Chapter 2: The Canadian Securities Industry

Flashcards describing the Canadian securities industry

19 cards   |   Total Attempts: 182
  

Cards In This Set

Front Back
What are self-regulatory organizations (SROs)?
They establish and enforce industry regulations to protect investors and to maintain fair, equitable, and ethical practices.
When would the term intermediary be used? Example?
To describe any organization that facilitates the trading or movement of financial instruments that transfer capital between suppliers and users.
ex. Banks or trust companies gathering funds from suppliers in the form of savings deposits or GICs and transferring them to users in the form of mortgages, car loans and other lending instruments.
How do investment dealers play a significant role in the securities industry's two main functions?
First, investment dealers help transfer capital from savers to users through the underwriting and distribution of new securities. This takes place in the primary market.
Second, investment dealers maintain secondary markets in which previously issued or outstanding securities can be traded.
What happened to trust companies between 1993 and 2007? Why?
Their asset base decreased from $89 billion to $18 billion. The decline was primarily due to the acquisition of trust companies by the chartered banks.
Overall, the expansion of chartered bank assets has been due to what factors?
-much greater international activity-changes in the Bank Act permitting the banks to compete vigorously in new sectors of the financial services industry.-the creation of more banks, notably the foreign-owned schedule II and schedule III banks.-the purchase of many major trust companies.
What do integrated firms have to offer?
Products and services that cover all aspects of the industry, including full participation in both the institutional and the retail markets.
Explain why foreign and domestic firms are important when regarding institutional firms.
Some 50 foreign and domestic institutional firms serve institutional clients exclusively. Also, foreign firms account for about one third of total institutional firms and include affiliates of many of the major US and European securities dealers.
What is the difference between a full-service firm and a discount firm (when pertaining to retail firms)?
Full service retail firms offer a wide variety of products and services for the retail investor. Discount brokers execute trades for clients at reduced rates but do not provide any advice.
Generally, how is a firm organized?
MAnagement, Sales department, Underwriting/Financing Department, Trading Department, Research Department, Administration Department.
How are securities firms financed?
By capital originally subscribed by their owner shareholders, by year-to-year net earnings retained in the business and by loans.
In bull markets, what are securities firms especially vulnerable to?
-cyclical business swings-dramatic and unpredictable ebbs and surges in bond and stock trading volumes-securities price and interest rate gyrations not only in Canada but also throughout the world.
What are two important roles of investment dealers?
Bring together those who have surplus capital to invest and governments and companies who need investment capital.Also, to facilitate active and liquid secondary markets for the transfer of existing or already outstanding securities from one owner to another.
Differentiate between acting as a principal and as an agent.
When acting as a principal, the securities firm owns securities as part of its own inventory at some stage in its buying and selling transactions with investors. When acting as an agent, the broker acts for or on behalf of a buyer or a seller but does not itself own title to the securities at any time during the transaction.
What is underwriting?
Underwriting or financing has come to mean the purchase from a government body or a company of a new issue of securities on a given date at a specified price.
In Canada how are securities cleared? Who are the participants with access to this system?
Through the CDS or Clearing and Depository Services Inc. Primarily, banks, investment dealers and trust companies have access to this system.