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CPH > Chapter 7: Trading, Settlement, and Prohibited Activities > Flashcards

Chapter 7: Trading, Settlement, and Prohibited Activities Flashcards

1
Q

The three components of a trade:

A
  1. The standard trading unit
  2. The settlement Period
  3. The minimum quotation spread
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2
Q

The quantity of a security that makes up a standard trading unit is defined in the _________ ________ __________ __________.

A

Universal Market Integrity Rules (UMIR)

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3
Q

Orders (or portions of orders) to buy or sell that are not in multiples of standard trading units are considered to be ____ _____.

A

odd lots

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4
Q

What are the standard trading units and odd lots of a security that is less than $0.10 per unit?

A

Standard Trading Unit = 1,000

Odd Lot = 1 to 999

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5
Q

What are the standard trading units and odd lots of a security that is between $0.10 and $1.00?

A

Standard Trading Unit = 500

Odd lot= 1 to 499

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6
Q

What are the standard trading units and odd lots of a security that is more than $1.00?

A

Standard Trading Unit = 100

Odd Lot= 1 to 99

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7
Q

The process of transferring securities into the account of a buyer and cash into the seller’s account following a trade of stocks, bonds, futures, or other financial assets is known as ______ ________.

A

trade settlement

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8
Q

The _________ _________ is the time between the date of a securities transaction and the date on which ownership of the security is transferred

A

settlement period

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9
Q

What is the settlement period for Gov’t of Canada T-Bills?

A

T+0 (Same Day Settlement)

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10
Q

What is the settlement period for Gov’t of Canada Bonds?

A

T+2 (Trade date plus two business days)

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11
Q

What is the settlement period for Preferred and common shares?

A

T+2 (Trade date plus two business days)

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12
Q

When clients sell a security at the market, they receive the _____ ______, which is the highest price any buyer is willing to pay.

A

bid price,

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13
Q

When they buy a security at the market, they pay the ____ _____ (sometimes called the _____ _____), which is the lowest price at which any seller is willing to sell

A

Ask Price

Offer Price

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14
Q

The minimum acceptable range between bid and ask prices when quotations are given for securities.

A

The minimum quotation spread

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15
Q

For a security over $0.50, the minimum quotation spread is at least _____

A

$0.01 (EX: $2.34 (bid) and $2.35 (ask)

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16
Q

For each purchase and sale instruction received from a client, you must complete an _____ _______ in accordance with the rules enforced by provincial authorities, the exchanges, and IIROC

A

order ticket

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17
Q

The order ticket must include the following details

A
  • The client’s name or the account number (or both)
  • The quantity and description of the security (most often shown by a symbol)
  • A notation as to the price (e.g., limit, market, or on-stop)
  • A notation as to whether the order is professional (PRO), non-client (N–C), or employee (EMP)
  • A notation as to whether the order is a short sale or discretionary order
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18
Q

It is essential that you _______ each order back to the client

A

repeat

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19
Q

Generally speaking, order types are categorized by the following characteristics:

A

Duration - How long is the order valid for?
Price Restrictions- Have any limits been set on the price?
Special Instructions- Are there any special instructions attached to the order?
Other- Are there any changes to the original order or is the client a PRO?

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20
Q

A GTC order on the TSX expires after ____ days

A

90

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21
Q

Special terms orders are executed on a ______ _______ _______.

A

Best Efforts Basis

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22
Q

What is a FOK order?

A

A fill or kill order is an order in which as much as possible must be filled immediately, after which the balance of the order is cancelled.

23
Q

What is a Contingent order?

A

It is an order that takes second place to a primary order. (EX: Buy 1,000 shares of XYZ at market and Sell 10 calls at the current offer price.)

24
Q

A ________ _______ _______ is a special term order in which the buying and selling parties agree that
delivery of the securities will be delayed beyond the
usual three-day settlement period to a date specified
in the order

A

delayed delivery order

25
Q

The Standard Trading Unit for GOC T-Bills and other GOC direct and guarantees maturing in less than one year.

A

$250,000

26
Q

Standard trading units of GOC direct and guarantees with terms of one to three years

A

$100,000

27
Q

Standard trading units of GOC direct and guarantees with terms of over three years

A

$100,000

28
Q

Standard trading units of Provincial bonds and guarantees

A

$25,000

29
Q

Standard trading units of corporate and municipal bonds.

