CIFC Glossary Flashcards
Accredited investor (AI)
High income earners or high net worth individual investors that qualify to invest in prospectus exempt securities. Certain institutions like banks, trust companies, insurance companies may also qualify as AIs.
Accumulated income payment (AIP)
Payment of accumulated income from an RESP account, made to the subscriber in the event none of the beneficiaries pursue post-secondary education.
Active management
An investment strategy where the portfolio manager relies on his or her abilities to choose securities for the fund in an attempt to outperform its benchmark. Common styles include top-down, bottom-up, value, growth, or a combination thereof.
Allowance
An income-tested benefit for the spouse or common-law partner of low-income seniors that qualify.
Annual Information Form (AIF)
Disclosure document that provides a more detailed version of the information contained in the simplified prospectus including additional details about the mutual fund’s contracts, officers, directors, and trustees.
Annuitant
An individual who is designated to receive payments from an annuity. An annuity contract can have more than one annuitant. It also refers to the owner of an RRSP or RRIF.
Annuity
A contract that guarantees a series of payments in exchange for a lump sum investment.
Asset allocation
An investment strategy of determining portions of different assets such as stocks, bonds and money market instruments to be included in an investment portfolio.
Asset allocation fund
A mutual fund providing a blend of cash, fixed income, and equity in specific or varying proportions in response to changing market conditions.
Authorized firm representative (AFR)
A designated official authorized to submit information about the dealer and sponsored individuals to the National Registration Database (NRD).
Autorité de marchés financiers (AMF)
A regulatory body mandated by the government of Québec to regulate the province’s financial markets notably in the areas of insurance, securities, deposit institutions (other than banks) and the distribution of financial products and services. The AMF is also mandated to provide assistance to consumers of financial products and services.
Average tax rate (ATR)
The total income tax payable for a year divided by the taxable income for a year.
Back-end load
A sales charge levied when mutual fund units are redeemed.
Balanced fund
A mutual fund which has an investment policy of balancing its portfolio, generally by including cash, fixed income, and equities in varying proportions influenced by the mutual fund’s investment objectives and outlook.
Bankers’ acceptance
Short-term bank paper with the repayment of principal and payment of interest guaranteed by the issuer’s bank.
Beta
A statistical term used to compare the volatility of a financial asset like a stock or mutual fund to the volatility of a benchmark like a stock market index.
Bond
A long-term debt instrument, secured by specific assets of the issuer corporation, with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.
Bond fund
A mutual fund portfolio that consists primarily of bonds.
Book value
The value of an asset computed as original cost less its accumulated depreciation.
Broker
An agent who handles client orders to buy and sell securities, commodities, or other property. A commission also known as brokerage fee is generally charged by the broker for this service.
Business cycles
Economies experience fluctuations in economic activity over a period of time. Business cycles comprise of irregular waves of varying periods of economic expansion followed by periods of economic contraction. Business cycles are also known as economic cycles
Business risk
The risk that the issuers of financial instruments may not be able to meet their debt obligations or the stock of a company will not be profitable.
Call option
A derivative that gives the owner the right to purchase a particular underlying security at a certain price until a particular date.
Canada disability savings bond (CDSB)
Bonds paid by the federal government to low-income persons with disabilities, irrespective of the amount of contributions, up to a yearly maximum.
Canada disability savings grant (CDSG)
Matching grants of 100% to 300% paid by the federal government based on the beneficiary’s family income and the amount contributed to an RDSP account.
Canada education savings grant (CESG)
A grant provided by the federal government equivalent to the contributions made to an RESP for each beneficiary up to an annual and a lifetime maximum.
Canada Housing and Mortgage Corporation (CHMC)
Canada’s national and government-owned housing agency. It is a premier provider of mortgage loan insurance and mortgage-backed securities.
Canada learning bond (CLB)
Children of low-income families, born after a stipulated date whose primary caregiver is the recipient of the National child benefit supplement are given an additional incentive by the government with an amount of up to $2,000 every year.
Canada mortgage bonds (CMBs)
Bonds on which principal and interest is guaranteed by Canada Housing and Mortgage Corporation (CHMC) and backed by the Government of Canada.
Canada Pension Plan (CPP)
A federal government program designed to provide monthly pensions to contributors in retirement, to disabled contributors and their children, and to the widows, widowers and orphaned children of deceased contributors.
Canada Revenue Agency (CRA)
A federal agency administering tax laws for the Government of Canada and for most provinces and territories and various social and economic benefit and incentive programs delivered through the tax system.
Canada savings bond (CSBs)
A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value plus accrued interest.
Canadian Investment Funds Standards Committee (CIFSC)
This committee sets the standards used to classify mutual funds into specific categories. Its classification is based on the type of investments held in a mutual fund.
