Retail Securities (RSE)

The total variability or volatility of returns, incorporating all sources of risk embedded in returns, including first-order risks and second-order risks. Absolute risk does not distinguish between upside and downside volatility.

Whether an account type and its features can properly serve this client at all

An individual or institutional investor who meets certain minimum requirement relating to income, net worth, or investment knowledge.

An exemption that allows an accredited investor to purchase securities without receiving a prospectus.

ETF where the portfolio manager takes an active role in investment selection.

The investor or manager employs active management with the aim of outperforming a benchmark portfolio or index on a risk-adjusted basis through active securities selection.

Investment management that takes an active, as opposed to a passive, role when managing investments. Active fund managers make investment decisions based on their outlook for the markets and securities in which they invest. In almost all cases, active fund managers intend to outperform the return on a specific benchmark index.

The deemed cost of an asset representing the sum of the amount originally paid plus any additional costs, such as brokerage fees and commissions.

Manage trades for institutional clients. They do not trade the dealer member’s capital, and they trade only when acting on behalf of clients. Agency traders do not merely take orders; they must manage institutional orders with minimal market impact and act as the client’s eyes and ears for relevant market intelligence.

The use of sophisticated mathematical algorithms to execute equity trades over electronic trading systems.

The administrative procedure by which income generated by the segregated fund’s investment portfolio is flowed through to the individual contract holders of the fund.

A statistical measure of the value a fund manager adds to the performance of the fund managed. If alpha is positive, the manager has added value to the portfolio. If the alpha is negative, the manager has underperformed the market.

Alternative assets refer to real assets held directly or indirectly by an investor. Real assets include commodities, real estate, and collectibles.

Asset class that is different from the traditional three board asset classes of equities, bonds, and cash. Generally categorized for portfolio management analysis into three groups: alternative strategy funds, alternative assets and private equity.

A type of mutual fund that is permitted greater usage of derivatives, leverage, short selling and investments in illiquid assets than conventional mutual funds, but not the extent of hedge funds. Also known as liquid alternatives or liquid alts.

Gradually writing off the value of an intangible asset over a period of time. Commonly applied to items such as goodwill, improvements to leased premises, or expenses of a new stock or bond issue. See also Depreciation.

An expert in respect to a specific company or sector. Analysts provide other front office staff with ongoing analytical coverage in their area of specialty.

Fixing a decision on an irrelevant reference point

A document in which an issuer is required to disclose information about presently known trends, commitments, events or uncertainties that are reasonably expected to have a material impact on the issuer’s business, financial condition or results of operations. Although investors are typically not provided with the AIF, the prospectus must state that it is available on request.

The formal financial statements and report on operations issued by a company to its shareholders after its fiscal year-end.

Person on whose life the maturity and death benefit guarantees are based. It can be the contract holder or someone else designated by the contract holder. In registered plans, the annuitant and contract holder must be the same person.

A contract usually sold by life insurance companies that guarantees an income to the beneficiary or annuitant at some time in the future. The income stream can be very flexible. The original purchase price may be either a lump sum or a stream of payments. See Deferred Annuity and Immediate Annuity.

The simultaneous purchase of a security on one stock exchange and the sale of the same security on another exchange at prices which yield a profit to the arbitrageur.

A method of dispute resolution in which an independent arbitrator is chosen to assist aggrieved parties recover damages.

Interest or dividends that were not paid when due but are still owed. For example, dividends owed but not paid to cumulative preferred shareholders accumulate in a separate account (arrears). When payments resume, dividends in arrears must be paid to the preferred shareholders before the common shareholders.

The lowest price a seller will accept for the financial instrument being quoted. See also Bid.

Everything a company or a person owns or has owed to it. A statement of financial position category.

Apportioning investment funds among different categories of assets, such as cash, fixed income securities and equities. The allocation of assets is built around an investor’s risk tolerance.

This type of fund has similar objectives to those of balanced funds, but they differ in that they typically do not have to hold a specified minimum percentage of the fund in any class of investment.

A financial ratio that shows a company’s ability to cover its debt obligations with its assets after all non-debt liabilities have been satisfied.

The percentage distribution of assets in a portfolio among the three major asset classes: cash and equivalents, fixed income and equities.

The process of aggregating financial assets and transforming them into marketable securities. Assets that are typically securitized include mortgages, loans, and corporate receivables.

A type of security that has a maturity date of less than one year, typically in the range of 90 to 180 days, with a legal and design structure of an asset-backed security.

A short- to medium-term bond with equal claim on the principal and interest cash flows from a pool of underlying receivables.

Designated to fulfill the writer’s obligation on a call or put option for an option buyer who decides to exercise the option.

A not-for-profit company whose member firms are issuers of life-insurance contracts and whose mandate is to provide protection to contract holders against the insolvency of a member company.

An option with a strike price equal to (or almost equal to) the market price of the underlying security. See also Out-of-the-money and In-the-money.

Breaking a result into the decisions that produced it

A Canada Revenue Agency rule stating that an investor cannot avoid paying taxes at their marginal rate by transferring assets to other family members who have lower personal tax rates.

Market in which securities are bought and sold by brokers acting as agents for their clients, in contrast to a dealer market where trades are conducted over-the-counter. For example, the Toronto Stock Exchange is an auction market.

A professional review and examination of a company’s financial statements required under corporate law for the purpose of ensuring that the statements are fair, consistent and conform with International Financial Reporting Standards (IFRS).

An institution that creates or redeems ETF units in kind

The maximum number of common (or preferred) shares that a corporation may issue under the terms of its charter.

The body that administers the regulatory framework surrounding Québec’s financial sector: securities sector, the distribution of financial products and services sector, the financial institutions sector and the compensation sector.

A statistical tool used to measure the direction of the market. The most common average is the Dow Jones Industrial Average.

A list of products that a trader wishes to sell or buy as quickly as possible.

Canada’s interactions with the rest of the world which are captured here in the current account and capital account.

A budget is said to be balanced when revenue equals spending.

Invests in both stocks and bonds to provide a balanced mix of income and capital growth.

Canada’s central bank which exercises its influence on the economy by raising and lowering short-term interest rates.

The minimum rate at which the Bank of Canada makes short-term advances to the chartered banks, other members of Payments Canada and investment dealers who trade in the money market.

A group of investment firms, each of which individually assumes financial responsibility for part of an underwriting.

The legal status of an individual or company that is unable to pay its creditors and whose assets are therefore administered for its creditors by a Trustee in Bankruptcy.

One-hundredth of a percentage point of bond yields. Thus, 1% represents 100 basis points.

A security (usually a bond) which does not have the owner’s name recorded in the books of the issuing company nor on the security itself and which is payable to the holder, i.e., the holder is the deemed owner of the security. See also Registered Security.

A standard against which an investment or portfolio is measured. A common benchmark is the t-bill rate plus some sort of performance benchmark; for example, the T-bill rate plus 4%. A benchmark could also be a market index; for example, the S&P/TSX Composite Index.

The real (underlying) owner of an account, securities or other assets. An investor may own shares which are registered in the name of an investment dealer, trustee or bank to facilitate transfer or to preserve anonymity, but the investor would be the beneficial owner.

The individual or individuals who have been designated to receive the death benefit as part of a segregated fund or designated to receive assets as part of a testator’s will. Beneficiaries may be either revocable or irrevocable.

A direction that names who receives an account or policy on death

The attempt by an investment dealer (underwriter) to sell an issue of securities, to the best of their abilities, but does not guarantee that any or all of the issue will be sold. The investment dealer is not held liable to fulfill the order or to sell all of the securities. The underwriter acts as an agent for the issuer in distributing the issue.

The duty to take reasonable steps to obtain the best result for a client order in the circumstances

A measure of the sensitivity (i.e., volatility) of a stock or a mutual fund to movements in the overall stock market. The beta for the market is considered to be 1. A fund that mirrors the market, such as an index fund, would also have a beta of 1. Funds or stocks with a beta greater than 1 are more volatile than the market and are therefore riskier. A beta less than 1 is not as volatile and can be expected to rise and fall by less than the overall market.

The highest price a buyer is willing to pay for the financial instrument being quoted. See also Ask.

The difference between the current bid and ask, calculated as Ask - Bid.

A method that blends market equilibrium weights with an investor's views

A slang term for laws that various Canadian provinces and American states have enacted to protect the public against securities frauds. The term blue skyed is used to indicate that a new issue has been cleared by a securities commission and may be distributed.

An active, leading, nationally known common stock with a record of continuous dividend payments and other strong investment qualities. The implication is that the company is of “good” investment value.

A certificate evidencing a debt on which the issuer promises to pay the holder a specified amount of interest based on the coupon rate, for a specified length of time, and to repay the loan on its maturity. Strictly speaking, assets are pledged as security for a bond issue, except in the case of government “bonds”, but the term is often loosely used to describe any funded debt issue.

The actual legal agreement between the issuer and the bondholder. The contract outlines the terms and conditions – the coupon rate, timing of coupon payments, maturity date and any other terms. The bond contract is usually administered by a trust company on behalf of all the bondholders. Also called a Bond Indenture or Trust Deed.

