Chapter Two Flashcards
What is a broker
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
What is CDS
Clearing and depositary services
What’s all closed end funds
Shares in closed end investment companies that are readily transferable in the open market and bought and sold like other shares
What are open end funds
They are mutual funds
What is a mutual fund
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.
What is primary distribution
The original sale off any issue of the company securities
What is underwriting
The purchase for resale of a security issue by one or more investment dealers or underwriters
What are SROs and what do they do
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
When is the term intermediary used
To describe any organization that facilitates the trading or movement of financial instruments that transfer the capital between suppliers and users
What are investment dealers
Investment dealers sometimes acts on clients behalf as an agent or principal
What are the two main functions of investment dealers in the securities industry
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
What are the three categories of firms that make up the securities industry
Integrated firms, institutional funds, retail firms
What does the front office usually do
Includes all staff functions pertaining directly to portfolio management
Provide seven examples of institutional clients
Pension plans, mutual funds, insurance companies, endowments, charitable foundations, family trusts /estates, corporate treasuries.
What does the middle office do
Middle office staff duties have to do with compliance accounting audits and legalities
What does back-office do
Back office usually settles the firm securities transactions in an efficient and effective manner this activity is otherwise known as the trade settlement function
When acting as a principal what is the investment dealer
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
When acting as an agent what is the investment dealer
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
In the securities business what does underwriting or financing mean
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
Who are securities cleared through
CDS clearing and depository services Inc.
What is the advantage of using the central clearing system
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.
What are schedule 1, schedule and 3 banks
Schedule 1 are primarily Canadian banks and schedule 2/3 are foreign
What are the voting restrictions on schedule one banks
Shareholders to no more than 20%
What are the controls that inhibit information sharing between various businesses and business units commonly known as
Chinese walls
Examples of schedule 2 banks
Amex Bank of Canada and Citibank Canada
Example of schedule three banks
HSBC Canada and the Bank of New York Mellon
What are integrated firms
Offers products and services that cover all aspects of the industry both institutional and retail
What are institutional firms
Institutional funds primary handle the trading activities of large clients such as pension funds and mutual funds
What is an agent
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
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
Principal
