Trading, Settlement, and Order Mechanics

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Questions and Answers

An RR receives an order from a client to purchase shares of a company, but suspects the client might be involved in insider trading based on their access to non-public information. What is the RR's most appropriate course of action?

Execute the order immediately to fulfill the client's request, as RRs are obligated to prioritize client orders above all other considerations.
Consult with their compliance department and supervisor before taking any action, to ensure adherence to proper procedures and legal requirements. (correct)
Execute a portion of the order to avoid raising suspicion while still fulfilling part of the client's request.
Refuse to execute the order and immediately report the client to regulatory authorities for suspected illegal activity.

A client places an order to sell a large block of shares, and the RR, believing this will negatively affect the stock price, sells short shares of the same stock for their own account before executing the client's order. Which prohibited activity does this exemplify?

Wash trading
Churning
Frontrunning (correct)
Tipping

An RR notices that a client, whose account application states they are self-employed, is making unusually large purchases of a single stock. Upon researching the client's name, the RR discovers an individual with the same name is a director of the company whose stock is being purchased. What should the RR consider about this situation?

The client's internet search results are irrelevant, since it is common for multiple individuals to share the same name.
The client's trading behaviour should be rewarded, since encouraging clients to invest in the market benefits capital formation.
The client's trading behaviour is normal, since self-employed individuals often have more discretionary income to invest in stocks.
The client's trading behaviour may indicate potential insider trading, requiring further investigation and adherence to compliance procedures. (correct)

A client provides an RR with a 'Good Till Cancelled' (GTC) order to sell shares of a TSX-listed company at a specific price. After 90 calendar days, the order has not been executed. What is the status of the order according to TSX rules?

The order expires automatically after 90 calendar days, requiring the client to place a new order if they wish to continue selling the shares. (A) Signup and view all the answers

A client instructs their RR to execute a switch order, selling 100 shares of XYZ and using the proceeds to purchase shares of CDE. After the sale of XYZ, only a partial fill is achieved. How should the RR proceed, and what considerations should guide their actions?

Contact the client to determine whether they wish to proceed with purchasing CDE given the partial fill of XYZ, and whether they will accept odd-lot shares, prioritizing the client's explicit instructions. (A) Signup and view all the answers

Under what circumstances can a Registered Representative (RR) execute a trade on behalf of a client without obtaining explicit consent for the specifics of the trade?

When the client has granted the RR discretionary trading authority over the account in writing. (A) Signup and view all the answers

In the context of securities trading, what does the term 'fails' refer to, and what are the potential consequences for the parties involved?

'Fails' refers to instances where a security is not delivered by the seller by the settlement date, potentially leading to buy-in procedures and associated costs. (A) Signup and view all the answers

A client places an order to buy shares of a security that is not qualified for sale in their province of residence. As a Registered Representative (RR), what is your primary responsibility in this situation?

Ensure the security is qualified for sale in the client's province before executing the order. (D) Signup and view all the answers

An RR is responsible for ensuring best execution for all client orders. Which of the following factors should an RR consider when assessing best execution for a client order?

Price, speed of execution, certainty of execution, and total transaction cost. (A) Signup and view all the answers

What is the primary purpose of 'firewalls' within a financial institution, and what measures should be included in procedures to maintain them?

Firewalls are information barriers designed to prevent the misuse of inside information. (B) Signup and view all the answers

A client asks an RR to sell their shares but requests that the RR delay delivery of the securities beyond the usual settlement period to a specified date. What type of order is this, and what is a key consideration when entering it??

A 'Delayed Delivery Order', which needs agreement from the buying party for the delayed settlement date. (B) Signup and view all the answers

An RR discovers a client is using their account to engage in what appears to be money laundering. What steps should the RR take, and what protections are afforded to them when reporting such activity?

Immediately report the suspicious activity to FINTRAC and avoid informing the client or anyone else about the report; the RR is protected from legal repercussions for reporting in good faith. (D) Signup and view all the answers

In what situation is a dealer member permitted to trade ahead of a client order, and how must they handle the situation??

When the participant and the client have agreed on a client-principal cross. (A) Signup and view all the answers

An RR places an order on behalf of a client, then, two minutes later the client calls back and makes a change to the order, what type of order should the RR enter?

The RR should advise the client a that they have been put through to the trading desk, but that a Change Order will be entered in hopes that the previous order has not yet been executed. (C) Signup and view all the answers

According to the material, how may the knowledge of a large order by a client about to enter to the marketplace be viewed?

It is not considered material information about the affairs of the company; however, large orders may have an impact on the market price of the security. (B) Signup and view all the answers

What requirements are insiders responsible of filing accurately and on time?

The type of security, the transaction date, the type of transaction (such as a buy or sell), the value or number of securities involved in the transaction, and the type of currency involved. (B) Signup and view all the answers

Margaret, an RR is using a shared photocopy machine in close proximity to the corporate finance department and notices an incoming fax message addressed to someone in that department. The fax discusses the purchase of a large trust company by a competitor. What is Margaret's best course of action?

Deliver the fax to the corporate finance department immediately and to inform the department that she had inadvertently become aware of its contents. (A) Signup and view all the answers

What must be in place to ensure that the transfer of ownership is made only to those entitled to receive it?

Extensive controls. (D) Signup and view all the answers

What is a Suspicious Transaction due to AML/ATF?

Suspicious means 'if reasonable grounds exist to suspect a money laundering offense' or terrorist activity. (D) Signup and view all the answers

Flashcards

Standard Trading Unit

The quantity of a security that makes up a standard unit for trading.

Settlement Period

The time between a securities trade and the transfer of ownership.