A fund that invests primarily in bonds and derives its income mostly from interest payments made by bond issuers to the fund.

The remaining bond once the coupons have been stripped.

The amount of net assets belonging to the owners of a business (or shareholders of a company) based on statement of financial position values. It represents the total value of the company’s assets that shareholders would theoretically receive if a company were liquidated. Also represents the original cost of the units allocated to a segregated fund contract.

An investment approach that seeks out undervalued companies. A fund manager may find companies whose low share prices are not justified. They would buy these securities and when the market finally realizes that they are undervalued, the share price rises giving the astute bottom-up manager a profit. See also Top-Down Analysis.

A new issue of stocks or bonds bought from the issuer by an investment dealer for resale to its clients, usually by way of a private placement or short form prospectus. The dealer risks its own capital in the bought deal. In the event that the price has to be lowered to sell out the issue, the dealer absorbs the loss.

An investment dealer or a duly registered individual who is registered to trade in securities in the capacity of an agent or principal and is a member of the Canadian Investment Regulatory Organization.

The broker named as the official advisor to a corporation on financial matters; has the right of first refusal on any new issues.

Occurs when total spending by the government for the year is higher than revenue collected.

Occurs when government revenue for the year exceeds expenditures.

The recurrence of periods of expansion and recession in economic activity. Each cycle is expected to move through five phases – the trough, recovery, expansion, peak, contraction (recession). Given an understanding of the relationship between the business cycle and security prices, an investor or fund manager would select an asset mix to maximize returns.

The risk inherent in a company’s operations, reflected in the variability in earnings. A weakening in consumer interest or technological obsolescence usually causes the decline. Examples include manufacturers of vinyl records, eight track recording tapes and beta video machines.

Purchases the assets of an underlying company and the profits and losses resulting from the use of the trust are shared with investors on a proportional basis.

A passive investment approach where the investor or manager buys and holds a portfolio of securities for a long period of time.

The term applied to retail and institutional investors, since they are the buyers of securities and services provided by the sell-side of the market.

A company’s purchase of its common shares either by tender or in the open market for cancellation, subsequent resale or for dividend reinvestment plans.

The obligation to buy back the stock after selling it short if adequate margin cannot be maintained by the client and/or if the originally borrowed stock is called by its owner and no other stock can be borrowed to replace it.

A clause in a bond or preferred share agreement that allows the issuer the right to “call back” the securities prior to maturity. The company would usually do this if they could refinance the debt at a lower rate (similar to refinancing a mortgage at a lower rate). Calling back a security prior to maturity may involve the payment of a penalty known as a call premium.

The right to buy a specific number of shares at a specified price (the strike price) by a fixed date. The buyer pays a premium to the seller of the call option contract. An investor would buy a call option if the underlying stock’s price is expected to rise. See also Put Option.

The price at which a bond or preferred share with a call feature is redeemed by the issuer. This is the amount the holder of the security would receive if the security was redeemed prior to maturity. The call price is equal to par (or a stated value for preferred shares) plus any call premium. See also Redemption Price.

For callable bonds, the period before the first possible call date.

May be redeemed (called in) upon due notice by the security’s issuer.

May be redeemed (called in) upon due notice by the security’s issuer.

Deal Provides institutional investors with electronic access to federal bond bid and offer prices and yields from its six bank-owned dealers.

A federal Crown Corporation providing deposit insurance against loss (up to $100,000 per depositor) when a member institution fails.

An incentive program for those investing in a Registered Education Savings Plan (RESP) whereby the federal government will make a matching grant of a maximum of $500 to $600 per year of the first $2,500 contributed each year to the RESP of a child under age 18.

A mandatory contributory pension plan designed to provide monthly retirement, disability and survivor benefits for all Canadians. Employers and employees make equal contributions. Québec has its own parallel pension plan Québec Pension Plan (QPP).

A secure savings product fully guaranteed by the Government of Canada. The government discontinued the sale of CPBs in November 2017 but will continue to guarantee and honour any existing issues until investors redeem them or the issues mature, whichever comes first.

A secure savings product fully guaranteed by the Government of Canada. The government discontinued the sale of CSBs in November 2017 but will continue to guarantee and honour any existing issues until investors redeem them or the issues mature, whichever comes first.

TM (CDR) Securities designed to give Canadians access to popular U.S. and global companies that trade on the NYSE and NASDAQ, but in Canadian dollars and listed on the Cboe Canada exchange.

The CDCC is a service organization that clears, issues, settles, and guarantees options, futures, and futures options traded on the Montréal Exchange.

A fund that protects eligible customers in the event of the insolvency of a Canadian Investment Regulatory Organization (CIRO) dealer member. It is sponsored solely by CIRO and funded by assessments on dealer members.

The national trade group of the life insurance industry, which is actively involved in overseeing applications and setting industry standards.

The CSA is a forum for the 13 securities regulators of Canada’s provinces and territories to coordinate and harmonize the regulation of the Canadian capital markets.

Launched in 2003 as an alternative marketplace for trading equity securities and emerging companies.

An Internet web-based system for investment dealers to report completed trades in unlisted and unquoted equity securities in Ontario.

Has two distinct but related meanings. To an economist, it means machinery, factories and inventory required to produce other products. To an investor, it may mean the total of financial assets invested in securities, a home and other fixed assets, plus cash.

Account which reflects the transactions occurring between Canada and foreign countries with respect to the acquisition of assets, such as land or currency. Along with the current account a component of the balance of payments.

Selling a security for more than its purchase price. For non-registered securities, 50% of the gain would be added to income and taxed at the investor’s marginal rate.

Selling a security for less than its purchase price. Capital losses can only be applied against capital gains. Surplus losses can be carried forward indefinitely and used against future capital gains. Only 50% of the loss can be used to offset any taxable capital loss.

Financial markets where debt and equity securities trade. Capital markets include organized exchanges as well as private placement sources of debt and equity.

A company that is permitted to seek financing through an IPO prior to having any assets or commercial operation. The CPC uses the funds raised from the IPO to evaluate and acquire an existing business or significant assets in a qualifying transaction.

One of the components of split shares. Capital shares receive the majority of capital gains from the underlying common shares.

Total dollar amount of all debt, preferred and common stock, and retained earnings of a company. Can also be expressed in percentage terms.

Recording an expenditure initially as an asset on the statement of financial position rather than as an expense on the statement of comprehensive income, and then writing it off or amortizing it (as an expense on the statement of comprehensive income) over a period of years. Examples include interest, and research and development.

The amount of RRSP contributions that can be carried forward from previous years. For example, if a client was entitled to place $13,500 in an RRSP and only contributed $10,000, the difference of $3,500 would be the unused contribution room and can be carried forward indefinitely.

Deductible expenses for tax purposes.

A type of brokerage account where the investor is expected to have either cash in the account to cover their purchases or where an investor will deliver the required amount of cash before the settlement date of the purchase.

A company’s profit for a stated period plus any deductions that are not paid out in actual cash, such as depreciation. For an investor, any source of income from an investment including dividends, interest income, rental income, etc. Can also refer to money flowing into our out of an account or portfolio.

A financial ratio that gauges a company’s ability to repay the funds it has borrowed. Short-term borrowings must normally be repaid or rolled over within a year.

Involves writing a put option and setting aside an amount of cash equal to the strike price. If the cash-secured put writer is assigned, the cash is used to buy the stock from the exercising put buyer.

An electronic trading system for fixed-income securities operating in the retail market.

An electronic trading system for fixed-income securities operating in the institutional market.

An exchange that provides listing services and facilitates trading in the securities listed on it.

The method used to increase or reduce the number of underlying shares of the CDR based on how the Canada/U.S. exchange rate changes.

CDS provides customers with physical and electronic facilities to deposit and withdraw depository-eligible securities and manage their related ledger positions (securities accounts). CDS also provides electronic clearing services both domestically and internationally, allowing customers to report, confirm and settle securities trade transactions.

A regulatory order stopping trading in a security

A body established by a national Government to regulate currency and monetary policy on a national/international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.

The use of charts and patterns to forecast buy and sell decisions. See also Technical Analysis.

Shares that have different classes sometimes have different rights. Some may have superior claims over other classes or may have different voting rights. Class A stock is often similar to a participating preferred share with a prior claim over Class B for a stated amount of dividends or assets or both, but without voting rights; the Class B may have voting rights but no priority as to dividends or assets. Note that these distinctions do not always apply.

The process of confirming and matching security trade details.

A not-for-profit service organization owned by the exchanges and their members for the clearance, settlement and issuance of options and futures. A clearing corporation provides a guarantee for all options and futures contracts it clears, by becoming the buyer to every seller and the seller to every buyer.

Regulatory requirements that came into force in 2021, covering key industry requirements for the know your client rule, know your product rule, conflicts of interest, suitability and relationship disclosure.

