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28 Cards in this Set
- Front
- Back
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How can you become licensed to sell mutual funds to the public? |
1) Must pass mutual funds course 2) Must go through provinces' national registration data base (NRD) -Must include personal information in NRD (i.e. residential history, work history) |
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How are mutual funds regulated? |
Provincial Basis -Every province in Canada has a securities commission -For Ontario, it is the Ontario Securities Commission (OSC) |
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Ontario Securities Commission (OSC) |
Regulatory body for mutual funds -OSC can license you to sell mutual funds (if you pass mutual funds course, and provide information to NRD) -OSC investigates investor complaints -OSC is a disciplinarian => OSC has the power to give a license and take it away |
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Ontario Securities Commission (OSC) Responsibilities |
1) Disclosure -All the information the client needs before making a buying decision -Prospectus is the disclosure document that informs the client before making the buying decision -Mutual fund company must draft prospectus and send to the OSC (OSC approves/disapproves of the prospectus) |
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Ontario Securities Commission (OSC) Responsibilities (continued) |
2) Registering Body -Register companies and advisors to sell mutual funds to the public 3) Enforcer -Companies and advisors must get approved to sell mutual funds |
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Canadian Securities Administrators (CSA) |
A team of individuals that form policies -Drafted policies must be followed by OSC -Drafted policies are called national instruments => CSA harmonizes all provinces to follow policies |
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What is the point of a regulatory framework in Canada? |
Protection of the investing public -allows mutual funds dealers to earn an income -allows mutual funds dealers to serve in the best interest of their client |
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National Instruments |
P (81-101) -> Prospectus and Disclosure -What you will find in the prospectus M (81-102) -> Mutual Fund Operations -Advertising and sales communications -Fees and how they are calculated S (81-105) -> Sales Practices -Ethics (what you should/should not do) 81-107 -> Reviewing Practices -Reviewed on annual basis -Reviewed so that mutual fund is operating in the best interest of the client |
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Self-Regulatory Organizations (SRO's) |
1) Investment Industry Regulatory of Canada (IIROC) -self-regulatory organization for securities industry 2) Mutual Fund Dealers' Association (MFDA) -self-regulatory organization for mutual fund companies (i.e. Quadrus) |
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Investment Industry Regulatory of Canada (IIROC) |
Protects investing public by making sure advisors are continuously educated (i.e. informed about current products, current trends) -publishes statistical information in a fair way (cannot be misleading) -liason with securities commissions (i.e. making sure advisors are doing the right things) |
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How does the MFDA create a favourable investment environment? |
Through -audits -performing compliance reviews -liaison with securities commissions => provides protection of investing public => serving in the best interest of your client -choosing the correct investments for clients -makes sure KYC form matches the correct investments |
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How do the 4 regulatory bodies work together? |
IIROC and MFDA work with OSC and CSA |
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What is the federal body responsible for? / What should you report to the federal government? |
1) FINTRAC Disclosure 2) Politically Exposed Foreign Person |
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FINTRAC |
Tracks the flow of money in the mutual fund industry -Any cash in $10000 or higher must be reported -A cheque in $10000 does not need to be reported => any suspicious transactions should be reported to FINTRAC -you must provide client records within 30 days and maintain records for 5 years -provide ID upon purchase of mutual funds |
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Providing ID and Mutual Funds |
You must provide ID upon purchase of mutual funds (at time of account opening) -you have a 6 month window to provide ID -If someone opens a mutual funds account for you, the person opening the account must provide ID |
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Politically Exposed Foreign Person |
Extra care should be taken if a person is a politically exposed foreign person -i.e. Government officials, judge, president of a bank or company, military general in a foreign country, and anyone related to these individuals |
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Personal Information Protection and Electronic Documents Act (PIPEDA) |
Establishes rules for how federally regulated private sector organizations (i.e. banks, telecommunication companies) may collect, use or disclose personal information about customers or employees => rules that corporations must follow regarding personal information |
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PIPEDA Personal Information |
Personal information must be: -stored securely -for corporate use and collection |
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Privacy Act |
Imposes obligations on about 150 federal government departments and agencies to respect privacy rights by limiting the collection, use and disclosure of personal information (i.e. crown corporations, Canadian Mortgage Housing Corporation (CMHC), Canada Post, etc.) => rules that the government must follow regarding personal information |
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Rules of the MFDA |
Rule#2 -How we conduct our business =>Keep client information confidential => We must receive permission from the client to share personal information => If there is a conflict of interest, client and the mutual fund company must be informed immediately |
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Referral Arrangements |
Are only allowed with other licensed professionals only (i.e. life insurance and mutual fund professionals) -If there are any fees, they must be recorded and your mutual fund company must be aware of the fees => You must keep a record of everything and the mutual fund company should also keep a record |
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Client-Held Accounts |
Holding a mutual fund account under the client's name -Any changes to the investment requires a written consent from the client -The client could fill out a Limited Trade Authorization (LTA) -1 cheque and 1 transaction form for every fund company the client owns |
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Limited Trade Authorization (LTA) |
Allows mutual fund company to make changes without having the client having to fill out an application for every transaction |
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Nominee-Plan |
Holding a mutual fund account under the dealer's name -Dealer can make changes without the client's consent -Benefit is that it is a consolidated account -Only need to provide 1 cheque and 1 transaction form and receive 1 consolidated statement => higher fees than a client-held account |
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6 Step Planning Process |
1) Establish your client -disclosure agreement signed, tell client we receive commissions from mutual fund company 2) Establishing Objectives and Client Information (i.e. client wants to save for retirement, cottage, what does the client have to achieve objectives?) 3) Clarify Present Status and Identify Problems and Opportunities -preparing solutions and recommendations 4) Develop and Present the Strategic Investment Plan -present findings to the client, recommend investments 5) Implement the plan -client signing application, writing cheque to mutual fund company 6) Monitor/update the plan -minimum review with client is 1 year but 6 months is ideal => #1,2 is the first meeting with the client => #3 is done at the office => #4 is the 2nd meeting with the client |
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3 Objectives of Mutual Funds |
1) Safety (Capital Preservation) 2) Income 3) Growth Leverage (borrow money to invest) |
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Know Your Client (KYC) |
-Age (must be 18 at least) -Time Horizon (when they want to achieve their goals) -Objectives (Safety, income, growth) -Risk Tolerance (i.e. How the client feels about risk and their perception of risk) -Net Worth (i.e. annual income, tax implications and occupation) -Investment Knowledge (i.e. history and experience in investing) |
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Know Your Product (KYP) |
You can only recommend a product if you know EVERYTHING about a specific investment -i.e. how is it taxed? what is the risk? how does it generate returns? |
