Chapter 3

Question 1

Market integrity

Answer 1

Sự toàn vẹn của thị trường

Question 2

Remediation

Answer 2

Cách tuỳ chọn khắc phục (khi mà nhà đầu tư nghĩ mình bị lừa)

Question 3

Reprimand

Answer 3

Khiển trách

Question 4

Expulsion

Answer 4

Trục xuất

Question 5

Regulatory body in Quebec?

Answer 5

Autorite des marches financiers regulates both securities business and sectors like life and property insurance firms, providers of deposit insurance, and distributors of financial products

Question 6

What is the responsibility of OSFI?

Answer 6

Office of the superintendent of financial institutions (OSFI) - OSFI has responsibility for all federally regulated pension plans.

Question 7

What is CSA?

Answer 7

Canadian securities administrators is an umbrella organization if Canada’s 10 provincial and territorial regulator for capital market

Question 8

What is SRO, IIROC, MFDA?

Answer 8

Self-regulatory organizations (allowed by provincial regulatory bodies and has right to design their own rules)
Investment industrial regulatory organization of canada
Mutual fund dealers association
SRO include IIROC and MFDA

Question 9

What if the SRO rule and provincial rules are different?

Answer 9

Then the most stringent rule of two applies

Question 10

What does IIROC do?

Answer 10

Set high quality regulation for their members and their registered employees.

Question 11

Function of IIROC?

Answer 11

Financial compliance (make sure dealer members have enough capital)
Business conduct compliance (monitor policy and procedures)
Registration (standard and program to maintain the competence of employees)
Enforcement (cover the sales, business, financial practices, and trading activities of individual and firms under IIROC jurisdiction)
Market surveillance (make sure time and trading rules)

Question 12

What is MFDA?

Answer 12

Regulating the distribution and sales of mutual funds by its members. (the provincial securities administration regulates the mutual fund, not MFDA).
MFDa can admit members, audit, enforce rules, and apply penalties.

Question 13

What MFDA does in Quebec?

Answer 13

Sign agreement with AMF to avoid regulatory duplication for mutual fund firms in QC. Because in qc, Chambre de la securite financiere (CsF) is for mutual fund and insurance in qc

Question 14

What is OSFI?

Answer 14

The office is the superintendent of financial institutions: an independent agency of the government of Canada responsible for regulating and supervising registered institutions such as deposit-taking institutions, insurance companies, foreign bank representatives office, federally regulated pension plans.

Question 15

What is CIPF?

Answer 15

Canadian investor protection fund. To protect investors, overseeing self-regulatory system

Question 16

Will CIPF protect customers in the event of insolvency of mutual fund companies, banks?

Answer 16

No. Only for members of IIROC and only in case of insolvency because cIPF is sponsored solely by IIROC and funded quarterly assessment on IIROC dealer members.

Question 17

In case of insolvency, how much will CIPF cover?

Answer 17

All accounts of customers are combined and treated as one general account entitled up to 1 million. Separate accounts such as registered accounts and trusts, each entitled up to 1 million.

Question 18

What is MFDA IPC?

Answer 18

Mutual fund dealers association Investors protection corporation.
To protect customers in case of insolvency if MFDA members. Up to 1 million too.
(MFDA IPC is not for Quebec because MFDA is not recognized as a SRO in qc. QC has its own compensation fund)

Question 19

What us CDIC?

Answer 19

Canadian Deposit insurance corporation.

Insures deposit up ti 100,000$ per depositor in each member institution. (bank, trust company, or loan company)

Question 20

What are the primary sources if rulers governing in the industry of Canada?

Answer 20

Provincial securities commission and SROs

Question 21

What us demutualization?

Answer 21

Refers to a company that was owned by its members converting to a company owned by shareholders

Question 22

What is the main objective of regulators?

Answer 22

Consumer protection, fairness, economic stability, social objective.

Question 23

Does Canadian securities follow rule-based model?

Answer 23

No, principles-based regulatory model so that it apply to broad issues

Question 24

What is the difference between principles-based and rule-based model?

Answer 24

rules-based approach imposes detailed rules designed to provide clarity and legal certainty to
market participants, a principles-based approach is clearer, simpler, and less costly to apply

Question 25

what is the downside of principles-based models?

Answer 25

requires careful analysis and monitoring by each dealer member. If a compliance failure occurs, the firm has no set standards to rely on to prove that its supervision was adequate

Question 26

what is administrator?

Answer 26

the applicable regulatory authority of a province, whether it is a securities commission or a government entity

Question 27

What is The general principle underlying Canadian securities legislation?

Answer 27

full, true, and plain disclosure

Question 28

What is the securities acts’ three methods to protect investors?

Answer 28

Registration of securities dealers and advisors
Disclosure of facts necessary to make reasoned investment decisions
Enforcement of the laws and policies

Question 29

What is IA?

Answer 29

Investment advisor (must falls under the category of Registered Representative)

Question 30

Condition to be an IA?