The rule that a client's order precedes the dealer's own at the same price

The staged set of duties a dealer owes a client, from gathering information through recommending, acting, monitoring and reporting

The periodic record of holdings and activity

A fund with a fixed number of units that trade on an exchange

Funds that have the flexibility to buy back their outstanding shares periodically. Also known as interval funds.

Shares in closed-end investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed. See also Investment Company.

A portfolio strategy whereby the fund manager does not replicate the market exactly but sticks fairly close to the market weightings by industry sector, country or region or by the average market capitalization.

Statistical data that, on average, change at approximately the same time and in the same direction as the economy as a whole.

A bond secured by stocks or bonds of companies controlled by the issuing company, or other securities, which are deposited with a trustee.

An unsecured promissory note issued by a corporation or an asset-backed security backed by a pool of underlying financial assets. Issue terms range from less than three months to one year. Most corporate paper trades in $1,000 multiples, with a minimum initial investment of $25,000. Commercial paper may be bought and sold in a secondary market before maturity at prevailing market rates.

The fee charged by a stockbroker for buying or selling securities as agent on behalf of a client.

A product used for commerce that is traded on an organized exchange. A commodity could be an agricultural product such as canola or wheat, or a natural resource such as oil or gold. A commodity can be the basis for a futures contract.

Commodity ETFs are focused on commodity holdings or holdings that replicate or are related to commodities. Three different types of commodity ETFs include physical-based, futures-based, or equity-based ETFs.

Futures contracts based on an underlying commodity.

Securities representing ownership in a company. They carry voting privileges and are entitled to the receipt of dividends, if declared. Also called common stock.

A distribution method used in particular by the Bank of Canada in distributing new issues of government marketable bonds. Bids are requested from primary distributors and the higher bids are awarded the securities for distribution. See also Non-Competitive Tender.

An expression of dissatisfaction that starts the dealer's complaint process

Interest earned on an investment at periodic intervals and added to the amount of the investment; future interest payments are then calculated and paid at the original rate but on the increased total of the investment. In simple terms, interest paid on interest.

A printed acknowledgement giving details of a purchase or sale of a security which is normally mailed to a client by the broker or investment dealer within 24 hours of an order being executed. Also called a contract.

A combination of the financial statements of a parent company and its subsidiaries, presenting the financial position of the group as a whole.

Makes direct cash loans to consumers, who usually are unable to secure a loan from a bank. Consumer finance companies typically charge a higher interest rate than banks.

Price index which measures the cost of living by measuring the prices of a given basket of goods. The CPI is often used as an indicator of inflation.

A chart formation indicating that the current trend will continue.

The act of a public corporation complying with continuous disclosure requirements set out by the relevant provincial securities act.

The owner of a segregated fund contract.

Represents a downturn in the economy and can lead to a recession if prolonged.

Contrarian investors use sentiment indicators to determine what most investors expect prices to do in the future, so they can move in the opposite direction.

Transferring securities into an RRSP. The general rules are that when an asset is transferred there is a deemed disposition. Any capital gain would be reported and taxes paid. Any capital losses that result cannot be claimed.

Ownership of sufficient voting stock in a company to materially affect its affairs. In all provinces except Manitoba, New Brunswick and Quebec, a 20% holding is deemed to represent control.

The dollar value at which a convertible bond or security can be converted into common stock.

The right to exchange a bond for common shares on specifically determined terms.

A strategy that looks for mispricing between a convertible security and the underlying stock. A typical convertible arbitrage position is to be long the convertible bond and short the common stock of the same company.

A bond or debenture which may be exchanged by the owner, usually for the common stock of the same company, in accordance with the terms of the conversion privilege.

A measure of the rate of change in duration over changes in yields. Typically, a bond will rise in price more if the yield change is negative than it will fall in price if the yield change is positive.

In the context of ETFs, core holdings are typically passive ETF investments intended to provide the majority of returns, as opposed to satellite holdings which are more focused on riskier sector ETF holdings.

An unsecured promise made by the borrower to pay interest and repay the principal at a specific date.

A form of business organization created under provincial or federal statutes which has a legal identity separate from its owners. The corporation’s owners (shareholders) have no personal liability for its debts. See also Limited Liability.

A price reversal that typically occurs when a security has been overbought or oversold in the market.

A measure of the relationship between two or more securities. If two securities mirror each other’s movements perfectly, they are said to have a positive one (+1) correlation. Combining securities with high positive correlations does not reduce the risk of a portfolio. Combining securities that move in the exact opposite direction from each other are said to have perfect negative one (−1) correlation. Combining two securities with perfect negative correlation reduces risk. Very few, if any, securities have a perfect negative correlation. However, risk in a portfolio can be reduced if the combined securities have low positive correlations.

Used when a company owns less than 20% of a subsidiary.

A statement of comprehensive income account representing the cost of buying raw materials that go directly into producing finished goods.

A type of inflation that develops due to an increase in the costs of production. For example, an increase in the price of oil may contribute to higher input costs for a company and could lead to higher inflation.

A bond with coupons attached that represent the regular interest payments the issuer is obligated to pay.

The rate of interest that appears on the certificate of a bond. Multiplying the coupon rate times the principal tells the holder the dollar amount of interest to be paid by the issuer until maturity. For example, a bond with a principal of $1,000 and a coupon of 10% would pay $100 in interest each year. Coupon rates remain fixed throughout the term of the bond. See also Yield.

A pledge in a bond indenture indicating the fulfilment of a promise or agreement by the company issuing the debt. An example of a covenant may include the promise not to issue any more debt.

Buying a security previously sold short. See also Short Sale.

Manages trades on behalf of institutional clients and does not trade the dealer member’s capital. Also known as an agency trader.

A written call option where the writer owns the underlying stock, and uses this position to meet their obligations if assigned.

ETFs that employ covered calls to enhance the yield and reduce the volatility of owning the underlying stock or portfolio.

The writer of an option who also holds a position that is equivalent to, but on the opposite side of the market from the short option position. In some circumstances, the equivalent position may be in cash, a convertible security or the underlying security itself. See also Naked Writer.

The block of ETF shares provided by an ETF issuer to the designated broker.

The extra yield demanded for one issuer's credit over the benchmark

Segregated funds offer protection from creditors in the event of bankruptcy, because segregated funds are an insurance product, and the insurance proceeds generally fall outside the provisions of bankruptcy legislation.

The process of raising start-up capital by soliciting contributions from the public at large, usually aided by online or Internet-based systems.

With dividend. If you buy shares quoted cum dividend, i.e., before the ex-dividend date, you will receive an upcoming already-declared dividend. If shares are quoted ex-dividend (without dividend) you are not entitled to the declared dividend.

With rights. Buyers of shares quoted cum rights, i.e., before the ex-rights date, are entitled to forthcoming already-declared rights. If shares are quoted ex rights (without rights) the buyer is not entitled to receive the declared rights.

A preferred stock having a provision that if one or more of its dividends are not paid, the unpaid dividends accumulate in arrears and must be paid before any dividends may be paid on the company’s common shares.

A preferred whose unpaid dividends accumulate as a claim

Account that reflects all payments between Canadians and foreigners for goods, services, interest and dividends. Along with the capital and financial account it is a component of the balance of payments.

Cash and assets which in the normal course of business would be converted into cash, usually within a year, e.g. accounts receivable, inventories. A statement of financial position category.

Money owed and due to be paid within a year, e.g. accounts payable. A statement of financial position category.

A liquidity ratio that shows a company’s ability to pay its current obligations from current assets. A current ratio of 2:1 is the generally accepted standard. Also known as the working capital ratio.

The annual income from an investment expressed as a percentage of the investment’s current value. On stock, calculated by dividing yearly dividend by market price; on bonds, by dividing the coupon by market price. See also Yield.

A firm that holds the securities belonging to a mutual fund or a segregated fund for safekeeping. The custodian can be either the insurance company itself, or a qualified outside firm based in Canada.

Used to forecast when the market will start moving in a particular direction and when it will ultimately reach its peak or trough. The theory of cycle analysis is based on the assumption that cyclical forces drive price movements in the marketplace.

An industry that is particularly sensitive to swings in economic conditions. Cyclical industries tend to rise quickly when the economy does well and fall quickly when the economy contracts.

A stock in an industry that is particularly sensitive to swings in economic conditions. Cyclical Stocks tend to rise quickly when the economy does well and fall quickly when the economy contracts. In this way, cyclicals move in conjunction with the business cycle. For example, during periods of expansion auto stocks do well as individuals replace their older vehicles. During recessions, auto sales and auto company share values decline.

The amount of unemployment that rises when the economy softens, firms’ demand for labour moderates, and some firms lay off workers in response to lower sales. It drops when the economy strengthens again.

A method of calculating the NAVPS of a mutual fund. The incremental change in the value of a fund from day to day is expressed as an index from which the return can be calculated. This method of calculation is beneficial for mutual funds, which generally calculate NAVPS daily. It greatly simplifies their return calculation at the end of the month.

An equity marketplace that does not offer pre-trade transparency on trader orders.

A buy or sell order that automatically expires if it is not executed on the day it is entered. All orders are day orders unless otherwise specified.

