#1 Flashcards
Acts
The Securities Acts of the provinces or
territories.
Advertisement
A sales communication that is published or
designed for mass distribution through
public media.
Affi liate
In the context of insider trading
restrictions, this refers to a parent or
subsidiary or a company with common
ownership with the insider.
Agency Transaction
A transaction in which a dealer member
buys or sells securities from or to a third
party on behalf of a client.
All or None Order (AON)
An order that must be executed in its
entirety – partial fi lls will not be accepted
Annual Information Form (AIF)
A document in which an issuer is required
to disclose information about presently
known trends, commitments, events or
uncertainties that are reasonably expected
to have a material impact on the issuer’s
business, fi nancial condition or results of
operations.
Arbitration
A method of dispute resolution in which an
independent arbitrator is chosen to assist
aggrieved parties recover damages. It is an
alternative to costly and lengthy litigation.
Autorité des marchés fi nanciers
(Financial Services Authority)
(AMF)
The body that administers the regulatory
framework surrounding Quebec’s fi nancial
sector: securities sector, the distribution of
fi nancial products and services sector, the
fi nancial institutions sector and the
compensation sector
Associate
In the context of insider trading
restrictions, this refers to a spouse, relative,
relative of a spouse sharing the same house
as an insider, a partner, trust or estate in
which an insider acts as trustee or has a
substantial benefi cial interest and a
company of which an insider controls more
than 10% of the voting equity in a
company.
Benefi cial Owner
The real (underlying) owner of an account,
securities or other assets. An investor may
own shares which are registered in the name
of an investment dealer, trustee or bank to
facilitate transfer or to preserve anonymity,
but the investor would be the benefi cial
owner.
Best Efforts Basis
The attempt by an investment dealer to
fulfi ll a customer’s order or to sell an issue
of securities, to the best of their abilities.
The investment dealer is not held liable to
fulfi ll the order or to sell all of the
securities.
Bought Deal
An offering in which an underwriter (or
syndicate) buys all of the shares for resale to
its clients, usually by way of a private
placement or short form prospectus
offering. In a bought deal the dealer risks its
own capital.
Broker
Another term for a duly registered
individual or an investment dealer that is
registered to trade in securities in the
capacity of an agent or principal and is a
member of a Self-Regulatory Organization.
Bucketing
Confi rming a transaction when no trade
has actually been executed.
Canada Business Corporations Act
CBCA
The federal Act that governs all aspects of
business corporations, including
incorporation and take-over bids.
Canadian Deposit Insurance
Corporation (CDIC)
A federal Crown Corporation that insures
eligible deposits at member institutions (up
to $100,000 per depositor) and reimburses
depositors for the amount of their insured
deposits when a member institution fails.
CDS Clearing and Depository
Services Inc.
CDS Clearing provides customers with
physical and electronic facilities to deposit
and withdraw depository-eligible securities
and manage their related ledger positions
(securities accounts). CDS Clearing also
provides electronic clearing services both
domestically and internationally, allowing
customers to report, confi rm and settle
securities trade transactions.
Canadian Derivatives Clearing
Corporation (CDCC)
The CDCC is a service organization that clears, issues, settles, and guarantees options, futures, and futures options traded on the Montreal Exchange (Bourse de Montreal).
Canadian Investor Protection Fund
CIPF
A fund that protects investors against the insolvency of any dealer member. It is fi nanced by the IIROC and the exchanges (except ICE Futures Canada), who are collectively referred to as Sponsoring Self-Regulatory Organizations (SSROs) through quarterly assessments on dealer members
Canadian Securities
Administrators (CSA)
The CSA is a forum for the 13 securities
regulators of Canada’s provinces and
territories to co-ordinate and harmonize
regulation of the Canadian capital markets.
Carrying Broker
A securities fi rm that offers back offi ce
services and facilities to dealer members ,
which are known as introducing brokers.
The services provided by a carrying broker
include the execution, clearing and
settlement of trades, the custody of funds
and securities, the maintenance of books
and records of customer transactions and
the fi nancing of customer positions.
Cash Account
A type of account where an investor is
required to pay for purchases or deliver
securities sold by the settlement date of the
transaction.
Cash Account Rule
Rule governing settlement of securities transactions in cash accounts. It prescribes settlement dates, payment methods and restrictions on trading if accounts are overdue.
Cancel/Change Former Order
CFO
An instruction to cancel or change a
previously entered order.
Chinese Walls
Procedures and policies that ensure that a
dealer member restricts access between
departments to non-public, material
information, in order to avoid the illegal
use of inside information.
