IFC Exam Dumps - Investment Funds in Canada (IFC) Exam

Retractable preferred shares are a type of preferred stock that lets the issuer force the redemption of the shares at a set price and time. The issuer can pay cash or common shares to the retractable preferred shareholders.

References = Retractable Preferred Shares: What it is, How it Works, Example, What are Retractable Preferred Shares? Definition, And How Does it Work? - CFAJournal, Retractable Preferred Shares | Example | Feature - Accountinguide

In a mutual fund corporation, the Investment Funds in Canada course states that ultimate responsibility rests with the board of directors. The board acts on behalf of shareholders to oversee the management and operations of the mutual fund corporation and to ensure that the fund is managed in compliance with securities legislation and in the best interests of investors.

While portfolio managers are responsible for day-to-day investment decisions, they operate under the authority and supervision of the board. The board appoints key service providers, approves contracts, establishes governance policies, and ensures that conflicts of interest are properly managed. This governance structure is central to investor protection.

Regulatory bodies such as the Canadian Investment Regulatory Organization (CIRO) oversee market participants and enforce rules, but they do not manage or control individual mutual fund corporations. Shareholders are owners of the corporation, but they do not have operational control or responsibility for daily activities.

The CIFC curriculum clearly distinguishes between ownership and governance, emphasizing that directors bear fiduciary responsibility for ensuring proper management. Therefore, Option A is the correct and fully CIFC-aligned answer.

Survivorship bias occurs when poor-performing funds are closed, excluding them from performance rankings and inflating the perceived performance of surviving funds. The feedback from the document states:

"All comparison universes also exhibit some degree of survivorship bias no matter how carefully the universes are constructed. Survivorship bias develops as defunct portfolios drop out and are excluded from rankings in subsequent quarters. A performance universe is essentially a universe of survivors."

Long transactions involve buying a security with the expectation that its price will increase, while short transactions involve borrowing and selling a security with the hope of buying it back at a lower price. The feedback from the document states:

"Short transactions are a common feature of the capital markets, although not as common as long transactions – the transactions taken by investors who anticipate a price increase in the security. Investors who short sell stocks must first borrow the shares. They must also declare their short transactions."

Michael, capital gains are the profits you make when you sell an asset that has increased in value. For example, if you bought a mutual fund for $1,000 and sold it later for $1,500, you have a capital gain of $500. Capital gains are taxed only when they are realized, which means when you actually sell the asset and receive the proceeds. You do not have to report any unrealized capital gains, which are the potential profits you would make if you sold the asset at its current market value. Capital gains are taxed on all types of mutual funds, not just equity funds. However, the amount of capital gains you have to report may vary depending on the type of fund and how often it distributes its gains to investors. Capital gains are not tax-free, but they are taxed at a lower rate than other types of income. You only have to pay tax on 50% of your net capital gains, which is the total capital gains minus the total capital losses in a year. For more information on how to calculate and report your capital gains, you can refer to the Canada Revenue Agency website1 or consult a tax professional.

Canadian Investment Funds Course, Chapter 9: Taxation of Investment Income2

Hedge fund incentive fees apply only to returns above the hurdle rate.

Gross return = 22%

Hurdle rate = 5%

Excess return = 22% − 5% = 17%

Incentive fee = 20% × 17% = 3.4%

Thus, the fund manager earns 3.4% compensation.

Market risk (systematic risk) cannot be eliminated by diversification or hedging; it affects all securities in the market (e.g., recessions, geopolitical events, interest rate changes).

Default risk (B) relates to specific issuers of debt.

Unique risk (C) is company-specific and can be diversified away.

According to the Personal Information Protection and Electronic Documents Act (PIPEDA), personal information is any factual or subjective information, recorded or not, about an identifiable individual. This includes information in any form, such as age, name, ID numbers, income, ethnic origin, or blood type. However, PIPEDA also specifies some exceptions to the definition of personal information, such as business contact information. Business contact information is any information that is used for the purpose of communicating or facilitating communication with an individual in relation to their employment, business or profession. This includes the employee’s name, position name or title, work address, work telephone number, work fax number or work electronic address. Therefore, an employee’s business address and business telephone number are not considered personal information under PIPEDA. An employee’s name could be considered personal information if it is not used for business purposes, but it is not clear from the question whether that is the case. An employee’s credit record is clearly personal information under PIPEDA, as it reveals sensitive information about the individual’s financial situation and history.

 1: PIPEDA in brief - Office of the Privacy Commissioner of Canada 2