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Describe and Investment Policy Statement (IPS)

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Describe and Investment Policy Statement (IPS):

An IPS details the organization’s procedures for all client investments
An IPS is created by the Board of Trustees
An IPS is a FINRA required document
An IPS addresses the objectives of the client or pension plan
2

Which of the following are deposit-taking institutions (DTIs)?

Building societies
Insurance companies
Investment trust companies
Retail banks
Pension funds
DTIs are the following:

2 – 4
1 and 4
1 and 2
3 – 5

3

All of the following make an IPS important, EXCEPT:

Helps define all associated parties of their responsibilities
Sets target asset allocations
Will remove all emotions from the investment process
Helps identify potential risks the pool of assets may face

4

Which of the following is the reason why economic sticklers would not consider shares / equities as financial instruments:

Shares represent part-ownership in the company and are not redeemable
Companies can re-purchase their shares
Preferred shares are closer to debt instruments
Companies can have debt and shares, they are substitutes for each other

5

Which of the following are functions of a financial system?

The operation of a payment system
Providing the means of portfolio adjustment
Helping to reduce unemployment
Channelizing funds between lenders and borrowers
Helping speculators to bet on price movements
Functions of a financial system include:

1, 2, and 4
2, 3, and 5
2 – 5
1 and 5
6

Which of the IPS’s factors would change if the client went to another financial professional?

Investment strategies
Amount invested by the client
Responsibility for the risk management
Client objectives
7

Derivatives can be strictly defined as

Financial instruments
Securities with strong economic foundations
Contracts that may lead to profits or losses
Representatives of “claims” of holders on issuers
8

Which one of the following is the definition of an Investment Policy Statement (IPS)s:

A Specific document to govern investing activities
An agreement about services and prices
An engagement letter for investing services
Protects the client from investment losses
9

Constructing and IPS is the responsibility of

Financial professional
Investor
Financial professional and investor
Portfolio manager
10

How would you classify an Exchange Traded Fund (ETF)?

Collective investment scheme (CISs)
Alternative investments
Contractual intermediaries
Quasi-financial intermediaries (QFTs)
11

The most important component of an IPS is:

Statement of purpose
Investment objectives and constraints
Appendices
Signature of the investor
12

A well-defined IPS should include of the following, EXCEPT:

Investment strategy and asset allocations
Definition of duties and objectives
Purpose and scope
How much should be invested

 
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