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click on the letters below to find a term. Our glossary provides definitions
for terms widely used in the financial industry. Several associations
have on-line glossaries that define more specialized terms related
to insurance, banking and investment. You can access them through
our Links section, under the title "Industry
Associations."
If there's a term you would like added to this glossary, please let
us know.
A B C D E F G H I J-K L M N O P R S T U-Z
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A
Amortization period
The actual number of years it will take to repay a mortgage in full.
Annuity
A type of investment contract that pays you income at regular intervals,
usually after retirement.
Asset
Any thing of value owned by an individual or organization.
Automated banking machine (ABM)
An electronic kiosk or terminal that allows you to conduct financial
transactions such as paying bills, withdrawing cash and depositing
cheques. Also called an automatic teller machine
(ATM).
Automatic teller machine (ATM)
See automated banking machine.
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B
Bank
A federally regulated financial institution
that, in general, engages in the business of taking deposits, lending
and providing other financial services.
Bank Act
Federal legislation governing the structure and operation of banks
in Canada.
Bank of Canada
Canada's central bank. It is responsible for Canadian monetary policy,
issuing bank notes, regulating and supporting Canada's principal systems
for clearing and settling payments, and acting as fiscal agent for
federal government debt. For more information, visit the Bank
of Canada Web site.
Bank rate
The minimum lending rate of the Bank of
Canada. It is applied to advances to institutions that are members
of the Canadian Payments Association,
and to purchase and resale transactions with key investment dealers
in the money market. It is also the primary indicator of Bank of Canada
monetary policy. The bank rate is an
important tool because it is seen as the trend-setter for other short-term
interest rates. Changes in the bank rate often lead to changes in
the prime rate, which is the rate of interest
that commercial banks charge their lowest-risk customers. Other rates
can be affected, including those for mortgages, cars and business
loans, as well as rates paid to savers on deposits and investment
certificates.
Bond
A certificate received for a loan made to a company or government.
In return, the issuer of the bond promises to pay the lender interest
at a set rate and to repay the loan on a set date.
Broker
A securities firm or a registered individual affiliated with one.
Brokers are the link between investors and the stock market, handling
the public's orders to buy and sell securities, commodities, etc.
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C
Canada Deposit Insurance Corporation (CDIC)
A federal Crown corporation established in 1967 to protect Canadian
currency deposits against the possible failure of member financial
institutions (which include banks, and trust and loan companies).
As a general rule, eligible deposits are protected up to a maximum
of $100,000 per person, including principal and interest, at each member
institution. For more information, visit the Canada
Deposit Insurance Corporation Web site.
Canada Education Savings Grant (CESG)
Federal government program designed to help parents, grandparents
and interested Canadians save for a child's post-secondary education.
The Government of Canada will contribute 20% of the amount of contributions
made to a Registered
Education Savings Plan, to a maximum yearly amount of $400 per
child per year or a lifetime maximum of $7,200. For more information,
visit the CESG
page on the Human Resources Development Canada Web site.
Canada Mortgage and Housing Corporation (CMHC)
Crown corporation that administers the National Housing Act for the
federal government, and creates and sells mortgage loan insurance
products. For more information, visit the CMHC
Web site.
Canada Premium Bond
A new savings product for individual Canadians, introduced by the
Government of Canada in 1998. It offers a higher interest rate than
the Canada Savings Bond, and is redeemable once a year on the anniversary
of the issue date or during the 30 days thereafter without penalty.
For more information, visit the Canada
Investment and Savings Web site.
Canada Savings Bond (CSB)
A savings product issued and guaranteed by the federal government,
and offered for sale by most Canadian financial institutions to individual
Canadians. It pays a competitive rate of interest that is guaranteed
for one or more years. It may be cashed at any time and, after the
first three months, pays interest up to the end of the month prior
to encashment. For more information, visit the Canada
Investment and Savings Web site.
Canadian Bankers Association (CBA)
Established in 1891, the CBA is the main representative body for banks
in Canada. It provides its members — the chartered banks of Canada
— with information, research, advocacy and operational support
services. The CBA also provides information to the public on banking
and financial issues. For more information, visit the CBA
Web site.
Canadian Life and Health Insurance Association (CLHIA)
An association of most of the life and health insurance companies
in Canada. It conducts research and compiles information about the
life and health insurance industry in Canada. For more information,
visit the CLHIA
Web site.
Canadian Life and Health Insurance Compensation Corporation (CompCorp)
A private, non-profit corporation established in 1990 by the life
insurance industry. It is funded by the industry and provides Canadian
policyholders with compensation coverage against loss of policy benefits
in the event of the insolvency of their insurance company. For more
information, visit the CompCorp
Web site.
