Chapter 8 - Monitoring

Question 1

What is meant by “Controls” when talking about Internal Controls?

Answer 1

Controls = refers to the P&P that ensure the orderly and efficient conduct of a firm’s business.

Question 2

What Rule Requires all Dealer Members to establish and maintain adequate internal controls?

Answer 2

IIROC Rule 17

Question 3

What is the difference between Detective Controls and Preventative Controls

Answer 3

Detective are meant to maximize the chance of detecting violations
Preventative - minimize the occurrence of fraud & errors.

Question 4

Define Risk Based Approach

Answer 4

Identify areas of concern and allocate resources accordingly.

Question 5

What is meant by The Concept of Reasonable Assurance?

Answer 5

• Means that a firms supervisory system be “Reasonably Designed” to achieve compliance with applicable securities Regulations.

Question 6

Under IIROC Rule 2500, When must positive action take place for Missing Account Documentation?

Answer 6

Action must be taken within 25 days

Question 7

What are 3 Non-Trading Transactions that require supervision controls in place?

Answer 7

1. Deposits & Withdrawls
2. Deliver-IN and Transfer-Outs (including Certs)
3. Journal Entries between Accounts

Question 8

What Rule will provide information on Minimum Requirements for Supervision of Accounts under Suitability Relief

Answer 8

IIROC Rule 3200

Question 9

What is IIROC Rule 2700?

Answer 9

Minimum Standards for Institutional Account Opening, Operation and Supervision

Question 10

What are Firewalls within a Firm

Answer 10

Chinese Walls - Information Barriers that prevent the disclosure or tipping of the insider information within other divisions of the firm.

Question 11

IN the process of a Bought Deal, what must be filed with IIROC before the Bought Deal can be sold?

Answer 11

Certificate that no pre-marketing on the bought deal has taken place.

Question 12

What is a Gatekeepers Obligation?

Answer 12

Gatekeepers must act on Red Flags that may include improper behavior and report potential violations to their Supervisor or compliance department

Question 13

How Frequently must a dealers Trading Supervision Rules be reviewed?

Answer 13

Must be reviewed at least Annually to ensure it prevents and detects problems. (reviews must be maintained for 5 years)

Question 14

How frequently must the dealer report findings of Trade Supervision to the Board of Directors?

Answer 14

At least Annually.

Question 15

If Significant problems or compliance procedures are Identified (re Trade Desk) who Must be Notified?

Answer 15

The Board of Directors

Question 16

Does Insurance activity need to be reported as Outside Activity?

Answer 16

Yes - it must be reported via NRD as separate business activity.

Question 17

Is a dealer member required to have its P&P rules regarding supervision of Sales Com, Advertising and Correspondence approved by IIROC?

Answer 17

YES - IIROC must approve the dealers P&P regarding advertising, sales literature and correspondence relating to its business.