CSI IFC Exam Part 1

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Client Service

fully understanding and satisfying the unique needs of each client

Compliance

following the rules, whether those rules are legal requirements or dealer policies

Disclosure

Includes under reports, regular corporate financial reports, timely disclosure of material changes in the affairs of a company and examination of all prospectuses to ensure that there is full, true and plain disclosure. Proper disclosure allows investors to make informed choices.

Financial Circumstances

Includes the size of the client's investment portfolio, employment and investment income, whether the source of employment income is secure, and the level of periodic expenses incurred.

Financial Goals and Objectives

client's reason for selecting a given investment. May be expressed in terms of the types of desired returns (such as growth or investment income) or in terms of desired investment characteristics such as safety or liquidity.

Financial Planner

A professional holding a recognized designation (CFP, ChP or PFP) who assists clients in establishing and reaching financial goals by analyzing current finances and making recommendations on reaching financial goals. Beyond the scope of a mutual funds sales rep.

Fund Facts

a short mutual fund document designed to give investors key information that is relevant to their investment decisions, including facts about the fund itself, performance history, investments and the cost of investing in the fund.

Investment Fund

offers investors an interest in a pool of securities. Mutual funds included are a type

Investment Horizon

The length of time within which an investor expects a given investment to satisfy their investment/return objectives

Know your client

Mutual funds advisor must use due diligence to learn the essential facts relevant to every client and every order. Info concerning client's financial status (both income and net worth), family an d other commitments, as well as financial goals

Know your product

understand characteristics such as risk level, fees, type of income generated, and tax consequences of all the funds offered for sale

legal responsibility

the responsibility of the investment guide to ensure that each client only buys suitable investments.

mutual fund

An unlimited number of unites are issued by the fund and they are bought and sold directly by the fund itself. The value of a unit is not determined by market demand but by the net asset value of the securities in the fund's portfolio

Mutual Fund Sales Representative

individuals who are licensed to sell and provide advice on mutual funds products to their clients in the province or territory where they have been licensed.

net worth

whatever an individual has accumulated to date is their net worth. It is the difference between total assets and total liabilities

personal circumstances

these include client's age, whether they are single or married, how many children they have, and what kind of lifestyle they wish to maintain. They have major impact on the ability of the investor to bear risk and on the financial goals selected.

professional responsibility

The responsibility of the investment guide to provide the best client service possible and to refuse to sell a product that is felt to be unsuitable.

prospectus

A legal document which must accompany all new security issues. It primarily outlines the financial condition of the issuer, the use to which the funds raised will be put, and the risk associated with the securities.

risk

volatility

suitability

A registrant's major concern in making investment recommendations. All information about a client and a security must be analyzed to determine if an investment is suitable for the client in accounts where a suitability exemption does not apply.

Volatility

Measures the periodic change in returns in relation to the average or mean return- the greater the change, the more volatile. More volatile = more risky

ask price

the lowest price at which a seller will accept for the financial instrument being quoted

Autorite des marches financiers (AMF)

the body that administers the regulatory framework surrounding Quebec's financial sector: securities sector, the financial institution sector and the compensation sector

bid price

highest price at which a buyer will pay for the financial instrument being quoted

capital

To an economist it means machinery, factories, and inventory required to produce other products. To an investor it may mean the total of financial assets invested in securities, a home and other fixed assets, plus cash.

chambre de la sécurité financière

responsible for setting and monitoring continuing education requirements and for enforcing a code of ethics in the province of Quebec

dealer market

a market in which securities are bought and sold over the counter in which dealers act as principals when buying and selling securities for clients. Also referred to as the unlisted market.

derivatives

a security whose price is determined by the value of some other security or asset. E.g. an option or a future

equities

investments that provides an ownership stake in the company

financial intermediaries

suppliers and users of capital access the markets through the chartered banks, trust companies, life insurance companies, and investment dealers. These financial intermediaries can be either deposit taking or non deposit taking institutions.

fixed income securities

securities that generate predetermined periodic interest or dividend income. They include government and corporate bonds, mortgages, and preferred shares.

Initial Public Offering (IPO)

an issuing company that has never issued shares before. It requires an estimate of an appropriate offering price for the shares.

Investment Industry Regulatory Organization of Canada (IIROC)

Canadian investment industry's national self regulatory organization. Carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on canadian equity marketplaces.

