Mixed Deck — All CSC Topics Flashcards

SEDAR+ replaced the original SEDAR system in 2023. What is its primary function?

Answer: Serving as Canada's electronic filing and public access system for securities regulatory documents and continuous disclosure filings

SEDAR+ (System for Electronic Document Analysis and Retrieval) is the CSA's modernized online platform for filing and accessing public company disclosure documents such as prospectuses, AIFs, and financial statements.

A client wants to open a joint account with their spouse. Which statement about joint accounts is correct?

Answer: Both account holders must provide KYC information

Both joint account holders must complete KYC requirements since the suitability obligation applies to each person on the account.

A technical analyst identifies a chart pattern for a stock that has been in a strong uptrend. The pattern consists of a peak (left shoulder), followed by a higher peak (the head), and then a lower peak (right shoulder). What does this 'head and shoulders' pattern typically signify?

Answer: A potential reversal of the uptrend to a downtrend

The head and shoulders pattern is one of the most reliable trend reversal patterns in technical analysis. When it appears at the top of an uptrend, it signals that bullish momentum is waning and that the trend is likely to reverse into a downtrend.

Which of the following best describes a 'systematic withdrawal plan' (SWP) offered by mutual funds?

Answer: Regular redemption of a fixed dollar amount or number of units over time

A SWP allows investors to receive regular fixed payments by automatically redeeming fund units, commonly used to generate retirement income.

The Gordon Growth Model is used to value a stock based on:

Answer: A constant growth rate of dividends in perpetuity

The Gordon Growth Model values a stock as the next dividend divided by the difference between the required return and the constant dividend growth rate.

When analyzing a bond's yield to maturity, which assumption is built into the calculation?

Answer: The bond will be held to maturity and all coupons reinvested at the YTM rate

YTM assumes the bond is held to maturity and that all coupon payments are reinvested at the same YTM rate throughout the bond's life.

What happens to a bond's price when prevailing interest rates fall?

Answer: The bond's price rises

Bond prices and interest rates move inversely; when rates fall, existing bonds with higher coupons become more valuable, so prices rise.

When a conflict of interest exists between a registrant and their client, what is the registrant's primary obligation?

Answer: To disclose the conflict to the client and address it in the client's best interest

Registrants must disclose material conflicts of interest to clients and take steps to ensure the conflict is addressed in a manner that prioritizes the client's best interests.

Under the 'Know Your Client' (KYC) obligations, which of the following is NOT typically required information?

Answer: Client's employment history for the past 10 years

KYC requires investment objectives, risk tolerance, time horizon, and financial situation, but does not require a detailed 10-year employment history.

What is the 'superficial loss' rule in Canadian tax law?

Answer: A rule that denies a capital loss when the same or identical property is repurchased within 30 days before or after the sale

The superficial loss rule denies a claimed capital loss if the taxpayer (or an affiliated person) reacquires the same or identical property within 30 days of the sale.

A 'prospectus' is required in the primary market primarily to:

Answer: Provide full, true, and plain disclosure of material facts to investors

A prospectus is a legal document that discloses all material information about a new securities offering so investors can make informed decisions.

Which of the following best describes a callable bond?

Answer: A bond that can be redeemed by the issuer before maturity at a set price

A callable bond gives the issuer the right to redeem the bond before its stated maturity date, typically at a premium to par.

Many players in the market employ margin accounts. Which two of the following selections best exemplify the features of margin accounts? 1. Interest must be paid by the borrower to the dealer 2. Dealer can only sell the securities on margin with the client's approval 3. Margin calls must be covered immediately 4. Margin reduces market risk for the client

Answer: 1 and 4 only

In a margin account, the customer receives a loan from the broker to buy stocks or other financial items. The purchased assets and cash serve as collateral for the loan in the account, which has a recurring interest rate. Because a client is borrowing money through a margin account, the investor has the added risk of having to fund the account when margin calls come.

In Canada, which regulator oversees the registration and conduct of mutual fund dealers?

Answer: CIRO (formerly MFDA)

CIRO (Canadian Investment Regulatory Organization, formerly MFDA) regulates mutual fund dealers and their registered representatives in Canada.

An investor buys mutual fund units at a 5% front-end load. On a $10,000 investment, how much is actually invested in the fund?

Answer: $9,500

A 5% front-end load means $500 (5% of $10,000) is deducted as a sales commission, leaving $9,500 invested in the fund.

What is the role of a 'market maker' on an exchange?

Answer: Continuously quoting bid and ask prices to provide liquidity

Market makers stand ready to buy or sell a security at quoted prices, ensuring continuous liquidity and narrower bid-ask spreads.

What ethical obligation requires an advisor to deal with clients honestly, fairly, and in good faith?

Answer: The fair dealing obligation

The fair dealing obligation requires registrants to deal with clients honestly, fairly, and in good faith, ensuring that client interests are given appropriate consideration in all dealings.

Which of the following would be classified as a current liability on the balance sheet?

Answer: Accounts payable

Accounts payable are obligations due within one year and are therefore classified as current liabilities.

What is the primary purpose of a bond sinking fund?

Answer: To gradually retire a portion of the bond issue before final maturity

A sinking fund requires the issuer to set aside money periodically to retire portions of the bond issue, reducing default risk at final maturity.

What is 'market manipulation' in the context of Canadian securities regulation?

Answer: Engaging in transactions or conduct intended to create a false or misleading appearance of trading activity or market price

Market manipulation involves intentional conduct designed to create an artificial appearance of supply, demand, or market price for a security, which misleads other investors and distorts market integrity.