Which organization oversees investment dealers and mutual fund dealers across Canada, as well as trading on Canada’s debt and equity marketplaces?
The Canadian Investment Regulatory Organization CIRO is the pan-Canadian self-regulatory organization that oversees investment dealers and mutual fund dealers. It also oversees trading activity on Canada’s debt and equity marketplaces.
Money is moved through a long string of transfers between accounts so that no one can trace where it came from. Which stage of money laundering is this?
Layering Layering is the stage where funds are moved through many transactions to separate them from their source. It comes after placement and before integration.
A client says she would be very uncomfortable watching her portfolio drop sharply, even for a short time. Which part of her risk profile does this describe?
Risk tolerance Risk tolerance is a client’s willingness to accept a fall in value. Her comment is about how she feels about losses, so it describes her tolerance rather than her capacity.
Why might an Investment Dealer contact the trusted contact person that a retail client has named?
To raise a concern about financial exploitation A trusted contact person is someone the dealer may contact with concerns such as possible financial exploitation of the client. They have no authority to make decisions on the account.
A client’s portfolio holds only shares of large Canadian companies. Which benchmark fits it best?
The S&P/TSX Composite Index A benchmark should hold the same kind of investments as the portfolio it measures. The S&P/TSX Composite Index tracks shares listed on the Toronto Stock Exchange, so it fits a portfolio of Canadian stocks.
In a discretionary account, who decides which trades to make?
The Approved Person, with written authority In a discretionary account, the client gives written authority for trades to be made without asking them first each time. The Approved Person then makes the decisions within that authority.
A portfolio is built to match the return of a market index rather than beat it. Which investment style is this?
Passive A passive style aims to match an index, for example by holding the securities in it. An active style tries to beat the index through security selection or timing.
A retail client isn’t satisfied with how an Investment Dealer handled their complaint. Which independent service can they take it to?
The Ombudsman for Banking Services and Investments The Ombudsman for Banking Services and Investments (OBSI) is an independent service for disputes between clients and firms. The syllabus lists it with litigation and CIRO’s arbitration program as a dissatisfied client’s recourse.
Inflation is running well above the Bank of Canada’s target. What is the bank most likely to do?
Raise its policy interest rate The Bank of Canada runs monetary policy, and raising its policy rate makes borrowing more expensive and slows spending. That eases the pressure on prices.
Which financial statement shows a company’s assets, liabilities and equity at a single point in time?
The statement of financial position The statement of financial position, also called the balance sheet, lists what a company owns, what it owes and the owners’ equity on one date. The other statements cover a period of time.
A client wants to buy a stock but pay no more than $20 a share. Which type of order should be entered?
A limit order at $20 A limit order sets the highest price the client will pay on a buy. At $20, it can fill at $20 or less, but never above.
An Approved Person learns that a client is about to place a large buy order and first buys the same stock for their own account. What is this called?
Front running Front running is trading ahead of a client order you know about, to profit from the price move that order is likely to cause. The Universal Market Integrity Rules (UMIR) prohibit it.
Which feature belongs to preferred shares rather than common shares?
Dividends paid before any common dividends Preferred shareholders have a prior claim on dividends: the company must pay their dividends before it pays any to common shareholders. In return, they don’t normally share in the company’s growth the way common shareholders do.
Market interest rates rise after an investor buys a fixed-rate bond. What happens to the bond’s market price?
It falls Bond prices and interest rates move in opposite directions. When bonds being issued pay more, an existing bond with a lower coupon is worth less, so its price falls until its yield matches the market.
An investor buys units of an exchange-traded fund (ETF) on a stock exchange during the trading day. What price do they pay?
The market price when the trade is made ETF units trade on an exchange like shares, so a buyer pays the market price at the moment of the trade. That price can be a little above or below the fund’s net asset value (NAV).
An investor owns 100 shares at $40 each. The company does a 2-for-1 stock split. What does the investor hold right after the split, if nothing else changes?
200 shares at about $20 A 2-for-1 split gives two shares for each one held and halves the price per share. The holding is worth $4,000 before and after, so the split itself doesn’t change its value.
When can the holder exercise a European-style option?
Only on its expiry date A European-style option can be exercised only on its expiry date. An American-style option can be exercised at any time up to expiry.
A dealer finds a material conflict of interest that it can’t address in the client’s best interest. What must it do?
Avoid the conflict Dealers must address material conflicts of interest in the client’s best interest. If a conflict can’t be addressed that way, it must be avoided.
What is an information barrier at an Investment Dealer meant to do?
Stop inside information passing between areas An information barrier stops material non-public information in one part of the firm, such as corporate finance, from reaching others, such as sales and trading. It helps prevent insider trading and other misuse of that information.
A friend asks an Approved Person whether a neighbour is a client of the firm. What should the Approved Person do?
Decline, as client information is confidential The fact that someone is a client is itself confidential client information. An Approved Person shouldn’t confirm it to anyone without the client’s consent or a legal requirement.
Canada · Proficiency exams