Chapter 1 Terms Flashcards
Canadian Securities Industry
AGENT
An investment dealer operates as an agent when it acts on behalf of a buyer or a seller of a security and does not itself own title to the securities at any time during the transactions.
BROKER
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 a Self-Regulatory Organization.
Canadian Investor Protection Fund (CIPF)
Canadian Investor Protection Fund (CIPF)
A fund that protects eligible customers in the event of the insolvency of an IIROC dealer member. It is sponsored solely by IIROC and funded by quarterly assessments on dealer members.
CDS Clearing and Depository Services Inc. (CDS)
CDS provides customers with physical and electronic facilities to deposit and withdraw depository-eligible securities and manage their related ledger positions (securities accounts). CDS also provides electronic clearing services both domestically and internationally, allowing customers to report, confirm and settle securities trade transactions.
Clearing
Clearing
The process of confirming and matching security trade details.
Closed End 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.
Consumer Finance Company
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.
Discount Brokers
Discount Brokers
Brokerage house that buys and sells securities for clients at a greater commission discount than full-service firms. Also known as self-directed brokers.
Financial Intermediary
Financial Intermediary
An institution such as a bank, life insurance company, credit union or mutual fund which receives cash, which it invests, from suppliers of capital.
FINTECH
Financial technology companies that take advantage of computer technology to provide more efficient financial products and services.
FIREWALL
Firewall
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.
Initial Public Offering (IPO)
Initial Public Offering (IPO)
A new issue of securities offered to the public for investment for the very first time. IPOs must adhere to strict government regulations as to how the investments are sold to the public.
Institutional Firm
Institutional Firm
Investment dealer that serves institutional clients exclusively.
INTEGRATED FIRM
Integrated firm
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.
INVESTMENT DEALER
investment dealer
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 IIROC.
INVESTMENT FUND
investment fund
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 or 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.
Investment Industry Regulatory Organization of Canada (IIROC)
Investment Industry Regulatory Organization of Canada (IIROC)
The Canadian investment industry’s national self-regulatory organization. IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.
MARKET MAKER
market maker
A trader employed by a securities firm who is authorized and required, by applicable self-regulatory organizations (SROs), to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities.
MONEY MARKET?
money market
That part of the capital market in which short-term financial obligations are bought and sold. These include treasury bills and other federal government securities, and commercial paper, and bankers’ acceptances and other instruments with one year or less left to maturity. Longer term securities, when their term shortens to the limits mentioned, are also traded in the money market.
MUTUAL FUND?
mutual fund
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).
PENSION FUND?
pension fund A regular payment made to a retired employee from an investment fund that the employee and/or employer has contributed to during the working life of the employee.
PRIMARY MARKET?
primary market
The market for new issues of securities. The proceeds of the sale of securities in a primary market go directly to the company issuing the securities.
PRINCIPAL
principal
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.
RETAIL FIRM?
retail firm
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.
ROBO-ADVISOR
robo-advisor
An online investment service that provides clients with automated investment advice.
SALES FINANCE COMPANY
sales finance company
Purchases, at a discount, instalment sales contracts from retailers and dealers when such items as new cars and appliances are bought on instalment plans.
SAVINGS BANK?
savings bank
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.
SCHEDULE I BANK
schedule I bank
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.
SCHEDULE II BANK
schedule II bank
Banks that are incorporated and operate in Canada as federally regulated foreign bank subsidiaries. Schedule II banks are regulated by the Bank Act.
SCHEDULE III BANK
schedule III bank
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.
SELF-DIRECTED BROKER
self-directed broker
Also known as discount brokers. Self-directed brokers offer discounted transaction costs and do not provide investment advice to investors.
SELF-REGULATORY ORGANIZATION
self-regulatory organization (SRO)
An organization recognized by the Securities Administrators as having powers to establish and enforce industry regulations to protect investors and to maintain fair, equitable, and ethical practices in the industry and ensure conformity with securities legislation. Canadian SROs include the Investment Industry Regulatory Organization of Canada and, the Mutual Fund Dealers Association.
SECONDARY MARKET?
secondary market
The market where securities are traded through an exchange or over-the-counter subsequent to a primary offering. The proceeds from trades in a secondary market go to the selling dealers and investors, rather than to the companies that originally issued the shares in the primary market.
MARKET MAKER?
Market Maker
A market maker helps to create a market for investors to buy or sell securities. Market makers are typically large banks or financial institutions. They help to ensure there’s enough liquidity in the markets, meaning there’s enough volume of trading so trades can be done seamlessly.
Without market makers, there would likely be little liquidity. In other words, investors who want to sell securities would be unable to unwind their positions due to a lack of buyers in the market.
Market makers help to keep the market functioning, meaning if you want to sell a bond, they are there to buy it. Similarly, if you want to buy a stock, they’re there to have that stock available to sell to you.
SETTLEMENT?
settlement
The moment of irrevocable exchange of cash and securities.
UNDERWRITING
underwriting
The purchase for resale of a security issue by one or more investment dealers or underwriters. The formal agreements pertaining to such a transaction are called underwriting agreements.
