IFIC Mutual Funds Licensing Practice Exam · Question
What is the primary purpose of a 'Know Your Client' (KYC) rule for a mutual fund representative?
The KYC rule requires representatives to collect comprehensive client information, including financial situation, investment objectives, and risk tolerance, to
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Question: What is the primary purpose of a 'Know Your Client' (KYC) rule for a mutual fund representative?
Answer options:
- To ensure the representative sells as many funds as possible. ✅ To gather enough information to make suitable investment recommendations.
- To prevent clients from withdrawing their investments.
- To minimize the administrative burden on the fund company.
Correct answer: To gather enough information to make suitable investment recommendations.
Explanation: The KYC rule requires representatives to collect comprehensive client information, including financial situation, investment objectives, and risk tolerance, to ensure that investment recommendations are suitable for the client. This is a regulatory requirement for investor protection.
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