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 Lesson #6 - Careers in the Investment IndustryEst. Time: 2 x 70-minute periods

Teaching/Learning in this Lesson

Students will:

I Identify general career areas in the investment industry

I Compare different types of careers in the investment industry

I Assess personal interest in careers in the investment industry

I Describe the roles of the different regulatory organizations in the investment industry

Teaching/Learning Strategies

I Class discussion

I Individual or small-group research and task assignment

I Individual reading, research, and writing assignment

Suggested Implementation Plan

6.1 Let’s explore career opportunities in the industry

You will need:I copies of Black Line Master (BLM) #6.1 Exploring Your Interest in Careers in the

Investment IndustryI transparency of BLM #6.2 General Career Areas in the Investment Industry

Use BLM #6.2, to identify a number of the general career areas in the investment

industry.

6.2 Who regulates the industry?

You will need:I transparency and copies of BLM #6.3 Regulating the Investment Industry

Distribute BLM #6.3. Ask students to review the roles of the different organizations

and players in the investment industry – including information on who has to be

registered and why, how rules/laws are put in place to govern investment activity

and with which individuals and firms must comply, and the actions that can be

taken by these organizations if individuals and/or firms do not comply.

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6.3 Careers in the industry

You will need:I transparency and copies of BLM #6.4 Who Needs to be Registered?

I transparency and copies of BLM #6.5 Categories of Registration

Distribute BLM #6.4. Ask students to review the different careers related to

investment dealers and the differences that exist among them and to review the

different careers related to investment advisers.

HOMEWORK ASSIGNMENT: Distribute BLM #6.6 Assignment. Ask students to

complete the sheet indicating their first and second choices in terms of careers that

would potentially be of interest.

6.4 DAY TWO: Review the regulatory environment

You will need:I copies of BLM #6.7 Quiz

Ask students to put their books away and distribute BLM #6.7 Quiz

(BLM #6.8 provides answers to the quiz questions.)

While students are doing the quiz, review their completed copies of the BLM #6.6

and see which career areas are of greatest interest to students. You can use this

information to guide additional class discussion in which you can look more closely

at the career areas that are of most interest.

When the quiz is complete, collect it and/or go over the correct answers.

6.5 Summarize lesson

Review with students some of the key things that have been learned. Discuss why it

is important for investors to be able to have confidence in those who are providing

investment services and advice. Emphasize that there are many, many different

kinds of investments and many, many different individuals and firms offering their

investment services. To build confidence among investors, it is important that there

be some “regulation” and “control” of the investment industry.

Present the concluding and summary remarks you wish to emphasize to students

based on the material covered. Determine if there are any final questions students

have, and respond accordingly.

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Black Line Master #6.1 - Exploring Interest in Careers in the Investment Industry

Note the following scale for your score assignments in your self-evaluation:

1 = To a very little degree

2 = To a little degree

3 = Unsure

4 = To some degree5 = To a considerable or great degree

To what degree …

… do you feel you have a desire to work in 1 2 3 4 5

the field of investing?

… do you like working with people and helping 1 2 3 4 5

them make decisions that can affect their lives

and their ability to reach their goals?

… do you enjoy analyzing information and 1 2 3 4 5

drawing conclusions from that information

to guide decisions and actions?

… do you feel you are good at handling stress and 1 2 3 4 5

situations that vary from good and positive to

troubling and anxious?

… do you think you are an honest person with 1 2 3 4 5

strong personal values that guide your decisions

and actions – even when they involve someone

else’s money?

… do you have an interest in the world of business, 1 2 3 4 5

finance, and the economy and follow the news

on related events and issues?

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… do you enjoy working at a fast pace in a 1 2 3 4 5

fast-paced environment that can be exciting

but also entails pressures of time and money?

… do you enjoy working with numbers, money, 1 2 3 4 5

calculations etc.?

… do people relate to you easily, converse with 1 2 3 4 5

you, share information with you, trust you?

… are you able to accept events and outcomes that 1 2 3 4 5

are beyond your control – that is, things that you

hoped and planned would go one way but that

went a different, less desirable way without youbeing able to do anything about it?

