CIRE Element 7: Securities, Managed Products and Mutual Funds
Quick answer
Element 7 covers the products a registrant deals in: equities, fixed income, market indices, mutual funds, closed-end funds, ETFs, REITs and other managed products, plus hedge funds, structured products, alternative investment funds, crypto assets and ESG products. The official blueprint assigns 21 of 110 indicative questions, the largest element, across 12 outcomes.
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- Element
- 7 / 9
- Weight
- 21 of 110 questions (largest)
- Outcomes
- 12
- Practice Qs
- 423+
Coverage
What is tested in Element 7
Element 7 covers a wide product universe and the questions test specific product mechanics. For mutual funds, you need to know the MER vs TER distinction (the management expense ratio and the trading expense ratio are separate figures), the Fund Facts document, and the sales-practices rules: the DSC option for new mutual fund sales and trailing commissions paid to order-execution-only (OEO) dealers have both been banned in Canada since June 1, 2022 under NI 81-105 amendments.
Alternative mutual funds have been governed by NI 81-102 since the amendments that came into force on January 3, 2019. An alternative mutual fund may borrow cash up to 50% of NAV and short sell up to 50% of NAV, with a combined cap of 50% of NAV on cash borrowing and short selling, and its aggregate exposure to cash borrowing, short selling and specified derivatives is capped at 300% of NAV (s. 2.9.1). Existing commodity pools became alternative mutual funds when the amendments came into force.
ETF pricing sits in outcome 7.11 (market price vs NAV). A designated broker maintains the price-NAV link through creation (when ETF trades at a premium: buy basket, deliver to create units, sell at premium) and redemption (when ETF trades at a discount: buy cheap ETF, redeem for higher-value basket). The arbitrage closes the gap.
The element also covers market indices (outcome 7.6): how index values are built, market-value-weighted versus price-weighted indices, price return versus total return, and how indices are used as benchmarks. Outcome 7.12 adds hedge funds, structured products, alternative investment funds, crypto assets and ESG-related products at the Remember level.
Outcomes
Outcomes covered (12)
These follow the learning outcomes for Element 7in CIRO's January 2025 CIRE syllabus, in the same order. Each outcome has practice questions in the Registrant Prep bank with the rule citation behind every answer.
- 7.1Asset classes sold and traded at an Investment Dealer
- 7.2Types, features, risks and returns of common and preferred shares
- 7.3Shareholder considerations: market access, dividends and their taxation, splits and consolidations
- 7.4Fixed income types: government and corporate bonds, strips, T-bills and commercial paper
- 7.5Bondholder considerations: coupon vs yield, term, credit rating, duration and yield factors
- 7.6Market indices: construction, weighting, price vs total return, benchmarking
- 7.7Pooled products: mutual funds, closed-end funds, ETFs and REITs
- 7.8Managed products: fund trusts and corporations, income trusts, wrap funds, pooled funds
- 7.9Investor considerations for managed products, including fees, turnover and taxes
- 7.10Investor considerations for mutual funds, including Fund Facts and pricing
- 7.11Investor considerations for ETFs, including ETF Facts and market price vs NAV
- 7.12Other investments: hedge funds, structured products, alternative funds, crypto assets, ESG products
Rule citations
Rule citations to know cold
The rules behind Element 7. CIRO's official CIRE practice exam tests what the rules require, not their numbers, so learn the obligation first and use the number to find the rule text.
- §NI 81-101 (Mutual Fund Prospectus Disclosure)
- §NI 81-102 (Investment Funds, including alternative mutual funds since January 3, 2019)
- §NI 81-105 (Mutual Fund Sales Practices; DSC ban and OEO trailing-commission ban in force June 1, 2022)
- §NI 81-106 (Investment Fund Continuous Disclosure)
Study approach
How to study Element 7
Build a product matrix: rows are product types, columns are key facts (regulatory framework, fee structure, tax treatment, liquidity, typical investor profile, key risk). Element 7 is the largest element, so the matrix is worth the time.
Memorize the NI 81-102 alt-MF limits: 50% of NAV for cash borrowing and short selling combined; 300% of NAV for aggregate exposure. These are distinct caps.
For the DSC ban, know the date: June 1, 2022 was the effective date for the DSC prohibition on new mutual fund sales across Canada, including Ontario. Redemption schedules on DSC holdings bought before then were allowed to run their course, so legacy DSC holdings can still appear in client portfolios.
Traps the exam catches
Common mistakes on Element 7
- Treating MER and TER as the same number. They are separate figures.
- Treating alternative mutual funds as commodity pools under a separate regime. Since January 3, 2019 they have been governed by NI 81-102, and existing commodity pools became alternative mutual funds.
- Confusing the 50% cash-borrowing and short-selling cap with the 300% aggregate-exposure cap for alt MFs. They are different limits in NI 81-102.
- Describing ETF creation as the arbitrage for a discount-to-NAV. Creation fires when the ETF is at a premium; redemption is the discount arbitrage.
- Treating an ETF's market price and its NAV as the same thing. An ETF trades at a market price that can differ from NAV; creation and redemption keep the two close.
Memory hooks
Facts to memorize cold
- Alt MFs are governed by NI 81-102 (since January 3, 2019)
- Alt MF: cash borrowing + short selling combined 50% of NAV; aggregate exposure 300% of NAV
- DSC option: banned for new mutual fund sales since June 1, 2022 (NI 81-105)
- Trailing commissions to OEO dealers: banned since June 1, 2022
- ETF at a premium → creation; at a discount → redemption
- MER and TER are separate figures
Common questions
CIRE Element 7 FAQ
Which rule governs alternative mutual funds in Canada?
NI 81-102, since the amendments that came into force on January 3, 2019. Alternative mutual funds may borrow cash and short sell up to a combined 50% of NAV, and their aggregate exposure to cash borrowing, short selling and specified derivatives is capped at 300% of NAV (s. 2.9.1).
Are DSC mutual funds still available in Canada?
No. The DSC option has been prohibited for new mutual fund sales in Canada since June 1, 2022 under NI 81-105 amendments, including in Ontario. Redemption schedules on DSC holdings bought before then were allowed to run their course.
What does CIRE Element 7 cover?
Element 7 covers the asset classes sold at an Investment Dealer, equities, fixed income, market indices, pooled and managed products (mutual funds, closed-end funds, ETFs, REITs, income trusts, wrap and pooled funds), what investors should consider for each, and other investments such as hedge funds, structured products, alternative investment funds, crypto assets and ESG-related products.
How does an ETF arbitrage work when the ETF trades at a discount?
Redemption. A designated broker buys the underpriced ETF units in the market, redeems them with the ETF provider for the underlying basket (worth more at NAV), and captures the spread. Creation is the opposite arbitrage and fires when the ETF trades at a premium.
All 9 CIRE elements
Drill Element 7 now
423+ practice questions on Element 7 alone, with the rule citation behind every answer.