Chapter Two

Question 1

What is a broker

Answer 1

An investment dealer or registered individual that is registered to trade securities in the capacity of an agent or principal and is a member of a SRO

Question 2

What is CDS

Answer 2

Clearing and depositary services

Question 3

What’s all closed end funds

Answer 3

Shares in closed end investment companies that are readily transferable in the open market and bought and sold like other shares

Question 4

What are open end funds

Answer 4

They are mutual funds

Question 5

What is a mutual fund

Answer 5

An investment fund operated by company that uses the proceeds from shares and units sold to investors to invest in stocks bonds derivatives another financial securities. Mutual funds offer investors the advantage of diversification and professional management and are sold on a load or no load basis. Mutual fund share units are redeemable on demand at the funds current net asset value per share.

Question 6

What is primary distribution

Answer 6

The original sale off any issue of the company securities

Question 7

What is underwriting

Answer 7

The purchase for resale of a security issue by one or more investment dealers or underwriters

Question 8

What are SROs and what do they do

Answer 8

SRO is short for self regulatory organizations such as IIROC they establish and enforce industry regulations to protect investors and to maintain fair equitable and ethical practices

Question 9

When is the term intermediary used

Answer 9

To describe any organization that facilitates the trading or movement of financial instruments that transfer the capital between suppliers and users

Question 10

What are investment dealers

Answer 10

Investment dealers sometimes acts on clients behalf as an agent or principal

Question 11

What are the two main functions of investment dealers in the securities industry

Answer 11

They help transfer the capital from savings to users through the underwriting and distribution of new securities secondly they maintain secondary markets in which previously issued or outstanding securities can be traded

Question 12

What are the three categories of firms that make up the securities industry

Answer 12

Integrated firms, institutional funds, retail firms

Question 13

What does the front office usually do

Answer 13

Includes all staff functions pertaining directly to portfolio management

Question 14

Provide seven examples of institutional clients

Answer 14

Pension plans, mutual funds, insurance companies, endowments, charitable foundations, family trusts /estates, corporate treasuries.

Question 15

What does the middle office do

Answer 15

Middle office staff duties have to do with compliance accounting audits and legalities

Question 16

What does back-office do

Answer 16

Back office usually settles the firm securities transactions in an efficient and effective manner this activity is otherwise known as the trade settlement function

Question 17

When acting as a principal what is the investment dealer

Answer 17

When acting as a principal the securities firm owns security as part of its own inventory at some stage in buying and selling transactions with investors

Question 18

When acting as an agent what is the investment dealer

Answer 18

When acting as an agent the broker acts for or on behalf of a buyer or seller but does not itself own title to the securities at any time during the transactions

Question 19

In the securities business what does underwriting or financing mean

Answer 19

Underwriting or financing has come to mean the purchase from a government body or a company of a new issue of securities on a given date at a specified price

Question 20

Who are securities cleared through

Answer 20

CDS clearing and depository services Inc.

Question 21

What is the advantage of using the central clearing system

Answer 21

The number of securities and the amount of cash that has to be changed hands and moved by various members each day is substantially reduced by a process called netting.

Question 22

What are schedule 1, schedule and 3 banks

Answer 22

Schedule 1 are primarily Canadian banks and schedule 2/3 are foreign

Question 23

What are the voting restrictions on schedule one banks

Answer 23

Shareholders to no more than 20%

Question 24

What are the controls that inhibit information sharing between various businesses and business units commonly known as

Answer 24

Chinese walls

Question 25

Examples of schedule 2 banks

Answer 25

Amex Bank of Canada and Citibank Canada

Question 26

Example of schedule three banks

Answer 26

HSBC Canada and the Bank of New York Mellon

Question 27

What are integrated firms

Answer 27

Offers products and services that cover all aspects of the industry both institutional and retail

Question 28

What are institutional firms

Answer 28

Institutional funds primary handle the trading activities of large clients such as pension funds and mutual funds

Question 29

What is an agent

Answer 29

An investment dealer operates as an agent when it acts on the behalf of the buyer or seller and does not own the title on the security at any time

Question 30

What role is an investment firm performing when it completes a sell transaction from its own inventory of a security that is traded on the listed exchange

Answer 30

Principal