CANADIAN SECURITIES (CSC) TEST 1 NEW STUDY GUIDE FULL
SOLUTION 2022
Retail firms - full service and discount brokerage firms for individuals.
Institutional firms - includes pension funds, mutual funds, and insurance companies.
Integrated firms - contains all aspects of retail and institutional firms.
Front office - in charge of portfolio management, marketing, sales, and trading.
Middle office - in charge of compliance, accounting, audits, and legal.
Back office - in charge of settlements and clearing.
Schedule I banks - large domestic banks. There are ownership restrictions on shares - must be
widely held.
Schedule II banks - large foreign banks. Can do same activities as domestic banks.
Schedule III banks - foreign branches of banks. They are limited, with a more institutional
focus.
Trust company - acts as a trustee.
Auction market - market in which securities are bought and sold by brokers acting as agents
for their clients (stock exchanges).
Dealer market - a network of marketplaces. Here, trades are conducted OTC and consist of
bonds and debentures.
Equity electronic trading system - competes with existing exchanges. They can only trade
stocks that are on an existing exchange. They may have benefits such as different hours, better
commission, etc.
Fixed-income electronic trading system - where almost all bonds are traded (such as CanDeal).
Structured product - has the characteristics of debt, equity, and the investment fund (can be in
the form of principal-protected notes or index-linked guarantees).
IIROC (Investment Industry Regulatory Organization of Canada) - the Canadian investment
industry's SRO. It carries out its responsibilities through setting and enforcing rules regarding
the proficiency, business, and financial conduct of dealer firms and their registered employees.
MFDA (Mutual Fund Dealers Association) - the SRO that regulates the distribution (dealer)
side of the mutual fund industry in Canada.
, OSFI (Office of the Superintendent of Financial Institutions) - the federal regulatory agency
whose main responsibilities regarding insurance companies and segregated funds are to ensure
that the companies issuing the funds are financially solvent.
CDIC (Canadian Deposit Insurance Corporation) - a federal Crown Corporation providing
deposit insurance against loss (up to $100,000 per depositor) when a member institution fails.
CIPF (Canadian Investor Protection Fund) - a fund that protects eligible customers in the
event of the insolvency of an IIROC dealer member.
General acct. = $1M total
Separate acct. = $1M each
MFDA IPC (Mutual Fund Dealers Association Investor Protection Corporation) - provides
protection for eligible customers of insolvent MFDA member firms.
General acct. = $1M total
Separate acct. = $1M each
Gatekeeper - protects markets from potentially illegal client activity by collecting information,
monitoring activity, and reporting suspicious behaviour.
"Know your client" rule - salespersons must use diligence to learn essential facts about the
client (including every account and order) before entering into the relationship, in order to
make appropriate decisions for the client.
Ombudsman for Banking Services and Investments (OBSI) - an independent organization that
investigates customer complaints against financial services providers (non binding, but may
hurt the company's reputation if it does not comply).
Front running - when a broker puts his own account's order in front of a customer's order,
knowing the customer's order will move prices so the broker can make a profit.
National "Do not call" List (DNCL) - prohibits telemarketers from calling any number on the
list that has been registered for 31+ days.
Expansion - characterized by stable inflation, adequate inventory, start-ups exceed
bankruptcies, strong stock market, rising market activity (leading indicator), and falling
unemployment.
Peak - when demand outstrips capacity, wages rise, interest rates fall, sales decline, and
inventory rises. Stock prices decline, and market activity declines.
Contraction - when economic activity declines, profits decline, spending declines, and saving
increases.
Trough - when the bond market rallies (prices rise as rates fall), and consumers start spending
again.
SOLUTION 2022
Retail firms - full service and discount brokerage firms for individuals.
Institutional firms - includes pension funds, mutual funds, and insurance companies.
Integrated firms - contains all aspects of retail and institutional firms.
Front office - in charge of portfolio management, marketing, sales, and trading.
Middle office - in charge of compliance, accounting, audits, and legal.
Back office - in charge of settlements and clearing.
Schedule I banks - large domestic banks. There are ownership restrictions on shares - must be
widely held.
Schedule II banks - large foreign banks. Can do same activities as domestic banks.
Schedule III banks - foreign branches of banks. They are limited, with a more institutional
focus.
Trust company - acts as a trustee.
Auction market - market in which securities are bought and sold by brokers acting as agents
for their clients (stock exchanges).
Dealer market - a network of marketplaces. Here, trades are conducted OTC and consist of
bonds and debentures.
Equity electronic trading system - competes with existing exchanges. They can only trade
stocks that are on an existing exchange. They may have benefits such as different hours, better
commission, etc.
Fixed-income electronic trading system - where almost all bonds are traded (such as CanDeal).
Structured product - has the characteristics of debt, equity, and the investment fund (can be in
the form of principal-protected notes or index-linked guarantees).
IIROC (Investment Industry Regulatory Organization of Canada) - the Canadian investment
industry's SRO. It carries out its responsibilities through setting and enforcing rules regarding
the proficiency, business, and financial conduct of dealer firms and their registered employees.
MFDA (Mutual Fund Dealers Association) - the SRO that regulates the distribution (dealer)
side of the mutual fund industry in Canada.
, OSFI (Office of the Superintendent of Financial Institutions) - the federal regulatory agency
whose main responsibilities regarding insurance companies and segregated funds are to ensure
that the companies issuing the funds are financially solvent.
CDIC (Canadian Deposit Insurance Corporation) - a federal Crown Corporation providing
deposit insurance against loss (up to $100,000 per depositor) when a member institution fails.
CIPF (Canadian Investor Protection Fund) - a fund that protects eligible customers in the
event of the insolvency of an IIROC dealer member.
General acct. = $1M total
Separate acct. = $1M each
MFDA IPC (Mutual Fund Dealers Association Investor Protection Corporation) - provides
protection for eligible customers of insolvent MFDA member firms.
General acct. = $1M total
Separate acct. = $1M each
Gatekeeper - protects markets from potentially illegal client activity by collecting information,
monitoring activity, and reporting suspicious behaviour.
"Know your client" rule - salespersons must use diligence to learn essential facts about the
client (including every account and order) before entering into the relationship, in order to
make appropriate decisions for the client.
Ombudsman for Banking Services and Investments (OBSI) - an independent organization that
investigates customer complaints against financial services providers (non binding, but may
hurt the company's reputation if it does not comply).
Front running - when a broker puts his own account's order in front of a customer's order,
knowing the customer's order will move prices so the broker can make a profit.
National "Do not call" List (DNCL) - prohibits telemarketers from calling any number on the
list that has been registered for 31+ days.
Expansion - characterized by stable inflation, adequate inventory, start-ups exceed
bankruptcies, strong stock market, rising market activity (leading indicator), and falling
unemployment.
Peak - when demand outstrips capacity, wages rise, interest rates fall, sales decline, and
inventory rises. Stock prices decline, and market activity declines.
Contraction - when economic activity declines, profits decline, spending declines, and saving
increases.
Trough - when the bond market rallies (prices rise as rates fall), and consumers start spending
again.
