CSC Volume 2 Questions and Answers
Accredited Investor
An individual or institutional investor who meets certain minimum requirement relating to income, net worth, or investment knowledge. Also referred to as a sophisticated investor.
Accrued Interest
Interest accumulated on a bond or de...
accredited investor an individual or institutional
accrued interest interest accumulated on a bond or
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CSC Volume 2 Questions and Answers
Accredited Investor - answer An individual or institutional investor who meets certain
minimum requirement relating to income, net worth, or investment knowledge. Also
referred to as a sophisticated investor.
Accrued Interest - answer Interest accumulated on a bond or debenture since the
last interest payment date.
Adjusted Cost Base - answer The deemed cost of an asset representing the sum of
the amount originally paid plus any additional costs, such as brokerage fees and
commissions.
Advance-Decline Line - answer A tool used in technical analysis to measure the
breadth of the market. The analyst takes difference between the number of stocks that
increased in value each day less the number that have decreased.
After Acquired Clause - answer A protective clause found in a bond's indenture or
contract that binds the bond issuer to pledging all subsequently purchased assets as
part of the collateral for a bond issue.
After Market Stabilization - answer A type of arrangement where the dealer supports
the offer price of a newly issued stock once it begins trading in the secondary market.
Agency Traders - answer Manage trades for institutional clients. They do not trade
the dealer member's capital, and they trade only when acting on behalf of clients.
Agency traders do not merely take orders; they must manage institutional orders with
minimal market impact and act as the client's eyes and ears for relevant market
intelligence.
Agent - answer An investment dealer operates as an agent when it acts on behalf of
a buyer or a seller of a security and does not itself own title to the securities at any time
during the transactions. See also Principal.
Algorithmic Trading - answer The use of sophisticated mathematical algorithms to
execute equity trades over electronic trading systems.
All or None Order (AON) - answer An order that must be executed in its entirety -
partial fills will not be accepted.
Allocation - answer The administrative procedure by which income generated by the
segregated fund's investment portfolio is flowed through to the individual contract
holders of the fund.
,Alpha - answer A statistical measure of the value a fund manager adds to the
performance of the fund managed. If alpha is positive, the manager has added value to
the portfolio. If the alpha is negative, the manager has underperformed the market.
Alternative Trading Systems (ATS) - answer Privately-owned computerized networks
that match orders for securities outside of recognized exchange facilities. Also referred
to as Proprietary Electronic Trading Systems (PETS).
American-Style Option - answer An option that can be exercised at any time during
the option's lifetime. See also European-Style Option.
Amortization - answer Gradually writing off the value of an intangible asset over a
period of time. Commonly applied to items such as goodwill, improvements to leased
premises, or expenses of a new stock or bond issue. See also Depreciation.
Annual Information Form (AIF) - answer A document in which an issuer is required to
disclose information about presently known trends, commitments, events or
uncertainties that are reasonably expected to have a material impact on the issuer's
business, financial condition or results of operations. Although investors are typically not
provided with the AIF, the prospectus must state that it is available on request.
Annual Report - answer The formal financial statements and report on operations
issued by a company to its shareholders after its fiscal year-end.
Annuitant - answer Person on whose life the maturity and death benefit guarantees
are based. It can be the contract holder or someone else designated by the contract
holder. In registered plans, the annuitant and contract holder must be the same person.
Annuity - answer A contract usually sold by life insurance companies that guarantees
an income to the beneficiary or annuitant at some time in the future. The income stream
can be very flexible. The original purchase price may be either a lump sum or a stream
of payments. See Deferred Annuity and Immediate Annuity.
Any Part Order - answer A type of order in which the client will accept all stock in
odd, broken or standard trading units up to the full amount of the order.
Arbitrage - answer The simultaneous purchase of a security on one stock exchange
and the sale of the same security on another exchange at prices which yield a profit to
the arbitrageur.
Arbitration - answer A method of dispute resolution in which an independent
arbitrator is chosen to assist aggrieved parties recover damages.
