RSE Cheat Sheet (CIRO) — Rules, Workflows, Formulas

Use this as your product-fit + suitability rules engine. Pair it with the Syllabus for coverage and Practice for speed.

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RSE in 60 seconds (what the exam rewards)

• KYC first: constraints drive the “only defensible answer”.
• Suitability discipline: gather missing facts, KYP, explain tradeoffs, document.
• Product literacy: know what each product does, how it can fail, and when it does not fit.
• Controlled math: clean 1–3 step calculations (returns after fees, basic yields, ratios).
• Integrity reflex: on red flags, the safest answer is usually stop → escalate → document.

    flowchart TD
	  A["Scenario"] --> B["Extract constraints:<br/>KYC facts + horizon + liquidity + risk profile + costs/taxes + authority"]
	  B --> C["Confirm what is missing<br/>and gather it (if required)"]
	  C --> D["KYP + product-fit screening<br/>(features, risks, costs, liquidity)"]
	  D --> E["Recommendation / next step<br/>(best fit + defensible rationale)"]
	  E --> F{"Red flag?<br/>unsuitable instruction / conflict / integrity cue / missing facts"}
	  F -->|Yes| G["Stop, escalate, preserve records,<br/>follow firm policy"]
	  F -->|No| H["Execute appropriately<br/>(order type, best execution mindset)"]
	  G --> I["Document + retain an audit trail"]
	  H --> I
	  I --> J["Monitor + update KYC/suitability on triggers"]

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Official topic weights (use for time allocation)

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1) KYC and suitability (23%) — the “answer filter”

KYC snapshot (exam-friendly)

• Identity + authority: who can instruct? constraints/limitations?
• Objectives: growth/income/preservation (be specific).
• Time horizon: when is money needed?
• Liquidity needs: known withdrawals, emergencies.
• Risk profile: distinguish risk tolerance vs risk capacity.
• Knowledge/experience: complexity the client can reasonably understand.
• Cost sensitivity: fees + turnover can change outcomes.
• Constraints: tax, concentration limits, ethical constraints (if stated).

Suitability triggers (easy points)

Suitability is not “set and forget”. Re-assess when:

• the client’s circumstances change (job, income, dependants, health, retirement)
• a holding changes materially (risk profile, issuer events, structure, liquidity)
• the portfolio drifts (allocation off target, concentration grows)
• the client gives new instructions that conflict with KYC constraints

Best-answer pattern

If two options both “solve” the problem, the better answer usually:

• fills in missing KYC facts first (when required)
• addresses suitability and product-fit explicitly
• includes disclosure + documentation and escalation when warranted

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2) Fixed income (8%) — minimal math + intuition

Yield/price relationship

• When market rates rise, bond prices fall.
• Longer duration generally means higher sensitivity to rate changes.

Test-friendly formulas

Current yield

$$ \text{Current Yield} = \frac{\text{Annual Coupon}}{\text{Market Price}} $$

Simple total return

$$ R = \frac{(P_1 - P_0) + I}{P_0} $$

• $P_0$ = starting price, $P_1$ = ending price, $I$ = income (interest).

Common suitability cues

• “Needs cash soon” -> watch interest-rate risk and liquidity.
• “Low risk tolerance” -> avoid mismatch between stated profile and volatility/credit risk.

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3) Equities (10%) — what it is + how it can fail

High-yield reminders

• Dividends are not guaranteed.
• Common vs preferred: know the basic tradeoff (growth/volatility vs income/priority).
• Concentration is a frequent hidden constraint.

Dividend yield

$$ \text{Dividend Yield} = \frac{\text{Annual Dividends}}{\text{Price}} $$

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4) Securities analysis (11%) — interpret the exhibit

Macro → markets (concept map)

    flowchart LR
	  POLICY["Policy + inflation<br/>(rates, growth, expectations)"] --> YC["Discount rates"]
	  YC --> BONDS["Bond yields/prices"]
	  YC --> EQ["Equity valuation multiples"]
	  POLICY --> FX["FX + capital flows"]
	  FX --> EQ
	  BONDS --> EQ

Basic ratios (know what they imply)

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5) Managed products and other investments (13%) — costs + disclosure

Mutual funds vs ETFs (quick)

• Mutual funds: NAV-based purchases/redemptions; costs often dominated by MER.
• ETFs: trade like equities; add bid/ask spread and commissions; watch tracking error.

Cost checklist (easy points)

• MER and other embedded fees (if applicable)
• trading costs (commissions + spreads)
• redemption/early exit constraints
• tax impact (only when the question provides tax inputs)

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6) Portfolio construction (11%) — diversification is the mechanism

Expected return (simple)

$$ E(R_p) = \sum_{i=1}^{n} w_i\,E(R_i) $$

CAPM (recognize the idea)

$$ E(R_i) = R_f + \beta_i\left(E(R_m) - R_f\right) $$

High-yield cues

• Diversification is about correlation, not “number of holdings”.
• “Need income soon” + “low tolerance” -> avoid volatility and liquidity mismatch.

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7) Investment recommendations (12%) — defend the tradeoff

A recommendation answer is stronger when it includes:

• the dominant client constraint (why this fits)
• the main tradeoff (what you give up)
• what you would document (facts, rationale, disclosures)

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8) Execution and market integrity (6%) — order handling + red flags

Order types (recognize the constraint)

Trade lifecycle (mental model)

    sequenceDiagram
	  participant Client as "Client"
	  participant Dealer as "Dealer/Rep"
	  participant Venue as "Marketplace"
	  participant Clear as "Clearing"
	  participant Settle as "Settlement/Custody"
	  Client->>Dealer: "Order / instructions"
	  Dealer->>Venue: "Route order"
	  Venue-->>Dealer: "Execution report"
	  Dealer-->>Client: "Confirmation (fees/commissions)"
	  Dealer->>Clear: "Clear/net obligations"
	  Clear->>Settle: "Settlement processing"
	  Settle-->>Client: "Position/cash updated"

Integrity reflex

If you see an integrity cue (MNPI hints, manipulation patterns, conflicts, instructions that look wrong):

Stop → escalate → preserve records → document.

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9) Monitoring and reporting (6%) — triggers drive action

Common triggers to watch

• Client life changes: income, dependants, retirement, liquidity needs
• Portfolio drift: allocation or concentration changes materially
• Product changes: risk profile, structure, liquidity, issuer events
• New instructions that conflict with KYC/suitability constraints

Next: open RSE Practice and convert misses into one-sentence rules.