p.6
Financial Compliance and Market Surveillance
What is the right of withdrawal for purchasers of mutual funds in Canada?
Purchasers can withdraw from an agreement within two business days after receiving the fund facts document.
p.6
Financial Compliance and Market Surveillance
What should be done if a client wishes to exercise their right of rescission?
Contact the mutual fund dealer’s legal or compliance department and follow procedures.
p.7
Standards of Conduct for Sales Representatives
What must mutual fund representatives understand about the products they recommend?
The structure, features, fees, and risks of the products.
p.9
Standards of Conduct for Sales Representatives
What is required before engaging in outside business activities?
Approval from the Branch Compliance Officer (BCO) or the Regional Compliance Officer (RCO).
p.12
Telemarketing Regulations and National Do Not Call List
When do the Rules and National DNCL provisions not apply?
To calls to existing clients regarding servicing an account or normal communications between a sales representative and a client.
p.13
Canada's Anti-Spam Legislation (CASL)
What must all electronic marketing messages include according to CASL?
Clear identification of the sender, contact information, and an unsubscribe mechanism.
p.13
Canada's Anti-Spam Legislation (CASL)
What methods can be used to obtain electronic consent?
Through a toll-free number, over the internet, or other documented methods.
p.10
Standards of Conduct for Sales Representatives
What should be periodically reviewed to ensure proper behavior in mutual funds?
KYC files to ensure they remain current and asset allocations are suitable.
p.10
Standards of Conduct for Sales Representatives
What should be done with cautions about unsuitable trades?
They should be acknowledged and signed by the client and the sales representative.
p.10
Cybersecurity and Risk Management in Financial Services
What must mutual fund representatives comply with regarding cybersecurity?
Dealers’ policies and procedures related to cybersecurity and incident prevention.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is the purpose of the Financial Action Task Force (FATF)?
To establish international standards and improve national legal systems in the fight against money laundering.
p.12
Telemarketing Regulations and National Do Not Call List
Who is subject to the Rules when engaged in telemarketing?
Anyone working for a mutual fund dealer and organizations conducting telemarketing on behalf of an organization.
p.13
Canada's Anti-Spam Legislation (CASL)
What does Canada's Anti-Spam Legislation (CASL) regulate?
The sending of commercial electronic messages (CEMs).
p.7
Client Identification and Recordkeeping Requirements
What form must be completed to fulfill the 'Know Your Client' (KYC) obligation?
The KYC form, which must be periodically reviewed and updated.
p.10
Client Focused Reforms and Conflict of Interest Rules
What was the intent of the Client Focused Reforms?
To align the interests of securities registrants with those of their clients.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What does the FATF publish regarding jurisdictions?
A list of 'high-risk and non-cooperative' jurisdictions with inadequate AML/ATF financing regimes.
p.12
Telemarketing Regulations and National Do Not Call List
What is the definition of telemarketing according to the CRTC?
The use of telecommunications facilities to make unsolicited telecommunications for the purposes of solicitation.
p.11
Client Focused Reforms and Conflict of Interest Rules
What requirement was introduced by the CSA CFRs regarding conflicts of interest?
To address material conflicts of interest in the best interests of the client.
p.3
Client Identification and Recordkeeping Requirements
What type of documents must be viewed for identity verification?
Original documents that have not expired.
p.4
Financial Compliance and Market Surveillance
What must Canadian securities dealers report monthly?
They must report to their principal supervisory or regulatory body concerning the possession or control of property.
p.4
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is required if no clients are considered designated persons for a month?
A 'Nil' report must be filed with the principal regulator or CIRO.
p.2
Client Identification and Recordkeeping Requirements
What must dealer members do if they cannot establish a client's identity?
They are prohibited from opening an account for that client.
p.6
Standards of Conduct for Sales Representatives
What should be done if a client makes an unreasonable request?
Address the complaint fairly, but recognize that the client is not always right.
p.10
Standards of Conduct for Sales Representatives
How long are new sales representatives subject to enhanced scrutiny?
