Chapter 1: The Canadian Marketplace

Question 1

SROs

Answer 1

Self-Regulatory Organizations. Establish and enforce market rules.

Question 2

CDS

Answer 2

Clearing and Depository Services Inc. Clears and settles trades and other transactions through this service.

Question 3

Clearing

Answer 3

the process of consolidating and matching security trade details.

Question 4

Settlement

Answer 4

the moment securities and cash are exchanged

Question 5

CIPF

Answer 5

Canadian Investor Protection Fund. protects investors in the event of the insolvency of a member firm.

Question 6

Investment dealers fulfill two main functions:

Answer 6

1) underwriting and distributing new securities.

2) maintaining secondary markets.

Question 7

Types of investment dealers

Answer 7

Retail firms, institutional firms and integrated firms.

Question 8

investment boutiques

Answer 8

smaller dealers that specialize in a particular market segment, such as bond trading.

Question 9

3 level organization structure of most investment dealers

Answer 9

front office
middle office
back office

Question 10

Principal

Answer 10

firms are selling securities out of their own inventory

Question 11

Agent

Answer 11

acts as the middleman between the seller and buyer of a security. earns a commission 35% typically on the transaction.

Question 12

Netting

Answer 12

by using a clearing system, the amount of cash and securities that needs to change hands each day is substantially reduced.

Question 13

Chartered Banks

Answer 13

All chartered banks operate under the bank act.
Bank Act is updated every 5 years.
Schedule I, Schedule II, and Schedule III

Question 14

Schedule I

Answer 14

Canadian-owned bank, widely held, not permitted to own more than 20% voting shares.

Question 15

Schedule II

Answer 15

Incorporated and operate in Canada but are owned by a foreign parent bank or other FI.

Question 16

Schedule III

Answer 16

foreign institutions and do banking business in Canada

Question 17

CCAA

Answer 17

Cooperative Credit Associations Act. Govern the credit unions.

Question 18

Insurance companies have two main lines of business:

Answer 18

1. life insurance: underwriting is the most important aspect of an insurance business. underwriting involves evaluating risk, determining what policies to issue, and the appropriate premium.
2. property and casualty insurance: the largest aggregate premium (revenue) is for automobile insurance.

Question 19

2 types of Investment funds:

Answer 19

closed-end funds and open-end funds

Question 20

closed-end funds

Answer 20

fund company issues a set # of units and then no more.

won’t redeem any units until a stated maturity date.

Question 21

open-end funds

Answer 21

opposite of closed-end funds

Question 22

The Alberta Treasury Branches (ATB Financial)

Answer 22

1938

offered financial services when branches closed down in smaller towns.

Question 23

Robo-Advisors

Answer 23

• portfolios are created using algorithms based on modern portfolio management and online client questionnaires.
• goal-based investment management, optimized with tax-efficient rebalancing
• largely built with ETFs and rebalanced regularly
• human advisor will provide support to varying degrees.