Free CSI Conduct and Practices Handbook Course (CPH®) Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the CSI Conduct and Practices Handbook Course (CPH®) Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Which principle governs a CIRO Regulated Person's business dealings?

   1. A.Openness and fairness under equitable trading principlesCorrect answer: A
   2. B.Client consent as a substitute for equitable treatment
   3. C.Commercial advantage as the measure of fair treatment
   4. D.Equal investment returns as the measure of fair dealing

   Explanation: The source states: "act openly and fairly and in accordance with just and equitable principles of trade" The standard governs conduct, rather than guaranteeing equal results or allowing consent or profit to replace fair treatment.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 1402(1)(i)

2. 2Which outcome is a stated objective of the British Columbia securities regulator?

   1. A.Preserving the market price of every listed security
   2. B.Replacing investor judgment with guaranteed returns
   3. C.Supporting fair and efficient investment marketsCorrect answer: C
   4. D.Directing capital only toward profitable local issuers

   Explanation: "fosters fair and efficient investment markets" The objective concerns market fairness and efficiency, not price support, investment guarantees or directing investment to selected issuers.

   Reference: BCSC — About — About — opening statement

3. 3Except where a specific automatic-approval provision applies, by what latest point must an individual already have CIRO approval in the appropriate Approved Person category?

   1. A.Before beginning work in that roleCorrect answer: A
   2. B.After completing the first client's transaction
   3. C.By the end of the first calendar quarter of work
   4. D.After receiving the first commission payment

   Explanation: "before the individual begins working in that role." Passing examinations or being hired does not itself permit starting in the role before the required approval.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 2551(1)(iii)

4. 4Before opening an ordinary advised retail account, what must the dealer assess under CIRO's account-appropriateness requirement?

   1. A.Whether the account will generate the branch's target annual revenue
   2. B.Whether the client will accept every product available through the dealer
   3. C.Whether the account and accessible services are appropriate for the personCorrect answer: C
   4. D.Whether another dealer would offer an identical range of investment products

   Explanation: "the scope of products, services and account relationships which the person would have access to within the account are appropriate for the person." The assessment puts the person's interest first and concerns the account and its scope. Revenue, agreement to buy every product and matching another dealer's shelf do not determine appropriateness.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 3211(1)

5. 5An adviser considers an additional purchase of an issuer already dominating an advised retail portfolio. What must the suitability assessment consider?

   1. A.Only whether the security is approved for any client at the firm
   2. B.Only whether the new transaction's dollar amount is small
   3. C.Only whether the issuer has met its past earnings forecasts
   4. D.The transaction's effect on account concentration and liquidityCorrect answer: D

   Explanation: "the impact of the action on the retail client’s account, including the concentration of securities, derivatives or precious metals bullion, within the account and the liquidity of those securities, derivatives or precious metals bullion" Suitability includes the resulting account impact. Product approval, transaction size or past earnings alone does not resolve concentration and liquidity.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 3402(1)(i)(c)

6. 6What does the bid price of a security represent?

   1. A.The lowest price at which a seller is willing to sell
   2. B.The highest price a buyer is willing to payCorrect answer: B
   3. C.The price at which the previous trade necessarily occurred
   4. D.The price the issuer originally received for the security

   Explanation: "The highest price a buyer is willing to pay for a security." Bid describes buying interest; ask describes selling interest. It is neither necessarily the last trade nor the original issue price.

   Reference: CIRO — Glossary of Common Investing Terms — B — Bid Price

7. 7A client's cash account opens the statement period with $5,000. During the period it receives a $2,000 deposit and records a $3,000 purchase debit plus a separate $20 commission debit. There are no other entries. What is the closing cash balance?

   1. A.$3,980Correct answer: A
   2. B.$4,000
   3. C.$4,020
   4. D.$9,980

   Explanation: "all deposits, credits, withdrawals and debits made to the account" Opening cash plus credits minus debits gives $5,000 + $2,000 − $3,000 − $20 = $3,980, with no rounding. $4,000 omits commission; $4,020 credits it; $9,980 treats the purchase debit as a credit.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 3808(4)(i)–(iii)

8. 8A representative argues that business conduct is acceptable whenever it benefits an individual client. Which additional consideration does CIRO's general conduct standard expressly require?

   1. A.Whether the client has earned a positive investment return
   2. B.Whether the conduct is detrimental to the public interestCorrect answer: B
   3. C.Whether the transaction matches the firm's revenue target
   4. D.Whether the client has used the same representative before

   Explanation: The source states: "must not engage in any business conduct that is unbecoming or detrimental to the public interest." Individual benefit does not remove the public-interest restriction. Revenue, prior relationships and positive returns do not establish compliance.

   Reference: CIRO Investment Dealer and Partially Consolidated Rules — 1402(1)(ii)

9. 9Why do Canada's provincial and territorial securities regulators coordinate through the CSA?

   1. A.To improve and harmonize regulation across Canadian capital marketsCorrect answer: A
   2. B.To centralize all provincial enforcement in a single national agency
   3. C.To manage individual investors' portfolios across all provinces
   4. D.To set the offering prices charged by Canadian securities issuers

   Explanation: "whose objective is to improve, coordinate and harmonize regulation of the Canadian capital markets." The CSA coordinates provincial and territorial regulators to harmonize regulation. It does not turn them into a single enforcement agency, manage clients’ portfolios or set issuers’ offering prices.

   Reference: CIRO — Where We Fit in the Canadian Securities Regulatory Framework — Canadian Securities Administrators (CSA)

10. 10An Approved Person has passed the required examinations but lacks the training needed to perform a proposed activity competently. How does CIRO's proficiency principle apply?

    1. A.Examination success alone authorizes every activity in the category.
    2. B.Client consent replaces the missing practical competence.
    3. C.Required proficiency includes the necessary education, experience and training.Correct answer: C
    4. D.Competence need only be acquired after the first client complaint.

    Explanation: "has the education, experience and training that a reasonable person would consider necessary to perform the activity competently" The principle requires competence as well as prescribed proficiency requirements. Neither client consent nor waiting for a complaint satisfies it.

    Reference: CIRO Investment Dealer and Partially Consolidated Rules — 2602(1)