Business Ethics and Regulations Quiz
48 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What must be prioritized in cases of potential conflict of interest?

  • The investment dealer's interests
  • The company's interests
  • The market's interests
  • The client's interests (correct)

What is required from a person or company that accumulates beneficial ownership of 10% or more of voting or equity securities?

  • A press release and immediate reporting to the Administrator (correct)
  • Annual financial reports
  • A detailed business plan
  • A personal guarantee of investment

What defines a discretionary account?

  • An account with limited access to investment options
  • An account that allows clients to make trades without authorization
  • An account requiring no client input for transactions
  • An account where the client has authorized an investment dealer to make decisions (correct)

What is meant by crowdfunding?

<p>Raising capital by soliciting contributions from the public using online platforms (A)</p> Signup and view all the answers

What is an ethical dilemma?

<p>The need to make a decision between competing moral principles (A)</p> Signup and view all the answers

What is the primary characteristic of discount brokers?

<p>They buy and sell securities at a discount compared to full-service firms (C)</p> Signup and view all the answers

What does ethical relativism propose?

<p>Ethics is situational and negotiable based on personal beliefs (C)</p> Signup and view all the answers

What is meant by distribution in this context?

<p>Offering securities from the issuer's treasury that requires a prospectus (D)</p> Signup and view all the answers

What is the primary purpose of an information barrier in a securities context?

<p>To segregate non-public information between departments (D)</p> Signup and view all the answers

Which of the following best describes frontrunning?

<p>Making trades in advance of a large order to profit from expected price changes (D)</p> Signup and view all the answers

What does a fiduciary duty entail in a relationship between a registered representative (RR) and a client?

<p>A high degree of care and reliance by the client on the RR's advice (D)</p> Signup and view all the answers

What does the term 'Fully Margined' refer to in a margin account?

<p>The client margin being equal to or greater than the required margin (A)</p> Signup and view all the answers

What best describes hedging in investment?

<p>An investment made to reduce the risk of adverse price movements (C)</p> Signup and view all the answers

Which of the following is a characteristic of fails in securities transactions?

<p>Deliveries made after the settlement date (B)</p> Signup and view all the answers

What is analyzed in the 'Front Page Test'?

<p>Whether actions taken are ethical and justifiable (B)</p> Signup and view all the answers

What does 'Fully-Secured' indicate in the context of an account?

<p>A situation where the customer's holdings exceed any debit balance (A)</p> Signup and view all the answers

What is the purpose of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?

<p>To assist in the detection and deterrence of money laundering (C)</p> Signup and view all the answers

What does PIPEDA stand for?

<p>Personal Information Protection and Electronic Documents Act (B)</p> Signup and view all the answers

What is the role of Politically Exposed Persons (PEPs) in financial regulations?

<p>Persons identified as potential risks for money laundering (C)</p> Signup and view all the answers

Which organization merged with IIROC to form CIRO?

<p>Mutual Fund Dealers Association (D)</p> Signup and view all the answers

What is a prospectus in the context of securities?

<p>A legal document describing securities offered for sale (B)</p> Signup and view all the answers

What are Red Flags in financial regulation?

<p>Indicators of possible improper activities (D)</p> Signup and view all the answers

What does the Mutual Fund Dealers Association primarily regulate?

<p>The distribution side of the mutual fund industry (B)</p> Signup and view all the answers

Who is considered a Portfolio Manager?

<p>A person managing client investment portfolios (D)</p> Signup and view all the answers

What is the primary purpose of a Final Prospectus?

<p>To offer detailed information about securities being offered (A)</p> Signup and view all the answers

Inside Information refers to which of the following?

<p>Material non-public information about a company (B)</p> Signup and view all the answers

What is a Contract of Mandate in Quebec?

<p>A disclosure document for mutual fund investors (C)</p> Signup and view all the answers

What is the time frame for delivering a Final Prospectus to all purchasers after an agreement of purchase or sale?

<p>No later than midnight on the second business day (D)</p> Signup and view all the answers

Who is classified as an Insider in corporate terms?

<p>Directors and senior officers with access to non-public information (C)</p> Signup and view all the answers

What does the term Loan Value refer to?

<p>The dollar amount of credit extended for a margin purchase (B)</p> Signup and view all the answers

What is an Issuer Bid?

<p>An offer to buy back the company's own shares (C)</p> Signup and view all the answers

What is the role of an Investment Representative (IR)?