Answer 30

they must complete the Canadian Securities Course and an examination based on the Conduct and Practices Handbook course. To advise and sell securities to the public, new IAs must also complete a 90-day training program. After licensing, the registrant is subject to a six-month period of supervision by his or her supervisor. New registrants must also complete CSI’s Wealth Management Essentials Course (WME) within 30 months
of becoming licensed as an IA. Participation in the industry’s continuing education program is also a
condition of maintaining a license

Question 31

what is IR?

Answer 31

Investment Representatives (IRs) are largely employed by self-directed brokerage firms, where clients make their own investment decisions

Question 32

Conditions to be an IR?

Answer 32

Investment Representatives – CSC and CPH as well as a mandatory 30-day training program and the WME is not required.

Question 33

What is NRD?

Answer 33

National registration database. is a web-based system used by investment dealers and employees to
file registration forms electronically when applying for approval by a stock exchange, the CSA, or IIROC. The NRD is designed to enable a single electronic submission to satisfy all jurisdictions. The NRD also allows regulators to verify registration status in other jurisdictions.
Both the IA and the dealer member are required to notify the applicable SROs immediately, in writing, of any
material changes

Question 34

What is gatekeepers?

Answer 34

an important role of IA to take measures to identify
suspicious clients, detect and report suspicious transactions, and prevent illegal activity such as illegal activities, including money laundering, terrorist financing, financial fraud, and illegal insider trading

Question 35

what is the requirement of gatekeepers?

Answer 35

Collect and record client information that is accurate and complete.
• Monitor activity in client accounts.
• Report any suspicious transactions or proposed transactions in client accounts

Question 36

What is KYC?

Answer 36

Know your clients -
Learn the essential facts relative to every client and to every order or account accepted.
Verify that the acceptance of any order for any account is within the bounds of good business practice.
Verify that recommendations made for any account are appropriate for the client’s investment objectives,
personal circumstances, and tolerance to risk.

Question 37

What is CRM?

Answer 37

Client relationship model. - The IA must disclosure to client all info:
The types of products and services offered by the firm
• The terms of the account relationship to which the client has consented
• The process used by the firm to assess investment suitability and the client’s KYC information
• The date on which account suitability will be reviewed
• All fees and charges associated with operating, transacting, and holding investments in the account
• The firm’s complaint handling procedures
A description of all the reporting that the client will receive, including the date on which account statements
and trade confirmations will be sent, as well as a statement describing the firm’s obligations to provide
performance information

Question 38

What are the measures to deal with the conflict with customer?

Answer 38

avoid the conflict, disclosure the conflict and control the conflict.

Question 39

When the CRM guideline must be conducted?

Answer 39

• A trade is accepted.
• A recommendation is made.
• Securities are transferred or deposited to an account.
• There is a change of representative or portfolio manager responsible for the account.
• There is a material change to the KYC information for the account.

Question 40

what are the remediation options when there is conflict?

Answer 40

ARBITRATION and Ombudsman for Banking

Services and Investments (OBSI)

Question 41

What is arbitration?

Answer 41

an independent arbitrator is chosen to listen to the facts and arguments of both sides in the dispute. The arbitrator then decides how the dispute should be resolved and what remedy should be imposed. Arbitration is often cheaper and faster than a court action, particularly if relatively small amounts of money are concerned. If a client requests arbitration from an SRO, the securities dealer must accept both the process and the arbitrator’s decision

Question 42

Condition to use arbitration?

Answer 42

Attempts have been made to resolve the dispute with the investment dealer.
• The claim does not exceed $500,000.
(Claims for higher amounts may also be arbitrated, if both parties agree to the process.)

Question 43

Can investor sue the dealer to court after arbitration?

Answer 43

NO. The decision of the arbitrator is binding. Before the arbitration process begins, both parties must sign an agreement to give up the right to further pursue the matter in court

Question 44

What is OBSI?

Answer 44

Ombudsman (Thanh tra viên) for Banking Services and Investments (OBSI) investigates customer complaints against financial services providers, OBSI provides a prompt and impartial resolution. The process is not binding for either the investor or the financial services provider. However, participating firms that do not agree to a recommendation by OBSI are publicly reported.

Question 45

what is the consequences of unethical?

Answer 45

Infractions may lead to fines, suspension, expulsion, and even criminal charges

Question 46

what is front running?

Answer 46

Trading in one’s own account before effecting the same trade for a client

Question 47

what is prohibited sale action?

Answer 47

unethical behaviour, dishonest conduct, and high-pressure selling tactics

Question 48

What is DNCL?

Answer 48

Do not call list - The DNCL rules prohibit telemarketers and clients of telemarketers from calling any number that has been registered on the DNCL for more than 31 days

Question 49

The securities industry in Canada is regulated by whom?

Answer 49

by the provinces and territories. In several provinces, the day-to-day rqegulation is delegated to Securities Commissions. In other provinces, securities regulators are appointed by the province.

Question 50

Is securities commissions of Toronto a SRO?

Answer 50

None of the securities commissions are SRO’s. Securities commissions are the securities administrators. In fact, it’s the securities commissions that recognize various institutions (e.g., IIROC) as SRO’s and grant them the authority to act as such.