CIC Client Communication and Disclosure 2

Question 1

Under SEC Regulation Best Interest (Reg BI), which disclosure document must broker-dealers provide to retail customers?

Accepted Answer

Form CRS (Customer Relationship Summary)

Answer

Form ADV Part 2

Answer

Form U4

Answer

Form 13F

Question 2

A client asks why their portfolio underperformed the benchmark. The investment counselor's most appropriate response is to:

Accepted Answer

Provide a written attribution analysis explaining factor-level performance drivers

Answer

Blame market conditions without specifics

Answer

Redirect the conversation to future opportunities

Answer

Assure the client the benchmark is irrelevant

Question 3

Which of the following best describes 'informed consent' in the context of investment advisory relationships?

Accepted Answer

A client agreeing to terms after receiving full, clear disclosure of material facts

Answer

A client signing any document provided by the adviser

Answer

Verbal acknowledgment of investment risks only

Answer

Regulatory approval of an investment strategy

Question 4

An investment counselor discovers a conflict of interest after an advisory relationship has already begun. The counselor should:

Accepted Answer

Disclose the conflict promptly and obtain the client's consent to continue

Answer

Wait until the annual review to mention it

Answer

Resolve the conflict internally without telling the client

Answer

Transfer the account to another adviser without explanation

Question 5

Which communication practice is specifically required when an adviser changes its fee schedule?

Accepted Answer

Notifying affected clients in writing with sufficient advance notice

Answer

Posting the new schedule on the company website only

Answer

Informing clients verbally at the next meeting

Answer

Filing a report with the SEC with no client notification needed

Question 6

A client with low financial literacy asks about derivatives exposure in their portfolio. The counselor should:

Accepted Answer

Explain the concept in plain language appropriate to the client's knowledge level

Answer

Use technical jargon to demonstrate expertise

Answer

Decline to discuss complex instruments

Answer

Refer the client to the prospectus without further explanation

Question 7

Under FINRA rules, which statement about customer account statements is correct?

Accepted Answer

Statements must be sent quarterly at minimum for accounts with activity

Answer

Statements are only required annually unless the client requests otherwise

Answer

Monthly statements are mandatory regardless of account activity

Answer

Statements must be delivered in paper format only