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Free IFC ("IFIC") Practice Questions: 10 Questions with Answers
Getting ready for the mutual fund licensing exam? Below are 10 free practice questions covering core IFC topics — fund governance, fees, pensions and registered plans, risk, bonds, closed-end funds and anti-money laundering. Pick your answer, then tap "Show answer" for the correct choice and explanation.
These questions are taken word-for-word from the SmartExam IFC practice bank. They are written for study and are not actual exam questions.
"IFIC exam" or "IFC exam"? A quick naming guide
You'll see both names online. IFC — Investment Funds in Canada is the Canadian Securities Institute (CSI) course. "IFIC exam" is what many people called the IFSE Institute's Canadian Investment Funds Course (CIFC), because IFSE was linked to the Investment Funds Institute of Canada (IFIC).
IFSE has since closed — its website says "the time has come for us to say goodbye" and points students to CSI. (Industry press reported it stopped operating at the end of June 2025 and that IFIC rebranded as SIMA.) So the course you can enrol in today is CSI's IFC. National Instrument 31-103 still lists the CIFC, CSC and IFC exams as qualifying for mutual fund dealing representatives, so an existing CIFC pass may still count — check with your dealer.
Question 1 — Fund governance
What is the primary role of the 'Independent Review Committee' (IRC) for a mutual fund?
- A) To select the stocks for the portfolio.
- B) To oversee conflicts of interest identified by the fund manager.
- C) To audit the fund's financial statements.
- D) To set the daily NAV of the fund.
Show answer
Correct answer: B — To oversee conflicts of interest identified by the fund manager.
The IRC is an independent body required by NI 81-107 to review and make recommendations or approvals regarding conflict of interest matters referred to it by the fund manager.
Question 2 — Fees and the MER
Which component of the Management Expense Ratio (MER) is paid directly to the dealer to compensate the representative for ongoing client service?
- A) The management fee
- B) The trailer fee
- C) The operating expense
- D) The acquisition fee
Show answer
Correct answer: B — The trailer fee
The trailer fee (or service fee) is paid by the fund manager to the dealer (and subsequently the representative) for ongoing service and advice provided to the client. It is part of the management fee included in the MER.
Question 3 — Closed-end funds
A client is considering a 'closed-end fund' that is currently trading at a discount to its Net Asset Value (NAV). What does this imply for the investor?
- A) The investor must pay a premium to acquire the shares.
- B) The investor can purchase the fund's assets for less than their market value.
- C) The fund is likely to redeem the shares at par value immediately.
- D) The fund is engaging in high-risk leverage strategies.
Show answer
Correct answer: B — The investor can purchase the fund's assets for less than their market value.
When a closed-end fund trades at a discount to its NAV, the market price of the share is lower than the value of the underlying assets, allowing investors to buy the assets at a 'bargain' price.
Question 4 — Risk and diversification
Which type of investment risk cannot be eliminated through diversification?
- A) Specific risk
- B) Business risk
- C) Market (systematic) risk
- D) Liquidity risk
Show answer
Correct answer: C — Market (systematic) risk
Systematic risk affects the entire market (e.g., inflation, interest rates, recession) and cannot be diversified away. Specific risk (unique to a company) can be reduced by diversification.
Question 5 — Interest rates
Which of the following describes a 'normal' yield curve?
- A) Short-term interest rates are higher than long-term interest rates.
- B) Short-term interest rates are lower than long-term interest rates.
- C) Interest rates are the same across all maturities.
- D) The curve is flat.
Show answer
Correct answer: B — Short-term interest rates are lower than long-term interest rates.
A normal yield curve slopes upward, indicating that long-term bonds yield more than short-term bonds to compensate investors for the risks associated with time (e.g., inflation).
Question 6 — Bonds
If an investor holds a bond until maturity, what price will they receive?
- A) The current market price plus accrued interest.
- B) The par (face) value.
- C) The original purchase price.
- D) The average price over the holding period.
Show answer
Correct answer: B — The par (face) value.
At maturity, the issuer is obligated to repay the principal amount, which is the par or face value of the bond, regardless of the price the investor paid.
