Conduct and Practices Handbook (CPH) Exam Questions And Answers 100% Pass.
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Conduct and Practices Handbook
Institution
Conduct And Practices Handbook
Conduct and Practices Handbook (CPH)
Exam Questions And Answers 100% Pass.
Duty of care - answerThis refers to obligation #3 of registered representative (RR) about acting
honestly, in good faith, and in a professional manner. This is a requirement to provide advice to clients
with those attrib...
Conduct and Practices Handbook (CPH)
Exam Questions And Answers 100% Pass.
Duty of care - answer✔This refers to obligation #3 of registered representative (RR) about acting
honestly, in good faith, and in a professional manner. This is a requirement to provide advice to clients
with those attributes in mind along with the proper skills and knowledge to do so. It is important to note
that the standard of care provided is not a standard of perfection. RRs are usually held to this standard
much more often than the standard of fiduciary duty. The two aspects of this are suitability and fiduciary
duty.
Ethics - answer✔These are a set of values or morals that guide individual behaviour. They are rules and
habits of conduct established according to society's perceived standards of right and wrong. In terms of
the CPH course, these are a continuous process of examining our choices and making decisions within
the context of moral principles. These are important because rules cannot encompass every possible
situation that might occur in a day to day business, therefore we need these to help keep everyone held
to another standard.
Fiduciary duty - answer✔This is a concept related to the duty of care. It is a higher standard imposed by
common law. It exists in circumstances where one person must place trust in the honest intentions of
another person who holds greater authority or expertise. This is not as common as the standard of duty
of care. Disputes in regard to this are sometimes resolved through civil litigation where a client was
owed a fiduciary duty based on how much they relied on the RR's investment advice/product
recommendations.
Investment Industry Regulatory Organization of Canada (IIROC) - answer✔This is the national self
regulatory organization that oversees the securities industry. It regulates the actions and behaviour of
its Registered Representatives (RRs). It has a strict compliance of rules and regulations and requires that
the RR observe high standards of ethics and conduct when transacting business. This is the national SRO
overseeing all investment dealers and trading activity on equity and debt marketplaces in Canada.
IIROC rule 1402 Standards of Conduct - answer✔Every IIROC dealer has a set of these rules that
ultimately comply with IIROC. This is a rule in IIROC that summarizes IIROC's expectations regarding it's
Registered Representative (RR). It states that the RR must be a regulated person (observes high
standards of ethics/acts fairly and does not engage in business that is detrimental to public interest) and
they must be foregoing any business conduct that is negligent, fails to comply with
legal/regulator/contractual obligations/interanal rules and policies, that displays an unreasonable
departure from standards, or is likely to diminish investor confidence in the integrity of
securities/futures/derivatives.
Know Your Client (KYC) - answer✔This refers to obligation #1 of a registered representative (RR) about
understanding your client's situation before making investment recommendations. This rule
implemented by IIROC states that forces you to have an understanding of your client's circumstances
and that you must have an understanding their suitability before you can do any business. The dealer
member must keep a record of every single client's circumstances and takes notes on the situation. This
is the companion obligation of the KYP.
Know Your Product (KYP) - answer✔This refers to obligation #2 of a registered representative (RR) about
understanding the products you recommend. Every registered representative (RR) must have this
knowledge before recommending the purchase of any investment product to a client. You must
understand how it is constructed and how it is likely to perform in various market conditions, as well as
how new/non-tradition/complex/structured products function. This is the companion obligation of the
KYC.
Registered Representative (RR) - answer✔These people are permitted to provide advice on the full
range of equity and fixed income securities. This is you. The person that is must do all the work with
regards to the client and must have all of the certifications and must pass all the tests. These people
must observe high standards of ethics and conduct, must understand the client's situation before
making investment recommendations (KYC), must understand the products to recommend (KYP), and
must act honestly, in good faith, and in a professional manner (duty of care). You must also avoid
entering into situations where you interests conflict with those of your client, and you should strive to
maintain and improve your professional knowledge in the profession. Finally you must hold all your
client's information in the strictest confidence.
Suitability - answer✔This is a term that is mentioned throughout several sections such as KYC and KYP
and is directly related to the duty of care. It refers to a client's current financial situation, investment
knowledge, investment objectives, time horizon, and risk tolerance. Essentially it is the quality of
something being right or appropriate for a particular person, administered by IIROC.
End values - answer✔This is one of two main types of values; They are values that help define our
personal goals for which we strive for, which may be years away. These values include a sense of
accomplishment, service to people, security, a world at peace, and social recognition.
Ethical Dilemma - answer✔These situations arise when we are faced with two or more choices and we
must make an ethical decision. There are two main categories that these situations fall into; right vs.
wrong issues & right vs. right dilemmas. Right vs. right issues are the difficult ones to analyze because
there are 2 right answers and it is when our core values conflict.
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