CIFC practice question 1 of 30

Josephine is a Dealing Representative with Sunshine Mutual Funds Inc. for over 10 years. Her brother Jonathan has an account with Sunshine Mutual…

Josephine is a Dealing Representative with Sunshine Mutual Funds Inc. for over 10 years. Her brother Jonathan has an account with Sunshine Mutual Funds Inc., too. Jonathan wants Josephine to manage his portfolio and make investment decisions on his behalf. Jonathan trusts his sister to make better investment choices than he can. He also wants to give Power of Attorney (POA) to Josephine so she can have full authority over his account. How can Josephine respond to her brother's request?

Answer options

A: Josephine can accept a limited POA. Correct answer

B: Josephine cannot accept the POA as she is not the immediate family.

C: Josephine can accept the POA as it is an exception that is permitted under the MFDA rules.

D: Josephine should accept the POA after making a full disclosure to her dealer about the POA.

Correct Answer:

A. Josephine can accept a limited POA.

Explanation

MFDA Rule 2.3 prohibits Approved Persons from accepting or acting on a general or full power of attorney from any client. The sole exception permits acceptance of a Limited Trading Authorization or limited power of attorney that only allows execution of specific trade instructions and does not confer discretionary authority. Because Jonathan is an immediate family member, Josephine may accept such a limited POA, but not a full discretionary mandate.

Why Incorrect

B. Jonathan is Josephine’s brother—an immediate family member—so the premise is incorrect.
C. MFDA allows only a limited trading authorization, not a blanket exception for full POA.
D. Disclosure does not override the prohibition on accepting a full discretionary POA.

References

1. Mutual Fund Dealers Association (MFDA) Rulebook, Rule 2.3.1 & 2.3.2(b) (Limited Trading Authorization; immediate family exception).

2. IFSE Institute, CIFC Study Manual, 2023 ed., Ch. 14 “Regulatory Environment”, pp. 14-9–14-10 (discussion of POA limitations for dealing representatives).

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