Questions and Answers
What is the primary difference between closed-end and open-end funds?
What percentage of aggregate funds invested do open-end funds represent?
What significant development occurred to ATB Financial in 2002?
What type of companies typically charge higher interest rates than banks?
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What type of contracts do sales finance companies purchase?
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What has led to the institutionalization of savings in Canada over the past 60 years?
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What main concern is highlighted regarding the Canada Pension Plan?
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Which type of banks were formed in response to chartered banks pulling out of smaller towns?
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Which financial service is NOT typically provided by ATB Financial?
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What is a key characteristic of consumer finance companies?
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What is one of the specific services that contributes to competitive positioning in client experience?
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Which demographic group is primarily influencing the Canadian economy due to their increasing numbers?
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How many Canadians are older than the baby boomers, generally being in their retirement years?
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What aspect of portfolio management is mentioned as being optimized through specific tools?
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What is one expected service adjustment for advisors as the population aged 65 and older increases?
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What type of investment dealer firms encompasses firms that provide a wide range of industry services?
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What is the main role of an agent in securities transactions?
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Which statement accurately describes the role of investment dealers in the securities market?
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In securities transactions, when does an investment dealer primarily act as a principal?
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What is one way investment dealers add liquidity to the market?
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What distinguishes a broker from a dealer in the context of securities transactions?
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What is a market-making duty that investment dealers may undertake?
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How do investment dealers advise clients about new issues?
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What is a characteristic of agency trades in securities?
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What role does an investment dealer fulfill when taking securities into inventory?
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What is a primary characteristic of robo-advisors?
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When did robo-advisors begin to gain significant traction in the United States?
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What role do fintech companies play in the financial industry?
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What was the amount of assets under management for robo-advisors by 2015?
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What is a common feature of portfolios managed by robo-advisors?
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What notable change in service provision occurred with the emergence of robo-advisors?
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Which of the following services may not typically be provided by robo-advisors?
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In which year did multiple robo-advisor service providers register in several provinces in Canada?
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What is an attribute that varies among robo-advisors?
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What impact does the fintech industry have on traditional financial services?
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What is the primary focus of Schedule III banks in Canada?
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Which of the following statements is true regarding the operations of foreign banks in Canada?
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What legislation governs the operations of credit unions in Canada?
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Which of the following best describes the clientele of credit unions?
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Examples of which type of bank in Canada include Citibank Canada and AMEX Bank of Canada?
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What kind of services do credit unions NOT typically provide?
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What characterizes the relationship between Canadian banks and foreign banks operating in Canada?
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What type of financial services do Schedule II banks primarily focus on?
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Which of the following is not a characteristic of Schedule I banks?
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What may limit the activities of credit unions in Canada?
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Study Notes
Principal and Agent Roles in Securities Transactions
- An agent acting on behalf of a client is typically referred to as a broker.
- Brokers can function in multiple capacities as investment dealers.
- In most secondary trading of debt securities, investment dealers operate as principals; however, some agency transactions do occur.
- Dealers may sell new money market issues as agents or hold them as principals for future resale.
Services Provided by Investment Dealers
- Investment dealers facilitate secondary market trading and maintain securities inventories.
- They offer informed advice on new issues grounded in secondary market conditions.
- They enhance market liquidity by executing transactions directly from inventory.
- Some investment dealers act as market makers to stabilize prices in assigned listed stocks.
- They accumulate large blocks of shares as principals to better serve institutional clients.
Banking Categories in Canada
- Schedule I Banks: Engage in all types of business; example: major Canadian banks.
- Schedule II Banks: Generate revenue primarily from retail banking; examples include AMEX Bank of Canada and Citibank Canada.
- Schedule III Banks: Foreign bank branches focusing on corporate and institutional finance; examples include Barclays Bank and Comerica Bank.
- Foreign banks operate in Canada, aiding Canadian banks in international transactions and providing access to foreign investment.
Credit Unions and Caisses Populaires
- Offer various banking services such as deposits, loans, mortgages, and insurance.
- Typically serve members from cohesive groups sharing similar interests or locales.
- Governed by the Cooperative Credit Associations Act (CCAA), limiting activities to specific groups.
Types of Investment Funds
- Closed-end funds issue shares minimally and are typically less common than open-end funds.
- Open-end funds, or mutual funds, continuously issue and redeem shares, representing approximately 95% of total funds invested.
Financial Institutions and Consumer Finance
- ATB Financial: Originated in 1938 to fill the gap left by chartered banks in smaller towns, providing comprehensive financial services.
- Consumer Finance Companies: Offer direct loans to consumers often with higher interest rates compared to traditional banks.
- Sales finance companies acquire installment sales contracts from retailers for consumer goods.
Pension Plans and Demographics
- Pension plans have led to significant growth in institutional savings over the last six decades.
- Aging demographics are influencing economic trends, particularly concerning the Canada Pension Plan and Quèbec Pension Plan.
Financial Technology Trends
- The fintech industry utilizes technology to enhance banking and financial services, challenging traditional institutions.
- Services include online loans, electronic wallets, and automated financial planning tools.
Robo-Advisors
- An emerging online investment service providing algorithm-based advice instead of traditional brokerage models.
- Gained traction in Canada after 2014, offering personalized portfolio management and financial planning.
- Portfolios are primarily built with exchange-traded funds and are regularly rebalanced.
Shifting Demographics
- Canada’s population is aging, with roughly 9.5 million baby boomers and 4.5 million older Canadians.
- Advisors must adapt their services to cater to an increasingly retired client base, particularly those over 65.
Summary of the Canadian Securities Industry
- Canadian capital markets are advanced, showing a rich variety in new issues and robust secondary market trading.
- Investment dealers are categorized into integrated, institutional, and retail, with integrated firms covering all industry service aspects.
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Description
This quiz explores the roles of principal and agent in securities transactions, highlighting the distinction between the two. Understanding these roles is crucial for comprehending financial markets and their operations. Test your knowledge on the dynamics of buyer and seller interactions within this context.