A market in which securities are bought and sold over-the-counter in which dealers acts as principals when buying and selling securities for clients. Also referred to as the unlisted market.

A stock brokerage firm or investment dealer which is a member of a stock exchange or the Canadian Investment Regulatory Organization.

The amount that a segregated fund policy pays to the beneficiary or the estate when the market value of the segregated fund is lower than the guaranteed amount on the death of the annuitant.

A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset. In other words, no specific assets have been pledged as collateral.

Money borrowed from lenders for a variety of purposes. The borrower typically pays interest for the use of the money and is obligated to repay it at a set date.

A debt instrument such as a bond or debenture is an instrument that represents a liability on a loan and specifies basic terms such as the amount borrowed, the interest rate and maturity date. The issuer promises to repay the loan at maturity. The term of the loan varies depending on the type of instrument.

A ratio that shows whether a company’s borrowing is excessive. The higher the ratio, the higher the financial risk.

An industry moving from the maturity stage. It tends to grow at rates slower than the overall economy, or the growth rate actually begins to decline.

An accounting method of depreciation whereby a fixed percentage is applied to the outstanding balance of an asset to determine the expense to be charged each period.

Under certain circumstances, taxation rules state that a transfer of property has occurred, even without a purchase or sale, e.g., there is a deemed disposition on death or emigration from Canada.

A bond is in default when the borrower has failed to live up to its obligations under the trust deed with regard to interest, sinking fund payments or has failed to redeem the bonds at maturity.

The risk that a debt security issuer will be unable to pay interest on the prescribed date or the principal at maturity. Default risk applies to debt securities not equities since equity dividend payments are not contractual.

An industry with a record of stable earnings and continuous dividend payments and which has demonstrated relative stability in poor economic conditions.

A stock of a company with a record of stable earnings and continuous dividend payments and which has demonstrated relative stability in poor economic conditions. For example, utility stock values do not usually change from periods of expansion to periods of recession since most individuals use a constant amount of electricity.

This type of contract, usually sold by life insurance companies, pays a regular stream of income to the beneficiary or annuitant at some agreed-upon start date in the future. The original payment is usually a stream of payments made over time, ending prior to the beginning of the annuity payments. See also Annuity.

The income tax payable in future periods. These liabilities commonly result from temporary differences between the book value of assets and liabilities as reported on the statement of financial position and the amount attributed to that asset or liability for income tax purposes.

A type of registered pension plan in which the annual payout is based on a formula. The plan pays a specific dollar amount at retirement using a predetermined formula.

A type of registered pension plan where the amount contributed is known but the dollar amount of the pension to be received is unknown. Also known as a money purchase plan.

A sustained fall in prices where the consumer price index is negative.

Postponement in the opening of trading of a security the result of a heavy influx of buy and/or sell orders.

Removal of a security’s listing on a stock exchange.

The quantity demanded of a good or service based on a particular price during a given period. The lower the price, the higher the demand.

A type of inflation that develops when continued consumer demand pushes prices higher.

The face values of a bond.

Refers to consumption of natural resources that are part of a company’s assets. Producing oil, mining and gas companies deal in products that cannot be replenished and as such are known as wasting assets. The recording of depletion is a bookkeeping entry similar to depreciation and does not involve the expenditure of cash.

A listed security representing an interest in a foreign company's shares

Systematic charges against earnings to write off the cost of an asset over its estimated useful life because of wear and tear through use, action of the elements, or obsolescence. It is a bookkeeping entry and does not involve the expenditure of cash.

A type of financial instrument whose value is based on the performance of an underlying financial asset, commodity, or other investment. Derivatives are available on interest rates, currency, stock indexes. For example, a call option on IBM is a derivative because the value of the call varies in relation to the performance of IBM stock. See also Options.

A designated broker has a contractual agreement with an ETF company to aid in the creation and redemption of ETF units.

The reduction in each holder's percentage ownership when new shares are issued

This term is used to describe bonds issued by governments that are firsthand obligations of the government itself. See also Guaranteed Bonds.

The process of some institutional clients directly accessing the exchanges electronically via their investment dealers rather than placing orders (usually verbally) with their investment dealer who would in turn execute the transaction.

A type of hedge fund that places a bet on the anticipated movements in the market prices of equities, fixed-income securities, foreign currencies and commodities.

Person elected by voting common shareholders at the annual meeting to direct company policies.

Information sent to shareholders by the directors of a company that are the target of a takeover bid. A recommendation to accept or reject the bid, and reasons for this recommendation, must be included.

One of the principles of securities regulation in Canada. This principle entails full, true and plain disclosure of all material facts necessary to make reasoned investment decisions.

The amount by which a preferred stock or bond sells below its par value.

Brokerage house that buys and sells securities for clients at a greater commission discount than full-service firms. Also known as self-directed brokers.

In computing the value of a bond, the discount rate is the interest rate used in calculating the present value of future cash flows.

Individuals that are available and willing to work but cannot find jobs and have not made specific efforts to find a job within the previous month.

A securities account where the client has given specific written authorization to a partner, director or qualified portfolio manager to select securities and execute trades for him. See also Managed Account and Wrap Account.

A decline in the rate at which prices rise – i.e., a decrease in the rate of inflation. Prices are still rising, but at a slower rate.

Invests in the equity or debt securities of companies that are in financial difficulty and face bankruptcy or reorganization; these generally sell at deep discounts, reflecting their issuers’ weak credit quality.

Spreading investment risk by buying different types of securities in different companies in different kinds of businesses and/or locations.

An amount distributed out of a company’s profits to its shareholders in proportion to the number of shares they hold. Over the years a preferred dividend will remain at a fixed annual amount. The amount of common dividends may fluctuate with the company’s profits. A company is under no legal obligation to pay preferred or common dividends.

The relationship between a stock’s current price and the present value of all future dividend payments. It is used to determine the price at which a stock should be selling based on projected future dividend payments.

Invest in preferred shares as well as high-quality common shares, with a history of consistently paying dividends.

A ratio that measures the amount or percentage of the company’s profit that are paid out to shareholders in the form of dividends.

The date upon which a company determines which shareholders are entitled to the declared dividend.

The automatic reinvestment of shareholder dividends in more shares of the company’s stock.

A procedure to encourage Canadians to invest in preferred and common shares of taxable, dividend-paying Canadian corporations. The taxpayer pays tax based on grossing up the dividend and obtains a credit against federal and provincial tax based on the grossed-up amount. The federal government may adjust the gross up rate and tax credit from year to year.

A value ratio that shows the annual dividend rate expressed as a percentage of the current market price of a stock. Dividend yield represents the investor’s percentage return on investment at its prevailing market price.

Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time, thereby reducing the average cost paid per unit.

Bonds issued in the currency and country of the issuer. For example, a Canadian dollar-denominated bond, issued by a Canadian company, in the Canadian market would be considered a domestic bond.

A price-weighted average that uses 30 actively traded blue chip companies as a measure of the direction of the New York Stock Exchange.

A cash management open-market operation pursued by the Bank of Canada to influence interest rates. A drawdown refers to the transfer of deposits to the Bank of Canada from the direct clearers, effectively draining the supply of available cash balances. Drawdown also refers to peak-to-trough investment declines during a specific period, expressed as a percentage of the peak value. Individual drawdowns measure the percentage loss an investor would have realized if an investment was bought at its peak and subsequently sold at its lowest point.

When negotiations for a new issue of securities begin between a dealer and corporate issuer, the dealer normally prepares a due diligence report examining the financial structure of the company.

A measure of bond price volatility. The approximate percentage change in the price or value of a bond or bond portfolio for a 1%-point change in interest rates. The higher the duration of a bond the greater its risk.

The responsibility to conduct due diligence before providing advice or recommending products.

An asset allocation strategy that refers to the systematic rebalancing, either by time period or weight, of the securities in the portfolio, so that they match the long-term benchmark asset mix among the various asset classes.

A fee that is typically charged by a mutual fund when the fund is redeemed within 90 days of the initial purchase.

Income that is designated by Canada Revenue Agency for RRSP calculations. Most types of revenues are included with the exception of any form of investment income and pension income.

A financial ratio that shows the earnings available to each common share.

Net income less preferred dividends, over weighted average common shares

A value ratio that shows the portion of net income for a period attributable to a single common share of a company. For example, a company with $100 million in earnings and with 100 million common shareholders would report an EPS of $1 per share.

Statistics or data series that are used to analyze business conditions and current economic activity. See also leading, lagging, and coincident indicators.

A social science that is concerned with an understanding of production, distribution, and consumption of goods and services.

An economic principle whereby the per unit cost of producing each unit of output falls as the volume of production increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

The curve that reflects the most efficient portfolios for all levels of risk.

The theory that a stock’s price reflects all available information and reflects its true value.

When an investor purchases an extendible or retractable bond, they have a time period in which to notify the company if they want to exercise the option.

Brand new industries in the early stages of growth. Often considered as speculative because they are introducing new products that may or may not be accepted and may face strong competition from other new entrants.