Arrears - answer Interest or dividends that were not paid when due but are still owed.
For example, dividends owed but not paid to cumulative preferred shareholders
,accumulate in a separate account (arrears). When payments resume, dividends in
arrears must be paid to the preferred shareholders before the common shareholders.
Ask - answer The lowest price a seller will accept for the financial instrument being
quoted. See also Bid.
Asset - answer Everything a company or a person owns or has owed to it. A
statement of financial position category.
Asset Allocation - answer Apportioning investment funds among different categories
of assets, such as cash, fixed income securities and equities. The allocation of assets is
built around an investor's risk tolerance.
Asset-backed commercial paper (ABCP) - answer A type of security that has a
maturity date of less than one year, typically in the range of 90 to 180 days, with a legal
and design structure of an asset-backed security.
Asset Mix - answer The percentage distribution of assets in a portfolio among the
three major asset classes: cash and equivalents, fixed income and equities.
Assuris - answer A not for profit company whose member firms are issuers of life-
insurance contracts and whose mandate is to provide protection to contract holders
against the insolvency of a member company,
At-the-Money - answer An option with a strike price equal to (or almost equal to) the
market price of the underlying security. See also Out-of-the- money and In-the-money.
Attribution Rules - answer A Canada Revenue Agency rule stating that an investor
cannot avoid paying taxes at their marginal rate by transferring assets to other family
members who have lower personal tax rates.
Auction Market - answer Market in which securities are bought and sold by brokers
acting as agents for their clients, in contrast to a dealer market where trades are
conducted over-the- counter. For example, the Toronto Stock Exchange is an auction
market.
Audit - answer A professional review and examination of a company's financial
statements required under corporate law for the purpose of ensuring that the statements
are fair, consistent and conform with International Financial Reporting Standards
(IFRS).
Authorized Shares - answer The maximum number of common (or preferred) shares
that a corporation may issue under the terms of its charter.
Autorité des marchés financiers (Financial Services Authority) (AMF) - answer The
body that administers the regulatory framework surrounding Québec's financial sector:
, securities sector, the distribution of financial products and services sector, the financial
institutions sector and the compensation sector.
Averages - answer A statistical tool used to measure the direction of the market. The
most common average is the Dow Jones Industrial Average.
Back-End Load - answer A sales charge applied on the redemption of a mutual fund.
Balance of Payments - answer Canada's interactions with the rest of the world which
are captured here in the current account and capital account.
Bank of Canada - answer Canada's central bank which exercises its influence on the
economy by raising and lowering short-term interest rates.
Bank Rate - answer The minimum rate at which the Bank of Canada makes short-
term advances to the chartered banks, other members of the Canadian Payments
Association and investment dealers who trade in the money market.
Bankers' Acceptance - answer A commercial draft (i.e., a written instruction to make
payment) drawn by a borrower for payment on a specified date. A BA is guaranteed at
maturity by the borrower's bank. As with T-bills, BAs are sold at a discount and mature
at their face value, with the difference representing the return to the investor. BAs may
be sold before maturity at prevailing market rates, generally offering a higher yield than
Canada T-bills.
Banking Group - answer A group of investment firms, each of which individually
assumes financial responsibility for part of an underwriting.
Bankrupt - answer The legal status of an individual or company that is unable to pay
its creditors and whose assets are therefore administered for its creditors by a Trustee
in Bankruptcy.
Basis Point - answer One-hundredth of a percentage point of bond yields. Thus, 1%
represents 100 basis points.
Bear - answer One who expects that the market generally, or the market price of a
particular security, will decline. See also Bull.
Bear Market - answer A sustained decline in equity prices. Bear markets are usually
associated with a downturn (recession or contraction) in the business cycle.
Bearer Security - answer A security (stock or bond) which does not have the owner's
name recorded in the books of the issuing company nor on the security itself and which
is payable to the holder, i.e., the holder is the deemed owner of the security. See also
Registered Security.
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