LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
When a deposit into a creditor-protected seg fund is made shortly before bankruptcy with intent to shield assets:
- A trustee or creditor can apply to set aside the transfer, so the protection fails; agents must not facilitate it
- BIt is fully protected, since insurance law exempts the contract from seizure regardless of when the deposit was made
- CIt is a crime for the insurer that accepted the deposit, which must report itself to FINTRAC and refund the money
- DThe insurer refunds the deposit to the client automatically once it learns of the bankruptcy from the trustee
Correct answer: A) A trustee or creditor can apply to set aside the transfer, so the protection fails; agents must not facilitate it
The exemption protects legitimate planning, not fraud. Agents risk liability for knowingly assisting.
Why the other options are wrong
- BSuch transfers are vulnerable to challenge.
- CThe insurer is not culpable absent knowledge.
- DThe insurer is not the actor; the trustee challenges the transfer.
Exam tip
Timing and intent defeat creditor protection.
Common mistake
Advising a client facing judgment to move money into a seg fund.
What this tests
CISRO competency component 1.5 — 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.