Chapter 3 Flashcards
Primary objective of regulation?
Investor protection
Principle-based regulation vs. Rules-based regulation
Principle: Canada follows principle based regulation, regulators set objectives, firm decide how to meet goals
Rules: detailed rules outlining objectives, must be accurately followed
Purpose of the Provincial Securities Act?
PSA designed to regulate the underwriting, distribution, sales of securities. Also to protect buyers and sellers
What does full, true, and plain disclosure mean?
General principle underlying all Canadian securities legislations
Investment advisor v Investment representative
Investment advisor: must be registered with administrator, licensed to trade securities
Investment representative: cannot give advice, can execute trades. employed by self-directed brokerages
What is the National Registration Database?
Web-based system used by dealers to file registration forms
Single application for all jurisdictions
Members must notify applicable SRO immediately of any material changes
Explain gatekeeper role
Guarding the markets from wrongdoing
Collect client information, monitor activity, report suspicion
What is the KYC rule?
SRO’s require dealers to gather client information
Who are CSA and what role do they play? What is their goal?
Canadian Securities Administrator
Umbrella organization of all regulators to harmonize markets
GOAL: Develop fair, efficient, vibrant markets, where investors are protected from unfair practices
What is an SRO? Who do they regulate? Examples of SRO’s?
Self-Regulatory Organization
Private bodies that regulate provincial administrators
SRO’s by-laws uphold securities regulation
SRO’s monitored by the CSA
IIROC & MFDA
What is the IIROC mandate?
To set high quality regulatory and investment industry standards, protect investors, and strengthen market integrity, while maintaining efficient and competitive capital markets
What role does IIROC play in the market? Who do they oversee?
IIROC oversees all dealers on debt and equity markets
Who is the MFDA?
Mutual Fund Dealer Association
SRO regulating mutual funds
Who does Canadian Investor Protection (CIPF) protect?
Investor protection against IIROC members
Explain CIPF coverage
Protection against IIROC members
Cash, margin, short sale = 1M protection
Registered accounts, trusts = 1M protection
Who does MFDA protect?
Protects against MFDA dealers
Describe MFDA IPC coverage
Protects MFDA dealers
Each account = 1M protection
Who is Office of the Superintendent of Financial Institutions (OSFI)?
OSFI is regulatory body for all financial institutions
Independent agency of Government of Canada
OSFI does not regulate the CSI
List who OSFI regulates
Deposit-taking institutions, banks
Insurance companies
Foreign bank representatives
Federally regulated pension plans
Who does Canadian Deposit Insurance Company (CDIC) protect?
Federal Crown Corporation
Deposit insurance for financial system
Describe CDIC coverage
Protects deposits up to 100k per institution
Who protects the credit union members?
Provincial Insurance Corporations
Compare arbitration to OBSI
Arbitration: used for an SRO, independent party listens to both sides, makes recommendation
OBSI: specifically financial services remediation
Describe IIROC’s Client Relationship Model
- Relationship disclosure
- Conflict of interest
- Suitability assessment
What is a relationship disclosure document?
IIROC dealer must provide document that provides information.
Includes: types of products, terms of account relationship, processes used for suitability, fees, complaint processes
How are conflicts of interest addressed?
Avoid. Disclose. Control
List examples of unethical sales practices
Omission
Deception
Misleading information
Front-running
Describe the purpose of NDNCL
National Do Not Call List
Enforced by the CTRC
