Chap 8:

Question 1

What term describes a debit position with no securities?

Answer 1

Unsecured account

Question 2

In cash accounts, when do restrictions on further trading occur?

Answer 2

When an account balance is outstanding for 20 business days or more.

Question 3

What is the minimum frequency that dealer members must send account statements to their clients?

Answer 3

Quarterly

Question 4

Dealer members are also required to send a statement of account ___________ where there has been any activity, holds an unexpired and unexercised commodity futures contract option, open commodity futures contract, or exchange contract at the month end; if the balance of securities or cash in the customer’s account has been modified, unless the entries refer to dividends or interest; or if the client has requested a monthly statement.

Answer 4

monthly

Question 5

The decision to proceed with arbitration is the:

Answer 5

client’s decision.

Question 6

To be eligible for arbitration, the claim cannot exceed:

Answer 6

$500,000

Question 7

Within how many days of receiving a complaint must a dealer member send a substantive response letter?

Answer 7

90 days

Question 8

What is the limit for OBSI recommendations?

Answer 8

$350,000

Question 9

What is civil litigation used for?

Answer 9

It is generally used for more serious breaches.

Question 10

The Cash Account Rule requires that any cash accounts that are overdue for six or more business days after the settlement date be treated as though they are:

Answer 10

margin accounts

Question 11

__________ regulates the amount of credit that dealer members may extend to clients on the purchase of securities (both listed and unlisted).

Answer 11

The Investment Industry Regulatory Organization of Canada (IIROC)

Question 12

If the price of a margined security falls to the point where the account becomes undermargined, the broker issues a ________ ______, which is a request for sufficient funds to bring the account up to full margin

Answer 12

margin call

Question 13

Maximum Loan Values Extended for Long Positions:

Answer 13

2$ and Over = 50% margin required

$1.75 to $1.99 = 60% margin required

$1.50 to $1.74 = 80% margin required

Under $1.50 = 100% margin required

Question 14

IIROC produces a list of securities eligible for reduced margin. Inclusion is restricted to those securities that
demonstrate both:

Answer 14

sufficiently high liquidity and sufficiently low price volatility

Question 15

Securities eligible for reduced margin qualify for up to ______% of their value in dealer loans (e.g., ____% margin requirement).

Answer 15

70%

30%

Question 16

The maximum amount of financing a dealer member will supply is called:

Answer 16

Loan Value

Question 17

When an account’s loan value is equal to or greater than the amount borrowed (the debit balance), the account is said to be:

Answer 17

fully margined

Question 18

The difference between the loan value and the debit balance is called

Answer 18

excess margin

Question 19

When the loan value is less than the amount borrowed, the account is said to be ________. The shortage is called _______ ___________

Answer 19

undermargined

margin deficiency

Question 20

Describes a positive equity position. If the securities were liquidated, their market value would cover any debit balance owing.

Answer 20

Fully Secured

Question 21

Describes a negative equity position when securities are held in the account. If the account were liquidated, there would still be money owing.

Answer 21

Partly Secured

Question 22

Describes an account with a debit balance and no securities.

Answer 22

Unsecured

Question 23

The Cash Account Rule, which governs the operation of cash accounts, was designed with the following two
purposes:

Answer 23

• To eliminate poor credit practices without restricting normal business relations with clients.
• To ensure that all dealer members extend credit to clients on an equal basis.

Question 24

It is important to note that clients must be sent an acknowledgement letter within _______ _______ ______ of receipt of a complaint

Answer 24

five business days

Question 25

Complaints must also be reported to IIROC on the:

Answer 25

Complaints and Settlement Reporting System (ComSet)