A

$25,000

30
Q

Orders for the accounts of partners, directors, officers, RRs, and employees of a dealer member are generally considered PRO, EMP, or N-C orders, and will rank behind any client order of the same dealer member for the same security, at the same time, at the same price. This is known as the:

A

Client Priority Rule

31
Q

Registrants, including RRs and Investment Representatives (IRs), have a ___________ ______ in that they must not, through act or omission, facilitate breaches of securities laws or regulations by clients

A

gatekeeper role

32
Q

A client who wishes to place a buy order instructs the RR to contact a particular person at another dealer
member to take the other side of the trade. This is known as a _____ ______

A

Wash Trade

33
Q

RRs must also be aware that under current anti-money laundering and anti-terrorist financing (AML/ATF)
regulations, suspicious transactions must be reported to:

A

Financial Transactions and Reporting Analysis

Centre of Canada (FINTRAC).

34
Q

Failure to report suspicious transactions is an offence punishable by

A

up to five years’ imprisonment, a maximum fine of $2 million, or both

35
Q

FINTRAC has legislative authority to issue an administrative monetary penalty (AMP) of up to _________ to reporting entities that are in noncompliance with Canada’s (PCMLTFA).

A

$500,000

36
Q

When a dealer member determines that there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission of a money laundering offence, it is required to send a suspicious transaction report to FINTRAC within ______ days.

A

30

37
Q

Failure to report a suspicious transaction through willful blindness is punishable by a fine of up to
______ and imprisonment for up to _______ years

A

$2 million and imprisonment for up to five years

38
Q

Trading ahead of, and to the disadvantage of, a client order is known as ________, which is a serious offence

A

frontrunning

39
Q

Trading in the marketplace based on material non-public information about the affairs of the underlying company constitutes ______ ________, and is prohibited by law

A

insider trading

40
Q

The act of carrying out multiple transactions in a client’s account solely to increase the RR’s remuneration

A

Churning

41
Q

RRs cannot display _________ certificates at their business location; however, the display of course completion certificates is permitted.

A

registration

42
Q

For the purposes of the reporting provisions of the Acts, insiders are defined to include the following people:

A

• The directors and senior officers of the issuer.
• Any person or company (excluding underwriters in the course of public distribution) that beneficially owns, controls, or directs more than 10% of the voting rights attached to all voting securities.
• Any director or senior officer of a company that is a subsidiary of the issuer or is itself an insider due to
ownership, control, or direction over more than 10% of the voting rights attached to all voting securities of the issuer involved.

43
Q

The maximum penalties for insider trading under the Securities Act (Ontario) include a fine of __________ and imprisonment for __________________.

A

$5 million

5 years less 1 day

44
Q

(OSC) also has the power to order the payment of an administrative penalty of up to ________and to order
the disgorgement of monies obtained as a result of noncompliance if a person or company fails to comply with Ontario’s insider trading laws.

A

$1 million

45
Q

The Criminal Code deals with the most serious cases that merit stiffer criminal penalties. The offences can carry prison terms of up to _______ for illegal insider trading and __________ for tipping

A

10 years

5 years

46
Q

__________ are information barriers that separate persons who make investment decisions from persons who are privy to undisclosed material information that may influence those decisions

A

Firewalls

47
Q

In Ontario, insider reporting requirements remain in the Securities Act (Ontario) and include a _____ day requirement for filing initial insider reports and a ______ day requirement for subsequent insider reports

A

10 day

5 day

48
Q

A SEDI issuer is any reporting issuer, other than a mutual fund, that files disclosure documents electronically through the:

A

System for Electronic Document Analysis and Retrieval (SEDAR).

49
Q

With this system, insiders can file their reports 24 hours a day, seven days a week and are not required to pay filing fees.

A

SEDI

50
Q

Reporting issuers are also required to file issuer event reports on SEDI within _____ _________ ____of events, such as:

A

One business day

mergers, amalgamations, stock splits, and consolidations.

51
Q

The seller _______ all accrued interest on bonds and debentures to the date the bonds or debentures are sold, unless otherwise arranged at the time of the transaction

A

retains

52
Q

With this type of transfer, the beneficial owner or registered shareholder is an entity such as a corporation, partnership, or investment club

A

Transfer Involving Legal Documentation

53
Q

Securities not delivered by the settlement date are called _______.

A

Fails

CPH (9 decks)

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