IFSE Institute CIFC Exam - Topic 11 Question 10 Discussion

Actual exam question for IFSE Institute's CIFC exam

Question #: 10
Topic #: 11

[All CIFC Questions]

Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two

different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been

reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form

(LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change.

What type of activity has Khuyen performed?

ATop-down management

BChurning

CDiscretionary trading

DValue investing

Show Suggested Answer

Suggested Answer: C

by Annice at Aug 18, 2025, 06:06 AM

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Earnestine

3 months ago

Yup, definitely discretionary trading.

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Novella

3 months ago

Totally agree, she had the LAF!

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Leontine

4 months ago

Wait, is it really okay to change funds without consulting Bao?

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Katlyn

4 months ago

I thought churning was a bigger issue, but this seems fine.

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Solange

4 months ago

Sounds like discretionary trading to me.

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Valentine

4 months ago

I'm leaning towards churning because she switched funds without Bao's input, but I need to double-check the definitions to be certain.

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Elvera

5 months ago

I remember learning about discretionary trading and how it applies when a client gives limited authority. So, I think that's what Khuyen did, but I could be wrong.

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Nana

5 months ago

This reminds me of a practice question we did on trading authority. I feel like it could be churning if she was just trying to generate commissions, but that doesn't seem to fit here.

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Cecil

5 months ago

I think Khuyen's action might be discretionary trading since she made a decision without consulting Bao, but I'm not entirely sure.

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Alona

5 months ago

Okay, I think I've got it. Khuyen had the client's permission to make changes, and she determined that the client would be better off in the Blue Moon fund. So this is a case of discretionary trading, where the advisor has the authority to make decisions on the client's behalf. I'm going with C on this one.

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Bok

5 months ago

Hmm, this is a tricky one. Khuyen did have the client's authorization, but she still made the change without checking with them first. That feels a bit like churning to me, but I could be wrong. I'll have to think this through carefully.

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Mira

5 months ago

I'm a bit confused here. Khuyen made a change to the client's investments without consulting them first, even though she had authorization. Is that really considered discretionary trading? I'm not sure.

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Fausto

6 months ago

This seems like a straightforward question about discretionary trading. Khuyen had the client's authorization to make changes, so I think the answer is C.

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