Untitled Quiz

Duty of Care

• Obligation of registered representatives (RRs) to act honestly, in good faith, and professionally.
• Requires RRs to provide advice based on skills and knowledge, with a standard of care that is not perfection.
• Emphasizes two aspects: suitability and fiduciary duty.

Ethics

• Set of values or morals guiding individual behavior based on societal standards of right and wrong.
• Continuous examination of choices and decisions within moral principles, necessary for navigating complex business situations.

Fiduciary Duty

• Higher standard than the duty of care, imposed by common law.
• Exists when trust is placed in another with greater authority or expertise.
• Non-compliance can lead to civil litigation regarding investment advice.

Investment Industry Regulatory Organization of Canada (IIROC)

• National self-regulatory organization overseeing the securities industry in Canada.
• Regulates actions and conduct of RRs and ensures compliance with ethical standards.

IIROC Rule 1402 Standards of Conduct

• Outlines expectations for RRs, including high ethical standards and the prohibition of negligent behavior.
• Requires adherence to legal and regulatory obligations, promoting investor confidence.

Know Your Client (KYC)

• Obligation for RRs to understand a client's circumstances prior to making investment recommendations.
• Ensures suitable investment advice by maintaining detailed client records.

Know Your Product (KYP)

• Obligation for RRs to understand the investment products being recommended.
• Requires knowledge of product structure, performance, and market conditions.

Registered Representative (RR)

• Permitted to offer advice on equity and fixed income securities; must meet certification and ethical standards.
• Responsibilities include KYC, KYP, and maintaining client confidentiality while avoiding conflicts of interest.

Suitability

• Relates to a client's financial situation, investment knowledge, objectives, time horizon, and risk tolerance.
• Ensures appropriateness of investment recommendations made to clients.

End Values

• Define long-term personal goals; examples include accomplishment, security, and social recognition.

Ethical Dilemma

• Situations presenting two or more choices requiring ethical decision-making.
• Two categories: right vs. wrong issues and right vs. right dilemmas; the latter involves conflicting core values.

Front Page Test

• Part of the ethical decision-making process focusing on personal reputation.
• Evaluates potential damage to reputation if decisions were made public.

Legal Test

• Evaluates whether a person's actions are illegal or violate industry rules or terms.

Means Values

• Daily actions undertaken to achieve goals; influence decision-making.
• Examples include ambition and competence.

Mom Test

• Considers comfort in revealing a decision to important personal figures, reflecting potential ethical outcomes.

Morals

• Society's established rules of conduct based on reason; guide decision-making but are not established by authorities.

Unified Value System

• Alignment of end values and means values; crucial for avoiding conflicts in values leading to unethical behavior.

Values

• Cultural or individual beliefs regarding the worth of ideas and behaviors, influencing life goals and decisions.

Laws

• Not synonymous with ethics but emerge from societal values; essential for allowing structured coexistence.

Tone at the Top

• Establishes a climate of ethical behavior within firms; influences conduct throughout the organization.

Ethical Relativism

• Concept that denies the existence of universal moral principles, emphasizing personal interpretation of right and wrong.

Types of Ethical Dilemmas

• Categories include truth vs. loyalty, individual vs. group rights, short term vs. long term considerations, and justice vs. mercy.

Ethical Decision-Making Process

• Steps include recognizing moral issues, determining stakeholders, gathering facts, and testing ethical dilemmas before making a decision.

Ethical Dilemma Solutions

• Outcomes may include various ethical thinking approaches such as end-based thinking (greatest good), rule-based thinking, and social contract-based thinking.

Administrator

• Securities regulatory authority in each Canadian province responsible for registration and regulation of market activities.

Canadian Investor Protection Fund (CIPF)

• Established in 1969 to protect client assets from dealer insolvency but does not cover poor investment performance.

Canadian Securities Administrators (CSA)

• An organization aimed at harmonizing capital market regulation in Canada, working to protect investors and ensure efficient markets.

Dealer Member

• Brokers that facilitate buying and selling securities for investors.

Designated Stock Exchange

• Only listed securities on these exchanges can be held in registered accounts; must meet specific operational and regulatory standards.

Disclosure

• Fundamental principle of Canadian securities regulation requiring full transparency of material facts before public securities sales.