For the first six months.
p.7
Standards of Conduct for Sales Representatives
What is the relationship between the firm's product approval and the representative's obligations?
The firm's approval is not enough; representatives must understand the product's suitability for clients.
p.9
Standards of Conduct for Sales Representatives
What should be disclosed to avoid conflicts of interest?
All outside business relationships with clients.
p.12
Telemarketing Regulations and National Do Not Call List
What must mutual fund dealers comply with when using the phone for solicitation?
They must comply with the broader framework of the Rules.
p.9
Standards of Conduct for Sales Representatives
What is prohibited regarding joint accounts with clients?
Employees should not open a joint account with a client.
p.4
Financial Compliance and Market Surveillance
What is the reporting requirement for cross-border currency and monetary instruments?
All persons and entities must report the importing and exporting of currency and monetary instruments of $10,000 or more to the CRA.
p.11
Client Focused Reforms and Conflict of Interest Rules
What must representatives do if a conflict of interest cannot be adequately addressed?
They must avoid the conflict.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the penalties for failing to report a suspicious transaction?
Up to five years imprisonment, a maximum fine of $2 million, or both.
p.6
Financial Compliance and Market Surveillance
What is the right of rescission in mutual fund purchases?
It allows purchasers to seek rescission or damages if offering documents contain a misrepresentation.
p.9
Standards of Conduct for Sales Representatives
What should be ensured to maintain the security of information within the branch?
The flow of information must be secure to prevent inadvertent access to insider information.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is the deadline for filing reports under the UN Reporting System?
No later than the 15th day of each calendar month, unless it falls on a weekend or holiday.
p.7
Standards of Conduct for Sales Representatives
How should client information be used according to the standards of conduct?
For the benefit of the client only, maintaining arm’s-length relationships.
p.1
Financial Compliance and Market Surveillance
What does CIRO monitor to ensure proper supervision of client accounts?
Policies and procedures in place by dealer members.
p.1
Financial Compliance and Market Surveillance
What does CIRO enforce in relation to trading activities?
Rules and regulations covering sales, business, financial practices, and trading activities.
p.4
Financial Compliance and Market Surveillance
Are there any restrictions on the amount of currency that can be imported or exported from Canada?
No, there are no restrictions, but amounts of $10,000 or more must be reported.
p.4
Financial Compliance and Market Surveillance
What types of instruments are included in the definition of monetary instruments?
Stocks, bonds, debentures, treasury bills, bank drafts, cheques, promissory notes, traveler's cheques, and money orders.
p.4
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is the role of the Office of the Superintendent of Financial Institutions (OSFI) regarding PCMLTFA?
OSFI has no legislated role but subscribes to core principles of supervision and assesses banks' policies to prevent criminal use.
p.2
Client Identification and Recordkeeping Requirements
What is a foreign politically exposed person (PEP)?
A person who holds or has held an office in or on behalf of a foreign state.
p.2
Client Identification and Recordkeeping Requirements
What additional information must dealer members obtain from clients?
The client's date of birth.
p.8
Standards of Conduct for Sales Representatives
What must sales representatives avoid regarding outside deals?
Engaging in outside deals that appear to involve the mutual fund dealer.
p.8
Standards of Conduct for Sales Representatives
How should sales representatives maintain their personal integrity?
By keeping their personal business affairs confidential.
p.7
Standards of Conduct for Sales Representatives
What must all recommendations be based on?
An analysis of the KYC information, proposed transactions, and the client’s account.
p.9
Standards of Conduct for Sales Representatives
What should be done with offers of gratuities or compensation from clients?
Discuss with the BCO and typically decline unless truly nominal.
p.5
Financial Compliance and Market Surveillance
What is the role of FICOM in relation to FINTRAC?
FICOM provides FINTRAC with compliance assessment results and receives information for risk assessment.
p.9
Standards of Conduct for Sales Representatives
What type of trading authorization is not allowed?