Question 7 — Pension plans
For a 'Defined Contribution' pension plan, which of the following statements is true?
- A) The retirement benefit amount is guaranteed by the employer.
- B) The employer bears the investment risk.
- C) The contribution amount is known, but the final benefit depends on investment performance.
- D) It provides a flat monthly benefit based on years of service.
Show answer
Correct answer: C — The contribution amount is known, but the final benefit depends on investment performance.
In a defined contribution (money purchase) plan, contributions are fixed, but the final pension amount depends on how well the investments perform. The employee bears the investment risk.
Question 8 — Spousal RRSPs
An investor contributes to a spousal RRSP. Which party receives the tax deduction for the contribution?
- A) The contributing spouse.
- B) The non-contributing (annuitant) spouse.
- C) Both spouses split the deduction evenly.
- D) Neither spouse receives a deduction until withdrawal.
Show answer
Correct answer: A — The contributing spouse.
In a spousal RRSP, the contributor receives the tax deduction, but the plan is registered in the name of the spouse, who is the annuitant.
Question 9 — Locked-in plans
What is the origin of funds in a 'Locked-in Retirement Account' (LIRA)?
- A) Voluntary personal savings contributed annually.
- B) Proceeds from a registered pension plan (RPP) transferred upon termination of employment.
- C) Government grants for education savings.
- D) Insurance death benefit proceeds.
Show answer
Correct answer: B — Proceeds from a registered pension plan (RPP) transferred upon termination of employment.
A LIRA holds funds transferred from a registered pension plan (RPP) when an employee leaves their employer before retirement. The funds are 'locked in' to provide lifetime retirement income.
Question 10 — Anti-money laundering
Under Anti-Money Laundering (AML) rules, what is the 'layering' stage?
- A) The initial deposit of illegal cash into the banking system.
- B) A series of complex transactions designed to hide the source of the funds.
- C) Using the laundered funds to purchase luxury assets.
- D) Reporting the transaction to FINTRAC.
Show answer
Correct answer: B — A series of complex transactions designed to hide the source of the funds.
Layering involves moving funds through various accounts and transactions to obscure the audit trail and separate the criminal proceeds from their illegal source.
A note on Question 2: in Canada, trailing commissions can no longer be paid to dealers that don't make suitability determinations, such as order-execution-only (discount) brokers, under rules in force since June 1, 2022. The question describes the usual case for a full-service dealer.
The IFC exam at a glance
Per CSI: one proctored exam (remote or in person), 100 multiple-choice questions, 3 hours, 60% to pass, up to 3 attempts, within a 1-year enrolment. The heaviest topic is The Know Your Client Communication Process (19%). For fees and what happens if you fail, see IFC pass mark, fees and retakes, and for study strategy, IFC exam prep.
Keep practising with SmartExam
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Frequently asked questions
Is the IFIC exam the same as the IFC exam?
Not exactly. 'IFC' is CSI's Investment Funds in Canada course. 'IFIC exam' is a nickname many people used for the IFSE Institute's Canadian Investment Funds Course (CIFC), because IFSE was linked to the Investment Funds Institute of Canada (IFIC). IFSE has since closed and points students to CSI, so the IFC is the course most new candidates take today.
Are these real IFC exam questions?
No. They come from SmartExam's own IFC practice bank and are written for study. They are not actual exam questions.
What is the IFC exam format?
According to CSI: one proctored exam, 100 multiple-choice questions, 3 hours, 60% to pass, with up to 3 attempts.
Sources
- CSI — IFC exam details and weightings: csi.ca/en/learning/courses/ifc/exam-credits
- IFSE Institute — closure notice: ifse.sima-amvi.ca
- NI 31-103, ss. 3.1 and 3.5 (OSC unofficial consolidation): osc.ca
- Canadian Securities Administrators (news release via AMF) — ban on trailing commissions for order-execution-only dealers: lautorite.qc.ca
- Investment Executive (industry press, secondary) — IFSE Institute to shut down: investmentexecutive.com; IFIC rebrands: investmentexecutive.com
Information checked October 13, 2026. Answers follow the course material; where current rules differ, we note it.
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