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CSI
Canadian Securities Course
CSC2
Canadian Securities Course Exam 2 Questions and Answers

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Viewing page 5 out of 7 pages

Viewing questions 41-50 out of questions

Questions # 41:

The principle of retraction in retractable preferred shares is identical to what other security?

Options:

Callable preferred shares.

Retractable common shares

Redeemable preferred shares.

Retractable bonds and debentures

Answer

Explanation

The principle of retraction in retractable preferred shares allows the shareholder to force the issuing company to redeem the shares for cash at a predetermined price on or after a specified date. This feature is identical to retractable bonds and debentures, which give the bondholder the option to require the issuer to repay the principal before maturity.

A. Callable preferred shares: Callability benefits the issuer, not the holder, and is not similar to retraction.

B. Retractable common shares: Such securities are not common in the market and are not comparable to retractable preferred shares.

C. Redeemable preferred shares: Redemption is at the issuer’s discretion, unlike retraction, which is at the holder’s discretion.

[Reference:CSC Volume 1, Chapter 8, "Preferred Shares – Retractable Preferred Shares" explains the retraction feature and its similarity to retractable bonds., ]

Questions # 42:

What event would trigger an amendment of the account application while monitoring a portfolio?

Options:

When a new market cycle is formed.

When the advisor ' s views are influenced by a recent news headline.

When a client ' s job situation has changed.

The annual client meeting.

Answer

Questions # 43:

What obligation dues an IA have when communicating information about a preliminary prospectus to prospective investors?

Options:

The IA must ensure 3 proxy is mailed to the investors to vote for approval or disapproval of the offering.

The IA must provide a greensheet

The IA must make a tombstone advertisement.

The IA mum record the names addresses of those who have requested and received a preliminary prospectus

Answer

Explanation

Investment advisors (IAs) are required to record the names and addresses of all individuals who have requested and received a preliminary prospectus. This ensures compliance with securities regulations and provides a record for follow-ups and potential disclosures related to the offering.

A. The IA must ensure a proxy is mailed: Proxy voting is related to shareholder meetings, not the prospectus distribution.

B. The IA must provide a greensheet: A greensheet is used internally by investment firms, not distributed to clients.

C. The IA must make a tombstone advertisement: Tombstone advertisements are created by the issuer, not the IA.

[Reference:CSC Volume 1, Chapter 12, "Preliminary Prospectus – IA Obligations" explains the compliance requirements during prospectus distribution., ]

Questions # 44:

Which would most likely be a violation of the Know Your Client Duty of Care guideline?

Options:

Not verifying if a proposed transaction is suitable for a client

Borrowing a client ' s excess funds held in their account

Failing to disclose a conflict of interest to the client

Not changing account information when the client ' s needs change

Answer

Questions # 45:

The price of FMA common stock is set to break through its 200-day moving average line from below on heavy volume. How might a technical analyst interpret this information?

Options:

A buy signal as FMA ' s price is set to rise.

A sell signal as FMA ' s price is set to fall.

The upward price trend is reversing.

The declining price trend will continue.

Answer

Questions # 46:

Kenji is ready to place a large trade in a European small-cap ETF, traded on the TSX. It is 10 a.m. in Toronto, where Kenji is located. What trading tip can Kenji use to protect his trade from sudden price movements?

Options:

Place his trade by executing it in small portions at a time.

Place his trade when a trading halt is issued for any underlying ETF holding.

Place his trade close to the end of the TSX ' s regular trading hours.

Place his trade by using a limit order.

Answer

Questions # 47:

What action must an investment advisor take when submitting a trade ticket for a short sale?

Options:

Verify the client can borrow the shares.

Mark the sell-order ticket as a short sate

Obtain minimum margin amount from client

Mark it as a margin order

Answer

Explanation

When submitting a trade ticket for a short sale, an investment advisor must mark the sell-order ticket as a short sale. This ensures compliance with regulatory requirements and informs the broker and exchange that the sale involves borrowed shares. Marking the order appropriately helps maintain transparency and enables monitoring for potential market manipulation.

A. Verify the client can borrow the shares: The responsibility for ensuring share availability lies with the broker, not the advisor.

C. Obtain minimum margin amount from client: This is done separately as part of the account setup and transaction process, not when submitting the trade ticket.

D. Mark it as a margin order: Short sales involve margin, but the ticket must specifically indicate " short sale " rather than just " margin. "

[Reference:CSC Volume 1, Chapter 9, "Short Selling – Trade Requirements" details the process and importance of marking short-sale tickets., ]

Questions # 48:

A young couple is looking to buy a house in the near future with a down payment. What type of investment should they consider for their portfolio?

Options:

Corporate bonds

Stable bank Stocks

Diversified balanced portfolio.

Government Treasury bills

Answer

Explanation

For a young couple planning to buy a house in the near future, the primary investment consideration is safety and liquidity. Government Treasury bills (T-bills) are most suitable for the following reasons:

Safety :

T-bills are backed by the government and are considered virtually risk-free investments. For individuals seeking to preserve capital for a short-term goal like a home down payment, this feature is critical.

Liquidity :

T-bills are highly liquid instruments, allowing the couple to access their funds quickly if needed. They trade in active secondary markets, ensuring that they can sell their holdings with minimal price impact.

Short-Term Nature :

T-bills have maturities ranging from a few days to a year, making them ideal for short-term investment horizons like a pending house purchase.

Avoiding Risk :

Investments like corporate bonds, bank stocks, or balanced portfolios carry higher risk due to potential market volatility or credit issues, which are unsuitable for a short-term goal.

References to Study Documents :

Volume 1, Chapter 6, " Fixed-Income Securities: Features and Types, " details the safety and liquidity of Treasury bills.

Volume 2, Chapter 16, " The Portfolio Management Process, " emphasizes aligning investment objectives with time horizons and risk tolerance.

Questions # 49:

Tracy invests $12,000 in a five-year PPN linked to the S & P/TSX 60, with a participation rate of 75% and a performance cap of 27%. On the issue date of the PPN, the index level was 825, and at the PPN ' s maturity, the level was 1,200. How much will Tracy receive upon the PPN ' s maturity?