Discretionary trading authorization, unless the representative is registered as an advising representative.
p.2
Anti-Money Laundering and Anti-Terrorist Financing Laws
What must dealer members report under PCMLTFA?
They must report attempted transactions related to money laundering or terrorist financing offences.
p.2
Client Identification and Recordkeeping Requirements
What must a dealer member do if they identify a client as a foreign PEP?
They must establish the source of funds and obtain senior management approval to keep the account open within 30 days.
p.8
Standards of Conduct for Sales Representatives
What should a sales representative do if a client wants a product that holds its value when interest rates rise?
Inform the client that only a money market mutual fund meets this requirement.
p.8
Standards of Conduct for Sales Representatives
What should a sales representative do if offered a business opportunity by a client?
Decline the offer or obtain head office approval before entering into the deal.
p.10
Cybersecurity and Risk Management in Financial Services
What is a significant risk to the mutual fund industry?
Cyber risk due to the frequency and complexity of cyber breaches.
p.9
Standards of Conduct for Sales Representatives
What should employees not do with client property?
Act as a personal custodian or hold client property or mail.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
Why is international cooperation necessary in combating money laundering?
Individual jurisdictional efforts have proven insufficient due to global organized crime and terrorism.
p.12
Telemarketing Regulations and National Do Not Call List
What is required for a mutual fund dealer to contact a potential client?
The potential client must provide express consent to be contacted.
p.11
Client Focused Reforms and Conflict of Interest Rules
How has CIRO aligned its conflict-of-interest rules?
By aligning its best-interest standard with the CSA’s CFRs.
p.12
Telemarketing Regulations and National Do Not Call List
What factors are considered when determining penalties for violations?
Nature of the violation, number and frequency of complaints, relative disincentive, and potential for future violations.
p.2
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is required of dealer members regarding property owned by terrorist groups?
They must disclose such property to the RCMP and CSIS and file a report with FINTRAC.
p.2
Client Identification and Recordkeeping Requirements
What actions must dealer members take regarding domestic PEPs?
They must perform a risk assessment and determine the source of funds, obtaining senior management approval within 30 days if high risk is identified.
p.2
PCMLTFA and FINTRAC Responsibilities
What must wholly owned subsidiaries in non-FATF countries do?
They must develop and implement policies consistent with PCMLTFA requirements, unless it contravenes local laws.
p.6
Standards of Conduct for Sales Representatives
What standards of conduct are expected for clients of a branch?
Clients are entitled to the highest standards of service and ethical conduct.
p.7
Standards of Conduct for Sales Representatives
What is the primary responsibility of sales representatives regarding client information?
To make a diligent effort to learn the client’s essential and current financial and personal circumstances.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What must individuals in Canada disclose to FINTRAC, the RCMP, and CSIS?
The existence of any property they believe is owned or controlled by designated persons.
p.7
Standards of Conduct for Sales Representatives
What should a sales representative do if a trade is found unsuitable?
Advise against proceeding with the order and recommend suitable alternatives.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the three choke points identified by the FATF in the money laundering process?
Entry of cash into the financial system, transfers to and from the financial system, and cross-border flows of cash.
p.1
Financial Compliance and Market Surveillance
What is the role of market surveillance in CIRO's functions?
Real-time monitoring of trading activity and ensuring compliance with timely disclosure of information.
p.12
Telemarketing Regulations and National Do Not Call List
What are the penalties for violations of the National DNCL?
Up to $1,500 for individuals and up to $15,000 for corporations.
p.12
Telemarketing Regulations and National Do Not Call List
What does express consent include?
Written consent signed by the person or oral consent verified by a third party or audio recording.
p.4
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the three key areas of focus for OSFI's AML/ATF assessments?
1. Compliance with PCMLTFA policies and procedures. 2. Framework for reporting designated transactions to FINTRAC. 3. Adequacy of controls and risk management processes.
p.4
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the requirements imposed by CSA Staff Notice 31-352 for registrants and exempt international dealers?
