CSC (AACN) cheat sheet

Securities regulation in Canada is provincial and territorial; the CSA coordinates the provincial and territorial regulators, and no single national securities regulator exists.

CIRO, created in 2023 from the merger of IIROC and the MFDA, is the self-regulatory organization for investment dealers and mutual fund dealers.

CIPF protects client accounts up to $1 million per client per member firm against losses caused by member insolvency; it does not cover market losses or unsuitable advice.

Settlement in Canada moved to T+1 in May 2024; CDS acts as the central clearing and depository service for Canadian securities.

Primary market = new issues sold through a prospectus or a prospectus exemption; secondary market = trading of outstanding securities on exchanges and alternative trading systems.

Common order types: market, limit, stop, stop-limit; time qualifiers include day, good-till-cancelled, and fill-or-kill or all-or-none instructions.

Registration categories include dealing representative, portfolio manager (discretionary authority), associate, and exempt market dealer.

Prospectus exemptions include accredited investor, the $150,000 minimum investment, family and close business associates, and the offering memorandum (with a rescission right).

OBSI is the independent dispute-resolution service for banking and investment complaints; the TSX and TSX Venture Exchange list senior and venture equities, and the Montreal Exchange handles derivatives.

Bond price and yield are inversely related; price = present value of coupons plus present value of principal at the yield, and clean price = dirty price minus accrued interest.

Duration measures price sensitivity: a 1% change in yield changes price by roughly the modified duration; convexity refines the estimate for larger yield moves.

Common shares carry voting rights and a residual claim; preferred shares rank ahead for dividends and assets but generally lack voting rights, and their dividends are declared at the board's discretion.

Mutual fund purchases and redemptions occur at the end-of-day NAV per share; ETFs trade intraday at market prices pulled toward NAV by arbitrage.

Segregated funds are insurance contracts with at least a 75% maturity guarantee and 100% death guarantee, and may offer creditor protection.

Money market instruments mature in one year or less and include treasury bills, commercial paper, bankers' acceptances and short-term GICs.

Liquid alternative mutual funds may use leverage up to three times NAV, short selling and derivatives, and remain redeemable daily.

Structured products such as principal protected notes combine a fixed-income component with a derivative return; both return and credit risk depend on the issuer.

Strip bonds pay no cash before maturity and carry no reinvestment risk, but accrued interest is taxable annually even though no cash is received.

Gordon growth model: P0 = D1 / (k - g); rearranged, k = D1/P0 + g and g = ROE x (1 - payout ratio).

CAPM: required return = Rf + beta x (E(Rm) - Rf); beta measures the stock's sensitivity to market movements.

Valuation multiples: P/E = price/EPS, P/B = price/book value, EV/EBITDA; compare against peers and the stock's own history.

Liquidity ratios: current = current assets/current liabilities; quick excludes inventory. Leverage: debt/equity and interest coverage = EBIT/interest.

Profitability: ROE = net income/equity, ROA = net income/assets, gross margin = gross profit/revenue; DuPont decomposition reveals the drivers.

Performance measures: Sharpe = (Rp - Rf)/standard deviation; Treynor = (Rp - Rf)/beta; Jensen's alpha = Rp - [Rf + beta(Rm - Rf)].

Bond yields: current yield = annual coupon/price; YTM discounts all cash flows to price; yield to call substitutes the call date for maturity.

Technical analysis uses support and resistance, trendlines, moving averages, RSI and MACD; fundamental analysis focuses on earnings, cash flow and ratios.

Option value = intrinsic value + time value; intrinsic value is max(S - X, 0) for a call and max(X - S, 0) for a put.

KYC and suitability require knowing objectives, risk tolerance, time horizon and financial circumstances, with the account reviewed at least annually.

Asset allocation drives most of the variability in portfolio returns; diversification reduces risk when correlations are below 1.

Portfolio beta is the weighted average of component betas; expected portfolio return is the weighted average of component expected returns.

Systematic risk cannot be diversified away; unsystematic risk can be reduced by adding securities with low correlation.

Registered plans: RRSP (deductible, tax-deferred), TFSA (after-tax, tax-free growth), RESP (CESG grants), RRIF (minimum withdrawals), FHSA (first home).

Tax treatment: interest is fully taxable, dividends are grossed up with a dividend tax credit, and only the included portion of capital gains is taxed.

CRM2 requires disclosure of charges and account performance; conflict-of-interest rules require the dealer to put the client's interest first.

Behavioural biases to identify include overconfidence, anchoring, loss aversion, recency bias, herding and mental accounting.

Rebalancing to target weights controls risk drift; the efficient frontier plots the highest expected return available for each level of risk.