<p>To take orders and assist in sales but not provide investment advice (C)</p> Signup and view all the answers

What is a market order?

<p>An order to buy or sell securities at the prevailing market price. (B)</p> Signup and view all the answers

What is the role of IIROC in the Canadian financial markets?

<p>It oversees investment dealer members and trading activity. (B)</p> Signup and view all the answers

What does a preliminary prospectus provide to prospective investors?

<p>An outline of the new issue of securities and public interest. (A)</p> Signup and view all the answers

Which statement accurately defines a new issue?

<p>An offering of stocks or bonds sold by a company for the first time. (D)</p> Signup and view all the answers

What does the margin rate describe in the context of securities?

<p>The percentage of a security’s value a client must put up to make a purchase. (D)</p> Signup and view all the answers

What is the significance of 'odd lot' in trading?

<p>It denotes a number of shares that is less than a standard trading unit. (A)</p> Signup and view all the answers

What does 'material information' refer to?

<p>Information about a material change that has occurred or is likely to occur. (C)</p> Signup and view all the answers

What does a power of attorney allow an individual to do?

<p>It gives authority to direct the affairs of another person. (A)</p> Signup and view all the answers

What is the purpose of a Stop Buy Order?

<p>To buy a security only after it has reached a certain price. (D)</p> Signup and view all the answers

What does the term 'Reporting Issuer' refer to?

<p>A corporation that has issued securities to the public and is subject to disclosure requirements. (C)</p> Signup and view all the answers

Who is responsible for the administration of a provincial Securities Act?

<p>The Securities Administrators. (C)</p> Signup and view all the answers

Which of the following best defines a Self-Regulatory Organization (SRO)?

<p>An organization recognized by the Securities Administrators to oversee trading practices. (D)</p> Signup and view all the answers

What is indicated by the term 'Standard Trading Unit'?

<p>A recognized variation in board lot sizes across different marketplaces. (C)</p> Signup and view all the answers

When must short sales be reported?

<p>At the time the order is entered. (D)</p> Signup and view all the answers

What role does the Securities Administrators play?

<p>They enforce compliance with provincial Securities Acts. (C)</p> Signup and view all the answers

What type of organization recognizes and supports self-regulation in trading practices?

<p>Self-Regulatory Organizations (SROs). (D)</p> Signup and view all the answers

Flashcards

Crowdfunding

A process where start-up businesses raise capital from the public, often using platforms like the internet.

Discretionary Account

Securities trading accounts where clients give permission to brokers to make investment decisions on their behalf.

Conflict of Interest

A situation where a broker must prioritize a client's interests when a conflict of interest arises.

Ethics

A set of values or moral principles that guide an individual's behavior.

Signup and view all the flashcards

Ethical Dilemma

A situation where an individual must choose between two or more ethical options, often with no easy solution.

Signup and view all the flashcards

Ethical Relativism

The philosophical position that ethical principles are subjective and relative to individuals or cultures.

Signup and view all the flashcards

Distribution

A security offering where the issuer sells securities directly to the public. It typically requires a prospectus.

Signup and view all the flashcards

Day Order

A type of order that expires at the end of the trading day if not executed.

Signup and view all the flashcards

Exempt Market

The portion of the capital markets where participation is restricted to certain individuals and entities who meet certain requirements specified in securities legislation.

Signup and view all the flashcards

Front Page Test

A test to determine whether you are dealing with a right-versus-wrong issue.

Signup and view all the flashcards

Frontrunning

Entering an order with the prior knowledge of a pending trade that will likely affect the market price of the security.

Signup and view all the flashcards

Hedge

An investment made to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, (e.g., an option or a short sale).

Signup and view all the flashcards

Fails

Securities that are not delivered by settlement date.

Signup and view all the flashcards

Fully Margined

A situation in which the client margin in a margin account is equal to or greater than the margin required.

Signup and view all the flashcards

Fully-Secured

A positive net equity position in an account. In other words, the value of holdings exceeds any debit balance.

Signup and view all the flashcards

Information Barrier (see Firewall)

Procedures and policies that ensure a dealer member restricts access between departments to non-public, material information, to avoid the illegal use of inside information.

Signup and view all the flashcards

Final Prospectus

A document that contains complete details of securities being offered for sale. It provides full, true and plain disclosure of all material facts relating to the distribution.

Signup and view all the flashcards

Inside Information

Material non-public information about a company.

Signup and view all the flashcards

Insider Trading (Illegal)

Using material non-public information to buy or sell securities.

