that must be reviewed daily after the first 90 days of employment for sales representatives?
What is the minimum percentage of trades that must be reviewed daily after the first 90 days of employment for sales representatives?
When should the greater of five trades or 10% of the previous month’s trades be checked in relation to the supervision practices?
When should the greater of five trades or 10% of the previous month’s trades be checked in relation to the supervision practices?
What should be documented and accessible as part of sales practices supervision to assist during reviews?
What should be documented and accessible as part of sales practices supervision to assist during reviews?
How frequently should outside business activities of sales representatives be reviewed and attested to?
How frequently should outside business activities of sales representatives be reviewed and attested to?
What is a significant implication of the past performance of a mutual fund when predicting future returns?
What is a significant implication of the past performance of a mutual fund when predicting future returns?
Which of the following statements about sales representatives' predictions on mutual fund values is correct?
Which of the following statements about sales representatives' predictions on mutual fund values is correct?
What is required of mutual fund advertisements according to the rules set by the MFDA?
What is required of mutual fund advertisements according to the rules set by the MFDA?
When making performance comparisons between mutual funds, what is a mandatory requirement?
When making performance comparisons between mutual funds, what is a mandatory requirement?
How does the volatility of a mutual fund relate to the reliability of its past returns as an estimate for future returns?
How does the volatility of a mutual fund relate to the reliability of its past returns as an estimate for future returns?
What should be kept in mind while explaining the importance of the 10.4% return earned over ten years?
What should be kept in mind while explaining the importance of the 10.4% return earned over ten years?
Which action is strictly prohibited for sales representatives when discussing money market funds?
Which action is strictly prohibited for sales representatives when discussing money market funds?
What does the historical return of 10.4% signify in terms of investment risk?
What does the historical return of 10.4% signify in terms of investment risk?
What must sales representatives do when presenting performance charts to clients?
What must sales representatives do when presenting performance charts to clients?
Which characteristic is NOT essential when comparing different types of investments?
Which characteristic is NOT essential when comparing different types of investments?
What does the management expense ratio (MER) include?
What does the management expense ratio (MER) include?
What factor should be clearly described when comparing a mutual fund's performance with a benchmark?
What factor should be clearly described when comparing a mutual fund's performance with a benchmark?
Which of the following statements about no-load funds is correct?
Which of the following statements about no-load funds is correct?
How is performance data for mutual funds calculated?
How is performance data for mutual funds calculated?
What is a load fund?
What is a load fund?
Which of the following is a responsibility when comparing investments like a GIC and a money market fund?
Which of the following is a responsibility when comparing investments like a GIC and a money market fund?
When might sales charges for load funds be negotiable?
When might sales charges for load funds be negotiable?
What is often NOT included in the management expenses charged directly to a fund?
What is often NOT included in the management expenses charged directly to a fund?
Why is it essential to differentiate between various credit ratings when comparing investments?
Why is it essential to differentiate between various credit ratings when comparing investments?
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Study Notes
Relationship Between Sales Representatives and Clients
- Sales representatives are entrusted with the clients’ finances and are obligated to act in the best interests of the client.
- Sales representatives have a fiduciary responsibility, which means that they must act in the client’s best interests and with honesty, fairness, and integrity.
- Sales representatives are required to understand their clients’ financial situations, investment experience, and goals.
- Sales representatives must accurately describe the risks and rewards of mutual funds to clients.
- Sales representatives are required to maintain client confidentiality.
- Sales representatives are not permitted to use their clients' information for personal gain.
Mutual Fund Performance Communications
- Sales representatives must use standard performance data when presenting performance to clients.
- Sales representatives should not emphasize only the positive performance of the mutual fund.
- Sales representatives must disclose the risk that past performance is not indicative of future performance.
- Sales representatives must not predict future prices or values of mutual funds.
- Sales representatives must not make statements about the probability of future returns, which are strictly prohibited.
Sales Staff Prohibited Activities
- Non-registered sales staff cannot provide investment advice.
- Non-registered sales staff cannot discuss mutual fund performance.
- Non-registered sales staff cannot open mutual fund accounts.
- Registered sales staff cannot take orders to sell mutual funds outside of regular trading hours.
- Registered sales staff cannot accept orders to sell mutual funds that are not within the client’s risk profile.
- Sales representatives can only discuss rankings prepared by an independent organization and accompanied by the SPD for the mutual fund.
Supervision of Sales Representatives
- Sales representatives are required to maintain records of all orders and instructions given for the purchase, sale, or exchange of mutual funds in accordance with the dealer’s record retention policy.
- Branch compliance officers should discuss sales practices with sales representatives at regular meetings.
- Branch compliance officers should review all new accounts opened by sales representatives for the first 90 days of their employment before any trading takes place.
- Branch compliance officers should review subsequent trades within one business day, unless leveraging was recommended, in which case it should be reviewed before the transaction takes place.
- Branch compliance officers need to maintain evidence of their supervision.
- Outside business activities of sales representatives should be reviewed and attested to at least annually, with copies placed in the sales representative’s file.
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