LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
A 'fundamental change' provision in a segregated fund contract gives the owner:
- Notice and the right to switch or withdraw without charges when the insurer makes a fundamental change
- BNothing beyond the notice, since the insurer is entitled to reorganize its funds under the terms of the contract
- CA new servicing agent, since a fundamental change to the fund means the original recommendation no longer applies
- DA refund of all fees paid since the deposit, since the client did not agree to the fund as it is now constituted
Correct answer: A) Notice and the right to switch or withdraw without charges when the insurer makes a fundamental change
Fundamental change rights are regulatory protections built into seg fund contracts.
Why the other options are wrong
- BOwners have defined rights on a fundamental change.
- CA new agent has nothing to do with fundamental change rights.
- DA fundamental change does not refund fees already paid.
Exam tip
Fundamental change: notice + free exit/switch.
Common mistake
Ignoring a fundamental change notice until the deadline passes.
What this tests
CISRO competency component 1.4 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.