Invest in equity and debt securities of companies in emerging markets by using derivatives, short selling, and other complex investment strategies. As some emerging markets do not allow short selling and do not have viable derivative markets, these funds may not be able to hedge. As a result, performance can be volatile.

Refers to the environmental, social and governance factors of an investment. There is growing evidence that incorporating ESG factors into investment decisions can reduce risk and improve returns.

The price at which the quantity demanded equals the quantity supplied.

A type of debt security that was historically used to finance “rolling stock” or railway boxcars. The cars were the collateral behind the issue and when the issue was paid down the cars reverted to the issuer. In recent times, equipment trusts are used as a method of financing containers for the offshore industry. A security, more common in the U.S. than in Canada.

Ownership interest in a corporation’s stock that represents a claim on its revenue and assets. See also Stock.

An accounting method used to determine income derived from a company’s investment in another company over which it exerts significant influence.

Funds in the equity category must invest a minimum of 90% of their non-cash assets in equity securities. The main investment objective of equity funds is long-term capital growth.

Designed to exploit inefficiencies and opportunities in the equity market by creating simultaneously long and short matched equity portfolios of approximately the same size with a goal of having zero (or very low) beta (directional exposure).

Evidence of a share of ownership stake in the company that issued the security.

A financial ratio, also called book value per common share, measures the net asset coverage for each common share if all assets were sold and all liabilities were paid.

Commodity ETF that invests in listed companies that are involved in exploration and development or in the processing or refining of a commodity.

Outstanding shares of a company which, while entitled to vote and receive dividends, may not be bought or sold unless special approval is obtained. Mining and oil companies commonly use this technique when treasury shares are issued for new properties. Shares can be released from escrow (i.e., freed to be bought and sold) only with the permission of applicable authorities such as a stock exchange and/or securities commission.

A method of minimizing tax liability by creating a structure where the growth of assets transfers directly to the owner's children or spouse.

Planning for the orderly transfer of a client’s assets from one generation to the next.

The person who settles the estate and distributes the assets according to the terms of a will. Estate trustees in Ontario are also generally known as executors.

A summary disclosure document that ETFs are required to produce and file.

Decision-making based on the principles of trust, integrity, justice, fairness, honesty, responsibility, and reliability.

Defined as the rules or standards governing the behaviour of a particular group or profession, a set of moral principles or values, or the study of the general nature of morals and the moral choices made by individuals.

Bonds that are issued and sold outside a domestic market and typically denominated in a currency other than that of the domestic market. For example, a bond denominated in Canadian dollars and issued in Germany would be classified as a Eurobond.

An option that can only be exercised on a specified date – normally the business day prior to expiration.

A type of hedge fund that seeks to profit from unique events such as mergers, acquisitions, stock splits or buybacks.

The first date a buyer is no longer entitled to the pending distribution

A projection of expected returns – what investors expect to realize as a return.

A term that denotes that when a person purchases a common or preferred share, they are not entitled to the dividend payment. Shares go ex-dividend on the shareholder record date. See also Cum Dividend.

The date that the shares start to trade ex-dividend. See ex-dividend.

The rate of return that was actually received. This historic data is used to measure actual performance.

A term that denotes that the purchaser of a common share would not be entitled to a rights offering. Common shares go ex-rights on the shareholder of record date.

A special federal government account operated by the Bank of Canada to hold and conduct transactions in Canada’s foreign exchange reserves on instructions from the Minister of Finance.

The price at which one currency exchanges for another.

A discretionary account where a single annual fee, based on the account’s total assets, is charged. Often directed by a single portfolio manager, the managed account holds a basket of ETFs for security selection. The underlying ETFs tend to be passive in the investment management.

Open-end mutual fund trusts that hold the same stocks in the same proportion as those included in a specific stock index. Shares of an exchange-traded fund trade on major stock exchanges. Like index mutual funds, ETFs are designed to mimic the performance of a specified index by investing in the constituent companies included in that index. Like the stocks in which they invest, shares can be traded throughout the trading day.

Exchange-traded debt obligations issued by a bank that promises to pay investors a return on their investment based on the performance of a specific reference asset such as an index or another benchmark.

The person who settles the estate and distributes the assets according to the terms of a will. Executors in Ontario are also generally known as estate trustees.

Investors who meet certain qualifications that permit them to purchase securities without receiving a prospectus.

Large professional buyers of securities, mostly financial institutions, that are offered a portion of a new issue by one member of the banking group on behalf of the whole syndicate. The term exempt indicates that this group of investors is exempt from receiving a prospectus on a new issue as they are considered to be sophisticated and knowledgeable.

The process of invoking the rights of the option or warrant contract. It is the holder of the option who exercises his or her rights. See also Assignment.

The price at which a derivative can be exchanged for a share of the underlying security (also known as subscription price). For an option, it is the price at which the underlying security can be purchased, in the case of a call, or sold, in the case of a put, by the option holder. Synonymous with strike price.

A phase of the business cycle characterized by increasing corporate profits and hence increasing share prices, an increase in the demand for capital for business expansion, and hence an increase in interest rates.

A theory stating that the yield curve is shaped by a market consensus about future interest rates.

The date on which certain rights or option contracts cease to exist. For equity options, this date is usually the Saturday following the third Friday of the month listed in the contract. This term can also be used to describe the day on which warrants and rights cease to exist.

A bond or debenture with terms granting the holder the option to extend the maturity date by a specified number of years.

For extendible bonds, the maturity date of the bond can be extended so that the bond changes from a short-term bond to a long-term bond.

An extra payment made in addition to a regular dividend payment.

A type of fee-based fund with a lower MER. To accommodate fee-based financial advisors, many mutual fund companies began offering F-class mutual funds. These funds reduce or eliminate the double charge.

The value of a bond or debenture that appears on the face of the certificate. Face value is ordinarily the amount the issuer will pay at maturity. Face value is no indication of market value.

A type of account that bundles various services into a fee based on the client’s assets under management, for example, 1% to 3% of client assets.

The responsibility of an investment advisor, mutual fund salesperson or financial planner to always put the client’s interests first. The fiduciary is in a position of trust and must act accordingly.

A finished product, one that is purchased by the ultimate end user.

The prospectus which supersedes the preliminary prospectus and is accepted for filing by applicable provincial securities commissions. The final prospectus shows all required information pertinent to the new issue and a copy must be given to each first-time buyer of the new issue.

A non-physical representational asset that derives a claim based on what it represents. For example, stocks, bonds and bank deposits are financial assets.

Futures contracts with a financial asset as the underlying asset. Examples of underlying assets include currencies and stock indexes.

An institution such as a bank, life insurance company, credit union or mutual fund which receives cash, which it invests, from suppliers of capital.

Financial calculations based on a company’s financial statements, often providing clues about the company’s financial health.

The additional risk placed on the common shareholders from a company’s decision to use debt to finance its operations.

An independent regulatory agency established to improve consumer and pension plan beneficiary protections in Ontario.

The purchase for resale of a security issue by one or more investment dealers. The formal agreement between the investment dealer and the corporation issuing the securities is called the underwriting agreement. A term synonymous with underwriting.

The lead underwriter of a new issue of securities brought to market by an issuing company. Also known as managing underwriters and syndicate managers.

Financial technology companies that take advantage of computer technology to provide more efficient financial products and services.

Policies implemented to separate and isolate persons within a firm who make investment decisions from persons within a firm who are privy to undisclosed material information which may influence those decisions. For example, there should be separate fax machines for research departments and sales departments.

The underwriter commits to buy a specified number of securities at a set price, which it then resells to the public. In a firm commitment agreement, the underwriter pays the full proceeds to the issuer, regardless of whether it has been able to resell the securities to the public. The underwriter assumes the risk of selling the security.

A deductible account whose qualifying home withdrawal is tax free

The senior securities of a company as they constitute a first charge on the company’s assets, earnings and undertakings before unsecured current liabilities are paid.

Inventory items acquired earliest are sold first.

Market-induced or systematic exposure to changes in the general direction of equity, fixed income, currency, and commodity markets that cannot be reduced through diversification.

An investment dealer appointed by a company or government to advise it in financial matters and to manage the underwriting of its securities.

The policy pursued by the federal government to influence economic growth through the use of taxation and government spending to smooth out the fluctuations of the business cycle.

A company’s accounting year. Due to the nature of particular businesses, some companies do not use the calendar year for their bookkeeping. A typical example is the department store that finds December 31 too early a date to close its books after the Christmas rush and so ends its fiscal year on January 31.

Preferred shares that pay a fixed dividend for an initial five-year term after which, if not called by the issuer, shareholders have the option to continue receiving fixed-rate dividends that have been reset or receive a floating-rate preferred share.

A tangible long-term asset such as land, building or machinery, held for use rather than for processing or resale. A statement of financial position category.

A country whose central bank maintains the domestic currency at a fixed level against another currency or a composite of other currencies.

A systematic withdrawal plan where the fund holder chooses a specified dollar amount to be withdrawn on a monthly or quarterly basis.

