Canadian Securities Course I
Chapter 1 – The Canadian Securities Industry
Structure of the Canadian Securities Industry
CIRO was formally IIROC
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What types of firms are intermediaries?
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What types of firms are intermediaries?
• Banks
• Credit Unions
• Trust Companies
• Insurance Companies
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Types of investment dealers
Retail
• Serves retail investors of all account sizes
• Wealth doesn’t matter; investors with accounts from $1,000 to many
millions are considered retail investors
Self-directed broker Full-service broker
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Types of investment dealers
Institutional
• Serves institutional investors (e.g. pension funds, mutual funds)
• Institutional investors have unique requirements
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Types of investment dealers
Integrated
• Firms that participate in both retail and institutional markets
• The “Big 6” banks are integrated, even though they use different
marketing names for their retail and institutional divisions
Retail Institutional
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Principal
• When acting as a principal, the
investment firm owns the securities
at some point
• Their profit is the difference
between what they paid for it and
what they sell it for (spread)
• Compare with other types of
dealers (e.g. car dealer)
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Agent
• When acting as an agent, the
investment firm does not own the
securities at any point during the
transaction
• Their profit is a commission that
they charge
• Compare with other types of agents
(e.g. real estate agent)
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Test your knowledge
With an Initial Public Offering (IPO), a company raises money by issuing new
securities to the public. ABC Inc. completes an IPO by selling the new
securities to the investment company InvCo, who in turn sells them to the
public.
1. By purchasing the securities from ABC Inc. and then reselling them to the
public, InvCo is acting as:
a) Agent
b) Principal
c) Broker
d) Front Office
Test your knowledge
With an Initial Public Offering (IPO), a company raises money by issuing new
securities to the public. ABC Inc. completes an IPO by selling the new
securities to the investment company InvCo, who in turn sells them to the
public.
2. The InvCo sales and marketing teams that worked with ABC Inc. are part of:
a) Compliance
b) Back office
c) Middle office
d) Front Office
Test your knowledge
Later the same month, InvCo coordinates a sale of $10,000,000 shares of XYZ
Common stock. It was owned by one of InvCo’s institutional clients, and it was
sold to a US pension fund. InvCo charged a percentage of the sale price as
commission for facilitating the trade.
3. In this case, InvCo is acting as:
a) Agent
b) Principal
c) Integrated firm
d) Dealer
Schedule I vs. Schedule II vs. Schedule III
Schedule I Schedule II Schedule III
• Operate retail • Operate retail • Operate offices, not
branch network retail branches
branch network
• Do not accept deposits
• Accepts Deposits • Accepts Deposits • Not eligible for CDIC
• Eligible for CDIC • Eligible for CDIC coverage
coverage coverage • Typically focus on
• Widely held • Owned by foreign corporate/ institutional
banks business
End of chapter 1
1 2 3 4 5
Describe the Distinguish Explain the Distinguish Discuss the trends
relationships among the three difference among the roles affecting the
between the major categories of between of the various financial services
participants in the investment principals and financial industry in Canada
Canadian dealers including agency institutions and globally
securities industry how they are transactions
organized
Image sources
• rbc.com
• nbc.ca
• bmo.com
• td.com
• scotiabank.com
• cibc.com
• cwbank.com
• laurentianbank.ca
• hsbc.ca
• icicibank.ca
• credit-suisse.com
• bankofamerica.com
• bnymellon.com
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Image Source: Adobe Stock
