CMFAS M9A Suitability, Sales Process & After-Sales question: fall short of the inception-disclosure requirements

CMFAS M9ASuitability, Sales Process & After-Sales

A structured ILP policy document discloses the upfront sales charge but omits an ongoing administrative charge that the insurer in fact deducts. Why does this fall short of the inception-disclosure requirements?

A The policy document must specify all fees and charges, however they are paid
B Only fees taken from the sub-fund's assets need to be disclosed
C Administrative charges are disclosed solely in the benefit illustration
D Fees below a prescribed threshold need not be disclosed

Show the answer and explanation

Answer: A. The policy document must specify all fees and charges, however they are paid

The policy document must specify all fees and charges, however they are paid — whether by deducting premium or cancelling units (e.g. sales commission, mortality and administrative charges) or from the sub-fund's assets.

Common mistake

Fee disclosure is comprehensive; no charge may be left out because it is small or of a particular type.

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Related CMFAS M9A questions

In an ILP, the minimum payout and capital repayment are guaranteed by an unrelated bank (XYZ), and the policy document states the guarantee ends if XYZ is liquidated. This means In Case Study 1 the maximum return is capped at 20% while the capital is protected (barring the owner's own early termination or failure of guarantor XYZ). Beyond the early-redemption/reinvestment risk, this feature illustrates that the policy owner A client holds a capital-guaranteed structured ILP and, needing cash, asks to redeem units well before maturity. Besides any mark-to-market cost, what key consequence must the Adviser flag?

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