Attempts to profit from price anomalies between related interest rate securities and their derivatives, including government and non-government bonds, mortgage-backed securities, options, swaps, and forward rate agreements.

Securities that generate a predictable stream of interest or dividend income, such as bonds, debentures and preferred shares.

A systematic withdrawal plan where a specified amount is withdrawn over a pre-determined period with the intent that all capital will be exhausted when the plan ends.

Pays a fixed quarterly dividend, typically expressed as an annual percentage of the issue price and have no stated maturity date. Like almost all Canadian preferred shares, however, issuers have the right to call or redeem fixed-rate perpetual preferred shares on established dates at prices set at the time of issue.

Preferred shares with fixed dividend rates that periodically change or ‘reset’ according to a formula or process outlined at the time the shares are issued. There have been two broad types of fixed-reset preferred shares issued in Canada: rate-reset preferred shares and fixed / floating preferred shares.

Means that the quoted market price of a bond or debenture is its total cost (as opposed to an accrued interest transaction). Bonds and debentures in default of interest trade flat.

That part of the issued shares that are outstanding and available for trading by the public, and not held by company officers, directors, or investors who hold a controlling interest in the company. Also known as public float.

A country whose central bank allows market forces alone to determine the value of its currency, but will intervene if it thinks the move in the exchange rate is excessive or disorderly.

A term used to describe the interest payments negotiated in a particular contract. In this case, a floating rate is one that is based on an administered rate, such as the Prime Rate. For example, the rate for a particular note may be 2% over Prime.

Dividend payments that fluctuate to reflect changes in interest rates. If interest rates rise, so will dividend payments, and vice versa.

A type of debt instrument that offers protection to investors during periods of very volatile interest rates. For example, when interest rates are rising, the interest paid on floating rate debentures is adjusted upwards every six months.

Employee of a member of a stock exchange, who executes buy and sell orders on the floor (trading area) of the exchange for the firm and its clients.

When a company’s stock rises in value above the conversion price a company may force the convertible security holder to exchange the security for stock by calling back the security. Faced with receiving a lower call price (par plus a call premium) or higher valued shares the investor is forced to convert into common shares.

If a Canadian company issues debt securities in another country, denominated in that foreign country’s currency, the bond is known as a foreign bond. A bond issued in the U.S. payable in U.S. dollars is known as a foreign bond or a “Yankee Bond.” See also Eurobond.

The risk associated with an investment in a foreign security or any investment that pays in a denomination other than Canadian dollars, the investor is subject to the risk that the foreign currency may depreciate in value.

A Canadian debt security issued in Canada but pays interest and principal in a foreign currency is known as a foreign pay bond. This type of security allows Canadians to take advantage of possible shifts in currency values.

A forward contract is similar to a futures contract but trades on an OTC basis. The seller agrees to deliver a specified commodity or financial instrument at a specified price sometime in the future. The terms of a forward contract are not standardized but are negotiated at the time of the trade. There may be no secondary market.

An over-the-counter forward.

Pricing an order at the next value calculated after it is received

Buying in a cash account without funds to settle, relying on a sale to pay

Unemployment that results from normal labour turnover, from people entering and leaving the workforce and from the ongoing creation and destruction of jobs.

Making a practice, directly or indirectly, of taking the opposite side of the market to clients, or effecting a trade for the advisor’s own account prior to effecting a trade for a client.

A sales charge applied to the purchase price of a mutual fund when the fund is originally purchased.

The level of unemployment due solely to both frictional and structural factors, or when cyclical unemployment is zero.

The ETF holds all of the stocks in the same weight as the respective index. The full replication process tracks extremely close to the benchmark index, with minimal tracking error.

The general principle underlying Canadian securities legislation. All pertinent facts by those offering securities for sale to the public must be disclosed.

Earnings per common share calculated on the assumption that all convertible securities are converted into common shares and all outstanding rights, warrants, options and contingent issues are exercised.

A disclosure document designed to give mutual fund investors key information about a fund. The document is limited to two double-side pages in length and provides timely information that would be material to an investment decision.

A portfolio of hedge funds overseen by a manager who determines which hedge funds to invest in and how much to invest in each.

Security analysis based on fundamental facts about a company as revealed through its financial statements and an analysis of economic conditions that affect the company’s business. See also Technical Analysis.

All outstanding bonds, debentures, notes and similar debt instruments of a company not due for at least one year.

A contract that signifies an agreement between a futures buyer and futures seller.

ETFs that invest in futures contracts of different commodities, with an underlying portfolio of money market instruments to cover the full value of the contracts. As near-term contracts approach expiration, they are rolled over into more distant contracts.

A limit on how much can be redeemed from a fund at once

Refers to dealers and all of their employees who are responsible for protecting the markets from potentially illegal client activities. Universal Market Integrity Rules set out specific rules that identify the gatekeeper function and formal reporting procedures.

Changes in the target-date fund’s asset allocation mix over time. The fund pursues a growth strategy in its early years by holding more risky assets. It then gradually moves towards less risky assets as the target date approaches. The fund manager adjusts the fund over time, without any action required from the fund holder.

Invests in all major markets, including equities, bonds, currencies, and commodities with strategy based on predictions for major events affecting entire economies, such as shifts in government policy that alter interest rates, thereby affecting currency, stock, and bond markets.

When a security is sold it must be delivered to the broker properly endorsed, not mutilated and with (if any) coupons attached. To avoid these difficulties and as a general practice most securities are held by the broker.

A deposit of money by the buyer or seller of a futures product which acts as a financial guarantee as to the fulfilment of the contractual obligations of the futures contract. Also called a performance bond or margin.

An order to buy or sell that expires 90 calendar days from entry, unless the investor decides to cancel the trade sooner than the expiry date.

An order to buy or sell that expires on a date specified by the investor.

An order to buy or sell that is open until either the order is filled, the client cancels the order, the order expires on a date specified by the client, or the order expires after 90 days. There are two types of good til order: good til canceled and good til date.

Generally understood to represent the value of a well-respected business – its name, customer relations, employee relations, among others. Considered an intangible asset on the statement of financial position.

Typically an investment dealer or bank that is authorized to bid at Government of Canada debt auctions.

Highlights for the firm’s sales representatives the salient features of a new issue, both pro and con in order to successfully solicit interest to the general public. Dealers prepare this information circular for in-house use only.

An activity used to stabilize the aftermarket price of a recently issued security. If the price increases above the offer price, dealers can cover their short position by exercising an overallotment option (also referred to as a greenshoe option) by either increasing demand in the case of covering a short position or increasing supply in the case of over-allotment option exercise.

The value of all goods and services produced in a country in a year.

The amount remaining after the cost of sales is subtracted from revenue.

A profitability ratio that shows the company’s rate of profit after allowing for cost of sales.

The mechanism that adjusts Canadian dividend income for tax already paid at the company level

An industry in which sales and earnings are consistently expanding at a faster rate than in most other industries.

Common stock of a company with excellent prospects for above-average growth; a company which over a period of time seems destined for above-average expansion.

The minimum amount payable under death benefits or maturity guarantees provided for under the terms of the segregate fund contract.

Bonds issued by a crown corporation but guaranteed by the applicable government as to interest and principal payments.

A pension payable to OAS recipients with no other or limited income.

A deposit instrument most commonly available from trust companies, requiring a minimum investment at a predetermined rate of interest for a stated term. Generally nonredeemable prior to maturity but there can be exceptions.

A temporary halt in the trading of a security to allow significant news to be reported and widely disseminated. Usually, the result of a pending merger or a substantial change in dividends or earnings.

With a hard retraction feature, the company must pay any redemption value in cash.

A trend reversal pattern that can occur either at a market top, called a head-and-shoulders top formation, or at a market bottom, called an inverse head-and-shoulders or head-and-shoulders bottom formation. The formation consists of a shoulder, a head, and a second shoulder and the breaking of a neckline.

Lightly regulated pools of capital in which the hedge fund manager invests a significant amount of his or her own capital into the fund and whose offering memorandum allows for the fund to execute aggressive strategies that are unavailable to mutual funds such as short selling.

A protective manoeuvre; a transaction intended to reduce the risk of loss from price fluctuations.

A sub-set of algorithmic trading. High frequency trading is characterized by a very large number of orders for individual trades of very small size done at extremely high speed.

Used in the context of how a hedge fund manager is compensated. The high-water mark sets the bar above which the fund manager is paid a portion of the profits earned for the fund.

Investing, generally using little or no leverage, in high-yield debt securities (also known as junk bonds) of a company the manager feels may get a credit upgrade or is a potential takeover target.

A transactional rate of return measure that takes into account all cash flows and increases or decreases in a security’s value for any time frame. Time frames can be greater or less than a year.

Holding a disproportionate share of domestic securities

A type of separately managed account that involves the coordination of holdings across a family or household. In this approach, one overall portfolio model is used to coordinate investment management within and across accounts for the family or the household.

The rate that a hedge fund must earn before its manager is paid an incentive fee.

To pledge securities as collateral for a loan. Referred to as collateral assignment or hypotec in Québec for segregated funds.

