Chap 8: Flashcards
What term describes a debit position with no securities?
Unsecured account
In cash accounts, when do restrictions on further trading occur?
When an account balance is outstanding for 20 business days or more.
What is the minimum frequency that dealer members must send account statements to their clients?
Quarterly
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.
monthly
The decision to proceed with arbitration is the:
client’s decision.
To be eligible for arbitration, the claim cannot exceed:
$500,000
Within how many days of receiving a complaint must a dealer member send a substantive response letter?
90 days
What is the limit for OBSI recommendations?
$350,000
What is civil litigation used for?
It is generally used for more serious breaches.
The Cash Account Rule requires that any cash accounts that are overdue for six or more business days after the settlement date be treated as though they are:
margin accounts
__________ regulates the amount of credit that dealer members may extend to clients on the purchase of securities (both listed and unlisted).
The Investment Industry Regulatory Organization of Canada (IIROC)
If the price of a margined security falls to the point where the account becomes undermargined, the broker issues a ________ ______, which is a request for sufficient funds to bring the account up to full margin
margin call
Maximum Loan Values Extended for Long Positions:
2$ 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
IIROC produces a list of securities eligible for reduced margin. Inclusion is restricted to those securities that
demonstrate both:
sufficiently high liquidity and sufficiently low price volatility
Securities eligible for reduced margin qualify for up to ______% of their value in dealer loans (e.g., ____% margin requirement).
70%
30%
The maximum amount of financing a dealer member will supply is called:
Loan Value
When an account’s loan value is equal to or greater than the amount borrowed (the debit balance), the account is said to be:
fully margined
The difference between the loan value and the debit balance is called
excess margin
When the loan value is less than the amount borrowed, the account is said to be ________. The shortage is called _______ ___________
undermargined
margin deficiency
Describes a positive equity position. If the securities were liquidated, their market value would cover any debit balance owing.
Fully Secured
Describes a negative equity position when securities are held in the account. If the account were liquidated, there would still be money owing.
Partly Secured
Describes an account with a debit balance and no securities.
Unsecured
The Cash Account Rule, which governs the operation of cash accounts, was designed with the following two
purposes:
- 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.
It is important to note that clients must be sent an acknowledgement letter within _______ _______ ______ of receipt of a complaint
five business days
Complaints must also be reported to IIROC on the:
Complaints and Settlement Reporting System (ComSet)
