Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

afm 121 > unit 2 | the canadian securities industry > Flashcards

unit 2 | the canadian securities industry Flashcards

1
Q

Which level of government manages securities regulations?

A

Provincial
- Ontario Securities Commission (OSC), BC Securities Commission (BCSC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What do Self Regulatory Organizations (SROs) do? Examples?

A

Provide oversight & enforcement for some rules
- IIROC, TSX, TSX Venture Exchange

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define IIROC

A

Investment Industry Regulatory Organization of Canada
- Important regulator of investment banks (BMO, RBC → IIROC members work in the institution to regulate)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does The Canadian Depository for Securities (CDS) do?

A
  • Clears, or settles, trades
  • Owned by TMX
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does the Canadian Investor Protection Fund (CIPF) do?

A

Insures brokerage account contents (not losses)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What does the Canadian Securities Institute (CSI) do?

A
  • Offers courses required for licensing by regulators
  • Owned by Moody’s
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Who are Investment Dealers?

A

Small number of national-scope investment dealers
- Big Banks, a few independent (not bank owned)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are “boutique” investment dealers?

A

Seniors from big corporations that open up own firm
- Lesser clients, bigger profits to self
- May specialize in specific sectors or products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Departments within an investment dealer:

A
  • Underwriting (settling of shares/bonds)
  • Trading
  • Investment banking
  • Brokerage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Define brokers

A

Investment/financial advisor (wealth management)
- Can be full-service or discount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Full-service brokers

A

Full-service brokers offer “high-touch” service & advice
- High fees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Discount brokers

A

Discount brokers limited services (ex. Stock & bond trade execution) but no advice
- Low fees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Describe leverage in the finance sector

A
  • The Financial Services industry is highly leveraged
  • Short-term borrowing finances long-term investments
  • Borrow money every 90 days to finance a 20 year mortgage
  • Borrow short, lend long
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How has the evolution of technology change the financial industry?

A
  • Enhanced market efficiency
  • Increased interconnectedness of markets
    > Interlisted securities
    > Multiple listing for securitie
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What change did globalization bring to the financial industry?

A
  • Markets are no longer restricted to local suppliers & issuers of capital
  • Canadian investors can buy US listed shares; Canadian banks lend to US borrowers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Regulatory Changes

A
  • Post-crisis financial regulation is increasing the compliance responsibility for financial firms
    > Foreign Account Tax Compliance Act (FATCA)
    > Anti-Money Laundering (AML)
  • At the same time that technology increasingly facilitates easier capital flows, regulation creates additional barriers
17
Q

Primary Markets/New Issues

A

(Also called Debt or Equity Underwriting/Financing)
- Investment dealers buy & sell newly issued securities to investors (Ex. BMO Capital Market)

18
Q

Investment dealers as Principals (Primary Markets)

A

Investment Dealer agrees to a price with the issue & buys all of the shares/bonds (aka “bought deal”) → with their own money

19
Q

Investment dealers as Agents (Primary Markets)

A

Investment Dealer markets the shares or bonds to investors on a “best efforts” basis (gets commission) → the Investment Dealer does not purchase

20
Q

Secondary Markets

A

Investment Dealers buy & sell securities on financial markets

21
Q

Investment dealers as Principals (Secondary Markets)

A

Invest their own capital & earn a spread between purchase & sale prices (aka proprietary or liability trading)

22
Q

Investment dealers as Agents (Secondary Markets)

A

Invest their clients’ capital & earn a commission on executed trades (aka brokerage)

23
Q

What happens after a trade is executed?

A

The trade is “settled”
- Cash from the buyer’s brokerage account is transferred to the brokerage account of the seller
- Share ownership is transferred from the seller to the buyer

24
Q

What does the CDS do during trade settlement?

A

CDS “clears” or “settles” the trade (“clearinghouse”) as the central repository keeping track of who owns each share of a company
- Registered owners have their name on the (electronic) share certificate (really a book entry)
- Shares in “street” form are registered in the name of the brokerage
> The broker then keeps track of individual client ownership

25
Q

How does the banking side work when transferring financial instruments?

A
  • Banks collect money from depositors (chequing & savings accounts) & lend the money to borrowers (car loans, mortgages)
  • Banks earn the difference between the cost of borrowing (interest paid to depositors) & revenue from lending (interest paid by borrowers)
26
Q

Describe the setup of Chartered Banks in Canada

A

Banks in Canada are governed by the Bank Act (among other acts)
- Schedule i: Domestic Banks
- Schedule ii: Subsidiaries of Foreign Banks
- Schedule iii: Branches of Foreign Banks

27
Q

Describe Schedule i banks and provide examples

A

The Big 6 Banks (BMO, BNS, CIBC, NA, RY, TD) are Schedule i banks
- Also called “conglomerate” banks or banking institutions
- Own subsidiaries in non-banking areas (insurance & investments)

28
Q

Other Bank-like Companies

A
  • Trust & Mortgage Companies
    > Currently similar to banks, but can also act as Trustees
  • Credit Unions & Caisses Populaires
    > Owned by customers/depositors
    > Profit returned to owners; not focused on profits
29
Q

Describe Life Insurance Companies

A
  • Match liabilities (death) with assets
    > Invest mostly in long-term fixed-income products
  • Insurers can own trusts & offer banking & investment products
  • Large life insurers used to be owned by policyholders, but “demutualized” to become public companies
30
Q

Describe Property & Casualty (P&C) Insurance Companies

A
  • P&C Insurers cover cars, houses, business assets
    > Distinct from life insurers
  • P&C liabilities occur more frequently in a customer’s life
    > Ex. car accidents → more frequent payout than life insurers, consequently shorter-term investments
31
Q

Describe Investment Funds

A

Mutual funds (higher fees), hedge funds, ETFs
- Often formed as Trusts that distribute Units to investors
- May also be corporations or Limited Partnerships (LPs)
- Close-end & open-ended funds
- Most investment fund assets are in open-ended mutual fund trusts

32
Q

Describe close-end funds

A

Closed-end funds are listed on an exchange
- Fixed number of units outstanding
- Investors trade units in a similar manner as shares

33
Q

Describe open-ended funds

A

Open-ended funds are not listed on an exchange
- No fixed number of units outstanding
- Investors can only purchase & redeem units from/with the investment fund

34
Q

Who sponsors pension plans?

A
  1. Government sponsored
    • CPPIB (everyone, OMERs (municipal employees), OTPP (teachers)
  2. Company sponsored
    • Rogers, Agrium, BMO
35
Q

What is the point of pension plans?

A
  • Conservative, long-term focus
    > Match the expected payoff of investments with the expected liabilities
    > Underfunding shows up on the BS
  • Large Government sponsored pension plans have become significance players in global financial markets

afm 121 (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions