Certified Power Quality Professional (CPQ)

Correct: According to National Instrument 33-109, firms are required to report changes in registration information, including disciplinary actions and suspensions, through the National Registration Database (NRD). This notification must generally occur within 10 days of the event. Furthermore, the firm is responsible for ensuring that the individual does not perform any registrable activities during the suspension period mandated by the SRO.

Incorrect: Waiting for an appeal period to expire is incorrect because regulatory reporting requirements for NRD updates are triggered by the decision itself, not the exhaustion of all possible appeals. The Canadian Investor Protection Fund (CIPF) provides protection against the insolvency of a member firm, not against losses resulting from rule breaches or disciplinary fines. Reassigning accounts to a non-registered assistant is a violation of securities regulations, as only registered individuals are permitted to perform activities that require registration, such as providing investment advice or executing trades.

Takeaway: Firms must report disciplinary sanctions and registration status changes via the National Registration Database (NRD) within 10 days to maintain regulatory compliance.

Correct: ESG integration is the systematic inclusion of environmental, social, and governance factors into traditional financial analysis. This approach is considered most appropriate for many institutional investors because it focuses on ‘materiality’—identifying how ESG factors specifically affect a company’s bottom line and long-term valuation. By doing so, the advisor can mitigate risk and identify opportunities without necessarily limiting the investment universe or sacrificing the primary goal of competitive financial returns.

Incorrect: Exclusionary screening (negative screening) can lead to a lack of diversification and may ignore companies that are successfully transitioning to more sustainable models. Relying solely on third-party ESG ratings for a passive strategy can be problematic because these ratings often lack standardization and may rely on lagging, historical data rather than forward-looking risk assessment. Prioritizing social impact over financial returns (impact investing) is a specific niche strategy that may violate the fiduciary duty of an advisor if the client’s primary objective is market-competitive growth for a pension or institutional fund.

Takeaway: ESG integration treats environmental, social, and governance factors as material components of a comprehensive financial analysis rather than just ethical filters.

Correct: Under AML and KYC regulations, financial institutions are required to maintain accurate and up-to-date information on the source of wealth for clients, particularly those in high-risk categories like high-net-worth individuals. Taking immediate action to remediate the files ensures the institution meets its regulatory obligations and accurately assesses current risk, which is the primary goal of a risk-based compliance approach.

Incorrect: Flagging accounts for future closure does not address the immediate compliance failure and leaves the institution exposed to risk in the interim. Submitting incomplete files with a promise to fix them later is insufficient as regulators require compliance at the time of inspection. Transferring accounts is an attempt to shift responsibility rather than addressing the underlying regulatory breach and does not resolve the compliance deficiency.

Takeaway: Effective regulatory compliance requires proactive remediation of KYC and AML documentation gaps to accurately assess and mitigate institutional risk.

Correct: Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), financial entities are required to report large cash transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This includes single or multiple cash transactions totaling $10,000 or more within a 24-hour period. The report, known as a Large Cash Transaction Report (LCTR), must be submitted within 15 calendar days.

Incorrect: Filing a Suspicious Transaction Report (STR) with IIROC is incorrect because while STRs are required for suspicious activity, the primary regulatory body for AML reporting is FINTRAC, and the specific trigger here is the cash threshold. The Canadian Investor Protection Fund (CIPF) deals with member firm insolvency and investor protection, not AML enforcement. Waiting for an annual OSFI audit is a failure of the firm’s immediate regulatory reporting obligations and does not satisfy the specific 15-day reporting window required by law.

Takeaway: Financial institutions must report aggregate cash transactions of $10,000 or more within a 24-hour period to FINTRAC within 15 calendar days to comply with AML regulations.

Correct: Under Canadian Self-Regulatory Organization (SRO) rules, such as those governed by CIRO (formerly IIROC), investment dealers are required to maintain comprehensive records of all business transactions, including the exact time of order receipt and execution, for a minimum of seven years. This requirement ensures that an adequate audit trail exists for regulators to reconstruct market activity and investigate potential misconduct.

