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CSC - Chapter 3

Canadian Securities Course Chapter 3

QuestionAnswer
The Office of the Superintendent of Financial Institutions (OFSI) is: A regulatory body for all federally regulated financial institutions.
OFSI is responsible for regulating and supervising (1): Deposit-taking institutions including banks, trusts and loan companies, and cooperative credit associations.
OFSI is responsible for regulating and supervising (2): Insurance companies, including life insurance companies, fraternal benefit societies and property and casualty insurance companies.
OFSI is responsible for regulating and supervising (3): Foreign bank representative offices that are chartered, licensed or registered by the federal government.
OFSI is responsible for regulating and supervising (4): Federally regulated pension plans.
OFSI does not: Regulate the Canadian securities industry.
Canada Deposit Insurance Corporation (CDIC) is: A federal Crown Corporation that provides eligible deposits up to $100,000 per depositor in each member instituion (banks, trusts companies and loan companies), and reimburses depositors for the amount of any deposits if a member institution fails.
CDIC - To be eligible for insurance deposits must: Be held with a member institution in Canadian currency and payable in Canada.
CDIC - To be eligible for insurance term deposits must: Be repayable no later than five years from date of deposit.
CDIC - The $100000 maximum includes: All insurable types of deposits you have with the same CDIC member. Deposits at different branches of the same member institution are not insured seperately.
Accounts and products insured by CDIC include: Savings and Chequing accounts, Guaranteed investment certificates and other term deposits that mature in five or less years. Money orders, certified cheques, traveller's cheques and bank drafts. Accounts that hold realty taxes on mortgaged properties.
CDIC does not insure: Mutual funds and stocks, GICs and other term deposits that mature in more than five years. Bonds and treasury bills. Debentures issued by governments, corporations or chartered banks. Deposits held in foreign currency.
It is possible to have more than $100000 in deposits eligible for CDIC coverage, provided that: The deposits are held in more than on of CDIC's six deposit insurance categories.
CDIC deposit insurance categories include deposits held: In one name, jointly in more than one name, in a trust account, in a registered retirement savings plan, in a registered retirement income fund, in a mortgage tax account.
The regulation of the securities business is: A provincial responsibility. Each province and the three territories is reponsible for creating the legislation and regulation under which the industry must operate.
In several provinces, much of the day-to-day regulation is delegated to: Securities Commissions.
Other provinces appoint: Securities administrators to take on regulatory function.
The Autorité des marchés financiers is responsible for: Administering the regulatory framwork for Québec's financial sector, notable in the areas of insurance, deposit insurance institutions, the distribution of financial products, financial services and securities.
The 13 securities regulators of Canada's provinces and territories joined together to form: The Canadian Securities Administrators, a forum to co-ordinate and harmonize rgulation of the Canadian capital market.
The mission of the CSA is to: Give Canada a securities regulatory system that protects investors from unfair, improper or fraudulent practices and that fosters fair, efficient and vibrant capital markets.
Deposit insurance corporations protect the deposits of: Credit union members. Coverage varies by province.
Self-regulatory organizations are: Private industry organizations that have been granted the privilege of regulating their own members by the provincial regulatory bodies.
SROs are responsible for: Enforcement of their members' conformity with securities legislation and have the power to prescribe their own rules of conduct and financial requirements for their members.
SROs are delegated: Regulatory functions by the provincial bodies, and SRO by-laws and rules are designed to uphold the principles of securities legislation.
The conduct of SROs is monitored by: The provincial securities commission. They also reveiw the rules of the SROs in the province to ensure that the SRO rules do not conflict with securities legislation and are in the public's interest.
SRO regulation apply in addition to provincial regulations. If an SRO rule differs from a provincial rule: The most stringent rule of the two applies.
Canadia SROs include: The Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association.
IIROC carries out its regulatory responsibilities through: Setting and enforcing rules regarding the proficiency, business and financial conduct of dealer member firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces
IIROC's mandate is: To set a high quality regulatory and investment industry standards, protect investors and strengthen market intergrity while maintaining efficient and competitive capital markets.