… are you personally motivated to work hard? 1 2 3 4 5

… do you have a willingness to learn and keep on 1 2 3 4 5

top of news and new information?

… do you believe you are capable of transferring 1 2 3 4 5

something you have learned in one situation to

another situation?

… are you able to accept responsibility for 1 2 3 4 5

outcomes – both positive and negative – that

were a result of your actions?

… are you able to plan effectively, follow plans, 1 2 3 4 5

and keep clear records?

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… are you able to communicate effectively – 1 2 3 4 5

verbally and in writing?

… are you able to market and sell yourself and 1 2 3 4 5

your ideas to others?

… are you truly interested in people and in 1 2 3 4 5

trying to help others?

… are you personally willing to take financial risks? 1 2 3 4 5

… can you see yourself working in an industry 1 2 3 4 5

with sharp cycles – that is, strong upturns anddownturns that can bring good times followed

by tough times – where the workplace is not

always stable and relatively calm?

Add up your total. Maximum total score: 100

If your score is high, you may want to explore career options in the investment industry.

Scoring Guide – Totally untested and unsophisticated, but it gives you an idea!

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Black Line Master #6.2 - General Career Areas in the Investment Industry

Buying and selling of securities

I Provide services when buying and selling securities – Investment Dealers (Registered)

I Provide investment advice to clients concerning securities –

Investment Advisers (Registered)

Financial planning

I Provide assistance with financial planning and budgeting – Financial Planners

(may also be registered as a mutual fund dealer or investment dealer)

Regulation

I Develop and supervise the regulatory environment

I Enforce regulations

Research & Analysis

I Analyze investment markets and products

I Analyze international markets and developments

I Provide market advice and analysis to companies and governments

I Analyze data and information and develop forecasts and estimates

Legal & Accounting Support

Marketing & Communications

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Black Line Master #6.3 - Regulating the Investment Industry

(adapted from Dealers and Advisers: With Whom are you Dealing for Your Investment Services,with permission from the Ontario Securities Commission)

Within Ontario, the OSC oversees self-regulatory organizations (SROs) such as the Investment

Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of

Canada (MFDA).

SROs can set and enforce registration requirements for their members as long as those

requirements meet or surpass the OSC’s standards.

The OSC sets out the educational requirements for registration, but courses are administered by

industry organizations. The OSC reviews education and experience requirements periodically to

ensure they meet the changing needs of the industry and you, the client.

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OSC

Makes and enforces rules

Oversees SROs

Sets proficiency requirements

Disciplines firms and individuals

CanadianSecurities Institute

www.csi.ca

Provides courses forindividuals who want to

become registered ormaintain registration as

dealers or advisers

CFA Institute

www.cfainstitute.org

Provides courses forindividuals who want tobe registered in certain

categories of adviser

Institute ofCanadian Bankers

www.icb.org

Provides courses forindividuals who want tobe registered as mutual

fund salespeople and whomostly work in banks

Investment FundsInstitute of Canada

www.ific.ca

Provides courses forindividuals who want tobe registered as mutual

fund dealers

MFDA

Sets rules for its members and enforces them

Disciplines member firmsand their staff

SROs

Educators

IIROC

Sets and enforces rules regarding the proficiency,business and financial conduct of dealer firms and their

registered employees

Sets and enforces market integrity rules regardingtrading activity on Canadian equity marketplaces

Disciplines firms and individuals

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Black Line Master #6.4 - Who Needs to be Registered?

(adapted from Dealers and Advisers: With Whom are You Dealing for Your 

Investment Services, with permission from the Ontario Securities Commission)

The registration system works on two levels. First, all securities firms have

to register with the OSC. Second, all their employees who provide

trading or advising services are required to register as well.

Dealers and advisers cannot be registered as individuals unless a

registered firm employs them. This is to ensure that adequate

record keeping, supervision and insurance are in place to protect your investments.

Handling people’s savings is a highly responsible business. For that reason, the OSC does detailed

background checks before they register a firm or individual. The OSC also keeps up-to-date

records by requiring both firms and all registered employees to renew their registrations every

year and to provide notification of any changes that occur within the firms.