Mutual Fund Dealers Association (MFDA)

The self regulatory organization that regulates the distribution (dealer) side of the mutual fund industry in Canada

open-end fund

a mutual fund whose shares are issued and redeemed by the investment company at the request of investors

over-the-counter (OTC) market

large computer network through which investment dealers negotiate transactions among themselves. Most bonds trade OTC but shares of some small and large companies can also be OTC

primary market

the market for newly issued and underwritten securities that have never been offered to the public

secondary market

market for securities that have previously been sold by the issuer. When an investor purchases a security through a broker, this is said to be a secondary market transaction

Securities

Paper certificates or electronic records that evidence ownership of equity (stocks) or debt obligations (bonds)

Source of Capital

savings from retail, institutional, and foreign investors

stock exchange

a marketplace where buyers and sellers of securities meet to trade and where prices are established according to supply and demand

Underwriting

occurs when a new issue is purchased by an investment dealer and the dealer bears the risk that the issue will be sold at the desired price. In a best efforts underwriting, the dealer does not assume the risk of guaranteeing that all or any part of an issue will be sold

balance of payments

accounts maintained by a country to record international activities such as foreign trade and international borrowing and lending. Comprise two separate accounts the current account and the capital account

Bank rate

The minimum rate at which the Bank of Canada makes short-term advances to the chartered banks, other members of the Canadian Payments Association and investment dealers who trade in the money market.

Basis Point

A unit equal to 1/100th of 1%

Consumer Price Index (CPI)

a measure of the average of the prices paid for a basket of goods and services compared to a base year

coincident indicators

economic indicators that behave similarly and simultaneously with the economy. Includes GDP, personal income, and retail sales

contractionary policy

A monetary policy that decreases the money supply, usually with the intention of raising interest rates and combating inflation.

cost-push inflation

increase in the costs of production resulting in inflation

current account

net trade of goods and services, net payments of interest abroad and net transfers between countries

cyclical unemployment

rises during economic downturns and falls when the economy improves

Deflation

a decrease in the general price level of goods and services. Inflation rate less than 0%

demand-pull inflation

when demand is greater than supply and inflation results

Disinflation

a decline in the rate at which the prices rise. Prices still rising but at a slower pace

expansionary policy

seeks to expand the money supply to encourage economic growth or combat inflationary price increases

fiscal policy

a deliberate action by a government to influence the economy through changes in either spending or taxation initiatives

frictional unemployment

the result of labour turnover in a normal, healthy economy, where people enter and leave the workforce and jobs are created and terminated

Gross Domestic Product (GDP)

the market value in current dollars of all goods and services produced in a country within a year. Does not include goods and services produced by Canadians abroad

labour force

Sum of the population aged 15 years and over who are either employed or unemployed

lagging indicators

an economic indicator that measures the change after an economy has passed through a phase in the business cycle. unemployment, private sector equipment spending, labour costs, inflation rate, business loans and related interest rates.

leading indicators

an economic indicator that helps to determine which phase of the business cycle is likely to occur in the future. Stock prices, money supply, housing starts, manufacturers new orders, average hours worked per week

monetary aggregates

An aggregate that measures the quantity of money held by a country's households, firms and governments. It includes various forms of money or payment instruments grouped according to their degree of liquidity, such as M1, M2 or M3.

monetary policy

the regulation of the money supply and available credit for the purpose of promoting sustained economic growth and price stability

natural unemployment rate

at this level the economy is thought to be operating at full capacity

nominal GDP

GDP measured in current prices

nominal interest rate

does not take into account the effects of inflation

open market operations

method through which the Bank of Canada influences interest rates by trading securities with participants in the money market.

output gap

difference between real GDP and potential GDP

overnight rate

Interest rate where Canadian financial institutions lend each other money on an overnight basis

Payments Canada

an organization that establishes, operates, and maintains systems for the clearing and settlement of payments among member financial institutions on behalf of their clients.

Phillips Curve

A graph that shows the relationship between inflation and unemployment. Unemployment can be reduced in the short run by increasing the price level at a faster rate. Conversely inflation can be lowered at the cost of possibly increased unemployment and slower economic growth

Potential GDP

goods and searches an economy is capable of producing when its existing inputs of labour, capital, and technology are fully employed at their normal levels of use

Real GDP

the dollar value of all goods and services in a given year valued at prices that prevailed in some base year

real interest rate

nominal rate of interest minus inflation

sacrifice ratio

describes the extent to which GDP must be reduced with increased unemployment to achieve a 1% decrease in the inflation rate

seasonal unemployment

occurs as a result of industries where workers are not needed in certain parts of the year. e.g. golf course

soft landing

economic growth slows sharply but does not turn negative

structural unemployment

mismatch between demand in labour market and the skills and locations of workers seeking employment.

capital account

flow of payments between countries to finance the acquisition of assets such as stocks, bonds, and real estate