CIC Cheat Sheet 2026

The 30 highest-yield CIC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Which risk measure considers ONLY returns below the mean or a minimum acceptable return? → Semivariance
2. Under the Investment Advisers Act, an investment adviser is prohibited from charging a performance fee to a client unless the client is a: → Qualified client meeting net worth or AUM thresholds
3. Which strategy aims to outperform market benchmarks? → Active management
4. What is fiduciary duty? → Acting in client's best interest
5. Under the Investment Advisers Act of 1940, the fiduciary duty owed by an investment adviser to a client is comprised of which two primary components? → Duty of Care and Duty of Loyalty
6. Which of the following best describes the concept of 'crowding out' in economics? → Private investment declines because government borrowing raises interest rates
7. An investor increases gold and TIPS allocations prior to expected inflation spikes. This is an example of: → Tactical asset allocation using inflation hedges
8. Which of the following is a key characteristic that distinguishes a fiduciary standard from a suitability standard in investment counseling? → A fiduciary must act in the client's best interest and disclose all material conflicts
9. Which risk is NOT reduced through portfolio diversification? → Systematic (market) risk
10. An investor wants to minimize tracking error relative to the S&P 500 while slightly overweighting technology. This best describes: → Enhanced indexing
11. When an IPS states 'the portfolio shall not hold more than 5% in any single security,' this is an example of a: → Concentration risk constraint
12. In the DuPont analysis framework, Return on Equity (ROE) is decomposed into which three components? → Net profit margin, asset turnover, and equity multiplier
13. An investment counselor uses a Monte Carlo simulation primarily to: → Model a range of possible outcomes by running thousands of random scenarios
14. The Investment Advisers Act of 1940 was primarily enacted to address concerns about: → Conflicts of interest and fraudulent practices by investment counselors and advisers
15. A CIC who simultaneously serves as a trustee for a client's estate and as the investment counselor for that estate faces: → A potential conflict of interest that must be disclosed and managed
16. Which measure best evaluates a portfolio manager's risk-adjusted performance relative to a benchmark? → Information ratio
17. A CIC holder is transitioning to a competitor firm. Which of the following actions regarding client data would violate professional standards? → Copying client account records to solicit them at the new firm without authorization
18. Which of the following best defines 'churning' in the context of investment ethics? → Excessive trading in a client's account primarily to generate commissions
19. A portfolio's standard deviation increased from 10% to 18% after adding a new position. What does this indicate? → Overall portfolio volatility increased
20. Which of the following IPS elements is unique to endowments and foundations compared to individual investor policies? → A perpetual time horizon with an intergenerational equity mandate
21. IAA Standards require that an adviser's Code of Ethics must be provided to: → All supervised persons and, upon request, to clients and prospective clients
22. What does the Sharpe ratio measure? → Excess return per unit of total risk (standard deviation)
23. Which investment policy constraint refers to the minimum acceptable holding period before assets can be liquidated? → Liquidity constraint
24. A client in the highest tax bracket holds large unrealized capital gains. Which tax-efficient strategy can reduce current-year tax liability? → Tax-loss harvesting to offset gains with losses
25. Which factor primarily determines the appropriate asset allocation for a client? → Client's time horizon, risk tolerance, and financial goals
26. What is liquidity in financial analysis? → Cash conversion ability
27. An investment counselor discovers a material error in a client's account statement that overstates portfolio value. The ethical response is to: → Notify the client promptly and correct the error
28. A client who is retired and relies entirely on portfolio distributions for living expenses would have which type of liquidity profile in the IPS? → High liquidity requirement due to regular income distributions needed
29. Which of the following best defines 'active return'? → Portfolio return minus the benchmark return over the same period
30. Under IAA Standards, which scenario best illustrates a violation of the prohibition on excessive trading? → Executing 12 trades per day in a small account primarily to generate commissions