Chaper 1

Question 1

Agent

Answer 1

An investment dealer operates as an agent when it acts on behalf of a buyer or a seller of a security and does not own title to the securities at any time during the transaction

Question 2

Broker

Answer 2

An investment dealer or a duly registered individual that is registered to trade in securities in the capacity of an agent or principal and is a member of the Canadian Investment Regulatory Organization (CIRO)

Question 3

Canadian Investment Regulatory Organization (CIRO)

Answer 3

National self-regulatory organization (SRO) that oversees all investment dealers, mutual funds dealers, and trading activity in Canada’s debt, equity, and mutual fund marketplace

Question 4

Capital Markets

Answer 4

Financial markets where debt and equity securities trade. Include organized exchanges as well as private placement sources of debt and equity

Question 5

CDS Clearing and Depository Services Inc.

Answer 5

Provides customers with physical and electronic facilities to deposit and withdraw securities and manage their ledger positions. Also provides electronic clearing services both domestically and internationally, allowing customers to report confirm and settle securities

Question 6

Clearing

Answer 6

Process of confirming and matching security trade details

Question 7

Closed-end fund

Answer 7

Shares in closed-end investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed.

Question 8

Consumer Finance Company

Answer 8

Makes direct cash loans to consumers, who usually are unable to secure a loan from a bank. Consumer finance companies typically charge a higher interest rate than banks.

Question 9

Discount Broker/Self-Directed Brokers

Answer 9

Brokerage house that buys and sells securities for clients at a greater commission discount than full-service firms.

Question 10

Financial Intermediary

Answer 10

An institution such as a bank, life insurance company, credit union or mutual fund which receives cash, which it invests, from suppliers of capital.

Question 11

Fintech

Answer 11

Financial technology companies that take advantage of computer technology to provide more efficient financial products and services.

Question 12

Firewall

Answer 12

Policies implemented to separate and isolate persons within a firm who make investment decisions from persons within a firm who are privy to undisclosed material information which may influence those decisions. For example, there should be separate fax machines for research departments and sales departments.

Question 13

Institutional Firm

Answer 13

Investment dealer that serves institutional clients exclusively.

Question 14

Integrated Firm

Answer 14

Investment dealer that offers products and services that cover all aspects of the industry, including full participation in both the institutional and the retail markets.

Question 15

Investment Dealer

Answer 15

A person or company that engages in the business of trading in securities in the capacity of an agent or principal and is a member of CIRO.

Question 16

Investment Fund

Answer 16

A fund or company that sells units or shares and invests the proceeds in a portfolio of securities. There are two principal types: closed-end and open end/mutual fund. Shares in closed end investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed. Open-end funds sell their own new shares to investors, buy back their old shares, and are not listed. Open-end funds are so-called because their capitalization is not fixed; they normally issue more shares or units as people want them.

Question 17

Investment Industry Association of Canada

Answer 17

A member-based professional association that represents the interests of market participants

Question 18

Mutual Fund/Open end fund

Answer 18

An investment fund operated by a company that uses the proceeds from shares and units sold to investors to invest in stocks, bonds, derivatives and other financial securities. Mutual funds offer investors the advantages of diversification and professional management and are sold on a load or no-load basis. Mutual fund shares/ units are redeemable on demand at the fund’s current net asset value per share (NAVPS).

Question 19

Pension Fund

Answer 19

A pension fund is a pool of assets managed with the goal of supplying its beneficiaries with income during their retirement years.

Question 20

Primary Market Distribution

Answer 20

The issuance of securities in the primary market.

Question 21

Principal

Answer 21

The person for whom a broker executes an order, or a dealer buying or selling for its own account. The term may also refer to a person’s capital or to the face amount of a bond.

Question 22

Retail Firm

Answer 22

Retail firms are investment dealers that serve only retail clients. Retail firms include full-service firms and discount brokers. Full-service firms offer a wide variety of products and services for the retail investor. Discount brokers execute trades for retail clients at a reduced rate, but do not provide investment advice.

Question 23

Robo-advisor

Answer 23

An online investment service that provides clients with automated investment advice.

Question 24

Sales Finance company

Answer 24

Purchases, at a discount, instalment sales contracts from retailers and dealers when such items as new cars and appliances are bought on instalment plans.

Question 25

Savings Bank

Answer 25

A financial institution whose main role is to accept savings deposits and pay interest on those deposits. Usually set up by a government and is similar in function to a credit union.

Question 26

Schedule 1 Bank

Answer 26

Canadian-owned banks. The largest 6 banks in Canada out-distance the asset size of other Canadian-owned banks. Schedule I banks are regulated by the Bank Act.

Question 27

Schedule 2 Bank

Answer 27

Banks that are incorporated and operate in Canada as federally regulated foreign bank subsidiaries. Schedule II banks are regulated by the Bank Act.

Question 28

Schedule 3 Bank

Answer 28

Banks that are federally regulated foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada.

Question 29

Self directed Broker

Answer 29

Also known as discount brokers. Self-directed brokers offer discounted transaction costs and do not provide investment advice to investors.

Question 30

Settlement

Answer 30

The moment of irrevocable exchange of cash and securities.

Question 31

VFV

Answer 31

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