Partners’, Directors’, and Senior Officers’ Exam

Questions

 

Chapter 4: Senior Officer and Director Liability

1. Prosecutions under the _________, would include bid rigging, price discrimination, predatory pricing or conspiracies to lessen competition. These are criminal prosecutions with fines ranging up to $10 million or five years imprisonment. This is an area where the regulators have indicated that they will be pursuing individual directors and officers, not just their corporations.

a) Combines Investigation Act

b) Free Trade Act

c) Constitution Act

d) Competition Act

 

Chapter 5: Risk Management in the Securities Industry

2. What is correct about Value-at-Risk (VaR)?

I.             VaR is a measure of the likely loss of market value at a pre-defined confidence level and holding period for a given portfolio.

II.            VaR is determined by four major factors: exposure, volatility, holding period and confidence level.

III.           Exposure refers to market positions at risk and volatility indicates market price fluctuation of the market positions.

IV.          Confidence level and holding period are determined by securities regulators.

a) I, II

b) I, II, III

c) I, II, IV

d) I, II, III, IV

 

 

Answers

 

1. d) Competition Act

 

2. b) I, II, III

Statement IV is incorrect. Confidence level and holding period are determined by individual institutions and the usage of VaR.

 

Partners’, Directors’, and Senior Officers’ Exam

Questions

Chapter 4: Senior Officer and Director Liability

1. What is correct about NI 31-103?

I.             The amendments addressed under NI 31-103 remove the forced structural element of the Branch Manager requirements, merging all supervisory categories into one: Supervisor.

II.            Previous Branch Managers will become approved in the supervisor category, as will other specific supervisory categories including product-specific supervisors such as options and futures contracts principals.

III.           As with trading categories, the proficiency requirements to supervise specific types of activity will remain.

IV.          In place of the prescribed positions and functions, dealer members will be required to maintain detailed historical records of their supervisory structures and the persons responsible for fulfilling specific supervisory functions.

a) I, II

b) I, II, III

c) I, II, IV

d) I, II, III, IV

Chapter 9: Discount Brokerage

2. What is correct about an Investment Advisor?

I.             Has a relationship with the client

II.            Has a Duty of Care with the client

III.           Always has a fiduciary responsibility to the client

IV.          Has specialized expertise and knowledge

V.            Standard suitability is the client’s responsibility

a) I, II, III

b) I, II, III, IV

c) i, ii , ii , iv , v

d) I, II, IV

Answers

1. d) I, II, III, IV

2. d) i, ii , iv

#III is incorrect. The IA might have a fiduciary relationship, depending on the relationship.

#V is incorrect. The IA has a strict suitability liability obligation to the client.

 

For more questions, you can order our quiz book. Or check back next month for questions on the blog. The next Foran Partners’, Directors’, and senior Officers’ Exam Seminar will be held in Toronto on April 20-21.

Partners’, Directors’, and Senior Officers’ Exam Prep Questions

This is our first ever post for PDO. Welcome, Partners, Directors, and Senior Officers!

The following questions are samples of the Foran PDO Quiz Workbook.

Questions

Chapter 1: Securities Regulation and the Capital Markets in Canada

1. The _________ is unique among the exchanges in that its by-laws grant it the power to order the restitution of funds to any person who has suffered a loss as a result of the misconduct of a person under its jurisdiction. Additionally, costs of the investigation are typically assessed against registrants found guilty of a violation.

a) TSX

b) MX

c) TSXV

d) ICE Futures Canada

 

Chapter 11: Uniform Minimum Capital Requirements

2. Green Securities Ltd. has risk adjusted capital (before concentration charges and minimum capital) of $60 million. It has margin loans to clients for Imperial Oil stock totaling $38 million and margin loans for Power Financial stock for $34 million. Is there a securities concentration charge and if so, for how much?

a) There is no securities concentration charge.

b) The securities concentration charge is $12 million.

c) The securities concentration charge is $4 million.

d) The securities concentration charge is $6 million.

 

Answers

1. b) MX

2. d) The securities concentration charge is $6 million.

The largest loan position of Imperial Oil ($38 million) does not exceed the ⅔ level of RAC or ⅔ × $60 million = $40 million. The second largest loan is above the 50% threshold of RAC (50% × $60 million = $30 million). There is a securities concentration based on the second highest loan position which is the loans on Power Financial for $34 million. There is an excess loan amount of $4 million ($34 mil – $30 mil) The securities concentration charge:

= 1.5 × Excess Loan Amount above 50% threshold

= 1.5 × $4 million

= $6 million