CIRO RSE Practice Exam Questions & Answers

Understand the client-relationship model, KYC requirements including financial and personal circumstances, risk profile assessment (willingness, capacity, and need), account types and documentation. Apply suitability determination requirements to specific scenarios, monitor for material changes, and manage conflicts of interest in the client's best interest.

Sample question from this domain above Q7

Summary: Element 2 requires the candidate to understand the features of fixed-income securities issued by governments, corporations and other bodies. Candidates will need to; apply this knowledge to specific situations to show how these features provide different risks and potential rewards to the holders and issuers of these securities. This element also; requires an ability to calculate the price and yields of fixed-income securities, as well as analyze the factors that can change these.; 2.1 Understand regulatory requirements for debt markets. Consider:; General requirements; To promote fair and efficient debt markets; Policies and procedures; The requirement; The content; Prohibited practices; Obligations on the Investment Dealer; Obligations on the Approved Person; 2.2 Understand types and features of fixed-income products.Consider:; Government of Canada Securities; Provincial and municipal government securities; Corporate securities; Guaranteed income certificates (GIC); 2.3 Apply terminology of fixed-income products to specific situations.; Consider:; Par value; Coupon rate; Maturity date; Term to maturity; Bond price; Yield to maturity; Settlement; Covenants; 2.4 Analyze characteristics of fixed-income products. Consider:; Advantages and disadvantages to the investor; Advantages and disadvantages to the issuer; Sources of risks and potential returns; Impact of the costs associated with acquiring and holding fixed-income products; 2.5 Understand the characteristics of the following instruments and the; conditions that affect the risk return profile. Consider:; Strips; Floating rate; Callable/puttable; Convertible; Extendable; Sinking/purchase funds; 2.6 Apply standard calculations to bond yields. Consider:; Income (or current) yield; (Approximate) yield to maturity; Yield on a zero-coupon instrument; Yield curves; 2.7 Apply in specific situations the relationships between:; Coupon, yield, term-to-maturity and price volatility; Macaulay duration, modified duration and price sensitivity; Changes in economic factors and price of fixed-income products; 2.8 Apply modified duration calculation to assess the change in a bond’s price for a given change in yields.; 2.9 Apply time value of money to investment calculations. Consider:; The calculation of the present value of a fixed-income security having been given the par value, coupon rate, term to maturity and discount rate; The calculation of any missing variable in a time value of money calculation

Summary: Element 3 requires the candidate to understand the features of equity securities issued by corporations.; Candidates will need to apply this knowledge to specific situations to show how these features provide different risks; and potential rewards to the holders and issuers of these securities.; 3.1 Understand the requirement for and purpose of a prospectus under; National Instrument 41–101 General Prospectus Requirements and when; this requirement may not apply under National Instrument 45–106; Prospectus Exemptions. Consider:; Application to primary and secondary distributions; Application to takeovers; Comprehensive disclosure; Advertising and marketing; Timely disclosure requirements; Exempt market securities; Private placements; Accredited investor; 3.2 Understand the types and key features of different classes of common; shares. Consider:; Dividend rights; Voting rights; Rights to surplus on dissolution; 3.3 Understand the types and key features of Canadian depositary receipts; (CDRs). Consider:; Rights to holder; CDR ratio; 3.4 Analyze the characteristics of investing into different classes of common; shares and depositary receipts. Consider:; Source of risks and potential returns; Impact of the costs associated with acquiring and holding common shares and depositary receipts; 3.5 Analyze features of common share ownership. Consider:; Advantages and disadvantages of common share ownership; Advantages and disadvantages to the issuer of common shares; 3.6 Understand how corporate actions can affect the shareholder’s position.; Consider:; How dividends are declared, claimed and taxed; The impact of stock splits and consolidations; Share buybac; 3.7 Understand types and key features of different classes of preferred shares.; Consider:; Dividend rights; Voting rights; Rights on dissolution; 3.8 Analyze the characteristics of investing into different classes of preferred; shares. Consider:; Source of risks and potential returns; Impact of the costs associated with acquiring and holding preferred shares; 3.9 Apply the distinction between common share and preferred share ownership to specific situations. Consider:; Advantages and disadvantages to the owners of preferred shares; Advantages and disadvantages to the issuer of preferred shares; 3.10 Apply time value of money to investment calculations. Consider:; The calculation of the present value of an equity security using appropriate models. Including:; Discounted cash flow; Price earnings growth models

Analyze company financial statements to assess investment value using liquidity, risk, profitability, efficiency, and equity ratios. Understand market information sources, index construction and use, fundamental and quantitative analysis methods. Apply macroeconomic factors and market sector analysis to investment expectations.

