CONDUCT AND PRACTICES HANDBOOK
(CPH) EXAM QUESTIONS WITH CORRECT
ANSWERS
1. Compliance - Compliance is following the rules, whether those rules
are legal and regulatory requirements or internal policies.
2. Confidentiality - The ethical principle that a securities industry
professional will hold secret all information relating to a client and the
client's account unless the client consents to its disclosure, or a formal
request is made by the appropriate regulators
3. Conflict of Interest - A situation in which a registrant's personal or
financial interests conflict with those of a client or the registrant's dealer
member. In cases of potential or actual conflict of interest, a client's
interests must be given priority and the conflict should be disclosed.
4. Discretionary Account - A securities account for which the client has
given a dealer member specific written authorization to make decisions
regarding the security, price, quantity or timing of orders in the account.
,5. Due Diligence - Investigation into and verification of the details of a
potential investment, such as an examination of operations and
management, and the verification of material facts.
6. Duty of Care - An IA's duty to his client to ensure that he/she does
everything "reasonably practicable" to protect the client's assets. This
involves devoting the time and attention necessary to make informed
decisions.
Also known as Standard A
7. Fiduciary Duty - A legal term that describes a high degree of duty of
care.
8. Know Your Client (KYC) Rule - The cardinal rule in making
investment recommendations. The IA must know all relevant
information about every client and every order to ensure that his/her
recommendations to clients are suitable.
9. Personal Information Protection and Electronic Documents Act
(PIPEDA) - The Act that governs each dealer member's information-
gathering processes and regulates how firms may use and disclose the
personal information that is collected in the course of doing business.
10. Registrant Standards of Conduct - The Standards of Conduct
amplify the Code of Ethics and set out certain specifics of required
behavior.
,These requirements are based in large part on the provincial Securities
Acts and the SRO rules.
11. Suitability - A registrant's major concern in making
investment recommendations. Unless a suitability exemption
applies, all
information about a client and a security must be analyzed to determine
whether a particular investment is suitable for a client.
12. Unsolicited Order - An order entered by a client where neither
the client's IA or his/her dealer member recommended the order.
13. Autorité des marchés financiers (Financial Services Authority)
(AMF)
- The body that administers the regulatory framework surrounding
Québec's financial sector securities sector.
14. Canadian Investor Protection Fund (CIPF) - A fund that
protects investors against the insolvency of any dealer member.
15. Disclosure - One of the principles of securities regulation in
Canada. This principle entails full, true and plain disclosure of all
material facts necessary to make reasoned investment decisions.
16. Financial Transactions Reports Analysis Centre of Canada
(FINTRAC) - FINTRAC receives, analyzes, assesses and discloses
financial intelligence on suspected money laundering, terrorist financing,
and threats to the security of Canada.
, 17. Integrated Market Enforcement Teams (IMETs) - An initiative of
the RCMP and the federal government to detect, investigate and deter
capital markets fraud.
18. Joint Serious Offences Team (JSOTs) - JSOT is an enforcement
partnership between the OSC, the RCMP Financial Crime program and
the Ontario Provincial Police Anti-Rackets Branch. JSOT investigates
and prosecutes serious violations of the law using provisions of the
Securities Act (Ontario) and Criminal Code.
19. Investment Industry Association of Canada (IIAC) - IIAC is
a member-based, advocacy association that advances the growth
and development of the Canadian investment industry.
20. Investment Industry Regulatory Organization of Canada (IIROC) -
The national self-regulatory organization overseeing all investment
dealers and trading activity on equity and debt marketplaces in Canada.
IIROC is responsible for enforcing the rules and regulations regarding
sales, business and financial practices and trading activities of
individuals and firms under IIROC's jurisdiction.
21. Mutual Fund Dealers Association (MFDA) - The Self-
Regulatory Organization that regulates the distribution (dealer) side
of the mutual fund industry in Canada.
(CPH) EXAM QUESTIONS WITH CORRECT
ANSWERS
1. Compliance - Compliance is following the rules, whether those rules
are legal and regulatory requirements or internal policies.
2. Confidentiality - The ethical principle that a securities industry
professional will hold secret all information relating to a client and the
client's account unless the client consents to its disclosure, or a formal
request is made by the appropriate regulators
3. Conflict of Interest - A situation in which a registrant's personal or
financial interests conflict with those of a client or the registrant's dealer
member. In cases of potential or actual conflict of interest, a client's
interests must be given priority and the conflict should be disclosed.
4. Discretionary Account - A securities account for which the client has
given a dealer member specific written authorization to make decisions
regarding the security, price, quantity or timing of orders in the account.
,5. Due Diligence - Investigation into and verification of the details of a
potential investment, such as an examination of operations and
management, and the verification of material facts.
6. Duty of Care - An IA's duty to his client to ensure that he/she does
everything "reasonably practicable" to protect the client's assets. This
involves devoting the time and attention necessary to make informed
decisions.
Also known as Standard A
7. Fiduciary Duty - A legal term that describes a high degree of duty of
care.
8. Know Your Client (KYC) Rule - The cardinal rule in making
investment recommendations. The IA must know all relevant
information about every client and every order to ensure that his/her
recommendations to clients are suitable.
9. Personal Information Protection and Electronic Documents Act
(PIPEDA) - The Act that governs each dealer member's information-
gathering processes and regulates how firms may use and disclose the
personal information that is collected in the course of doing business.
10. Registrant Standards of Conduct - The Standards of Conduct
amplify the Code of Ethics and set out certain specifics of required
behavior.
,These requirements are based in large part on the provincial Securities
Acts and the SRO rules.
11. Suitability - A registrant's major concern in making
investment recommendations. Unless a suitability exemption
applies, all
information about a client and a security must be analyzed to determine
whether a particular investment is suitable for a client.
12. Unsolicited Order - An order entered by a client where neither
the client's IA or his/her dealer member recommended the order.
13. Autorité des marchés financiers (Financial Services Authority)
(AMF)
- The body that administers the regulatory framework surrounding
Québec's financial sector securities sector.
14. Canadian Investor Protection Fund (CIPF) - A fund that
protects investors against the insolvency of any dealer member.
15. Disclosure - One of the principles of securities regulation in
Canada. This principle entails full, true and plain disclosure of all
material facts necessary to make reasoned investment decisions.
16. Financial Transactions Reports Analysis Centre of Canada
(FINTRAC) - FINTRAC receives, analyzes, assesses and discloses
financial intelligence on suspected money laundering, terrorist financing,
and threats to the security of Canada.
, 17. Integrated Market Enforcement Teams (IMETs) - An initiative of
the RCMP and the federal government to detect, investigate and deter
capital markets fraud.
18. Joint Serious Offences Team (JSOTs) - JSOT is an enforcement
partnership between the OSC, the RCMP Financial Crime program and
the Ontario Provincial Police Anti-Rackets Branch. JSOT investigates
and prosecutes serious violations of the law using provisions of the
Securities Act (Ontario) and Criminal Code.
19. Investment Industry Association of Canada (IIAC) - IIAC is
a member-based, advocacy association that advances the growth
and development of the Canadian investment industry.
20. Investment Industry Regulatory Organization of Canada (IIROC) -
The national self-regulatory organization overseeing all investment
dealers and trading activity on equity and debt marketplaces in Canada.
IIROC is responsible for enforcing the rules and regulations regarding
sales, business and financial practices and trading activities of
individuals and firms under IIROC's jurisdiction.
21. Mutual Fund Dealers Association (MFDA) - The Self-
Regulatory Organization that regulates the distribution (dealer) side
of the mutual fund industry in Canada.
