Podcast
Questions and Answers
What is the primary role of an agent in securities transactions?
What is the primary role of an agent in securities transactions?
- To execute trades on behalf of a client (correct)
- To provide capital for new issues
- To make independent investment decisions
- To act as a market maker
In the context of debt securities, what is the typical role of an investment dealer in secondary trading?
In the context of debt securities, what is the typical role of an investment dealer in secondary trading?
- Acting solely as an agent in every transaction
- Always selling securities to maintain market prices
- Mostly acting as principal while occasionally facilitating agency trades (correct)
- Exclusively issuing new securities
What service do investment dealers provide by maintaining an inventory of outstanding securities?
What service do investment dealers provide by maintaining an inventory of outstanding securities?
- They restrict market activity to prevent volatility
- They restrict access to new issues
- They only act as brokers for institutional clients
- They enhance market liquidity by facilitating transactions (correct)
What is one way investment dealers assist during new money market issues?
What is one way investment dealers assist during new money market issues?
Which statement accurately reflects a broker's role?
Which statement accurately reflects a broker's role?
How do investment dealers contribute to smoothing out price distortions in the market?
How do investment dealers contribute to smoothing out price distortions in the market?
Which of the following banks is NOT considered one of Canada's Big Six Banks?
Which of the following banks is NOT considered one of Canada's Big Six Banks?
What distinguishes the role of an investment dealer from that of an agent?
What distinguishes the role of an investment dealer from that of an agent?
What is the maximum percentage of voting shares that a single shareholder can control in a Schedule I bank?
What is the maximum percentage of voting shares that a single shareholder can control in a Schedule I bank?
Which of the following is NOT a typical feature of the investment dealer's services?
Which of the following is NOT a typical feature of the investment dealer's services?
When an investment dealer acts as a principal in a securities transaction, what does this imply?
When an investment dealer acts as a principal in a securities transaction, what does this imply?
What is the ownership restriction for medium-sized banks in Canada?
What is the ownership restriction for medium-sized banks in Canada?
Which of the following services is generally NOT offered by Canadian banks?
Which of the following services is generally NOT offered by Canadian banks?
What is a common misconception about the role of brokers in securities transactions?
What is a common misconception about the role of brokers in securities transactions?
How must the remaining 35% of voting shares in a medium-sized bank be handled?
How must the remaining 35% of voting shares in a medium-sized bank be handled?
What is a characteristic of small banks in Canada regarding ownership?
What is a characteristic of small banks in Canada regarding ownership?
What insurance coverage does the Canada Deposit Insurance Corporation (CDIC) provide?
What insurance coverage does the Canada Deposit Insurance Corporation (CDIC) provide?
Which of the following is a way the Big Six Banks have expanded their operations?
Which of the following is a way the Big Six Banks have expanded their operations?
Which characteristic is true for all Schedule I banks in Canada?
Which characteristic is true for all Schedule I banks in Canada?
Which Canadian bank is part of the Big Six and is known as TD Bank Group?
Which Canadian bank is part of the Big Six and is known as TD Bank Group?
What primary market activity is associated with the initial public offering (IPO)?
What primary market activity is associated with the initial public offering (IPO)?
Which of the following accurately describes the role of investment dealers as principals?
Which of the following accurately describes the role of investment dealers as principals?
Which type of investment dealer offers a do-it-yourself approach to investing?
Which type of investment dealer offers a do-it-yourself approach to investing?
What role do investment dealers primarily play in the securities industry's secondary markets?
What role do investment dealers primarily play in the securities industry's secondary markets?
Which of the following statements best describes the function of retail firms in investment dealing?
Which of the following statements best describes the function of retail firms in investment dealing?
What is the primary market primarily concerned with?
What is the primary market primarily concerned with?
Among the following, which entity is NOT categorized as a financial intermediary?
Among the following, which entity is NOT categorized as a financial intermediary?
What distinguishes institutional firms from retail firms in the investment dealer category?
What distinguishes institutional firms from retail firms in the investment dealer category?
What is a key function of investment dealers in the distribution of new securities?
What is a key function of investment dealers in the distribution of new securities?
What is one of the main functions of the fintech industry?
What is one of the main functions of the fintech industry?
Which year marked a significant increase in the popularity of robo-advisors in the United States?
