Canadian Securities Course (CSC) Level 2 Practice Exam

Which factor influences the transparency level in Exchange Traded Funds (ETFs) for investors?

1. Monthly disclosure of top holdings

2. Quarterly disclosure of total assets

3. Annual disclosure of trading costs

4. Sporadic disclosure of management fees

The correct answer is: Monthly disclosure of top holdings

Monthly disclosure of top holdings significantly influences the transparency level in Exchange Traded Funds (ETFs) for investors. This regular update allows investors to see which assets the ETF is currently invested in, providing insight into the fund’s strategy, risk profile, and potential performance. Understanding the underlying investments helps investors make informed decisions based on market trends and personal investment criteria. Regular disclosure facilitates better alignment with an investor's financial goals and enables proactive adjustments to their investment strategies when necessary. While other factors like quarterly disclosure of total assets and annual disclosure of trading costs provide valuable information, they do not offer the same level of real-time insight into the ETF's current investment positions. Sporadic disclosure of management fees lacks the timeliness needed for effective investment decision-making and does not contribute as effectively to overall transparency in the management of the ETF.