IIROC plays the following role in Financial Compliance: Monitoring of dealer members to ensure they have enough capital to carry out operations.
IIROC plays the following role in Business Conduct Compliance: Monitoring dealer members to ensure policies and procedures are in place to properly supervise the handling of client accounts.
IIROC plays the following role in Registration: Responsibility for overseeing professional standards and educational programs designed to maintain the competence of industry employees.
IIROC plays the following role in Enforcement: Includes responsibility for enforcing the rules and regulations that cover sales, business, and financial practices and trading activities of individuals and firms that are under IIROC's jurisdiction.
IIROC also conducts: Market Surveillance by regulating securities trading and market-related activities of participants on Canadian Equity marketplaces.
Market surveillance includes (1): Real time monitoring of trading activity on stock exchanges, the Natural Gas Exchange Inc., and Alternative Trading Systems across Canada.
Market surveillance includes (2): Ensuring dealer members comply with the timely disclosure of information by publicly-traded companies in Canada.
Market surveillance includes (3): Carrying out trading analysis and compliance with the Universal Market Integrity Rules. (UMIR)
The Investment Indusrty Association of Canada is: A member-based professional association the represents the interests of market paritipants. It provides support and services that contribute to the success of their members.
The Investment Indusrty Association of Canada represents: The investment indusrty's views and interests to federal and provincial governments and their agencies, and to other SROs.
The Mutual Fund Dealers Association is: The mutual fund industry's self regulatory organization responsible for regulating the distribution and sales of mutual funds by its members in Canada.
The MFDA does not: Regulate the mutual funds themselves, as this responsibility has remained with provincial securities commissions.
The MFDA is recognized as an SRO by: Alberta, British Columbia, Nova Scotia, Ontario, Saskatchewan, New Brunswick and Manitoba.
The MFDA has the ability to: Admit members, to audit, to enforce rules and apply penalities.
The securities industry offers the investing public protection against: Loss due to the financial failure of any firm in the selt-regulatory system.
The industry created the Canadian Investor Protection Fund and the Mutual Fund Dealer Association to: Foster continuing confidence in the firm-customer relationship.
The primary role of the CIPF is: Investor protection.
The secondary role of the CIPF is: Overseeing the self-regulatory system. The secondary role provides a mechanism to help CIPF contain the risk associated with its primary role.
CIPF protect eligible customers in the event of: Insolvency of an IIROC dealer member. CIPF does not cover customers' losses that result from changing market values, and accounts held at mutual fund companies, banks and other firms not that are not members of IIROC.
CIPF is sponsored solely by: IIROC and sponsored solely by quarterly assessments on dealer members.
All accounts are covered either as part of the customer's: General account or as a separate account.
A CIPF general account may contain: Cash, margin, short sale, options, futures and foreign currency and are treated as one general accounted entitled to the maximum coverage.
CIPF Joint accounts are: Presumed to be equally divided in value among each owner of the account.
CIPF Seperate accounts are: disclosed in the records that are treated as if the belonged to a separate customer, and they are each entitled to the maximum coverage. Each separate account held in the same capacity is combined to constitute a single separate account.
Examples of CIPF separate accounts include: The combination of all RRPs and RRIFs, LIFs, (Life Income Fund) LIRA or LIRSPs and LIRIFs. (Lock-In *) RESPs. Partnerships. Trusts.
CIPF coverage for a customer's general account is limited to: $1,000,000 for losses related to securities and cash balances.
CIPF coverage for seperate accounts of customers are each entitled to: The maximum coverage of $1,000,000 unless they are combined with other seperate accounts.
The maximum amount of financial loss that CIPF may pay to a customer is: The shortfall between any available securities and cash that the customer is entitled at the date of insolvency and the distribution of any assets of the insolvent dealer member, less any amounts owed by the client to the member.