Signup and view all the flashcards

Fund Facts

A document designed to give mutual fund investors key information about a fund.

Signup and view all the flashcards

Initial Public Offering (IPO)

A company's first sale of stock to the public.

Signup and view all the flashcards

Issuer Bid

An offer by an issuer to security holders to buy back any of its own shares or other securities convertible into its shares.

Signup and view all the flashcards

Loan Value

The dollar amount of credit that the dealer member will extend to a client for a purchase on margin.

Signup and view all the flashcards

Insider

All directors and senior officers of a corporation and those who may also be presumed to have access to non-public or inside information concerning the company; also anyone owning more than 10% of the voting shares in a corporation.

Signup and view all the flashcards

Market Order

An order to buy or sell securities at the prevailing market price. All orders are market orders unless a price limit is specified.

Signup and view all the flashcards

Margin Rate

The percentage of a security's value that a client must put up in order to make a purchase or short sale on margin. The reciprocal of loan value.

Signup and view all the flashcards

Power of Attorney

A legal document giving authority to an individual to direct the affairs of another (usually in the case of an absence).

Signup and view all the flashcards

Material Information

Information about a material change that either has occurred or is likely to occur.

Signup and view all the flashcards

Limit Order

A client’s order to buy or sell securities at a specific price or better. The order will only be executed if the market reaches or betters that price.

Signup and view all the flashcards

New Issue

An offering of stocks or bonds sold by a company for the first time.

Signup and view all the flashcards

Odd Lot

A number of shares that is less than a standard trading unit. This usually refers to an equity trade for less than 100 shares, and is sometimes called a broken lot.

Signup and view all the flashcards

Means Values

The actions we take today to achieve our goals. Means values include...

Signup and view all the flashcards

Morals

The rules and habits of conduct of a society established according to perceived standards of right and wrong.

Signup and view all the flashcards

Prospectus

A legal document that describes securities being offered for sale to the public. Must be prepared in conformity with requirements of applicable securities commissions.

Signup and view all the flashcards

IIROC (Investment Industry Regulatory Organization of Canada)

An organization that regulates investment dealers in Canada.

Signup and view all the flashcards

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

An Act that legislates specific measures aimed at assisting in the detection and deterrence of money laundering and facilitating the investigation and prosecution of money laundering offences.

Signup and view all the flashcards

Red Flags

Warning signals and indicators of possible improper activities that may provide a basis for further actions.

Signup and view all the flashcards

Reporting Issuer

A corporation that has issued securities to the public and is subject to continuous disclosure requirements.

Signup and view all the flashcards

Securities Administrator

The provincial regulatory authority responsible for administering a provincial Securities Act.

Signup and view all the flashcards

Politically Exposed Persons (PEPs)

A person who holds or has held a specific office or position in or on behalf of a foreign state (i.e., foreign PEPs) or a Canadian government (i.e., domestic PEPs).

Signup and view all the flashcards

National Instruments

Policies that apply to all Canadian jurisdictions and have the force of a binding rule.

Signup and view all the flashcards

Stop Buy Order

An order to buy a security only after it has reached a certain price. This may be used to protect a short position or to ensure that a stock is purchased while its price is rising.

Signup and view all the flashcards

Personal Information Protection and Electronic Documents Act (PIPEDA)

The Act that governs each firm’s information gathering processes and regulates what firms can do with the personal information that is collected, used and disclosed in the course of doing business.

Signup and view all the flashcards

Regulator

A general term referring to the Securities Administrators and Self-Regulatory Organizations (SRO) collectively.

Signup and view all the flashcards

Self-Regulatory Organization (SRO)

An organization recognized by the securities commission in each province, which sets the rules under which securities may be issued and traded in that province.

Signup and view all the flashcards

Individual Registered

A general term referring to individuals registered with the Securities Administrators or Self-Regulatory Organizations.

Signup and view all the flashcards

Standard Trading Unit

The replacement term for a "board lot" under UMIR, which recognizes that different marketplaces may use different sizes for board lots.

Signup and view all the flashcards

Short Sale Declaration

Short sales must be declared at the time the order is entered.