A natural gas exchange, headquartered in Calgary, Alberta that provides electronic trading, central counterparty clearing and data services to the North American natural gas and electricity markets.

An order that displays only part of its total size

Matching portfolio duration to liabilities so rate moves offset

The process where a basket of stocks is exchanged for ETF units, rather than for cash.

A call option is in-the-money if its strike price is below the current market price of the underlying security. A put option is in-the-money if its strike price is above the current market price of the underlying security. The in-the-money amount is the option’s intrinsic value.

A fee based on performance paid to the fund manager. Incentive fees are usually calculated after management fees and expenses are deducted, rather than on the gross return earned by the manager.

A tax planning strategy whereby the higher-earning spouse transfers income to the lower-earning spouse to reduce taxable income.

The legislation dictating the process and collection of federal tax in Canada, administered by Canada Revenue Agency.

A type of investment trust that holds investments in the operating assets of a company. Income from these operating assets flows through to the trust, which in turn passes on the income to the trust unitholders.

A measure of the market as measured by a basket of securities. An example would be the S&P/TSX Composite Index or the S&P 500. Fund managers and investors use a stock index to measure the overall direction and performance of the market.

Sets out to match the performance of a broad market index, such as the S&P/TSX Composite Index or the FTSE Canada Universe Bond Index. Index funds are typically categorized under the type of asset class they tend to replicate.

A hybrid investment product that combines the safety of a deposit instrument with some of the growth potential of an equity investment. They have grown in popularity, particularly among conservative investors who are concerned with safety of capital but want yields greater than the interest on standard interest bearing GICs or other term deposits.

A portfolio management style that involves buying and holding a portfolio of securities that matches, closely or exactly, the composition of a benchmark index.

The individual selected as the executor of an estate.

The term used in the IVIC Guidelines to describe a segregated fund contract.

A generalized, sustained trend of rising prices.

The rate of change in prices. See also Consumer Price Index.

The risk that the value of financial assets and the purchasing power of income will decline due to the impact of inflation on the real returns produced by those financial assets.

A control that stops confidential information moving between parts of a firm

Document sent to shareholders with a proxy, providing details of matters to come before a shareholders’ meeting.

A new issue of securities offered to the public for investment for the very first time. IPOs must adhere to strict government regulations as to how the investments are sold to the public.

A commission paid to the financial adviser at the time that the policy is purchased. This type of sales charge is also known as an acquisition fee or a front-end load.

All directors and senior officers of a corporation and those who may also be presumed to have access to nonpublic or inside information concerning the company; also anyone owning more than 10% of the voting shares in a corporation. Insiders are prohibited from trading on this information.

A report of all transactions in the shares of a company by those considered to be insiders of the company and submitted each month to securities commissions.

Trading in a security by someone who has access to non-public material information.

A bond or debenture issue in which a predetermined amount of principal matures each year.

A new issue of stock sold with the obligation that buyers will pay the issue price in a specified series of instalment payments instead of one lump sum payment. Also known as Partially Paid Shares.

A legal entity that represents the collective financial interests of a large group. A mutual fund, insurance company, pension fund and corporate treasury are just a few examples.

Investment dealer that serves institutional clients exclusively.

Organizations, such as pension and mutual fund companies, that trade in large-share quantities or dollar amounts. They typically have a steady flow of money to invest.

Their main role is to be a relationship manager, serving as the liaison between the institutional investment dealer and client.

Their main role is to execute orders on behalf of clients (as an agency trader) or on behalf of the dealer (as a liability trader).

A person is considered to have an insurable interest in the life or health of another person from whom they derive a financial or other kind of benefit from that person.

An asset having no physical substance (e.g., goodwill, patents, franchises, copyrights).

Investment dealer that offers products and services that cover all aspects of the industry, including full participation in both the institutional and the retail markets.

A broker that acts as a financial intermediary between investment dealers to facilitate inter-dealer transactions.

Money charged by a lender to a borrower for the use of his or her money.

Earnings before interest and tax over interest expense

A debt ratio that tests the ability of a company to pay the interest charges on its debt and indicates how many times these charges are covered based upon earnings available to pay them.

The proportion of the loan calculated as interest that is payable by the borrower. Also referred to as the cost of credit.

The risk that changes in interest rates will adversely affect the value of an investor’s portfolio. For example, a portfolio with a large holding of long-term bonds is vulnerable to significant loss from changes in interest rates.

A globally accepted high-quality accounting standard already used by public companies in over 100 countries around the world.

A type of mutual fund that has the flexibility to buy back its outstanding shares periodically. Also known as closed-end discretionary funds.

A person who dies without having made a will or having made a will that was subsequently revoked (e.g., by marriage) or otherwise determined to be invalid.

That portion of a warrant or call option’s price that represents the amount by which the market price of a security exceeds the price at which the warrant or call option may be exercised (exercise price). Considered the theoretical value of a security (i.e., what a security should be worth or priced at in the market).

The goods and supplies that a company keeps in stock. A statement of financial position item.

Cost of goods sold over average inventory

Cost of sales divided by inventory. The ratio may also be expressed as the number of days required to sell current inventory by dividing the ratio into 365.

An ETF that seeks to replicate, net of expenses, the inverse performance of a reference index.

The use of money to make more money, to gain income or increase capital or both.

An individual licensed to transact in the full range of securities. IAs must be registered by the securities commission of the province in which he or she works. The term refers to employees of SRO member firms only. Also known as a Registrant or Registered Representative (RR).

Responsible for building the dealer’s business with respect to corporate and public finance, and mergers and acquisition services.

A small retail or institutional investment dealer that specializes in a specific market segment such as stock trading, bond trading, unlisted stocks, arbitrage, portfolio management, targeted industry research, underwriting junior mines, oils and industrials, mutual fund distributions, or tax-shelter sales.

A company which uses its capital to invest in other companies. See also Investment Fund.

A professional engaged to give investment advice on securities for a fee.

A person or company that engages in the business of trading in securities in the capacity of an agent or principal and is a member of CIRO.

A fund or company that sells units or shares and invests the proceeds in a portfolio of securities. There are two principal types: closed-end and open-end or mutual fund. Shares in closed-end investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed. Open-end funds sell their own new shares to investors, buy back their old shares, and are not listed. Open-end funds are so-called because their capitalization is not fixed; they normally issue more shares or units as people want them.

A member-based professional association that represents the interests of market participants.

Was the Canadian investment industry’s national self-regulatory organization. IIROC carried out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces. On January 1, 2023, IIROC merged with the Mutual Fund Dealers Association to form the Canadian Investment Regulatory Organization (CIRO).

The agreement between a portfolio manager and a client that provides the guidelines for the manager.

A person who is licensed to sell securities but is not permitted to give investment advice.

The ownership a company has in another company. As a general rule, significant influence is presumed to exist when a company owns 20% or more of the voting rights of the other company.

One whose principal concern is the minimization of risk, in contrast to the speculator, who is prepared to accept calculated risk in the hope of making better-than-average profits, or the gambler, who is prepared to take even greater risks.

A beneficiary whose entitlements under the segregated fund contract cannot be terminated or changed without his or her consent.

A contract where the beneficiary’s entitlements under the segregated fund contract cannot be terminated or changed without his or her consent.

Any of a company’s securities; the act of distributing such securities.

That part of authorized shares that have been sold by the corporation and held by the shareholders of the company.

Actual return minus the return predicted by the capital asset pricing model

Ownership where two or more people own assets together, and each owner has equal rights and obligations regarding the asset.

A corporate bond issue, the collateral for which has been pledged as security for other more senior debt issues and is therefore subject to these prior claims.

One or more junior bond issues.

The cardinal rule in making investment recommendations. All relevant information about a client must be known in order to ensure that the registrant’s recommendations are suitable. KYC requires you to understand a client’s personal and financial circumstances, investment knowledge, investment needs and objectives, risk profile, and investment time horizon.

The rule that requires you to know certain aspects of the products you recommend, including a product’s features, risks, costs, and potential performance in different types of market environments.

Measures the tendency of a return distribution either to have values that collect around the average of all returns (lower kurtosis) or conversely, to have values that collect towards the tails of the distribution (higher kurtosis).

What you know about the client's circumstances, knowledge, objectives, constraints and horizon, held current

The sum of the population aged 15 years and over who are either employed or unemployed.

LSVCCs are investment funds, sponsored by labour organizations, that have a specific mandate to invest in small to medium-sized businesses. To encourage this mandate, governments offer generous tax credits to investors in LSVCCs.

A selection of statistical data, that on average, indicate highs and lows in the business cycle behind the economy as a whole. These relate to business expenditures for new plant and equipment, consumers’ instalment credit, short-term business loans, the overall value of manufacturing and trade inventories.

The price at which the last trade on a stock occurred. See also Market Price.

A selection of statistical data that, on average, indicate highs and lows in the business cycle ahead of the economy as a whole. These relate to employment, capital investment, business starts and failures, profits, stock prices, inventory adjustment, housing starts and certain commodity prices.

