LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
Segregated fund units differ from mutual fund units in that seg fund units:
- AAre owned outright by the client, who holds legal title to a share of the fund's securities
- BTrade on a stock exchange, so the client can sell them to another investor at any time
- CPay guaranteed dividends each quarter, funded by the insurer's general account
- Are notional measures of contract value; the assets belong to the insurer's fund
Correct answer: D) Are notional measures of contract value; the assets belong to the insurer's fund
The contractual nature is what supports guarantees, beneficiary designations and creditor protection. It also explains why fund switches within a contract can be non-taxable.
Why the other options are wrong
- AThe client owns a contract, not the units or the securities.
- BSegregated fund units are not exchange-traded.
- CNo dividends are guaranteed.
Exam tip
Seg fund units are notional; the client owns a contract.
Common mistake
Describing the client as owning the fund's securities.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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