Incorrect: The suggestion that records only need to be kept for five years is incorrect as it falls short of the seven-year Canadian standard for investment dealers. Preliminary order data, including timestamps, is a critical component of the audit trail and cannot be discarded after an audit. Furthermore, regulatory standards for record retention do not typically differentiate between cash-market equities and derivatives in a way that would allow for a three-year retention period.

Takeaway: Investment dealers must maintain comprehensive records of all client orders and transactions, including precise timestamps, for at least seven years to ensure regulatory compliance and market transparency.

Correct: Under provincial insurance legislation in Canada, segregated funds can offer protection from creditors if the beneficiary is a member of the ‘family class’ (spouse, child, parent, or grandchild). This is a significant feature for business owners who may face professional liability. The advisor must ensure the designation is correct to trigger this legal protection.

Incorrect: Maturity guarantees in segregated funds typically require a minimum holding period of ten years, not three, to be effective. The Canadian Investor Protection Fund (CIPF) covers assets held by investment dealers; insurance products like segregated funds are covered by Assuris. Naming the estate as a beneficiary subjects the proceeds to probate fees and makes the assets available to creditors, negating two of the primary benefits of using an insurance-based investment product.

Takeaway: To secure creditor protection in insurance-based investments, the beneficiary must be a member of the restricted family class or be designated as irrevocable.

Correct: Under National Instrument 31-103 and the regulatory framework established by the CSA, registrants are required to identify and address material conflicts of interest. If a conflict is not avoided, it must be disclosed to the client in writing. The disclosure must be timely and include the nature and extent of the conflict, as well as how the firm is managing it, so the client can make an informed decision about their relationship with the firm.

Incorrect: Updating internal registries or notifying regulators alone does not satisfy the obligation to inform the client of a material conflict. General best execution statements are too broad to cover specific conflicts arising from proprietary system biases. While fixing the system logic is a good control measure, it does not fulfill the transparency requirement for the period during which the conflict was active and undisclosed.

Takeaway: Material conflicts of interest must be disclosed to clients in writing with sufficient detail to ensure transparency and allow for informed client consent.

Correct: ESG integration is primarily focused on identifying material risks and opportunities that traditional financial analysis might overlook. In the Canadian regulatory context, this is seen as a way to fulfill fiduciary duties by considering all factors—including non-financial ones—that could affect the long-term value and sustainability of an investment.

Incorrect: Prioritizing social outcomes over financial returns describes impact investing or philanthropy rather than the core objective of ESG integration in a standard investment context. Strict exclusion of specific sectors is a strategy known as negative screening, which is only one possible ESG approach and not the overarching objective of integration. Using ESG primarily for marketing or to justify higher fees is considered unethical and risks ‘greenwashing,’ which is a major focus of regulatory scrutiny by the CSA.

Takeaway: ESG integration aims to improve risk-adjusted returns by incorporating material environmental, social, and governance factors into traditional financial analysis.

Correct: Over-the-Counter (OTC) markets are decentralized networks where participants trade directly with one another rather than through a centralized exchange. Because many OTC transactions lack a central clearing house, participants must prioritize the assessment of counterparty risk, which is the risk that the other party will default on the transaction. Additionally, since OTC trades are negotiated privately between dealers and clients, there is significantly less transparency regarding real-time bid-ask spreads and trade volumes compared to the public order books of an exchange.

Incorrect: OTC markets are dealer-intermediated (quote-driven) networks, not centralized auction (order-driven) systems. Securities traded in the OTC market are unlisted, meaning they do not meet or maintain the listing requirements of exchanges like the CSE or TSX. Finally, while the CIPF protects against the insolvency of a brokerage firm, it does not provide insurance against market price fluctuations or the inherent risks of trading speculative securities.

Takeaway: The OTC market is a decentralized, dealer-based network where the absence of a central exchange makes counterparty risk and price transparency the most critical factors for participants.