A customer must file a CIPF claim with-in: 180 days from the date of bankruptcy. Or the date of insolvency as communicated by CIPF.
In the event of the insolvency of a dealer member, CIPF would normally expect to: Petition the court under the Bankruptcy and Insolvency Act to appoint a trustee to liquidate the firm and prtoct its customers. The trustee and CIPF will usually arrange to transfer customer accounts in whole or in part to another CIPF dealer member.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (1): Anticipating and solving financial problems of dealer members, and helping to bring about an orderly wind-down of business if required.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (2): Conducting an annual evaluation of the SRO's examination activities to ensure compliance with CIPF Minimum Standards.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (3): Conducting financial examinations of dealer members to ensure compliance with the CIPF Minimum Standards.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (4): Establishing and reviewing national standards for capital adequacy and liquidity, financial reporting, accounting records, segregation of clients' fully and partly paid securities and insurance.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (5): Co-ordinating surveillance and enforcement efforts of the examination staff.
CIPF also provides regulatory oversight by working with the financial examiners and senior regulatory officials: Their role includes (6): Maintaining a close liaison with the panel of public firms approved to audit and report annually on dealer members.
The MFDA Investor Protection Corporation provides: Protection for eligible customers of insolvent MFDA member firms. The IPC does not cover customers' losses that result from changing market values, unsuitable investments, or the default of an issuer of a mutual fund.
The coverage provided by the MFDA IPC is: Limited to $1,000,000 per customer account for losses related to securities, cash balances, segregated funds, and certain other property held in the account of a MFDA member firm.
MFDA IPC follow the same structure of the: CIPF, customer accounts are covered either as part of a general account or as a seperate account. Each account is eligible for up to $1,000,000 in coverage.
MFDA IPC seperate accounts include: RRA such as RRSPs or RRIFs. These accounts are combined into one seperate account for coverage purposes. Accounts held with different MFDA IPC members are not combined.
The MFDA is not recognized as a SRO in the province of: Quebec.
If a client feels like they have been mistreated by a firm that is a member of an SRO they may: Sue the firm or request and arbitration.
Arbitration is a method of dispute resolution in which a independent arbitrator is chosen to: Listen to the facts and arguments of the parties to a dispute. Decide how the dispute should be resolved. And decide what remedy, if any, should be imposed.
SROs can only discipline member registrants and cannot: Order restitution to be made to clients.
The SROs therefore offer dissatisfied investors the option of: Pursuing damages through arbitration rather than in court. Arbitration may also be cheaper and faster than court action.
A client must be sent an arbitration brochure when: Opening an account and if a written complaint has been received.
If a client requests arbitration from an SRO, the dealer member must: Accept both the process and the arbitrator's decisions.
To be eligible for arbitration a dispute must meet the following criteria (1): Attempts must have been made to resolve the dispute with the investment dealer. Claims cannot exceed $100,000. (Claims that do not fit within the dollar amount mentionned above may still be arbitrated if both parties agree to the process)
To be eligible for arbitration a dispute must meet the following criteria (2): The events in the dispute must have originated after 1, 1992 in British Columbia, after January 1 , 1996 in Quebec, after June 30, 1998 in Ontario, after July 1, 1999 in Alberta, Saskatchewan and Manitoba, after June 30, 1999 in NL, PEI, NB and NS.
The decision of the arbitrator is: Binding, and at the beginning of the arbitration process both parties must sign an agreement to give up the right to pursue the matter further in the courts.
The Ombundsman for Banking Services and Investments is: An independent organization that investigates customer complaints against financial services providers, including banks and other deposit-taking organizations, ID, MFD and MF companies.
The OBSI provides: A prompt and impartial resolution of complaints that customers have been unable to resolve with their financial services provider. The OBSI is independent of the FS industry. The process is not binding for either investor or FS provider.
Companies who do not agree to recommendation by the Ombudsman are: Publicly reported. To date no member has failed to follow the Ombudsman's recommendation.
Created by: FrankLemieux