LLQP Ethics & Professional Practice · Component 1.1 · 60% of the exam
A life-licensed agent is asked by a client to recommend a mutual fund. The agent should explain that:
- Aa life licence covers mutual funds because segregated funds are an equivalent product
- Bmutual funds may be sold by anyone, since they are not insurance products at all
- Cthe client must buy through a bank, since licensed agents are barred from every securities product
- mutual funds require a separate registration, which the agent must hold before advising
Correct answer: D) mutual funds require a separate registration, which the agent must hold before advising
Segregated funds are insurance contracts sold under a life licence. Mutual funds are securities and require registration with the applicable securities regulator or self-regulatory body, which is an entirely separate qualification.
Why the other options are wrong
- ASimilar economics do not make the two products subject to the same licence.
- BMutual funds may be sold only by appropriately registered individuals.
- CAn agent who obtains the required registration may certainly sell them.
Exam tip
Segregated funds equal a life licence; mutual funds equal securities registration.
Common mistake
Assuming familiarity with segregated funds permits advice on mutual funds.
What this tests
CISRO competency component 1.1 — 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.