Business Ethics and Regulations Quiz
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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</p> Signup and view all the answers

    What is an ethical dilemma?

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

    What does ethical relativism propose?

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

    What is analyzed in the 'Front Page Test'?

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

    What does PIPEDA stand for?

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

    Which organization merged with IIROC to form CIRO?

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

    What are Red Flags in financial regulation?

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

    Who is considered a Portfolio Manager?

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

    Inside Information refers to which of the following?

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

    What is a Contract of Mandate in Quebec?

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

    What is an Issuer Bid?

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

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

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

    When must short sales be reported?

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

    What role does the Securities Administrators play?

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

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

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

    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

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    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.

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