Which year marked a significant increase in the popularity of robo-advisors in the United States?
What is a characteristic feature of portfolios managed by robo-advisors?
What is a characteristic feature of portfolios managed by robo-advisors?
In which year did online investment advice platforms start to proliferate in Canada?
In which year did online investment advice platforms start to proliferate in Canada?
What type of investment management do robo-advisors typically provide?
What type of investment management do robo-advisors typically provide?
How do robo-advisors determine the suitability of a portfolio for a client?
How do robo-advisors determine the suitability of a portfolio for a client?
What aspect of service do robo-advisors offer to intermediaries?
What aspect of service do robo-advisors offer to intermediaries?
Which of the following statements about regular portfolio rebalancing is true for robo-advisors?
Which of the following statements about regular portfolio rebalancing is true for robo-advisors?
What was the total amount of assets managed by robo-advisors by 2015?
What was the total amount of assets managed by robo-advisors by 2015?
What is a distinguishing factor of traditional financial institutions in comparison to the fintech industry?
What is a distinguishing factor of traditional financial institutions in comparison to the fintech industry?
What is a primary function of investment dealers?
What is a primary function of investment dealers?
Which type of banking institution is designated as having the most restrictive rules and regulations?
Which type of banking institution is designated as having the most restrictive rules and regulations?
How do self-directed brokers primarily differ from full-service firms?
How do self-directed brokers primarily differ from full-service firms?
What type of investment vehicles can investment funds sell to the public?
What type of investment vehicles can investment funds sell to the public?
Which of the following services is typically NOT provided by financial intermediaries?
Which of the following services is typically NOT provided by financial intermediaries?
Pension plans primarily serve which group of clients?
Pension plans primarily serve which group of clients?
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Study Notes
Role of Financial Intermediaries
- Intermediaries include investment dealers, banks, credit unions, trust companies, and insurance companies.
- Investment dealers facilitate the transfer of financial instruments between investors, acting as agents or principals.
Functions of Investment Dealers
- Capital Transfer: Underwrite and distribute new securities in the primary market through primary offerings.
- Initial Public Offering (IPO): The first sale of stock by a private company to the public.
- Secondary Market: Enable trading of previously issued securities, exemplified by stock exchanges like the Toronto Stock Exchange.
Types of Investment Dealers in Canada
- Retail Firms: Comprise full-service investment dealers offering comprehensive services, and self-directed brokers providing reduced-rate trades without advice.
- Institutional Firms: Exclusively serve large institutional clients trading significant volumes of securities.
Principal vs. Agent Transactions
- An agent acting for a client is often referred to as a broker, which is a broader term encompassing various roles in investment dealings.
- Investment dealers usually operate as principals in trading debt securities, although agency trades can occur.
Services Provided by Investment Dealers
- Offer informed advice on new issues based on secondary market conditions.
- Enhance market liquidity by managing an inventory of outstanding securities.
- Act as market makers, holding positions in assigned stocks to smooth price distortions.
Canada's Big Six Banks
- Dominant banks by asset size: Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), Scotiabank, Toronto-Dominion Bank, National Bank of Canada.
- Built extensive networks of branches and ATMs to centralize consumer savings.
- Voting shares of Schedule I banks must be widely held, with shareholder control limited to 20%.
Canadian Banking Services
- Provide a variety of consumer and commercial products, including mortgages, loans, and investment services.
- Savings deposits insured by the Canada Deposit Insurance Corporation (CDIC).
Financial Technology (Fintech)
- Fintech companies leverage technology to create various financial products and services, challenging traditional institutions.
- Include online loans, electronic wallets, and automated financial planning tools.
Emergence of Robo-Advisors
- Robo-advisors offer algorithm-based investment management and financial advice, gaining popularity post-2008 financial crisis.
- By 2015, U.S. robo-advisors managed $45 billion in assets; gained traction in Canada from 2014.
- Provide goal-based portfolio management, with services often built around exchange-traded funds, and regular rebalancing.
Overall Market Dynamics
- Investment dealers play a crucial role in primary and secondary markets, acting as agents or principals.
- Canadian chartered banks, categorized as Schedule I, II, or III, provide vast financial services that overlap with those from investment dealers.
- Financial intermediaries also include investment funds and pension plans, representing significant players in the savings and investment landscape.
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