Chap 5, Sec 2: The Account Application Flashcards
The account application is a critically important document and represents, in most instances, the ___________ of the client relationship.
Beginning
The account application is the contract for services between the ________________ and the ____________.
Dealer Member and the Client
The account application, in most cases, is executed by the RR on behalf of the dealer member, and it must include the following items:
- The client’s identity, including his or her full name, address, citizenship, and social insurance number
- Personal information, such as the client’s marital status, number of dependents, and employment
- Personal financial information, including the client’s income, net worth, and liquidity
- The client’s investment objectives, risk profile, and level of knowledge about investing
- Information about the client’s relationship with any publicly traded companies (i.e., insider status)
When you have completed, reviewed, and signed the account application form, it must be approved by the ___________________.
Designated Supervisor
In addition to forming the basis for the legal relationship, the account application is used for four main purposes:
- To establish the identity of the client
- To collect sufficient info to meet suitability obligations, such as the client’s investment objectives
- To judge the client’s creditworthiness
- To determine whether the client is an insider of a reporting issuer or other publicly traded company.
In addition to completing an account application for all new clients, you should update existing account applications regularly and whenever a ____________ occurs in a client’s circumstances.
significant change
Any significant change in circumstances could affect the client’s ________ ________, ____________, or ____ _________.
investment objectives, creditworthiness, risk tolerance
At a minimum, you should have _______ discussions to re-confirm that the information contained on the account application is still accurate.
Annual
It is not enough to simply know your client; you must be able to…..
demonstrate your knowledge of the client
There are three general categories of info required on the account applicaiton:
- Client info
- Account Info
- Registrant info
Only Canadian citizen residents in Canada can purchase certain percentages or number of shares of companies that are considered culturally or economically important to Canada, are known as _________ _________ companies, which include, for example, __________ or _________.
Constrained Share Companies
Broadcasting Companies or Banks
Employment info is required for three reasons:
- To help establish the client’s creditworthiness
- to establish whether any regulator issues to this account, such the requirement to report insider status
- To evaluate the client’s ability to withstand losses, and, thus, whether specific investment objectives are warranted.
Financial information is fundamental in judging a client’s creditworthiness if credit is to be extended. It is also a major factor when establishing the….
suitability of investment recommendations
Risk tolerance is the….
Risk capacity is the …….
Risk tolerance is the willingness to accept risk
Risk capacity is the ability to endure loss.
Account information consists of the 5 following concepts:
- Account Type
- Beneficial Ownership
- Currency
- Payment/delivery procedures
- Special instructions
_________ accounts require the client to deposit payment in full for each purchased transaction.
Cash
_________ accounts require only partial payment for purchases.
Margin
The client must make an initial deposit of a specified
portion of the value of the securities purchased, which is called the ______ ________.
Client Margin
Because margin accounts involve a loan by the dealer member to the client, a financing agreement, called a _______ _________, must be completed before the account is approved.
margin agreement
________________ accounts involve the purchase of securities and payment on settlement date.
Delivery against payment (DAP)
In this type of account, an intermediary, usually a financial institution, often acts as an agent to complete these transactions for the client. The dealer member delivers the securities to the purchaser, or the purchaser’s settlement agent, who then pays for the securities in full.
Delivery Against Payment (DAP)
Like cash accounts _____________ accounts are subject to the Cash Account Rule.
Delivery Against Payment (DAP)
________ accounts must be operated in accordance with the industry’ Cash Account Rule.
Cash Accounts
This type of account involves the sale of securities and the receipt of payment on settlement date. The dealer member receives the securities from the client (or agent) and pays the client (or agent) in full.
Receipt against payment (RAP)
It is a generally accepted industry practice that all employees of a dealer member or a related company and any of their family members living under the same roof are considered to be non-clients. The common name for an account belonging to a non-client is a _______ account
Pro Account
When setting up an investment club account, a specific document, called an ___________ ______ __________, must accompany the standard application
Investment Club Agreement
If the registrant handling the account is also a member of the investment club, the account automatically becomes a ______ account.
Pro
A ___________ account is one where discretionary authority has not been solicited, but where the client chooses to give it on a temporary basis.
Discretionary account
Clients must clearly indicate their reason for requesting the discretion, such as in the case of __________ or…….
illness or absence from the country.
Discretionary authority is valid for a maximum term of ___________
12 months
Any order in which the client has not clearly articulated any one of the following information: The security, the quantity, the price, and the length of time the order is good for.
Discretionary Order
A __________ ___________ must review, at least _________, the financial performance of all discretionary accounts.
Designated Supervisor
Monthly
Both the client and the dealer member may withdraw from the discretionary or managed account agreement, but the dealer has to give _____ days notice.
30 days
________ _________ grant discretionary authority on an ongoing basis; in other words, it is permanent.
Managed Account
No dealer member or any person acting on its behalf is permitted to exercise discretionary authority over these accounts, unless approved by IIROC as a ______ or __________ ____
PM or Associate PM
In order for the dealer member to approve a managed account, the client must sign a _________ _______ _________ , and the dealer member’s Designated Supervisor must accept it.
managed account agreement
These accounts may be solicited.
Managed accounts
Each managed account must be reviewed _________ by a __________ _________ to ensure that the client’s investment objectives are diligently pursued.
Quarterly
Designated Supervisor
When dealing with securities in a different currency, you must verify that your clients are aware that, in addition to investment risk, an investment denomination in a foreign currency also carries _______ ______
Currency Risk
Other than in connection with a bona fide ___________ __________ _________ account, any request for payment or receipt of funds to a third party is a warning flag, and management should be consulted
Delivery Against Payment
In the case of discretionary accounts, orders should be marked _____ only if the RR has some type of beneficial interest in the account.
Pro
If a person owns more than a certain percentage of a class of voting or equity shares of an issuer (usually _____), then that person is generally considered to be an insider.
10%
A control person is a person who generally owns
more than ______ of an issuer’s equity and therefore has significant influence over that company.
20%
Insiders must report their trades within ____days after the date of the trade. You should remind your clients of their obligation to file insider reports
10
When you pass inside info on to someone, it is called ________.
Tipping
There is often a _________ _________ _________ form to accommodate one person appointing another person to act on their behalf.
Standard Trading Authority Form
The approval necessary to have full authority over someone elses account.
Power of Attorney
What is the main reason that a client’s SIN is required by the dealer member?
To satisfy tax reporting requirments
When must the info disclosure for a strip bond be provided to clients?
Prior to the first trade
What information does the Relationship Disclosure Document provide about the dealer member?
The types of products and services offered by the dealer
