Chapter 2: Canadian Securities Industry Flashcards
Securities regulation is a _____ responsibility
provincial
OSC and BCSC
Ontario Securities Commission (OSC)
BC Securities Commission (BCSC)
Self Regulatory Organizations (SROs) provide
oversight and enforcement for some rules
Other SRO Players
The Canadian Depository for Securities (CDS)
Canadian Investor Protection Fund (CIPF)
Canadian Securities Institute (CSI)
Full-service brokers
Full-service brokers offer “high-touch” service and advice (High fees)
Brokers can be…
full-service or discount
Discount brokers
Discount brokers offer limited services, such as stock and bond trade execution, but no advice (Low fees)
Globalization
- Markets are no longer restricted to local suppliers and issuers of capital
- Canadian investors can buy US listed shares; Canadian banks lend to US borrowers
Post-crisis financial regulation is…
increasing the compliance responsibility for financial firms
FATCA
Foreign Account Tax Compliance Act
AML
Anti-Money Laundering
As Principals in primary markets…
- Investment Dealer agrees to a price with the issuer and buys all of the shares/bonds (aka “bought deal”)
- Investment Dealer then sells the purchased shares or bonds to investors
As Agents in primary markets…
- Investment Dealer markets the shares or bonds to investors on a “best efforts” basis; the Investment Dealer does not purchase
Secondary Markets
Investment Dealers buy and sell securities on financial markets
As principals in secondary markets…
Invest their own capital and earn a spread between purchase and sale prices (aka proprietary or liability trading)
As agents in secondary markets…
Invest their clients’ capital and earn a commission on executed trades (aka brokerage)
What happens after a trade is executed?
- Trade is “settled”
- CDS “clears” or “settles” the trade (hence the term “clearinghouse”) as the central repository keeping track of who owns each share of a company
What happens when the trade is “settled”?
- Cash from the buyer’s brokerage account is transferred to the brokerage account of the seller
- Share ownership is transferred from the seller to the buyer
What happens when CDS “clears” or “settles”?
- Registered owners have their name on the (electronic) share certificate (really a book entry)
- Shares in “street” form are registered in the name of the brokerage
- The broker then keeps track of individual client ownership
Banks in Canada are governed by the…
Bank Act
Six Big Banks
BMO, BNS, CIBC, NA, RY, TD
Schedule I banks
Schedule I
Schedule II
Schedule III
- Schedule I: Domestic Banks
- Schedule II: Subsidiaries of Foreign Banks
- Schedule III: Branches of Foreign Banks
Conglomerate
six big banks (BMO, BNS, CIBC, NA, RY, TD)
The Canadian Depository for Securities (CDS)
- Clears, or settles, trades
- Owned by the TMX
Canadian Investor Protection Fund (CIPF)
- Insures brokerage account contents (not losses!)
Canadian Securities Institute (CSI)
- Offers courses required for licensing by regulators
- Owned by Moody’s
