CPH
The Canadian Investment Regulatory Organization (CIRO) is the national self-regulatory organization that oversees all investment dealers, mutual fund dealers and trading activity on Canada’s debt and equity marketplaces
Canadian Investment Regulatory Organization
The duty an RR has to a client to ensure that everything ‘reasonably practicable’ is done to protect the client’s assets. This involves devoting the necessary time and attention to be able to make informed decisions
Duty of Care
Ethics
Defined as a set of values, or morals that guide individual behaviour
A legal term that describes a high degree of duty of care. Criteria that may be used to determine whether a fiduciary duty is present in an RR-client relationship include a high degree of reliance by the client on the RR’s advice and the vulnerability of the client. In Quebec, this concept is referred to as a “Contract of Mandate”.
Fiduciary Duty
The cardinal rule in making investment recommendations. All relevant information about every client and every order must be known to ensure that all recommendations made by an IA to clients are suitable
KYC - Know Your Client
A companion obligation of KYC. Before recommending an investment product to a client you must understand how a product is constructed and how it is likely to perform
KYP - Know Your Product
Individuals licensed to provide investment advice. Often referred to as
Investment Advisors.
RR - Registered Representative
An RR’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
Suitability
The values that help define our personal goals, which may be years away. These include accomplishment, security, and social recognition.
End Values
The need to make an ethical decision in the face of two or more choices.
Ethical Dilema
The philosophical position that states there is no such thing as a universal moral principle to govern our behaviour. Everything is relative, situational, negotiable, and personal. Each new situation requires us to redefine our values and actions, with each of us having an equal say on what is right or wrong.
Ethical Relitivism
A test to determine whether you are dealing with a right-versus-wrong issue.
Front Page Test
A test to determine whether you are dealing with a right-versus-wrong issue.
Legal Test
The actions we take today to achieve our goals. Means values include ambition, openness, or competence.
Means Values
A test to determine whether you are dealing with a right-versus-wrong issue.
Mom Test
The rules and habits of conduct of a society established according to perceived standards of right and wrong.
Morals
A value system in which end values and means values mutually reinforce and support each other
Unified Value System
The individual or cultural measures of the worth we place certain ideas and behaviour. They are generally of two types: end and means values.
Values
The securities regulatory authority in each province
Administrator
A fund that protects investors against the insolvency of any dealer member. It is financed by CIRO through quarterly assessments on dealer members
CIPF - Canadian Investor Protection Fund
A forum for the 13 securities regulators of Canada’s provinces and territories to coordinate and harmonize the regulation of the Canadian capital markets.
CSA - Canadian Securities Administrators
A firm that trades in securities in the capacity of an agent or principal and is a member of the Canadian Investment Regulatory Organization (CIRO)
Dealer Member
A stock exchange that has been designated (by the Minister of Finance) as qualified for investments in various
registered plans
Designated Stock Exchange
One of the principles of securities regulation in Canada. This principle entails full, true and plain disclosure of all material facts necessary to make reasoned investment decisions.
Disclosure
Receives, analyzes, assesses and discloses financial intelligence on suspected money laundering, terrorist financing, and threats to the security of Canada
FINTRAC - Financial Transactions Reports Analysis Centre of Canada
An initiative of the RCMP and the federal government to detect, investigate and deter capital markets fraud. The teams comprise police, lawyers and other investigative experts through branches in Toronto, Vancouver, Montreal and Calgary. They are jointly managed by the RCMP and Justice Canada and work closely with securities regulators, such as CIRO, and other federal and provincial authorities
(IMETs) - Integrated Market Enforcement Teams
The association that advances the position of the Canadian investment
industry on regulatory and public policy
issues. As the professional association for the industry, IIAC’s mandate is to promote efficient, fair and competitive capital markets in Canada.
(IIAC) - Investment Industry Association of Canada
An enforcement partnership between the OSC, the RCMP Financial Crime program and the Ontario Provincial Police Anti-Rackets Branch.
JSOT- Joint Serious Offences Team
The process in which the proceeds of crime are converted into legitimate funds using complex transactions, usually through financial institutions
Money Laundering
Formerly the Self-Regulatory Organization that regulated the distribution (dealer) side of the mutual
fund industry in Canada. The MFDA merged with IIROC and became the
Canadian Investment Regulatory
Organization (CIRO).