They must review records for property owned by designated persons, report findings monthly, and freeze property if a designated person is identified.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What must a dealer member do once there are reasonable grounds to suspect a transaction is related to money laundering?
Send a suspicious transaction report to FINTRAC as soon as practicable.
p.13
Standards of Conduct for Sales Representatives
What is the responsibility of a Branch Compliance Officer (BCO) regarding CASL?
To ensure that sales representatives comply with CASL rules.
p.8
Standards of Conduct for Sales Representatives
How must client information be treated?
As confidential and not disclosed without the client's written permission.
p.9
Standards of Conduct for Sales Representatives
What must all branch employees avoid using?
Insider information, such as details about a planned takeover or material lawsuits.
p.8
Standards of Conduct for Sales Representatives
Why is discussing personal investment holdings with clients considered improper?
It could unduly influence a client to make unsuitable purchases.
p.5
Financial Compliance and Market Surveillance
What type of agreements do OSFI and FINTRAC have?
A memorandum of understanding (MOU) for exchanging information about money laundering and terrorist financing.
p.1
Financial Compliance and Market Surveillance
What is one of the primary functions of CIRO as a regulator?
Monitors dealer members to ensure they have enough capital to carry out their operations.
p.1
Anti-Money Laundering and Anti-Terrorist Financing Laws
What type of transactions must be reported under the PCMLTFA?
Suspicious financial transactions and cross-border movements of currency.
p.1
Anti-Money Laundering and Anti-Terrorist Financing Laws
Who can receive information from FINTRAC regarding suspicious transactions?
Law enforcement agencies, Canada Revenue Agency (CRA), Canadian Security Intelligence Service (CSIS), and Immigration Canada.
p.2
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the requirements for AML/ATF compliance policies?
They must be written, up to date, approved by a senior officer, and audited every two years.
p.13
Canada's Anti-Spam Legislation (CASL)
What are the potential penalties for non-compliance with CASL?
Criminal charges, civil charges, personal liability for company officers and directors, and penalties up to $10 million.
p.6
Financial Compliance and Market Surveillance
What is required of branch staff regarding the delivery of fund facts?
They must ensure that investors receive the fund facts before accepting a purchase instruction.
p.10
Standards of Conduct for Sales Representatives
What is required from new sales representatives regarding compliance?
They must certify compliance with all policies and procedures and review product updates.
p.10
Client Focused Reforms and Conflict of Interest Rules
What initiative was released by the CSA on October 3, 2019?
Client Focused Reforms (CFR).
p.12
Telemarketing Regulations and National Do Not Call List
What does the CRTC define as 'solicitation'?
Selling or promoting a product or service, or soliciting money or money’s worth, directly or indirectly.
p.1
PCMLTFA and FINTRAC Responsibilities
What does the PCMLTFA require from entities engaged in activities susceptible to money laundering?
Recordkeeping and client identification requirements.
p.12
Telemarketing Regulations and National Do Not Call List
What happens if a mutual fund dealer has received an inquiry from a prospective client in the last six months?
The sales representative may be permitted to call to re-establish contact or inform them of new developments.
p.3
Client Identification and Recordkeeping Requirements
What must dealer members record for every new account opened?
The intended use of the account.
p.3
Client Identification and Recordkeeping Requirements
What is required before conducting transactions other than an initial deposit?
Verification of the individual's identity.
p.11
Client Focused Reforms and Conflict of Interest Rules
What are the obligations of individual representatives regarding conflicts of interest?
They must report conflicts to their firm promptly.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What defines a 'suspicious' transaction under the reporting regulations?
Reasonable grounds exist to suspect a money laundering offence.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the penalties for willful blindness in failing to report a suspicious transaction?
A fine of up to $2 million, imprisonment for up to five years, or both.
p.13
Canada's Anti-Spam Legislation (CASL)
What type of consent is required to send CEMs under CASL?
Either express 'opt-in' or implied consent.
p.6
Financial Compliance and Market Surveillance
What happens if a purchaser exercises their right of withdrawal?
