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Question 45/72
Quinton, a Dealing Representative, meets with his client Banji. Banji's Know Your Client (KYC) indicates that her risk profile is "medium''. Banji currently has $35,000 in her account which is invested 50% in the Middleton Balanced Fund and 50% in the Hector Growth Fund. She tells Quinton that she would like to contribute an additional $10,000 to purchase the Prospect Labour-Sponsored Fund. Which of the following statements about Banji's proposed transaction is CORRECT?
Correct Answer: C
Explanation
A labour-sponsored investment fund (LSIF) is a type of mutual fund that invests in small and medium-sized businesses that are not publicly traded. LSIFs are sponsored by labour unions or associations and offer tax credits to investors. However, LSIFs are also very risky and illiquid investments that may not be suitable for investors with a medium risk profile, such as Banji. Therefore, Quinton should not proceed with the purchase of the Prospect Labour-Sponsored Fund because it is not suitable for Banji based on her current KYC.
Therefore, C is the correct answer. References: Labour-Sponsored Investment Funds (LSIFs): Definition and How They Work - Investopedia, Canadian Investment Funds Course (CIFC) | IFSE Institute
A labour-sponsored investment fund (LSIF) is a type of mutual fund that invests in small and medium-sized businesses that are not publicly traded. LSIFs are sponsored by labour unions or associations and offer tax credits to investors. However, LSIFs are also very risky and illiquid investments that may not be suitable for investors with a medium risk profile, such as Banji. Therefore, Quinton should not proceed with the purchase of the Prospect Labour-Sponsored Fund because it is not suitable for Banji based on her current KYC.
Therefore, C is the correct answer. References: Labour-Sponsored Investment Funds (LSIFs): Definition and How They Work - Investopedia, Canadian Investment Funds Course (CIFC) | IFSE Institute
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