Financial Services Industry Regulation Flashcards
Which level of government is responsible for security regulation?
All the power resides with provincial or territorial governments for security regulation
What is the Canadian Securities Administrators (CSA)?
An umbrella organization of the 13 provincial and territorial Canadian securities regulatory authorities.
What is the role of the CSA?
contribute towards the coordination and harmonization of regulation within the Canadian capital markets.
How does the CSA operate?
Through meetings and other communications between commission chairs and staff of the Canadian SRAs.
What industry jurisdictions do the Provincial Securities Commissions oversee?
Pensions
securities
Insurance
Other financial services
They administer and enforce provincial/territorial securities legislation and regulations.
What are companies required to follow under the Securities Act?
Specific disclosure guidelines in their annual reporting, interim reporting, business operations, etc.
These guidelines are designed to maintain transparency and protect investors.
What 7 key objectives are overseen by the Provincial Securities Commission?
- Investor Protection
- Registration- licensing, sales, varies among provinces
- Regulation of Product distribution
- enforcement
- Fair access to markets- deter, detect and penalize market manipulation
- Reduction of systematic Risk- protects solvency
- Marketplace Regulations
What are 3 foundational principles of investor protection?
Full Disclosure of information that is material to investment decisions.
Published brochures educating risks and responsibilities of investing
establishing required qualifications and standards of conduct for individuals who provide services.
How does the PSC regulate product distribution?
Must be registered with the respective commission. Fulfill provincial requirements. Must be in good standing. In many cases, the distributor needs to be sponsored.
What actions can provincial securities commissions impose for non-compliance?
Disciplinary actions such as fines, litigation, or a ban on activities
These actions ensure adherence to the rules set forth in securities legislation.
How does the PSC regulate the marketplace?
Disclosing conflicts of interest
acting in an ethical manner
making information publicly available
consumer protection measures
PSC in all provinces and territories implement a series of stress tests on financial initiations to ensure that certain liquidity measures are in place to protect these companies from over leveraging themselves
Which one of the 7 provincial objectives would this policy align with?
reduction of systemic risks
What are Self-Regulatory Organizations (SRO’s) responsible for?
Ensuring their members meet the standards of provincial laws governing securities
Regulate markets and trading
Their member firms, employees and business practices
What are the 3 primary SRO’s in Canada?
Investment Industry Regulatory Organization of Canada- IIROC
Mutual Fund Dealers Association- MFDA
Stock Exchanges
What is the full name of IIROC?
Investment Industry Regulatory Organization of Canada
What is the primary responsibilities of IIROC?
- Regulating the business activities of investment dealers
- To foster investor confidence and safeguard investors
- Proficiency and conduct of market dealers and their registered employees
- Conducting compliance reviews
- sets the Capital adequacy ratio- a form of stress test
What type of marketplaces does IIROC supervise?
Debt or equity marketplaces in Canada
What does IIROC screen for in investment advisors?
Good character, proper training, education, and background checks
What action does IIROC take in response to alleged misconduct?
Investigates and enforces disciplinary action
Who are the Mutual Fund Dealers Association of Canada (MFDA)?
a not-for-profit federal corporation established to act as an SRO for mutual fund dealers.
It regulates the distribution side of the mutual fund industry, not the funds or fund manufacturers
What is the main role of the MFDA?
Admission of members
Performance of compliance reviews
enforcement of rules through a disciplinary process.
What is the main role of stock exchanges?
Set by-laws and rules to their members
ensure that regulatory services are provided without conflict of interest and in a fair and unbiased manner.
IIROC to administer the regulatory services.
What are the steps should a dispute arise regarding the conduct of a securities registrant?
- The client should write to the compliance department of the registrant
- if not satisfied- can file a complaint with the regulator
- If the regulator not able to resolve the issue- the client can seek help from the Ombudsman for Banking Services and investments OSBI
- If OSBI can’t resolve- litigation could be an option.
What regulatory enforcement can Canadian security regulators take when considering disciplinary action?
Reprimand: written sanction
Condition on registrant: specific conditions imposed
Fine: up to 5 million per offense
Suspension: removing authority
Registration termination: prohibition
Criminal prosecution: if breach violates criminal code
all details of actions are public.
what are the main sources of information when providing full disclosure of information to investors?
Fund fact documents
Prospectuses
Financial statements
material change reports
any conflicts of interest
What information is provided in the fund Facts document?
*Top 10 investments
* Risk rating
* Historical performance
* Expenses and sales charges
* Asset allocation
* Investor profile
True or false
The fund facts document can be presented to the client at any time.
False
Must be delivered before purchase takes place.
What is a prospectus?
an informative document required under securities legislation to provide information about a public offering.
A prospectus must be approved by a securities regulator and is required to
contain:
Full, true, and plain disclosure of all material facts related to the security. Intended to provide the public with sufficient information to enable them to make an informed investment decision.
What is System for Electronic Document Analysis and Retrieval (SEDAR) is
used for?
used by corporations and mutual fund dealers which enables them to file securities-related information electronically. Includes documents such as: Annual reports, certificates, financial statements, press releases etc. The investor can access at any time. Part of disclosure.
