Registrant Prep · Practice CIRE Element 7 free, no card
CIRE Element 7
~15% of marks (2nd largest) · Updated May 2026
7
Investment Products
The largest product-focused element on the CIRE. Covers equities (common, preferred, rights, warrants), fixed income (government, corporate, money market), pooled vehicles (mutual funds, ETFs, segregated funds, hedge funds, PPNs), and derivatives at a foundational level. Where non-finance candidates struggle most.
Rules tested:NI 81-101NI 81-102NI 81-104NI 41-101
Common and preferred shares
1- Common: voting rights, residual claim, last in liquidation.
- Preferred: fixed dividend, no maturity, paid before common in liquidation, usually non-voting.
- Cumulative preferred: missed dividends accrue and must be paid before common dividends.
- Restricted shares: non-voting, subordinate voting, or restricted voting.
- DRIP: dividends used to buy more shares instead of cash.
Bonds and money market
2- Coupon based on face value, not market price.
- Bond price and yield move in opposite directions.
- YTM > coupon = discount bond. YTM < coupon = premium bond.
- T-bills sold at discount, mature at par (no coupon).
- Strip bonds: coupons removed; income taxed annually even though no cash received.
- Eurobond: issued in a currency different from the market it's sold in.
Mutual funds (NI 81-101 / 81-102)
3- Fund Facts must be delivered at or before the time of order (pre-trade).
- MER includes management fee, operating expenses, taxes. Trailing commissions disclosed separately.
- DSC sales charges banned (post-2022). Front-end and no-load are the standard sales structures.
- Series A, F, D, I: same fund, different fee structures for different investor types.
- Switching within the same fund family at NAV is common and may be tax-deferred for corporate-class funds.
ETFs (NI 41-101 Part 3B)
4- ETF Facts delivered no later than 2nd business day after the trade.
- Creation/redemption in kind via authorized participants keeps the price close to NAV.
- Index ETFs vs active ETFs vs leveraged/inverse ETFs (the last reset daily, not for long-term holding).
- Bid-ask spread is a real cost, in addition to MER.
Segregated funds and PPNs
5- Segregated funds: insurance contract, with maturity and death benefit guarantees (75% or 100%).
- Creditor protection if named beneficiary is a spouse, child, parent, or grandchild.
- PPN (Principal-Protected Note): structured product. Principal guaranteed at maturity, return linked to an underlying.
- Hedge funds and alternative funds (NI 81-104): higher fees, lower regulation, accredited investor thresholds.
Derivatives and structured products
6- Option contract = 100 shares. Call breakeven = strike + premium. Put = strike − premium.
- Futures: standardized, exchange-traded, daily marked-to-market.
- Forwards: customized, OTC, settled at expiry.
- Swaps: exchange of cash flows. Interest rate, currency, credit default swaps.
- Structured notes with embedded derivatives: read the prospectus carefully for downside protection mechanics.
Rights and warrants
7- Rights: short-term (usually 4–6 weeks), issued to existing shareholders, subscription price < market.
- Rights stop trading at noon on expiry day (TSX & TSXV).
- Ex-rights formula (1 right): (S − X) ÷ n. Cum-rights: (S − X) ÷ (n + 1).
- Warrants: long-term (3–5 years), issued by the company, often attached to debt as a sweetener.
Exam traps
- Trap:Calculating coupon income from market price instead of face value.Fix:Coupon = par × rate. Market price affects yield, not the coupon dollar amount.
- Trap:Treating leveraged/inverse ETFs as buy-and-hold instruments.Fix:They reset daily. Hold for one day at most; compounding decay over longer periods.
- Trap:Missing Fund Facts pre-trade delivery requirement.Fix:Fund Facts must arrive AT OR BEFORE order entry. ETF Facts has a T+2 delivery window, different rule.
- Trap:Confusing rights with warrants on tenor.Fix:Rights = 4–6 weeks. Warrants = 3–5 years.
Memory hooks, Element 7
- →Coupon = face value × rate (not market price)
- →YTM > coupon = discount
- →Option contract = 100 shares
- →Call BE = strike + premium
- →Fund Facts pre-trade · ETF Facts T+2
- →Rights = SHORT term (weeks) · Warrants = LONG term (years)
- →Seg fund = insurance contract with creditor protection