Long Term Equity Anticipation Securities are long-term (2-3 year) option contracts.

The effect of fixed charges (i.e., debt interest or preferred dividends, or both) on per-share earnings of common stock. Increases or decreases in income before fixed charges result in magnified percentage increases or decreases in earnings per common share. Leverage also refers to seeking magnified percentage returns on an investment by using borrowed funds, margin accounts or securities which require payment of only a fraction of the underlying security’s value (such as rights, warrants or options).

An ETF that delivers daily investment results that correspond to a multiple of the daily performance of a reference index.

Debts or obligations of a company, usually divided into current liabilities—those due and payable within one year—and long-term liabilities—those payable after one year. A statement of financial position category.

Have the responsibility to manage a dealer’s trading capital to encourage market flows and facilitate the client orders that go into the market, while aiming to lose as little of that capital as possible. Liability traders can be considered those who set the direction for agency traders. Whereas agency traders have formal client responsibilities, liability traders have lighter responsibilities or none at all.

A model used in financial planning that tries to link age with investing. The underlying theory is that an individual’s asset mix will change, as they grow older. However the life cycle is not a substitute for the “know your client rule”.

Withdrawals are designed to deplete the entire investment by the end of the plan, while providing as high an income as possible during the plan holder’s expected lifetime. The amount withdrawn on each date is based on periods that are continually readjusted to the changing life expectancy of the plan holder. Readjustments are based on mortality tables.

A client’s order to buy or sell securities at a specific price or better. The order will only be executed if the market reaches or betters that price.

The word limited at the end of a Canadian company’s name implies that liability of the company’s shareholders is limited to the money they paid to buy the shares. By contrast, ownership by a sole proprietor or partnership carries unlimited personal legal responsibility for debts incurred by the business.

A type of partnership whereby a limited partner cannot participate in the daily business activity and liability is limited to the partner’s investment.

A debt instrument that guarantees the invested capital and whose return is based on the return of an underlying investment like an index.

Bonds that trade in significant volumes and can be made quickly without a significant sacrifice on the price.

The person in Quebec who settles the estate and distributes the assets according to the terms of a will.

1. The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. 2. A corporation’s current assets relative to its current liabilities; its cash position.

A theory that tries to explain the shape of the yield curve. It postulates that investors want to invest for the short-term because they are risk averse. Borrowers, however, want long-term money. In order to entice investors to invest long-term, borrowers must offer higher rates for longer-term money. This being the case, the yield curve should slope upwards reflecting the higher rates for longer borrowing periods.

Financial ratios that are used to judge the company’s ability to meet its short-term commitments. See Current Ratio.

The risk that an investor will not be able to buy or sell a security quickly enough because buying or selling opportunities are limited.

The stock of a company which is traded on a stock exchange.

A stock exchange document published when a company’s shares are accepted for listing. It provides basic information on the company, its business, management, assets, capitalization and financial status.

The portion of the offering price of shares of most open-end investment companies (mutual funds) which covers sales commissions and all other costs of distribution.

The time during which initial investments cannot be redeemed from a hedge fund.

Signifies ownership of securities. “I am long 100 BCE common” means that the speaker owns 100 common shares of BCE Inc.

A bond with greater than 10 years remaining to maturity.

Long-term (2-3 year) option contracts. Also known as LEAPS.

Managers try to buy stocks they feel will rise more in a bull market than the overall market and sell short stocks that will rise less. In a down market, good short selections are expected to decline more than the market and good long selections will fall less.

The tendency to feel a loss more sharply than an equal gain

A Payments Canada electronic system for the transfer of high-value payments between participating financial institutions. Also, a key tool used by the Bank of Canada to conduct monetary policy.

Macroeconomics focuses on the performance of the economy as a whole. It looks at the broader picture and to the challenges facing society as a result of the limited amounts of natural resources, human effort and skills, and technology.

Underlying price trend prevailing in a market despite temporary declines or rallies.

An account whereby a licensed portfolio manager has the discretion to decide and execute suitable investment decisions on behalf of clients.

A pool of capital gathered to buy securities according to a specific investment mandate. The pool seeds a fund managed by an investment professional that is paid a management fee to carry out the mandate.

The total expense of operating a mutual fund expressed as a percentage of the fund’s net asset value. It includes the management fee as well as other expenses charged directly to the fund such as administrative, audit, legal fees etc., but excludes brokerage fees. Published rates of return are calculated after the management expense ratio has been deducted.

The fee that the manager of a mutual fund or a segregated fund charges the fund for managing the portfolio and operating the fund. The fee is usually set as fixed percentage of the fund’s net asset value.

A document that requires management of an issuer to discuss the dynamics of its business and to analyze its financial statements with the focus being on information about the issuer’s financial condition and operations with emphasis on liquidity and capital resources.

The amount of money paid by a client when he or she uses credit to buy a security. It is the difference between the market value of a security and the amount loaned by an investment dealer.

Account used to buy or sell securities on partial credit. In such cases, the client pays only a portion of the purchase price and the investment dealer lends the balance to the client. Short sales can only take place in a margin account.

A contract that must be completed and signed by a client and approved by the firm in order to open a margin account. This sets out the terms and conditions of the account.

When an investor purchases an account on margin in the expectation that the share value will rise, or shorts a security on the expectation that share price will decline, and share prices go against the investor, the brokerage firm will send out a margin call requiring that the investor add additional funds or marketable securities to the account to protect the broker’s loan.

The tax rate that would have to be paid on any additional dollars of taxable income earned.

Any arrangement whereby products and services are bought and sold, either directly or through intermediaries.

The dollar value of a company based on the market price of its issued and outstanding common shares. It is calculated by multiplying the number of outstanding shares by the current market price of a share.

An index where each company counts in proportion to its size

An economic system where the decisions regarding investment, production, and distribution of goods and services are guided by the price signals created by the forces of supply and demand.

A trader employed by a securities firm who is authorized and required, by the applicable self-regulatory organization (SRO), to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities.

An order placed to buy or sell a security immediately at the best current price.

A clause in a prospectus that permits the underwriter to cancel an offering without penalty under certain conditions.

The price at which the last trade on a stock occurred. See also Last Price.

The non-controllable or systematic risk associated with equities.

A theory on the structure of the yield curve. It is believed that large institutions shape the yield curve. The banks prefer to borrow short term while the insurance industry, with a longer horizon, prefers long-term money. The supply and demand of the large institutions shapes the curve.

Market-linked GICs combine the guarantee of the principal invested with some of the growth potential of an underlying market in the form of a stock index, mutual fund, or ETF.

A measure of the ability to buy and sell a security. A security has good marketability if there is an active secondary market in which it can be easily bought and sold at a fair price.

Bonds for which there is a ready market (i.e., clients will buy them because the prices and features are attractive).

The process in the futures market in which the daily price changes are paid by the parties incurring losses to the parties earning profits.

The purchase of an underlying asset and the purchase of a put option on that underlying asset.

A change in the affairs of a company that is expected to have a significant effect on the market value of its securities.

A fact that would be expected to have an effect on the market value of its securities if the fact was expressed.

Information that would reasonably affect a security's price

An industry that experiences slower, more stable growth rates in profit and revenue than growth or emerging industries, for example.

The date on which a loan or a bond or debenture comes due and is to be paid off.

The date at which the contract expires, and the time at which any maturity guarantees are based. Segregated fund contracts normally mature in 10 years, although companies are allowed to set longer periods. Maturities of less than 10 years are permitted only for funds such as protected mutual funds, which are regulated as securities and are not segregated funds.

The minimum dollar value of the contract after the guarantee period, usually 10 years. This amount is also known as the annuity benefit.

The largest drawdown during a specific period.

A bond with 5 to 10 years remaining to maturity.

Treating money differently according to its label

Investing simultaneously in long and short positions of the common stock of companies involved in a proposed merger or acquisition, usually involving taking a long position in the company being acquired and a short position in the acquiring company. Also known as risk arbitrage strategy.

Analyzes the market behaviour of individual consumers and firms, how prices are determined, and how prices determine the production, distribution, and use of goods and services.

An investor exemption from receiving a prospectus based on a prescribed minimum investment. NI 45-106 sets the minimum across Canada at $150,000.

This method of fund valuation reduces the extensive calculations of the daily valuation method by providing a good approximation. It assumes a constant rate of return through the period, eliminating the need to value the portfolio on the date of each cash flow. The Modified Dietz method weights each cash flow by the length of time it is held in the portfolio.

Price sensitivity to a small change in yield

School of economic theory which states that the level of prices as well as economic output is determined by an economy’s money supply. This school of thought believes that control of the money supply is more vital to economic prosperity than the level of government spending, for example. See also Keynesian Policy.

An aggregate that measures the quantity of money held by a country’s households, firms and governments. It includes various forms of money or payment instruments grouped according to their degree of liquidity, such as M1, M2 or M3.

Economic policy designed to improve the performance of the economy by regulating money supply and credit. The Bank of Canada achieves this through its influence over short-term interest rates.