Churning
Excessive trading in a client’s account solely
to generate commissions and resulting in
no benefi t to the client.
Coat-tail Provision
A provision that allows shares that are not
fully-voting the right to participate in
take-over bids made for the fully-voting
shares of a target company.
Code of Ethics
A guiding set of principles that establish
norms geared towards compliance with “the
letter of the law” as well as with the “spirit
of the law.” These norms are based upon
principles such as trust, integrity, justice,
fairness and honesty.
Commission
The fee charged by an Investment Advisor for
his/her services in facilitating a transaction,
such as the buying or selling of securities.
Complaints and Settlement
Database (ComSet)
A web-based system that allows dealer
members to relay information to the
IIROC on matters such as client
complaints, securities-related civil claims
and arbitration notices, internal disciplinary
actions and criminal offences.
Confi dential Account
An account for which the benefi cial
ownership is on record only at the dealer
member’s head offi ce.
Confi dentiality
The ethical principle that a securities
industry professional will hold secret all
information relating to a client and a
client’s account unless the client gives
consent permitting disclosure or a formal
request is made by the appropriate
regulators.
Confi rmation
A written statement acknowledging a
securities transaction and confi rming the
details of the trade.
Confl ict of Interest
A situation in which the personal or
fi nancial interests of a registrant confl ict
with the interests of a client or the
registrant’s dealer member. In cases of
potential or actual confl ict of interest, a
client’s interests must be given priority and
the confl ict should be disclosed.
Constrained Share Companies
Companies or institutions that are either culturally important or fundamentally important to the Canadian economy (e.g., Canadian banks, trust, insurance, broadcasting and communication companies) and therefore have foreign ownership restrictions.
Contingent Order
An order for the simultaneous purchase of
one security and the sale of another.
Continuous Disclosure
The requirement for issuers of securities
that when a material change occurs a press
release must be issued and fi led immediately
and a material change report must be fi led
with the commission(s) within 10 days
through SEDAR. There is no requirement
to fi le a press release for non-material
changes.
Control Position
Ownership of suffi cient voting stock in a
company to materially affect its affairs. In
all provinces except Manitoba, New
Brunswick and Quebec, a 20% holding is
deemed to represent control.
Control Stock
The voting stock owned by a shareholder in
a control position.
Day Order
A buy or sell order that automatically
expires if it is not executed on the day it is
entered. All orders are day orders unless
otherwise specifi ed.
Dealer Member
A fi rm that engages in the business of
trading in securities in the capacity of an
agent or principal and is a member of the
IIROC.
Delayed Delivery Order
A transaction that will not be settled within
the normal settlement period.
Delivery Against Payment (DAP)
A transaction in which the buyer’s payment
for securities is due at the time of delivery
(usually to a bank acting as agent for the
buyer) upon receipt of the securities. The
payment may be made by bank wire,
cheque, or direct credit to an account.
Directors’ Circular
A document that must be sent to all
shareholders by the directors of a company
that is the target of a take-over bid. A
recommendation to accept or reject the bid,
and reasons for this recommendation, must
be included.
Disclosure
One of the principles of securities
regulation in Canada. This principle entails
full, true and plain disclosure of all material
facts necessary to make reasoned investment
decisions.
Discretionary Account
A securities account where the client has
given specifi c written authorization to an
investment dealer to make decisions
regarding the security, price, quantity or
timing of orders in the account.
Distribution
An offering of securities, generally by the
issuer from its treasury, which requires the
use of a prospectus or the availability of a
prospectus exemption. In some provinces
this is formally referred to as a primary
distribution.
Do Not Call List (DNCL)
The “Unsolicited Telecommunications
Rules and the National Do Not Call List”
(National DNCL) creates a regulatory
framework for telemarketing calls and other
unsolicited telecommunications received by
consumers. Their intent is to prevent undue
inconvenience and nuisance of unsolicited
telecommunications, while still allowing
legitimate uses of such communications.
The Rules and the National DNCL became
effective September 30, 2008.
Due Diligence
Investigation into and verifi cation of the
details of a potential investment such as an
examination of operations and management
and the verifi cation of material facts.
Duty of Care
The duty an IA has to a client to ensure
that everything ‘reasonably practicable’ is
done to protect the client’s assets. This
involves devoting the necessary time and
attention to be able to make informed
decisions.
Early Warning
An initial threshold prior to a take-over bid.
A person or company accumulating
benefi cial ownership or control over 10%
or more of voting or equity securities of a
class of securities must issue a press release
and report to the Administrator
immediately.