MFDA - Mutual Fund Dealers Association
These are policies that apply in all Canadian jurisdictions and have the force of a binding rule
National Instruments
Gives issuers a streamlined access to the capital markets in multiple jurisdictions by dealing (and filing documents) with only its Principal Regulator (PR) and meeting the requirements of one set of harmonized laws. What this means is that where an issuer files a prospectus in its principal jurisdiction with its PR, if the PR issues a receipt and the issuer gave notice to the local jurisdictions in which it otherwise would have filed the prospectus as well, the other jurisdictions will automatically issue a
deemed receipt.
Passport System
A distribution of securities, generally by the issuer from its treasury. All primary offerings are distributions which requires the use of a prospectus or the availability of a prospectus exemption
Primary Distribution
Individual registered with the Securities Administrators or Self-Regulatory Organizations
Registrant
A general term referring to the Securities Administrators and Self-Regulatory Organization (SRO) collectively.
Regulator
Redistribution or resale of previously issued securities to the public by a dealer or investment dealer syndicate.
Secondary Distribution
The trading of securities through an exchange or over-the-counter subsequent to a primary offering. The proceeds from trades in a secondary market go to the selling dealers and investors, rather than to the companies that originally issued the shares in the primary market
Secondary Trading
An organization recognized by the Securities Administrators as having powers to establish and enforce industry regulations. Its main functions are to protect investors, maintain fair, equitable and ethical practices in the industry and ensure conformity with securities legislation. In Canada, the SRO is the Canadian Investment Regulatory Organization (CIRO)
SRO - Self Regulatory Organization
A common set of equities trading rules enforced by CIRO and designed to ensure fairness and maintain investor confidence. These rules create the framework for the integrity of trading activity on marketplaces and allow for the competitive operation of exchanges and alternative trading systems (ATSs) in Canada
UMIR - Universal Market Integrity Rules
What is the requirement to understand a client’s situation known as?
KYC
What is the requirement to understand how an investment will perform in various market conditions known as?
KYP
What is the difference between duty of care and fiduciary duty?
Fiduciary duty is a higher standard than duty of care.
Why must Registered Representatives gather information about a client during the discovery process?
- To understand the client’s needs
- To understand the client’s goals
- To make suitable investment recommendations
True or False: People generally follow rules because they must do so.
True
True or False: Compliance with rules is synonymous with ethical behaviour.
False
True or False: A unified value system is one in which end values and means values reinforce each other.
True
True or False: Rules define a minimum level of acceptable conduct.
True
True or False: Dealer members must simply ensure employee compliance with regulations.
False
True or False: All ethical dilemmas involve clear-cut choices.
False
True or False: Ethical relativism places the needs of the community over the needs of the individual.
False
True or False: The first step in the ethical decision making process is to recognize that there is a moral issue.
True
Type of values that help define our personal goals
End Values
Type of values that directly influence the actions we take today to achieve our goals
Means Values
Term used to describe the climate of ethical behaviour where trust can flourish
Tone at the top
List the benefits of an explicit values statement
A sense of common direction for all members and guidelines for their daily behaviour
The social energy that moves an organization into action
A framework for ethical decision-making
A sense of stability and continuity in a rapidly changing environment
What aspects of life to core values influence
Your ability to interpret situations, make decisions, and solve problems
Your perception of other people and your ability to relate well to them
Your perception of success
Your perception of ethical behaviour
What is the focus of ethical relitivism
The individual is the focus of ethical behaviour - individual needs over the needs of the community
When does an ethical dilema arise
When we are faced with two or more choices and we must make an ethical decision
Every ethical decision falls into one of two categories - which are:
- Right vs Wrong Issues
- Right vs Right Issues
List the 4 types of Right vs Right Dilemas
1. Truth vs Loyalty
2. Individual vs Group
3. Short term vs Long term
4. Justice vs Mercy
Type of dilema where the values of honesty or integrity clash with the values of commitment, personal responsibility, or promise keeping
Truth vs. Loyalty
Type of dilema where the rights and values of the few clash with the rights and values of the many
Individual vs. Group
Type of dilema where a conflict arises when immediate needs or desires run counter to future goals or prospects
Short term vs. Long term
Type of dilema where the values of fairness, equity, and righteousness conflict with the values of compassion, empathy, and love
Justice vs. Mercy
List the 8 Steps of an Ethical Decision Making Process
1. Recognize that there is a moral issue
2. Determine whos moral issue it is
3. Gather the facts
4. Test for right vs wrong issues
5. Test for right vs right paradigms
6. Apply the resolution principles
7. Make the decision
8. Reflect on the process
What are the 4 modes of problem solving involved in the resolution principles
1. End-based ethical thinking
2. Rule-based ethical thinking
3. Social contract-based ethical thinking
4. Personalistic-based ethical thinking
This resolution principle demands a cost-benefit analysis to determine who will benefit and who will suffer. It asks that we look at our actions from the point of view of their consequences for the various parties involved. Which solution brings the greatest good for the greatest number of people?
