Canadian Securities Course

®
Condensed slides for study review

Developed by Dazia Consulting Inc.

Chapter 1

The Canadian Securities Industry

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 1 2 3 4 5
Lesson 1. Lesson 2. Lesson 3. Lesson 4. Lesson 5.
The Canadian The Capital Market The Canadian Overview of Economic Policies
Securities Market Regulatory Economic
Environment Principles

COURSE OUTLINE
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Structure of the Canadian Securities Industry
Auction markets Exchanges TSX, Montreal etc

Over the Counter or

Markets Bond market
OTC or Unlisted

Clearing and CDS Clearing and

Suppliers of capital
Settlement depository Services

Investment Industry
Regulatory
Investment Dealers All securities
Organization of
Canada (IIROC)

Mutual Fund Dealers Mutual fund dealers

Users of Capital
(MFDA) only

Self Regulatory Canadian Securities

Training
Organizations institute (CSI)

Canadian Investor Investment guarantee

Protection Fund (CIPF) (up to $1m)

E.g. Ontario Securities

Provincial Regulators
Commission

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Investment Dealers

Investment
Banks
dealers
Agents Principal
Credit Trust
union companies Earn a
Earn profit when
they buy and sell
commission on
securities at a
sale
markup
Insurance
companies
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 Functions of Financial Intermediaries

Transfer capital from suppliers to users

through underwriting
• Primary market = from corporation direct to
investor (initial public offering)

Maintain Secondary market (Auction &

OTC)
• Secondary market = between investors &
investors
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 Types of Investment dealers

Retail Firms Institutional Firms Integrated firms

Self-directed brokers or
Full Service dealers (e.g.
Discount brokers (RBC Investment Boutiques
TD Waterhouse, Scotia Deal both in retail &
Action Direct, Qtrade, Pension Firms Mutual funds specialize in a particular
McLeod, BMO Nesbitt institutional
Questrade, BMO segment
Burns) = offer advice
Investorline = no advice

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 Organization within Firms
Organization
chart

Senior
Front Office Middle office Back Office
management

President, Portfolio Trade

Compliance
Chairman etc management settlement

Trading Accounting

Sales Audits

Marketing Legal

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Role of financial intermediaries

=> Underwrite new

securities in a primary
market

=> Buy securities with

1. Principal anticipation to resell them at
profits

=> In secondary market, buy

securities in block, keep in
inventory and resell to its
Investment clients to make profit from
dealer/houses spread

=> In secondary market, act

on behalf of clients in
buy/sell transactions

2. Agent/Broker

Source of income: Main: 35%

from commission

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Other financial intermediaries

1. Bank
• Schedule I: Canadian Bank, no more than 20% shareholding of foreign investors, full range of services
• Schedule II: Foreign bank with branches, full range of services, but normally focus on commercial banking
• Schedule III: Foreign bank branch, limited services due to single branch presence

2. Trust company:
• Similar services as bank, plus being a trustee for individual estate

3. Credit union:
• Similar services as bank but for members/social groups

4. Insurance:
• Life, Non-life products, health & disability, term & whole life, pension plans, RRSP, Annuities, segregated funds,
home insurance, auto insurance, commercial business, re-insurance
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 Other financial intermediaries

5. Investment funds

• Closed ended funds (5%) => locked in funds

• Open ended funds (95%) => issue shares on business days

6. Alberta Treasury Branches (ATB Financial)

• Formed in 1938, became a crown corporation in 1997, provides full service to Albertans

7. Consumer Finance companies

• Direct cash loans to consumers

8. Sales Finance Companies

• Purchase installment sales contracts for cars, appliances etc

9. Pension plans

• Private company pension plans

• Canada pension Plan
• QPP

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 Financial Market trends

Financial Technology
• Online loans
• Electronic wallets
• Financial planning software

Robo-Advisors
• Portfolios created based on algorithms and modern portfolio theory,
and balanced
• Online or Telephone consultation
• Mainly use Exchange trade funds
• Transparency of fee

Shifting Demographics
• More age 65+ investors

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