IFIC Mutual Funds Licensing Practice Exam · Question
The phase-out of the Deferred Sales Charge (DSC) purchase option for mutual funds was primarily driven by concerns related to:
The prohibition on DSC purchase options by CIRO MFD rules was primarily enacted to address concerns about embedded conflicts of interest, where advisors might b
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Question: The phase-out of the Deferred Sales Charge (DSC) purchase option for mutual funds was primarily driven by concerns related to:
Answer options:
- The complexity of calculating redemption fees for clients. ✅ The potential for embedded conflicts of interest and investor harm due to long redemption schedules.
- A decline in overall mutual fund sales volumes.
- The inability of advisors to collect adequate compensation for their services.
Correct answer: The potential for embedded conflicts of interest and investor harm due to long redemption schedules.
Explanation: The prohibition on DSC purchase options by CIRO MFD rules was primarily enacted to address concerns about embedded conflicts of interest, where advisors might be incentivized to sell products with higher upfront commissions, and the potential for investor harm due to lengthy, restrictive redemption schedules that effectively 'locked in' investors.
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