They are entitled to receive the original purchase price back, and any load commissions are returned.
p.8
Standards of Conduct for Sales Representatives
What should sales representatives refrain from discussing?
Client information with anyone outside the mutual fund dealer.
p.8
Standards of Conduct for Sales Representatives
What type of behavior must sales representatives avoid?
Behavior that could improperly influence a client.
p.9
Standards of Conduct for Sales Representatives
What must branch employees avoid to prevent conflicts of interest?
Engaging in conflict-of-interest situations, whether real or perceived.
p.10
Client Focused Reforms and Conflict of Interest Rules
How has CIRO responded to the CSA's CFR amendments?
CIRO harmonized its implementation timelines and amended its rules for consistency.
p.1
Anti-Money Laundering and Anti-Terrorist Financing Laws
What agency was established by the PCMLTFA?
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
p.12
Telemarketing Regulations and National Do Not Call List
What is the key exemption in the regulation for mutual fund dealers?
Existing business relationships formed by voluntary, two-way communication.
p.11
Client Focused Reforms and Conflict of Interest Rules
What must the disclosure of conflicts of interest include?
Description of the nature and extent of the conflict, potential impact on the client, and how it will be addressed.
p.11
Client Focused Reforms and Conflict of Interest Rules
What does Part 13 of NI 31-103 require from registered firms and individuals?
To identify, address, and disclose material conflicts of interest.
p.3
Client Identification and Recordkeeping Requirements
What must dealer members consider regarding account transfers before identity verification is complete?
The risk that the client will be unable to effect transactions and the possibility of layering operations.
p.4
Anti-Money Laundering and Anti-Terrorist Financing Laws
What must be done if a client is identified as a designated person?
The property must be frozen, and details reported to the RCMP and CSIS, with a possible report to FINTRAC.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is 'willful blindness' in the context of reporting suspicious transactions?
Being aware that a situation should be investigated but failing to do so to protect a business deal.
p.8
Standards of Conduct for Sales Representatives
What documents must sales representatives be familiar with regarding mutual funds?
Fund facts documents, prospectuses, and annual information forms.
p.9
Standards of Conduct for Sales Representatives
What is the potential consequence of using insider information?
It could be illegal and may harm the financial institution's reputation.
p.5
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is considered an offence under the United Nations Act?
Dealing in property of a designated person or contravening the regulations.
p.7
Standards of Conduct for Sales Representatives
What action should be taken if a sales representative asks a client for a personal loan?
Refer the case to the regional compliance officer for disciplinary action.
p.1
Anti-Money Laundering and Anti-Terrorist Financing Laws
What is the purpose of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)?
To detect and deter money laundering and terrorist financing activities.
p.11
Telemarketing Regulations and National Do Not Call List
What requirements do the Unsolicited Telecommunications Rules impose on telemarketers?
Allowable times of day to call, required introductions, record maintenance, and penalties.
p.1
Anti-Money Laundering and Anti-Terrorist Financing Laws
What are the key responsibilities of FINTRAC?
Ensuring compliance with the PCMLTFA, collecting and analyzing information related to money laundering and terrorist financing.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
Who must comply with suspicious transaction reporting requirements?
Regulated financial institutions, securities dealers, currency exchange businesses, and individuals acting as financial intermediaries.
p.3
Anti-Money Laundering and Anti-Terrorist Financing Laws
What protection do dealer members and employees have when reporting suspicious transactions in good faith?
They are protected from criminal and civil legal proceedings.
p.11
Client Focused Reforms and Conflict of Interest Rules
When must firms disclose material conflicts of interest to clients?
At the time of account opening or as soon as possible if identified later.
p.2
PCMLTFA and FINTRAC Responsibilities
What does the definition of securities dealing in PCMLTFA include?
It includes 'other financial instruments', meaning dealers must comply regardless of whether they deal solely in securities.
p.11
Telemarketing Regulations and National Do Not Call List
What regulatory framework was established by the CRTC for telemarketing?
The Unsolicited Telecommunications Rules and the National Do Not Call List.
