Exam CIFC Topic 1 Question 124 Discussion

Actual exam question for IFSE Institute's CIFC exam
Question #: 124
Topic #: 1

Which of the following Dealing Representatives has fulfilled their "Know Your Product" obligation?

A. Godfried opens an account for his new client, Nadia. When the investments from her previous dealer are transferred in, Godfried sells the investments. Nadia becomes very upset when she is charged $4,329 in redemption fees that neither she nor Godfried expected. B. Otev meets with his client, Saeed. Saeed's brother invested in the Navigator Eastern Asia Fund and it provided great returns. When Saeed asks Otev if the Navigator Fund or something similar is available through his firm, Otev doesn't know and doesn't look it up. C. Rehan reviews the features of the Hedge Fund that her client, Georgi, wants to buy. When Rehan explains the product to Georgi, she tells him that the Hedge Fund has a lock-up period and he will not be able to redeem the fund if he needs the money. D. Tevy recommends the firm's in-house Principal Protected Note (PPN) to her client Mei. Since Mei is seeking safety and liquidity, Tevy determines that the PPN is a good product for her because it's on the firm's list and the principal is guaranteed.

Suggested Answer: C Vote an answer

Explanation
The "Know Your Product" obligation requires that Dealing Representatives understand all the products they purchase, sell or recommend for their clients, including their structure, features, risks, costs and suitability.
Rehan has fulfilled this obligation by reviewing the features of the Hedge Fund and explaining them to Georgi, who may not be aware of the lock-up period and its implications. The other Dealing Representatives have failed to fulfill their obligation by either not knowing or not disclosing important information about the products they deal with.
References: Canadian Investment Funds Course, Chapter 7: Know Your Product1

by Yale at May 24, 2024, 07:39 PM

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