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Canadian Securities Course V1 > Chapter 1: The Canadian Investment Marketplace > Flashcards

Chapter 1: The Canadian Investment Marketplace Flashcards

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SIE Exam flashcards
1
Q

Who is responsible for the regulation of the securities industry?

A

Securities commission in each province and self-regulatory organizations

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2
Q

What is an “investment dealer”?

A

Financial intermediaries that bring suppliers and users of capital together

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3
Q

Another name for “investment dealer”?

A

Broker

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4
Q

What is the CDS Clearing and Depository Services Inc.?

A

Clears and settles trades and other transactions

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5
Q

What is “clearing”?

A

The process of matching and confirming the details of a trade

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6
Q

What is “settlement”?

A

The moment when securities and cash are exchanged

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7
Q

What is a “provincial regulator”?

A

A provincial regulator oversees the markets and SROs

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8
Q

The two main functions of an investment dealer

A
  1. Underwriting and distributing new securities, which takes place in the primary market
  2. Maintaining secondary markets, where existing securities are traded among investors
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9
Q

Canadian securities industry is made up of which three different types of firms?

A
  1. Retail firms (individual investors and dealers can be full-service firms or discount brokers/self-directed brokers which cater to do-it-yourself investors)
  2. Institutional firms (institutional clients which can be both foreign or domestic)
  3. Integrated firms (both retail and institutional)
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10
Q

What are “investment boutiques”?

A

Investment boutiques are smaller dealers that specialize in a particular market segment

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11
Q

What are the three levels of organizational structure of most investment dealers?

A
  1. Front office
  2. Middle office
  3. Back office
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12
Q

What are the functions of front office?

A

Marketing, sales, trading, and portfolio management

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13
Q

What are the functions of middle office?

A

Compliance, accounting, auditing, and legal

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14
Q

What are the functions of back office?

A

Settling firm’s trade transactions

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15
Q

Investment firms can act as which 2 functions?

A
  1. Principal (firms sell securities directly out of own inventory)
  2. Agent (does not own securities; acts as the middleman between seller and buyer of a security and earns commission)
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16
Q

When can a dealer act as a principal?

A
  1. When underwriting a new issue (mostly debt securities) where dealer can buy directly from the issuer and resell to investors (“bought deal”)
  2. In the secondary market by holding an inventory of securities that sells directly to clients
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17
Q

What security clearing system is used in Canada?

A

Canadian Depository for Securities (CDS)

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18
Q

Explain the process of “netting”.

A

“Netting” is referred to the reduced amount of cash and securities that is exchanged under the clearing system

19
Q

Is CDS a financial intermediary?

A

No, it is only considered a valuable partner to institutions, not a financial intermediary.

20
Q

What is the Bank Act?

A

All chartered banks operate under the Bank Act, which establishes rules and restrictions and designate banks as Schedule I, II, or III.

21
Q

What is are the characteristics of Schedule I Chartered Banks?

A

Canadian-owned bank, voting shares must be widely held and an individual/group of individuals cannot own more than 20% of voting shares.

22
Q

What is are the characteristics of Schedule II Banks?

A

Incorporated and operate in Canadian, but owned by foreign parents bank/other financial institution. Can engage in same

23
Q

What is services are offered at Schedule I Chartered Banks?

A

Consumer and commercial banking products

24
Q

What is services are offered at Schedule II Banks?

A

Same types as Schedule I Chartered Banks (consumer and commercial)

25
Q

What are the characteristics of Schedule III Banks?

A

Bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada

26
Q

What are credit unions?

A

Institution that offers a wide range of banking services to member-savers from group of individuals that have some common interest or other similarity.

27
Q

What approach are credit unions required to follow under CCAA?

A

“Prudent portfolio approach”

28
Q

Credit unions are governed by?

A

Cooperative Credit Associates Act (CCAA)

29
Q

Insurance companies have which two main lines of business?

A
  1. Life insurance

2. Property and casualty insurance

30
Q

What is the most important aspect of an insurance business?

A

Underwriting, which involves evaluating risk, determining what policies to issue, and the appropriate premium

31
Q

What type of insurance has the largest aggregate premium?

A

Automobile insurance

32
Q

What are the two types of investment funds?

A
  1. Closed-end funds

2. Open-end funds (“mutual funds”)

33
Q

What are closed-ended funds? (2)

A
  • The fund company issues a set number of units and then no more.
  • Cannot redeem any units until a stated maturity date but can buy/sell existing units on an exchange.
34
Q

What are open-ended funds? (2)

A
  • The fund company will issue more units upon request (will create new units to sell)
  • The fund company will redeem units at the next valuation point based on the NAVPS “net asset value per share”
35
Q

What is the Alberta Treasury Branches (ATB Financial)?

A

ATB Financial is a savings bank from 1938 formed when chartered backs withdrew branches from many smaller towns

36
Q

What are consumer finance companies?

A

Companies that make interest cash loans, at a higher interest rate, to individuals who cannot get financing from a traditional lender

37
Q

What are sales finance companies?

A

Companies that purchase instalment sales contracts from retailers at a discount

38
Q

What are pension plans?

A

Pension plans are either private (employer/association) or public (Canada Pension Plan)

39
Q

What are robo-advisors?

A

Online investment services that offer advice

40
Q

What are the characteristics of robo-advisors? (5)

A
  1. Portfolios are created using algorithms based on modern portfolio management and online client questionnaires
  2. Portfolios employ goal-based investment management and optimized with tax-efficient rebalancing
  3. Portfolios are largely built with exchange-traded funds and rebalanced regularly
  4. Human advisor will provide support to varying degrees
  5. Financial planning services may be available to some degree
41
Q

What function does the front office fulfill?

A

Fulfills functions pertaining to portfolio management and direct contact with client

42
Q

What function does the middle office fulfill?

A

Fulfills functions essential to efficient operations

43
Q

What function does the back office fulfill?

A

Fulfils functions settling the firm’s trade transactions

Canadian Securities Course V1 (10 decks)

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