CSC Ch 1-5 Questions and Answers

CSC Ch 1-5 Questions and Answers Financial Intermediary (definition): - Describes any organization that facilitates the trading or movement of financial instruments - Investment dealers that act on their clients' behalf as agents and sometimes act as principals, risking their own capital Financial Intermediary (functions): - Help transfer capital from suppliers to users through the underwriting and distribution of new securities (primary market distribution) - Maintain secondary markets in which previously issued or outstanding securities can be traded Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:15 Full screen Brainpower Read More Financial Intermediary / Investment Dealers (categories): - Retail firms which include full-service investment dealers and self-directed brokers (discount brokers) - Institutional firms that service clients like pension funds and mutual funds - Integrated firms The Canadian securities industry is mainly regulated by the [...]. There are [...] such as the Investment Industry Regulatory Organization of Canada (IIROC) 1. Provinces 2. Self-regulatory organizations (SROs) Major participants in the Investment Industry include: - Suppliers of Capital - Investment Dealers - Users of Capital (Borrowers) - Self-regulatory Organizations - Markets - Clearing and Settlement - Canadian Securities Institute - Canadian Investor Protection Fund - Provincial Regulators Organization Within Investment Firms - Front Office Portfolio Management, Trading, Sales, Marketing - Middle Office Compliance, Accounting, Audits, Legal - Back Office Trade Settlement Most of the time, securities firms act as [...], buying and selling on behalf of clients [...] to those securities. Synonym: [...] 1. Agents 2. Without taking title (ownership) 3. Broker Securities firms tend to act as [...] in the [...] and in [...]. "Generally, for most secondary trading of debt securities, the investment dealer acts as [...]." 1. Principals 2. Underwriting function (primary market) 3. Secondary trading of non-equity securities 4. Principal When acting as broker, a securities firm is an agent in a [...]. However, the term "broker" may be used interchangeably to describe an investment dealer acting as a [...]. 1. Secondary securities transaction 2. Principal or an agent Services provided by the investment dealer include: - Providing informed advice about the terms and features for new issues in the primary market - Adding liquidity to the market - Acting as market makers in assigned listed stocks - buying listed stocks as principals During the day, an exchange member will buy and sell many different listed stocks. A designated clearing systems handles the daily settlement process between members, which means [...]. Exchanging securities for cash Securities in Canada are cleared through [...]. Marketplaces like the TSX and TSX Venture and ATSs report trades to [...]. Participants with access to the clearing system include [...]. 1. CDS Clearing and Depository Securities 2. CDSX clearing and settlement 3. Banks, investment dealers and trust companies The clearing system [...] that has to change hands among the various members each day. The clearing system uses a process called [...] to establish and confirm a credit or debit position. 1. Reduces the number of securities and amount of cash 2. Netting Banks operate under the Bank Act, which specifies [...]. Banks are the most important player in the Canadian Securities Industry and each Bank is designated as either [...]. 1. What they can and cannot do 2. Schedule I, Schedule II or Schedule III Schedule I Banks Most Canadian owned banks are designated as such. There are ownership rules - voting shares must be widely held and subject to no more than 20% ownership by any individual or group. There are 30 of these banks altogether. Number of Schedule I banks and examples: 30 Royal Bank, CIBC, TD, Bank of Nova Scotia, Bank of Montreal and National Bank Schedule II Banks Incorporated and operate in Canada, but are owned by a foreign parent. By law, may engage in all types of business permitted to a Schedule I Bank. However, most derive their greatest share of revenue from retail banking and electronic financial services. Examples of Schedule II Banks Citibank Canada, AMEX Bank of Canada and BNP Paribas (Canada). Schedule III Banks Foreign bank branches of foreign institutions. These banks tend to focus on corporate and institutional finance and investment banking. Other Investment Industry Players: - Trust and Loan Companies - Credit Unions and Caisses Populaires - Insurance Companies - Investment Funds - Savings Banks - Consumer finance companies - Sales finance companies - Pension plans Larger Trusts and Loan Companies are typically... Subsidiaries of Schedule I Banks Credit Unions and Caisses Populaires are... Co-operatively owned institutions, organized along employment, neighborhood or ethnic-origin lines A recent trend in Insurance Companies is... Demutualization where the policyholders of the company and the owners of the the company are two different groups. Life insurance companies tend to invest in mortgages and long-term bonds. Underwriting, the business of evaluating risk, is the most important aspect of the insurance business in Canada. What do Consumer Finance Companies do? Make direct loans to consumers, typically charging higher rates of interest than banks What do Sales Finance Companies do? Purchase instalment sales contracts from retailers and dealers at a discount