Before the OSC registers a firm

Before the OSC will approve a firm’s registration, the firm must provide the OSC with detailed

information. This includes information about the firm’s owners, directors and officers. These

people are the firm’s senior employees or owners who are responsible for how the company

conducts its business. The following is a list of some of the requirements a firm must meet.

In addition to completing education requirements, work experience (if applicable), and police

checks with the RCMP and other sources, the firm’s owners, directors and officers must:

I ensure that a proper record keeping system is in place to document its business affairs andthe transactions it carries out on behalf of you, the client.

I provide evidence of insurance and depending on the category of registration being sought,evidence of membership in a contingency protection fund, which protects against thepossible loss of clients’ money due to bankruptcy of the firm.

I appoint an auditor to audit the financial statements of the firm. Audits help the OSC ensurethat clients’ money is not being put at risk by bad procedures or because the firm is at risk ofgoing insolvent.

I select a Compliance Officer who will be responsible for all the activities of the firm and itsemployees. This means they are responsible if something goes wrong at the company, even ifthey aren’t directly involved.

Before the OSC registers a firm’s employees

Employees of a securities firm, salespeople or representatives, can only be registered with one

firm at a time. Before the OSC will register an individual in any category, they must meet

specific requirements.

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Some of the most common requirements are:

I they must work for a registered firm.

I they must disclose all outside business or employment activities so that the OSC can check forconflicts of interest. For example, it’s a conflict for a person to sell you shares in a companythey control.

I they must meet minimum education and experience requirements to the category ofregistration being sought.

I they must disclose any criminal record. In this situation consideration is given to the natureof the offence, the punishment imposed and the length of time since it occurred.

Ongoing monitoring

Securities firms must renew their registrations and their employees’ registrations every year. If

they don’t, the OSC can stop them from doing business.

Firms must show, on an ongoing basis, they are properly covered by insurance and provide the

OSC with their audited financial statements.

The OSC visits non-SRO firms to carry out both scheduled and random reviews of their financial

and operational records and can request additional information be supplied. The SROs perform

similar reviews of their members. This helps the OSC and the SROs identify firms at risk of going

out of business, or ones that may be mishandling their clients’ money.

If the OSC finds evidence of illegal operations, it can seize documents and other materials, order

an audit and compel witnesses to attend a hearing.

If an individual leaves one firm for another, his or her registration is suspended until the OSC can

confirm the transfer with the new registered employer.

Important Checks

I Background checks on individuals

I Audits and monitoring of firms

I Education and experience requirements for individuals

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Black Line Master #6.5 - Categories of Registration

(adapted from Dealers and Advisers: With Whom are You Dealing for Your Investment Services,

with permission from the Ontario Securities Commission)

Firms and their employees can only provide you with the services for which they are registered.

People in the securities business use many titles to describe themselves. Investment adviser and

investment specialist are terms commonly used. The OSC does not recognize these terms or use

them in its classifications of registration.

Under the Ontario Securities Act, there are two basic types of registration categories - dealers

and advisers. The main difference between them is the type of services they offer you.

Registration requirements vary depending on the type of service provided. In general, it requires

more working experience and education to work at an adviser firm than a dealer firm.

This is because adviser firms may provide services such as the discretionary management of your

portfolio and advice based on in-depth analysis of securities.

Dealers need your permission to make a transaction

Dealers are companies that trade (buy and sell) securities on your behalf,

but not without you agreeing to each transaction first. While many can

advise you on which investments to buy, you still have the final say over

each decision.

There are several different dealer classifications depending on the service

they offer you. Some firms are registered to sell you a wide range of

securities, while others are limited to just one kind of investment.

There are exemptions that may apply to any given registration category. If someone tells you

that they, or the products they offer, are exempt, contact the OSC’s registration department at

416-593-8269.