Signup and view all the flashcards

Study Notes

Account Application

  • A form completed by a client and registered representative (RR) at account opening
  • Includes personal information, financial position, risk tolerance, investment objectives
  • Assists RR in managing account and recommending suitable investments
  • Formally known as the NAAF
  • Must be completed and approved before trades are executed

Accredited Investor

  • Individual or institutional investor meeting minimum income, net worth, or investment knowledge requirements

Acts

  • Provincial or territorial securities acts

Administrator

  • Securities regulatory authority in each province (also see Canadian Securities Administrators)

All or None Order (AON)

  • Order requiring full execution; partial fills are not accepted

Arbitration

  • Dispute resolution method using chosen independent arbitrator to recover damages, avoiding lengthy litigation

Ask Price

  • Lowest price a seller accepts for a financial instrument

Associate Portfolio Manager

  • Person or company managing client portfolios with discretionary authority

Beneficial Owner

  • Actual owner of an account, security, or asset
  • Investor may hold ownership with registration in the name of an investment dealer, trustee, or bank to facilitate transfer or preserve anonymity

Best Efforts Basis

  • Investment dealer attempting to fulfill customer orders or sell securities to the best of their abilities
  • Not liable to fulfill order or sell all securities

Bid Price

  • Highest price a buyer is willing to pay for a financial instrument

Bought Deal

  • Underwriters purchase all shares for resale to clients, frequently through a private placement or short form prospectus.
  • Dealers risk their own capital

Canada's Anti-Spam Legislation (CASL)

  • Federal legislation standardizing commercial electronic messages (CEMs)

Canadian Investment Regulatory Organization (CIRO)

  • National self-regulatory organization overseeing investment dealers, mutual funds, and trading activity in Canada's debt and equity markets

Canadian Investor Protection Fund (CIPF)

  • Fund protecting investors from dealer member insolvency
  • Financed by CIRO through quarterly assessments on dealer members

Canadian Securities Administrators (CSA)

  • Forum coordinating and harmonizing regulation of Canadian capital markets for 13 provincial and territorial securities regulators

Cash Account

  • Account requiring payment for purchased or delivery of sold securities by settlement date

Cash Account Rule

  • Rules governing securities transaction settlements in cash accounts; specifying settlement dates, payment methods, and account over-due restrictions

Churning

  • Excessive trading in a client's account solely to generate commissions without benefiting the client

Client Discovery

  • Initial period where the client and registered representative (RR) ask questions to get to know each other

Client Priority

  • Order type for certain accounts like partners, directors, and employees who require priority for orders

Complaints and Settlement Reporting System (ComSet)

  • Web-based system allowing dealer members to relay information about client complaints, securities claims, arbitration notices, and disciplinary actions

Confirmation

  • Written statement confirming details of a securities transaction

Conflict of Interest

  • Situation where a registered representative's personal or financial interests conflict with client or dealer member interests; must be disclosed

Crowdfunding

  • Process of generating start-up capital through public contributions, often using online platforms

Cybersecurity

  • Security related to computers, software, communications systems, and services for internet interaction

Day Order

  • Buy/sell order expiring if not executed on the order entry day

Dealer Member

  • Firm trading securities as agent or principal; member of CIRO (Canadian Investment Regulatory Organization)

Delivery Against Payment (DAP)

  • Transaction where payment for securities is due at the time of delivery, usually through a bank acting as an agent

Disclosure

  • One of the fundamental principles of securities regulation in Canada
  • Principle of full, true, and plain disclosure of all material facts necessary for informed investment decisions.

Discretionary Account

  • Client authorization allowing a registered representative (RR) to make investment decisions regarding securities, price, quantity, or timing of orders

Discount Brokers

  • Dealers offering lower commissions compared to full-service firms (also known as order execution-only or online brokers)

Distribution

  • Issuer offering securities from its treasury assets, often requiring a prospectus or exemption

Do Not Call List (DNCL)

  • Regulatory framework protecting consumers from unsolicited telemarketing calls and other telecommunications

Duty of Care

  • Obligation of a registered representative (RR) to prioritize their clients' interests, devote appropriate time, and conduct actions suitable for informed decision-making

Early Warning

  • Initial phase prior to a takeover bid, notifying authorities with 10%+ ownership acquisition.

Ethics

  • Principles or morals governing conduct.

Ethical Dilemma

  • Faced with a choice between multiple conflicting ethical values

Ethical Relativism

  • Philosophical belief rejecting universally binding moral principles; moral values are context dependent

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Glossary of Canadian Securities Institute (PDF)

Description

Test your understanding of key concepts in business ethics and regulations, including conflict of interest, ownership disclosures, and crowdfunding. This quiz covers ethical dilemmas and the characteristics of discount brokers, providing a comprehensive overview of important topics in the business world.

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser