CIRO CFO flashcards
CIRO CFO · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- IFRS vs ASPE
- IFRS is principles-based and used by Canadian public companies; ASPE is a separate Canadian framework for private enterprises; US GAAP applies to SEC registrants.
- Accrual basis
- Revenue is recognized when performance obligations are satisfied, not when cash is received; expenses match the period in which related revenue is recognized.
- Fair value hierarchy
- Level 1 uses quoted prices in active markets; Level 2 uses observable inputs other than quoted prices; Level 3 uses unobservable inputs requiring significant judgment.
- Expected credit loss model
- IFRS 9 requires recognizing 12-month expected credit losses at initial recognition and lifetime expected credit losses when credit risk increases significantly.
- IFRS 16 leases
- Lessees recognize a right-of-use asset and a lease liability at present value of future lease payments; short-term and low-value leases are exempt.
- Current ratio
- Current assets divided by current liabilities; measures short-term liquidity and ability to meet obligations due within one year.
- Risk-adjusted capital ratio
- Adjusted capital divided by risk-weighted assets; compared against minimum and early warning thresholds set by the regulator.
- Adjusted capital
- Book equity adjusted for items such as goodwill, intangibles, and non-allowable assets; forms the numerator of the risk-adjusted capital ratio.
- Risk-weighted assets
- Exposures assigned risk weights by class; government securities receive low weights while corporate and equity exposures receive higher weights.
- Operational risk capital
- Capital required for losses from failed processes, people, systems, or external events; added to market and credit risk capital.
- Subordinated debt as capital
- Counts toward capital only if it meets term, subordination, and approval conditions set by the regulator; otherwise excluded.
- Initial vs maintenance margin
- Initial margin is the deposit required to open a position; maintenance margin is the minimum equity that must be maintained afterward.
- Margin call
- Occurs when account equity falls below maintenance margin; the client must deposit funds or the position is liquidated.
- Excess margin
- Account equity minus maintenance margin requirement; represents funds available for withdrawal or new positions.
- Client segregation
- Client securities and cash are held separately from dealer proprietary assets and not commingled; free credit balances are returned on demand.
- Free credit balance
- Client cash not required for margin; must be returned on demand unless the client has agreed otherwise in writing.
- Prohibited practices
- Unauthorized trading, churning, and discretionary trades without written authorization are prohibited; each can trigger disciplinary action.
- Registration categories
- Dealing representative, investment representative, and chief compliance officer; each category has defined permitted activities and supervision requirements.
- KYC and suitability
- Collect client information and ensure recommendations fit the client's objectives, risk tolerance, and financial circumstances before trading.
- Trade confirmation
- Discloses price, commission, and other charges; client statements are provided at least quarterly under dealer member rules.
- Recordkeeping rules
- Client records, order tickets, and communications must be retained for prescribed periods and produced to the regulator on request.
- Complaint handling
- Complaints must be logged, investigated, and answered within defined timelines; unresolved complaints may proceed to arbitration.
- Supervision duties
- Designated supervisors review accounts, trades, and correspondence, with heightened review for new or high-risk accounts.
- Market risk
- Includes equity, interest rate, currency, and commodity risk; measured through VaR, stress testing, and sensitivity analysis.
- Credit risk
- Risk of counterparty default; mitigated by collateral, margin, netting agreements, and credit limits.
- Liquidity risk
- Inability to meet obligations when due; managed through liquid asset buffers and diversified funding sources.
- Operational risk
- Arises from failed processes, people, systems, or external events; managed through controls, incident reporting, and business continuity plans.
- Concentration risk
- Arises when exposures cluster in one issuer, sector, or counterparty; monitored against limits and reported to senior management.
- COSO framework
- Five components: control environment, risk assessment, control activities, information and communication, and monitoring activities.
- Segregation of duties
- Separates authorization, custody, and recordkeeping functions to reduce fraud and error risk within the firm.
- Three lines of defense
- Business units own risk, compliance and risk functions oversee, and internal audit provides independent assurance to the board.
- Personal trading controls
- Pre-clearance, blackout periods, and reporting of holdings and trades are common controls over employee personal trading.