Canadian Securities Administrators (CSA)
Policy making body composed of members from each provincial and territorial securities commission. Its mandate is to harmonize securities regulation across Canada.
Canadian-controlled private corporation (CCPC)
A Canadian private corporation that is not controlled directly or indirectly by one or more non-residents or public corporations.
Capital dividend
A payment that is considered return of capital. There are no tax consequences arising from the payment but it reduces the individual’s adjusted cost base.
Capital gain
Gain realized from the sale of a capital asset when the proceeds of disposition are greater than the adjusted cost base of the capital asset.
Capital loss
Loss realized from the sale of a capital asset where the proceeds of disposition are less than the adjusted cost base of the capital asset
Chambre de la sécurité financière (CSF)
The self-regulatory organization (SRO) in Québec that regulates financial professionals including mutual fund representatives.
Chief Compliance Officer (CCO)
NI 31-103 requires all registered firms, including mutual fund dealers, to have a Chief Compliance Officer (CCO) who is registered with the securities commissions. The CCO must be an officer, partner or the sole proprietor of the firm entrusted with responsibilities of overseeing and managing regulatory compliance matters.
Churning
The practice of a dealing representative recommending a trade which provides little or no economic benefit to the client and which has little or no rationale other than the generation of commissions or other benefits for the dealing representative. Also known as excessive trading, it is an activity that is prohibited.
Client communication
Any written communication by a mutual fund dealer or dealing representative to a client, including trade communications and account statements. This does not include advertising or sales communication.
Client relationship model (CRM)
Regulatory disclosure and reporting requirements relating to costs, charges, compensation and account performance to be disclosed periodically by dealers and advisors.
Closed-end fund
An investment fund that issues a fixed number of shares that are bought and sold on stock exchanges or over-the-counter market.
Commercial papers (CPs)
A negotiable corporate promissory note with a term of a few days to a year. It is generally not secured by company assets.
Commission-based compensation
A system of remuneration whereby the dealer is compensated by means of commissions such as front-end loads, redemption fees, or deferred sales charges, and trailer fees paid by the fund manager. An alternative to fee-based compensation.
Compliance regime
The system of controls and supervision that all mutual fund dealers must establish. Includes a compliance department, policies, procedures, documentation and training.
Consumer price index (CPI)
CPI measures the change in the cost of living for consumers. It is calculated by tracking the retail prices of a basket of goods and services purchased by a typical household. It is used to illustrate the extent that prices have increased or decreased over a time period.
Convertible
A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.
Corporation
A legal business entity created under federal or provincial statutes. Since the corporation is a separate entity from its owner, shareholders have no legal liability for its debts.
Currency risk
Risk of a change in value of one currency against another currency. It is the risk that exists when dealing in investments denominated in different currencies. Movements in the currencies may result in an exchange gain or loss. Also known as exchange rate risk.
Current yield
The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.
Custodian
A financial institution, usually a bank or trust company that holds a mutual fund’s securities and cash in safekeeping.
Debenture
A bond unsecured by any pledge of property. It is supported by the general credit of the issuing corporation.
Deemed disposition
Certain transactions involving disposition of assets without receipt of any proceeds but presumed or deemed by the Income Tax Act to be dispositions attracting tax liability.
Deferred profit sharing plan (DPSP)
A plan, in the form of trust fund registered with CRA in accordance with the Income Tax Act, to which an employer makes contributions on behalf of its employees. Contributions are made from company profits.
Deferred sales charge (DSC)
A redemption charge paid by the unitholder when redeeming mutual fund units sold on a back-end load basis. The deferred sales charge is typically expressed as a percentage and usually decreases each year the mutual fund is held.
Defined-benefit pension plans (DBPPs)
Employer-sponsored retirement benefit plans designed to provide employees with specified benefit upon retirement, usually based on an employee’s earnings and the number of years of service.
Defined-contribution pension plans (DCPPs)
Employer-sponsored retirement plans where the employers guarantee the contributions made to the employees’ plans but not the income at retirement. Retirement income is determined by the performance of the underlying investments. It is also known as a money purchase plan.
Demand
Demand represents consumer’s desire, ability and willingness to pay the asking price for a good or service.
Demand curve
A graphical representation of the relationship between variations in demand in relation to a range of different prices. There is an inverse relationship between quantities demanded and prices. Quantities demanded will increase at lower prices.
Disability assistance payments (DAPs)
Annual withdrawals from an RDSP account, commencing by the end of the year in which the beneficiary turns 60 continuing during the life of the beneficiary.
Disclosure
Communicating to the client any relevant facts or information as may be required by legislation and regulations. Examples: risk disclosure, conflict of interest disclosure, referral arrangements, etc.