End-based ethical thinking
This resolution principle requires the decision maker to act the way they would want others to act in similar circumstances. It demands that any action taken be turned into a universal principle. Which solution results in a suitable rule for others to follow in similar situations?
Rule-based ethical thinking
This resolution principle aims to create harmonious relationships within a group. The decision maker should ask how his or her actions affect the cohesiveness and the wellbeing of the group. Which solution results in the most harmonious relationships among the various groups?
Social contract-based ethical thinking
This resolution principle requires that you act in a way that is authentic to who you are and that follows the dictates of your conscience. Which solution aligns most closely with my authentic self?
Personalistic-based ethical thinking
What 3 tests should you subject each choice in a set of choices when determining whether you are dealing with a right vs. wrong issue?
1. Legal test
2. Front page test (reputation)
3. Mom test
Step: Recognize that there is a moral issue.
Description:
How can you act with integrity in a difficult situation?
Step: Determine whose moral issue it is
Description:
- Who must take responsibility for making the decision?
- Who must be accountable for the consequences of the decision?
Step: Gather the facts
Description:
- To whom do you owe a duty?
- Is there another way to follow the firm’s policy?
- Is it possible that an exception may be granted regarding the number of accounts?
- How beneficial to you are the day traders’ accounts?
- How does the future planning for your business coincide with the accounts of your clients?
- Are you acting in a professional manner?
- Is the firm acting in a professional manner?
- Is there a solution that allows you to keep your clients while still accommodating the firm's wishes?
Step: Test for right- versus- wrong issues
Description:
Legal test:
Is it illegal to inform any client?
Is what is being asked of you illegal?
Front page test:
Would your reputation suffer if everyone knew how you acted in a specific situation?
Mom test:
Would you feel comfortable telling those whose opinions really matter to you that you did what you did to meet the new criteria imposed by your employer etc?
Step: Test for right- versus- right paradigms
Description:
- Is this a truth versus loyalty dilemma?
- Is this an individual versus group dilemma?
- Is this a short-term versus long-term dilemma?
- Is this a justice versus mercy dilemma?
Step: Apply the resolution principles
Description:
- End-based ethical thinking
- Rule-based ethical thinking
- Social contract-based ethics thinking
- Personalistic-based ethics thinking
Step: Make the decision
Description:
- How does applying the four tests for Right versus Right Paradigms help you in making your decision?
- How does applying the four resolution principles help you in making your decision?
Step: Reflect on the process
Description:
- How did you reach your final decision?
- Is there a better way to approach a similar dilemma in the future?
What does ethics involve?
Ethics involves compliance with both the letter and the spirit of the law.
Personal goals are best described as:
End Values
What is the term used for the beliefs you have that require no justification other than that they are right?
Core Values
“Ethical relativism” states that:
There is no such thing as a universal moral principle that governs our behaviour. Everything is relative, situational, negotiable, and personal.
“Black and white” issues are most often dealt with by:
Codes of Conduct, Codes of Ethics and Compliance Policies
What can change over time, but the change is always driven by standards of right or wrong, and not by personal need.
A person's values
Name the type of dilemma when immediate needs run counter to future goals or prospects.
Short term vs Long term
Carlos’s client mentions insider information that could be highly profitable to an investor. One of Carlos’s other clients is looking for an investment option and would be very grateful if he were to profit from an investment. What type of dilemma is Carlos facing in deciding whether to use the information to benefit his client?
Right vs Wrong - he has the choice of committing an illegal act, or choosing to keep the information confidential, making this a right-versus-wrong dilemma.
Identify the type of dilemma when the rights and values of the few clash with the rights and values of the many.
Individual vs Group
What is the first step in the ethical decision making process?
Determining if the decision represents a moral issue requiring further analysis.