Effective Delivery By Electronic
Means
The electronic distribution of information
to the intended recipients that is equivalent
to the information provided in paper form.
Enforcement
One of the principles of securities
regulation in Canada. Securities laws and
administrative policies are enforced by the
Administrators and the SROs.
Equity Position
The net credit in a client’s account.
Excess Margin
The client margin in an account exceeding
what is required by the dealer member.
Exempt Issue
A securities issue for which a prospectus is
not required. Exemptions may be due to
the nature of the securities, the nature of
the distribution or a resale of securities that
were originally exempt.
Fails
Securities that are not delivered by
settlement date.
Fiduciary Duty
A legal term that describes a high degree of
duty of care. Criteria that may be used to
determine whether a fi duciary duty is
present in an IA-client relationship include
a high degree of reliance by the client on
the IA’s advice and the vulnerability of the
client. In Quebec, this concept is referred to
as a “Contract of Mandate”.
Final Prospectus
A document that contains complete details
of securities being offered for sale. It
provides full, true and plain disclosure of all
material facts relating to the distribution.
The fi nal prospectus contains all of the
information omitted in the preliminary
prospectus (e.g., offering price, proceeds to
the issuer, etc.). A copy must be mailed or
delivered to all purchasers of the securities
by no later than midnight on the second
business day after an agreement of purchase
or sale had been entered into.
Financial Action Task Force on Money Laundering (FATF)
An inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist fi nancing.
Financial Institution
A banking or trust institution, pension
fund, insurance company, credit union or
other entity licensed to do business in the
fi nancial sector.
Financial Transactions Reports
Analysis Centre of Canada
(FINTRAC)
FINTRAC receives, analyzes, assesses and
discloses fi nancial intelligence on suspected
money laundering, terrorist fi nancing, and
threats to the security of Canada.
Form C
The Shareholder Communication and
Voting Instructions Form. This provides for
written instructions from clients as to the
receipt of proxy-related materials, disclosure
to issuers of the client’s name, address and
number of securities held and the voting of
securities held by the client.
Free Credit Balance
Uninvested monies in client accounts that
may be used by dealer members for their
own purposes but are payable on demand
to the clients.
Frontrunning
Entering an order with the prior knowledge
of a pending trade that will likely affect the
market price of the security.
Fully-Margined
A situation in which the client margin in a
margin account is equal to or greater than
the margin required.
Fully-Secured
A positive net equity position in an
account. In other words, the value of
holdings exceeds any debit balance.
Good Delivery By Electronic Means
Electronic delivery of information in which
the recipients receive prior notice of
delivery, have easy access to it, it is delivered
unaltered and uncorrupted and the sender
receives evidence of its successful delivery.
Grey Areas
Areas where compliance policies are not
clear and ethics play a part in decision
making. An ethical decision in a grey area
depends on the details of the situation.
Grey (or Watch) List
A limited-circulation list of issuers on which a dealer member (including any of its staff) has confi dential information, distributed for the purpose of watching for any trading activity suggesting that the information has been leaked or has been used inappropriately.
Hedge
An investment made to reduce the risk of
adverse price movements in a security, by
taking an offsetting position in a related
security, (e.g., an option or a short sale).
Initial Public Offering (IPO)
A company’s fi rst sale of stock to the public.
Inside Information
Material non-public information about a
company.
Insider
All directors and senior offi cers of a corporation and those who may also be presumed to have access to non-public or inside information concerning the company; also anyone owning more than 10% of the voting shares in a corporation.
Insider Report
Insiders are required to report their
holdings upon becoming an insider and
they must also report any change in those
holdings within 10 days following such
change. In Canada, insiders fi le these
reports through the System for Electronic
Disclosure by Insiders (SEDI) in electronic
format via the Internet.
nsider Trading (Illegal)
Using material non-public information
about a company to effect trades in that
company’s securities or trading in securities
as an insider without reporting the trades to
the regulators.
Integrated Market Enforcement
Teams (IMETs)
An initiative of the RCMP and the federal
government to detect, investigate and deter
capital markets fraud. The teams are
composed of police, lawyers and other
investigative experts through branches in
Toronto, Vancouver, Montreal and Calgary.
They are jointly managed by the RCMP
and Justice Canada and work closely with
securities regulators, such as the IIROC and
MFDA, as well as other federal and
provincial authorities.
Introducing Broker
A securities fi rm that does not clear or settle
trades and does not have the facilities to act
as a custodian for client securities or cash,
but relies upon the carrying broker, to
provide these services
