chapter 3

Question 1

what’s the role of the Office of Superintendent of Financial Institutions (OSFI)

Answer 1

regulates + supervises banks, insurance, trust, loan, pension plans, co-operative credit association which are chartered federally

doesn’t regulate the Canadian securities industry

Question 2

regulation of the securities industry in Canada is a ____ responsibility

Answer 2

provincial

Question 3

what’s the role of the Canadian Securities Administrators (CSA)

Answer 3

to provide a securities regulatory system that protects investors form unfair, improper or fraudulent practices and that foster fair, efficient, and vibrant capital markets

Question 4

what’s the role of the IIROC?

Answer 4

to set high quality regulatory + investment industry standards, protect investors, and strengthen market integrity while maintaining efficient + competitive capital market

serves as the securities industry regulatory - monitoring member firms for capital adequacy + business conduct

Question 5

how does the IIROC serve as a market regulator

Answer 5

1. playing a key role in formulating policies + standards for primary debt + equity market
2. monitoring activities of member firms + developing trading’s + sales practices for fixed-income markets

Question 6

what’s the role of the Mutual fund Dealers Association (MFDA)

Answer 6

establish a fund similar to the CIPF that designed to protect mutual fund investors from insolvency of an MFDA member firm

Question 7

what’s the role of the Canadian Investor Protection Fund (CIPF)

Answer 7

to protect investors from loss due to the insolvency of a member of any of the SROs

to anticipate + solve financial difficulties of member firms to minimize risk of insolvency + attempt to bring about an orderly wind down of a business if necessary

Question 8

what are the 3 basic methods used to protect investors

Answer 8

1. registration of securities dealers + advisors
2. disclosure of material facts
3. enforcement of laws + policies

Question 9

what are the 4 main area of member regulation

Answer 9

1. financial compliance
2. sales compliance
3. registration
4. enforcement

Question 10

what are the 3 main area of market regulation

Answer 10

1, market surveillance
2. investigation enforcement
3. regulatory/market policy

Question 11

why is ethical trading important?

Answer 11

critical to the proper function of capital markets

unethical practices are punishable by fines, suspension expulsion and/or criminal charges

Question 12

what are some examples of unethical trading practices

Answer 12

1. preforming any conduct that deceives the public
   2., creating false appearances of trade
2. using price manipulation schemes
3. deliberately causing the last sale of the day to be higher than warranted by market condition
4. misleading any board of governors or committee
5. confirming a transaction that never occurred (bucketing)
6. improperly soliciting orders by phone or otherwise
7. using high-pressure or other undesirable selling techniques
8. violating any applicable statues
9. attempting to sell a dividends
10. assuring no risk
11. taking the opposite side of client trades
12. rebating commissions
13. conducting business that brings the securities business, exchanges, or IDA into disrepute

Question 13

what statuory rights do security purchases have

Answer 13

1. right of withdrawal - within 2 business day of receipt or prospectus or if a distribution occurs without the required prospectus
2. right of rescission - if the prospectus or other related documents contain a misrepresentation
3. right of action for damages - against he issuer, director of the issuer, the security seller or underwriter or any other party who signs a prospectus without exhibiting “due diligence”

Question 14

what’s the role of a takeover bid legislation

Answer 14

protect the interests of the shareholders of the target company

Question 15

what requirements must a takeover bid legislation include?

Answer 15

1. the bid must be sent to all security holders in that class
2. the offeror shall deliver a takeover bid circular, describing material facts of the takeover as part of the bid
3. a directors’ circular including a recommendation and reasons must be sent to security holders within 15 days of the bid
4. any securities taken up must be paid within 3 days
5. when the bid is less than all securities subject to the bid, the offeror shall accept securities offered on a pro rata basis

Question 16

a takeover bid is exempt from the above requirement in any of the following cases

Answer 16

1. it’s made through the exchange facilities in accordance with appropriate regulations
2. it involves acquisitions, at market prices, which don’t aggregate more than 5% of the securities in a class within 12 months
3. it’s a private agreement with 5 or fewer security holders at a price not exceeding 115% of market value
4. it’s an offer to purchase shares in a private company
5. in Ontario only, if there are fewer than 50 security holders of that class or the aggregate holdings of the offer, would be less than 2% of the aggregate holdings of the offer, would be less than 2% of total outstanding

Question 17

define insiders

Answer 17

they include
1. a director or senior officer of the company/subsidiary
2. a person or company or director or senior office of a company which controls more than 10% of the voting
3. a reporting issuer that has acquired any of its securities
4. a director or senior officer of a company that is itself an insider due to ownership or control of more than 10% of the voting shares of the company involved