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Categories of registration for dealers

Mutual fund dealer Trades only in the shares or units of mutual funds

Investment dealer A member of the Investment Dealers Association (IDA) that can deal

in a wide range of products and services, including stocks, bonds,

mutual funds, options and discretionary portfolio management

Scholarship plan dealer Trades only in securities of scholarship or educational plans or trusts

Limited market dealer Can only sell what are known as exempt products – special products

that are exempt from various legal requirements

Futures commission Trades in futures contracts

merchant

International dealer Deals directly with designated institutions and is registered solely to

trade a restricted group of products such as foreign securities

Advisers may have “discretionary authority”

An adviser’s job is to recommend investments for your portfolio.

In situations where you authorize it, an adviser can have “discretionary authority” when dealing

with your money. This means they can make decisions on your behalf without first getting your

approval for each transaction.

Because discretionary authority involves a great deal more responsibility and potential for abuse,

requirements for advisers are generally more stringent. This is one reason why there may be

fewer advisers than dealers.

You should always be extremely careful about handing your money over to someone else to

manage like it was his or her own. Always check that the firm is registered with us and that it is

allowed to offer discretionary management.

It’s important to note that many individuals use the term “adviser” to describe themselves, such

as investment adviser, financial adviser or wealth management adviser. Don’t confuse this with

the OSC “adviser” registration category. The category of registration is more important than an

individual title, because it indicates what type of products or service advisers or dealers can

provide you.

Firms and their employees can be registered in several categories

Firms and their employees can be registered as both dealers and advisers and also hold

several categories of registration. This can make it difficult for you to know what kind of firm

you are dealing with.

A common example is when you buy mutual funds at a bank. The bank is a mutual fund dealer

and needs your permission before it can invest your money in any mutual fund it sells.

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Once you choose to invest in a fund, the bank sends your money to an adviser firm. This firm is

likely registered as a portfolio manager and invests your money under discretionary authority.

While you can choose which fund to invest in, once it’s invested in the fund the portfolio

manager makes all the decisions.

Categories of registration for advisers

Portfolio manager Manages the investment portfolios of clients through discretionary

authority granted by clients

Investment counsel Advises clients on the buying or selling of specific securities.

Advisers registered solely as Investment Counsel do not have

discretionary authority

Securities adviser Advises others through publications or writings on investing in

specific securities not specifically tailored to individual clients

Commodity Handles trading in futures contracts for customers through

trading manager discretionary authority granted by clients

Commodity Provides advice to others through publications or writings on the

trading adviser trading in futures contracts but does not specifically advise

individual clients

Commodity Advises others on trading in specific futures contracts or provides

trading counsel continuous advice on trading in futures contracts based on the

particular objectives of each client

International adviser Provides investment advice to a limited range of clients and is not

required to have an office in Ontario

Any company or individual (within or outside of Canada) that offers you investment services

must be registered with the OSC. Check with the OSC to ensure that a firm is registered to offer

you discretionary management.

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Black Line Master #6.6 - Assignment

Complete the following:

“Of the possible careers in the investment industry, I would be most interested in …”

Provide a brief explanation for why this possible career appeals to you. What question would

you like to ask someone in the investment industry to learn more about this career?

“Of the possible careers in the investment industry, I would also be interested in …”

Provide a brief explanation for why this possible career appeals to you. What question would

you like to ask someone in the investment industry to learn more about this career?

“From what I have learned, I am probably not interested in a career in the investment

industry because …”

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Black Line Master #6.7 - Quiz

1. Why is there a registration system for those involved in buying and selling securities?

2. What is an SRO? Provide a specific example of an SRO.

3. Give an example of a Canadian organization in the investment industry that provides

education courses and training for people in the investment industry.

4. What is one requirement that a firm must fulfill before the OSC will register the firm?

5. What is one requirement an individual must meet before the OSC will

register that person?

6. What is one thing that the OSC may require on an annual basis to continue the

registration of a firm?

7. What can the OSC do if it should discover evidence of illegal operation?

8. What happens if an individual registered with one firm leaves to work for another firm?

9. What are two types of dealer registration categories currently used by the OSC?

10. What does it mean to provide an adviser with discretionary authority?

11. Briefly describe the role and significance of the Know Your Client Rule.

12. Provide an example of a responsibility an investor has to his/her dealer or adviser.

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