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

• Enforces compliance with anti-money laundering laws for securities dealers in Canada.

Integrated Market Enforcement Teams (IMETs)

• Established to enhance capabilities in detecting and investigating capital markets fraud in cooperation with various agencies.

Joint Serious Offences Team (JSOT)

• Investigates serious violations of securities law; collaborates with multiple law enforcement agencies.

Money Laundering

• Process of converting illegal funds into legitimate assets through three stages: placement, layering, and integration.

Mutual Fund Dealers Association (MFDA)

• Self-regulatory organization overseeing mutual fund distribution in Canada, separate from mutual fund regulation itself.

National Instrument (NI)

• Harmonized regulatory instruments adopted by CSA jurisdictions, governing securities markets.

Passport System

• CSA tool to streamline regulatory filings across jurisdictions, promoting mutual reliance.

Primary Distribution

• Initial sale of stocks or bonds from an issuing entity as a means of raising capital.

Registrant

• Individuals maintaining licensing requirements for securities registration and operation.

Secondary Distribution

• Sale of previously issued securities, proceeds going to existing shareholders instead of the issuing entity.

Secondary Trading

• Trading of securities after their initial distribution, occurs mainly through stock exchanges.

Self-Regulatory Organization (SRO)

• Industry bodies with regulatory powers, ensuring member compliance with securities legislation.

Universal Market Integrity Rules (UMIR)

• Set of trading rules promoting fair markets and compliance monitoring by IIROC.

International Organization of Securities Commissions (IOSCO)

• Governing body with over 200 global members, including various Canadian regulators.

Financial Stability Board (FSB)

• Organization assessing vulnerabilities in the financial system and promoting international cooperation on financial stability.

Financial Industry Regulatory Authority (FINRA)

• U.S. counterpart to IIROC, enhancing cross-border cooperation in security regulation and oversight.### Regulatory Entities and Legislations
• The largest independent regulator for U.S. securities firms ensures compliance and protects investors.
• Canada Deposit Insurance Corporation (CDIC) provides deposit insurance for up to $100,000 per depositor against bank failures.
• Canada's Anti-Spam Legislation (CASL) mandates consent for sending commercial electronic messages, enforced by the CRTC.

Financial Concepts and Practices

• Conflict of interest arises when client and registrant interests diverge, potentially harming the client relationship.
• Cybersecurity is critical in financial compliance, protecting against reputational damage and operational risks.
• Investment representatives can serve as discount brokers or sales assistants in their roles.

Client Accounts and Transactions

• Cash accounts require full payment for transactions; subject to Cash Account Rule.
• Discretionary accounts allow dealers to make investment decisions without continuous client permission.
• Managed accounts involve ongoing discretionary authority granted by the client to the dealer member.

Legal and Compliance Framework

• Personal Information Protection and Electronic Documents Act (PIPEDA) governs the handling of personal data by businesses.
• Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) obliges RRs to report suspicious activities; violations can lead to severe penalties.
• The fit and proper test assesses individuals seeking IIROC approval based on integrity and competence.

Investment Tools and Strategies

• Exchange-traded funds (ETFs) track an index and typically have lower fees than mutual funds.
• Private placements involve directly selling securities to investors meeting specific criteria under provincial law.
• Principal-protected notes (PPNs) guarantee investors a minimum return, irrespective of underlying asset performance.

Documentation and Record-Keeping

• New account application form (NAAF) collects essential details before account setup, functioning as a contract for services.
• Relationship disclosure documents outline services offered and associated fees, enhancing transparency for clients.
• Security cross-reference lists all securities held by clients, facilitating communication regarding important developments.

Market Operations and Transactions

• Initial public offerings (IPOs) mark the first issuance of securities by a company to the public.
• Best efforts deals involve a dealer acting as an agent, with no guarantee of sales.
• Bought deals entail the dealer purchasing securities upfront, taking on the risk of resale.

Investor Rights and Protections

• Consumers hold the right of rescission to cancel certain agreements and loans.
• Investors have a right of withdrawal within 48 hours of purchase, ensuring the opportunity to reconsider decisions.

Risk and Due Diligence

• Politically exposed persons (PEPs) are clients in prominent public positions, requiring heightened scrutiny due to potential risks.
• Due diligence obligations ensure that dealer members provide clients with appropriate and thorough service.