Chapter 3 Flashcards
Market integrity
Sự toàn vẹn của thị trường
Remediation
Cách tuỳ chọn khắc phục (khi mà nhà đầu tư nghĩ mình bị lừa)
Reprimand
Khiển trách
Expulsion
Trục xuất
Regulatory body in Quebec?
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
What is the responsibility of OSFI?
Office of the superintendent of financial institutions (OSFI) - OSFI has responsibility for all federally regulated pension plans.
What is CSA?
Canadian securities administrators is an umbrella organization if Canada’s 10 provincial and territorial regulator for capital market
What is SRO, IIROC, MFDA?
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
What if the SRO rule and provincial rules are different?
Then the most stringent rule of two applies
What does IIROC do?
Set high quality regulation for their members and their registered employees.
Function of IIROC?
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)
What is MFDA?
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.
What MFDA does in Quebec?
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
What is OSFI?
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.
What is CIPF?
Canadian investor protection fund. To protect investors, overseeing self-regulatory system
Will CIPF protect customers in the event of insolvency of mutual fund companies, banks?
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.
In case of insolvency, how much will CIPF cover?
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.
What is MFDA IPC?
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)
What us CDIC?
Canadian Deposit insurance corporation.
Insures deposit up ti 100,000$ per depositor in each member institution. (bank, trust company, or loan company)
What are the primary sources if rulers governing in the industry of Canada?
Provincial securities commission and SROs
What us demutualization?
Refers to a company that was owned by its members converting to a company owned by shareholders
What is the main objective of regulators?
Consumer protection, fairness, economic stability, social objective.
Does Canadian securities follow rule-based model?
No, principles-based regulatory model so that it apply to broad issues
What is the difference between principles-based and rule-based model?
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
what is the downside of principles-based models?
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
what is administrator?
the applicable regulatory authority of a province, whether it is a securities commission or a government entity
What is The general principle underlying Canadian securities legislation?
full, true, and plain disclosure
What is the securities acts’ three methods to protect investors?
Registration of securities dealers and advisors
Disclosure of facts necessary to make reasoned investment decisions
Enforcement of the laws and policies
What is IA?
Investment advisor (must falls under the category of Registered Representative)
Condition to be an IA?
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
what is IR?
Investment Representatives (IRs) are largely employed by self-directed brokerage firms, where clients make their own investment decisions
Conditions to be an IR?
Investment Representatives – CSC and CPH as well as a mandatory 30-day training program and the WME is not required.
What is NRD?
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
What is gatekeepers?
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
what is the requirement of gatekeepers?
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
What is KYC?
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.
What is CRM?
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
What are the measures to deal with the conflict with customer?
avoid the conflict, disclosure the conflict and control the conflict.
When the CRM guideline must be conducted?
- 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.
what are the remediation options when there is conflict?
ARBITRATION and Ombudsman for Banking
Services and Investments (OBSI)
What is arbitration?
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
Condition to use arbitration?
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.)
Can investor sue the dealer to court after arbitration?
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
What is OBSI?
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.
what is the consequences of unethical?
Infractions may lead to fines, suspension, expulsion, and even criminal charges
what is front running?
Trading in one’s own account before effecting the same trade for a client
what is prohibited sale action?
unethical behaviour, dishonest conduct, and high-pressure selling tactics
What is DNCL?
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
The securities industry in Canada is regulated by whom?
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.
Is securities commissions of Toronto a SRO?
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.