Discretionary trading
When the holder of an account authorizes a dealer or dealing representative to buy and sell securities on his or her behalf without obtaining the account holder’s consent for each trade. It can be either absolutely or subject to certain restrictions.
Diversification
Investment in a number of different securities aimed at reducing the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographical locations.
Dividend
A per-share payment designated by a company’s board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company.
Dividend fund
A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as in preferred shares.
Dividend gross-up
The first part of the dividend gross-up and tax credit scheme. Dividends received from Canadian public corporations and Canadian-controlled private corporations, are required to be grossed up by a certain percentage and included as taxable income for the year by investors.
Dividend tax credit (DTC)
The second part of the dividend gross-up and tax credit scheme. Taxpayers are entitled to claim income tax credits on the grossed-up dividend amounts.
Do not call list (DNCL)
An initiative of the Canadian Radio-television and Telecommunications Commission (CRTC) to protect consumers from unwanted telemarketing calls. Consumers can register their phone number with the National DNCL.
Dollar cost averaging
Investing in equal payments at regular intervals in the hope of reducing average cost by acquiring more securities in periods of lower securities prices and fewer shares in periods of higher securities prices.
Due diligence
A process of investigation into the details of a potential investment or product to verify all material facts. Part of the fiduciary duty owed to clients when making recommendations.
Duration
Risk measure for fixed income investments measured as the number of years it will take for the bondholder to receive the present value of the interest and principal payments.
Earned income
The basis for calculating the current RRSP contribution limits; generally includes net income from employment, business and rentals.
Educational assistance payments (EAPs)
The portion consisting of interest and grants within an RESP account that can be withdrawn by the beneficiary once he or she is enrolled full-time or part-time in a qualifying post-secondary educational program.
Efficient frontier
See modern portfolio theory.
Efficient Market Hypothesis (EMH) theory
The theory that market prices of securities already reflect all publicly available information.
Equity fund
A mutual fund portfolio that consists primarily of equity securities, such as common stocks.
Ethics
Standard of conduct to which one is expected to adhere.
Exchange traded fund (ETF)
An investment fund whose units are traded like stocks on an exchange. Purchased or sold through an investment dealer or broker. Most are designed to track an index. An alternative to mutual funds.
Exempt market
The market in which exempt securities are traded. An exempt security is a security that is distributed under an exemption from the prospectus requirement.
Exempt market dealer
Dealers who only deal in securities that are exempt from the prospectus requirement (exempt securities).
Face value
The principal amount or value at maturity of a debt obligation. Also known as the par value.
Fair market value
The estimated price of a security if it was to be bought or sold on the market. The standard at which property is valued for a deemed disposition.
Fee based
A system of remuneration whereby the dealer is compensated by means of an overall fee paid directly by the client. The overall fee is expressed as an annual percentage of assets under administration and covers services provided by the dealer, whether in respect of advice or transactions. An alternative to commission-based compensation.
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
An independent government agency involved with collecting, analyzing and disclosing information to help detect and prevent money laundering from occurring both domestically and abroad.
Fiscal policy
Economic policy pursued by governments to manage the economy through taxes, spending, and transfer payments.
Fixed income investments
Investments that generate a fixed amount of income that does not vary over the life of the investment.
Fixed income funds
Mutual funds that invest in fixed income products with a view to earning interest income and perhaps capital gains.
Flow through
A tax concept whereby investment and property income, including capital gains, dividends and interest, pass to the investor while retaining its character for tax purposes.
Front-end load
A sales charge levied on the purchase of mutual fund units.
Fund fact sheets
A disclosure document provided by the mutual fund company highlighting key information about individual mutual funds including past performance, risks, and the costs of investing.
Fund of funds (FOF)
A managed portfolio solution to meet specific investment objectives by investing in a basket of other mutual funds instead of individual bonds and equities.
Fundamental analysis
A method of evaluating the future prospects of a company by analyzing fundamental facts by a detailed analysis of its financial statements and the environment in which the company operates. It may also involve interviewing the management of the company.
Global funds
Mutual funds that invest in global securities including the mutual fund company’s home country.
Gross domestic product (GDP)
Gross domestic product (GDP) is a measure of the total market value of all the final goods and services produced in the economy in a year.
Gross national product (GNP)
It is the market value of final goods and services produced within the country plus income earned by citizens of the country including those working abroad less the income of non-residents located in that country.
Group RRSP
A collection of individual RRSPs (basic or self-directed) grouped together for administrative purposes. Typically sponsored by an employer, union or professional association.
Growth at a reasonable price (GARP)
An investment strategy using a combination of growth and value investing in individual stock selection.
