New Entrants Course (NEC)

In this chapter, we describe the interrelationships between the various participants in the Canadian securities industry. In particular, we discuss the important role that investment dealers and other financial intermediaries play in channelling funds between lenders and borrowers.

Topics covered in this chapter are:

• Overview of the Canadian Securities Industry

• The Investment Dealer's Role as a Financial Intermediary

• Financial Intermediaries Other than Investment Dealers

• Financial Market Trends

This chapter provides an introduction to economics, wherein you will learn about the effect of microeconomic and macroeconomic environments on the financial markets. You will learn how economic growth is measured, and how certain factors determine the health of the economy and help predict the direction the markets might take. You will also learn to understand the indicators that influence investment decision-making, including the phases of the business cycle, the condition of the labour market, and the current state of interest rates. Finally, you will learn to analyze the effect of international economics on the domestic investing environment.

Topics covered in this chapter are:

• Defining Economics

• Measuring Economic Growth

• Business Cycle

• The Labour Market

• The Role of Interest Rates

• The Impact of Inflation

• International Finance and Trade

In this chapter, you will learn about economic policy, both fiscal and monetary, and the impact of government policy decisions on the investment landscape. In this context, you will learn about the roles and functions of the Bank of Canada and the challenges that governments face in setting their economic policies.

Topics covered in this chapter are:

• Fiscal Policy

• The Bank of Canada

• Monetary Policy

• The Challenges of Government Policy

In this chapter, you will learn about the fixed-income marketplace and the rationale for using fixed-income securities. You will become familiar with the terminology used to discuss bonds, debentures, and other types of fixed-income securities, and you will learn to distinguish among the different types used by governments and corporations. Finally, you will learn how to read bond quotes and ratings.

Topics covered in this chapter are:

• The Fixed-Income Marketplace

• The Basic Features and Terminology of Fixed-Income Securities

• Government of Canada Securities

• Provincial and Municipal Government Securities

• Types of Corporate Bonds

• Other Fixed-Income Securities

• How to Read Bond Quotes and Ratings

In this chapter, you will learn how to calculate the price and yield of fixed-income securities. You will also learn about interest rates on bonds, including the difference between the nominal and the real rate of return, how interest rates are depicted on a yield curve, and how they are determined according to three theoretical principles. You will then learn how and why bond prices go up or down according to certain fixed-income pricing properties. Next, you will learn about bond trading and the rules and regulations around the delivery of bonds and the settlement of transactions. Finally, you will learn how bond indexes are used by portfolio managers as performance measurement tools and to construct bond index funds.

Topics covered in this chapter are:

• Calculating Price and Yield of a Bond

• Term Structure of Interest Rates

• Fundamental Bond Pricing Properties

• Bond Market Trading

• Bond Indexes

In this chapter, you will learn the basic features of equity securities, a category that includes common and preferred shares. We explain the investment considerations of the two broad categories, and we compare the advantages and disadvantages of investing in either type. Finally, we describe the important role played by Canadian, U.S., and global stock market indexes.

Topics covered in this chapter are:

• Common Shares

• Preferred Shares

• Stock Indexes and Averages

In this chapter, we provide a brief introduction to managed products. We then focus specifically on one of the most widely recognized managed products-mutual funds. We discuss various mutual fund structures and explain the rules and regulations of the industry. We then discuss the importance of Know Your Client and suitability requirements in the context of mutual funds. Finally, you will learn about the requirements around documentation and disclosure.

Topics covered in this chapter are:

• Overview of Managed Products

• Overview of Mutual Funds

• Pricing Mutual Fund Units

• Mutual Fund Regulation

• Other Forms and Requirements

• The Know Your Client Rule

• Requirements For Opening and Updating an Account

In this chapter, you will learn about the regulation, structure, and taxation of exchange-traded funds. We will also discuss features, risks, and various types of exchanged-traded funds, as well as common strategies.

Topics covered in this chapter are:

• The Regulation and Structure of Exchange-Traded Funds

• Key Features of Exchange-Traded Funds

• The Various Types of Exchange-Traded Funds

• The Risks of Investing in Exchange-Traded funds

• Comparing Exchange-Traded Funds and Mutual Funds

• Taxation of Investors in Exchange-Traded Funds

• Investment Strategies Using Exchange- Traded Funds

• Other Related Products

In this chapter, you will learn about additional types of managed products, including their structure and characteristics, their regulatory issues and tax considerations, and their comparative advantages and disadvantages.

Topics covered in this chapter are:

• Segregated Funds

• Hedge Funds

• Labour-Sponsored Venture Capital Corporations

• Closed-End Funds

• Income Trusts

• Listed Private Equity

In this chapter, you will learn about the features of structured products in general, including their benefits and risks. You will also learn how different products are structured, and what risks and tax implications are associated with the different types.

Topics covered in this chapter are:

• Overview of Structured Products

• Principal-Protected Notes

• Market-Linked Guaranteed Investment Certificates

• Split Shares

• Asset-Backed Securities

In this chapter, you will learn the basics of taxation, including the tax features of pension income, tax deferral plans, and tax free savings plans in Canada. We explain how the different types of income are taxed and identify the expenses related to investment income that might be tax-deductible. We also explain the two main types of pension plans and the different types of tax deferral and tax-free registered plans. Finally, you will learn some basic tax planning strategies.

Topics covered in this chapter are:

• The Canadian Taxation System

• Capital Gains and Losses

• Tax Deferral and tax-free Plans

• Tax Planning Strategies

In this chapter, you will learn about the various types of fee-based accounts, both managed and unmanaged.

Topics covered in this chapter are:

• Overview of Fee-Based Accounts

• Managed Fee-based Accounts

• Non-Managed Fee-based Accounts

Topics covered in this chapter are:

• Know Your Client and Suitability

• Know Your product

• Fiduciary Duty

Topics covered in this chapter are:

• General Principles of Securities Regulation

• Key Players Involved in Securities Regulation

• Self-Regulatory Organizations (SROS)

• The Exchanges and Marketplaces in Canada

• Designated Stock Exchanges

• Dealing with Money Laundering and Terrorist Financing in the Securities Industry

• Investor Protection Funds

• Protection for Depositors

Topics covered in this chapter are:

• Types of Registration

• Categories of Registration

• Exemptions from Registration

• Registration of an Individual as a Registered Representative

Topics covered in this chapter are:

• Opening Accounts

• Client Records

Topics covered in this chapter are:

• Know Your Product (KYP) and Suitability

• Rules of Conduct

• Principal vs. Agency Transactions

• The Gatekeeper Role

• Deliveries and Payments

• Account Activity and Money Laundering Red Flags

• Dealing with Confi dential Information

• Commissions and Other Compensation

• Personal Financial Dealings and Outside Business Activities

Topics covered in this chapter are:

• How Securities are Traded

• Placing an Order

• Types of Orders

• Fixed Income Compliance and Supervision

• Settlement of Trades

• Errors

Topics covered in this chapter are:

• Accounting for Client Transactions

• Cash Accounts

• Margin Accounts

• Free Credit Balances

Topics covered in this chapter are:

• General Regulations and Guidelines for Sales Literature

• Mutual Fund Sales Communications

• Electronic Communications

• General Disclosure Requirements

• Communicating Trading Information to Customers

• Enhanced Performance Reporting

• Handling Client Complaints