Sample question from this domain above Q3

Summary: Candidates will be required to show an understanding of managed products and analyze how they compare to direct investments. General fund management approaches will be tested alongside the information that needs to be provided to investors. Questions will expect candidates to differentiate between the various types of managed products, from mutual funds to private equity funds and analyze the relative advantages and disadvantages of these products. Questions may also require candidates to calculate the value of a portfolio or the units/shares being issued.; 5.1 Understand the types of managed products. Consider:; Mutual fund trusts; Mutual fund corporations; Income trusts; Closed-end funds; Real estate investment trusts (REITs); Exchange-traded funds (ETFs); Wrap funds/fund of funds/ETF wrap; Pooled funds; 5.2 Analyze the main considerations affecting an investor or potential investor, in managed products. Consider:; Range of exposures available; Income and growth; Asset classes; Sectors; Geography; Ethical and ESG considerations; Diversification/concentration; Advantages and disadvantages of managed products; 5.3 Understand the main features of mutual funds. Consider:; Access to mutual funds in Canada; Structure; Trust vs. corporate; Participants trustee, manager, distributor, custodian; Fee structures; Daily pricing; 5.4 Analyze the main considerations affecting an investor or potential investor, in mutual funds. Consider:; Advantages and disadvantages to the investor; Advantages and disadvantages to the provider; Source of risks and potential returns, including; Risk ranking methodologies; 5.5 Analyze the main considerations affecting an investor or potential investor, in ETFs. Consider:; Access to ETFs; Creation; Pricing: market price vs. net asset value (NAV); ETF management styles; The use of leverage; Advantages and disadvantages of ETFs over mutual funds; Cost structures; 5.6 Understand features and purpose of fund management styles. Consider:; Active and passive management; Smart beta/factor investing; Leveraged funds; Inverse funds; 5.7 Understand information sources on mutual funds, ETFs and other managed products, including the requirement for the fund fact document and EFT fact sheets.; 5.8 Understand the typical criteria for the evaluation of a fund’s performance. Consider; Measuring return; Holding period return; Money-weighted rate of return; Time-weighted rate of return; Comparing return; Benchmark; Peer group; 5.9 Apply methods of valuation for investment in and performance of managed funds. This may include some calculations. Consider:; Pricing of mutual fund units or shares, including a fund’s net asset value per share (NAVPS); Measurement and comparisons of fund performance; Standard performance data and total return; Use of comparisons and appropriate benchmarks; Specified in advance; Appropriate; Measurable; Unambiguous; Reflective; Accountable; Investable; 5.10 Understand the impact of costs on the performance of managed products.; Consider:; Loads and charges; Turnover; Taxes; On the fund; On the investor; Withholding tax; Recoverable; Unrecoverable; Assessing expense ratios; Management expense ratio; Trading expense ratio; 5.11 Analyze the implications of redemptions. Consider:; Tax consequences; T-swps; Withdrawal plans; Suspension of redemptions Gating; 5.12 Apply the factors to consider when deciding between managed products or non-managed products. Consider:; The investor’s decisions; The Registered Representative’s recommendation; 5.13 Understand the types of alternative strategy funds and alternative assets. Consider:; Hedge funds; Structured products; Alternative investment funds; Crypto-assets; Private equity; Venture capital; 5.14 Analyze the characteristics of alternative strategy funds and other types of investments. Consider:; Structure; Features; Fees: management, performance, hurdle rates; Advantages and disadvantages to the investor; Advantages and disadvantages to the provider; Source of risks and potential returns; Impact of the costs associated with acquiring and holding other investments; Accredited investor requirement

Apply asset allocation principles, strategic and tactical approaches, and rebalancing strategies. Understand risk types and measures including standard deviation, beta, and drawdown. Apply risk management for short selling and hedging. Use capital asset pricing model, arbitrage pricing theory, and multi-factor models to evaluate portfolio risk and return.

Sample questions from this domain above Q1Q5

Apply retail client suitability determination using KYC information and product selection. Address behavioral finance biases including cognitive, information processing, emotional, and capital market biases. Apply tax planning for registered accounts and capital gains. Resolve conflicts between client expectations and risk profile.

Sample question from this domain above Q6

Apply Universal Market Integrity Rules to identify abusive trading, manipulative practices, and front running. Understand gatekeeping responsibilities and suspicious transaction reporting. Apply order types including limit, market, fill or kill, and short sale orders. Understand settlement processes and margin account requirements.

Sample questions from this domain above Q2Q4

Summary: Monitoring the client’s portfolio is an important part of the relationship between clients and the Investment; Dealer. This element requires candidates to apply requirements around the monitoring and reporting of portfolio; performance to specific scenarios. Candidates should also apply and analyze the requirements on Investment Dealers; when recording and communicating information; 9.1 Apply to specific situations the process of monitoring and evaluating portfolio performance. Consider:; The market and the economy; Client needs and circumstances; 9.2 Apply to specific situations the process of investment performance disclosure and measurement. Consider:; How performance is measured; How comparative performance is determined; The use of multi-factor regression; The proper use of benchmarks in assessing portfolio performance; Transaction costs and tax implications of investment recommendations; Fees and charges for the product and the impact on client returns; 9.3 Analyze investment performance calculations to individual securities or portfolios over any timeframe. Consider:; Rate of return; Absolute risk/standard deviation; Risk-adjusted returns; Sharpe; Treynor; Jensen; Performance against benchmarks; Multi-factor regression; 9.4 Apply to specific situations the CIRO requirements when Investment Dealers communicate with clients and/or the public. Consider:; Awareness of obligations and best practices; The appropriate use of professional titles; Misleading communications; Restrictions and guidelines regarding social media and other communications with the public; Off-channel communication issues; 9.5 Apply to specific situations the requirements to maintain all client responses/records in respect of:; Account appropriateness; Suitability determination; Know-your-client (KYC); Know-your-product (KYP); Conflict of interest; Sales practices; Compensation arrangements; Incentive practices and other compensation arrangements; Incentive practices which may benefit the Investment Dealer or Registered Representative