Canadian Life and Health Insurance OmbudService (CLHIO)
The Canadian Life and Health Insurance OmbudService (CLHIO) is an independent service that assists consumers with concerns and complaints about life and health insurance products and services. Our objective is to provide fair and prompt resolution of problems. For more information, visit the CLHIO Web site.
Canadian Payments Association (CPA)
A financial network established in 1980 to operate a national clearing
and settlement system. For more information, visit the CPA
Web site.
Capital gain or loss
The profit or loss that results from the sale of an asset, such as
a security or real estate.
Charge card
A plastic card that allows the holder to make purchases at participating
retailers with borrowed funds.
Cheque
A written order for payment of a certain amount of money.
Cheque cashing outlet
A business that provides cheque cashing and basic financial services,
such as foreign currency exchange, money transfers and money orders.
Code of conduct
Non-legislated guidelines that one or more organizations agree to
follow. Also referred to as "voluntary code" or "code
of practice," it typically outlines service standards that you
can expect in dealings with a company subscribing to the code.
Coercive tied selling
A practice that imposes undue pressure on, or coerces, a person to
obtain a product/service from a bank or any of its affiliates as a
condition for obtaining any other product from the same institution.
Banks are prohibited from engaging in coercive tied selling —
contact the Financial Consumer Agency
of Canada if you believe you’re affected by this practice. To
learn more, read Know
Your Rights — Coercive tied selling.
Common shares
An investment that gives the holder part ownership in a company and
the right to vote on major decisions affecting it.
Complaint handling process
Procedures that financial institutions must have in place for customers
who want to make a complaint.
Compliance agreement
The Commissioner of the Financial Consumer Agency of Canada may enter
into an agreement, called a "compliance agreement," with
a financial institution for the purposes of implementing any measure
designed to further compliance by that institution with federal consumer
provisions (see below).
Consumer price index (CPI)
Measure of price changes, produced by Statistics Canada on a monthly
basis. It measures the retail prices of a "shopping basket"
of about 300 goods and services, including food, housing, transportation,
clothing and recreation.
Consumer provisions
Certain sections of various federal acts and regulations relating
to financial institutions (e.g., the Bank Act, the Insurance Companies
Act) are designated as “consumer provisions” by the Financial Consumer
Agency of Canada Act. They are designed to protect consumers in
their everyday dealings with financial institutions. The FCAC monitors
federally regulated financial institutions to ensure they adhere to
the consumer provisions that apply to them. To learn more, visit the
Know Your Rights section
of our Web site.
Co-operative credit association
An association that is organized and operated on co-operative principles,
with one of its principal purposes being to provide financial services
to its members.
Co-operative Credit Associations Act
Federal legislation governing the structure and operation of co-operative
credit associations in Canada.
Credit card
A plastic payment card that allows the holder to obtain goods and
services on credit terms and without the requirement to pay cash.
A credit card may also be used to obtain cash.
Credit rating
A rating created by authorized credit agencies that denotes a person's
credit history.
Credit union / caisse populaire
A co-operative financial institution that is owned by its members
and operates for their benefit. Credit unions and caisses populaires
(a form of credit union located primarily in Quebec) are subject to
provincial regulation and are usually small and locally oriented.
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D
Debit card
A plastic card that, when used in conjunction with a personal identification
number (PIN), allows you to electronically access your bank accounts
from automated banking machines or at retailers offering the Interac
Direct Payment service.
Deductible
A set amount that you must pay before an insurance company provides
any benefit payments to you under an insurance policy.
Demutualization
The process of converting from a mutual company to a stock company.
A mutual company is owned by its voting policyholders, while a stock
company is owned by its shareholders. For more information, visit
the Office of
the Superintendent of Financial Institutions Web site.
Department of Finance
The federal department primarily responsible for providing the government
with analysis and advice on the broad economic and financial affairs
of Canada. Its mandate includes preparing the federal budget, preparing
tax and tariff legislation, managing federal borrowing on financial
markets, and representing Canada within international financial institutions.
To fulfil the department's role, Finance officials monitor and research
the performance of the Canadian economy in all important aspects:
output and growth, employment and income, price stability and monetary
policy, and long-term structural change. The department is also
vitally concerned with trade, monetary affairs and other aspects of
the global economy that bear on Canada's domestic performance. For
more information, visit the Department
of Finance Web site.
Deposit
Money put into an account at a financial institution, such as a bank.
The deposit may be in the form of cash, cheque or electronic transaction.
Deposit account
An account in which money is deposited. Examples include chequing
and savings accounts.
Deposit insurance
Certain types of deposits with a financial institution are insured
up to a maximum amount, in the event that the financial institution
fails (i.e., goes bankrupt). For more information, visit the Canada
Deposit Insurance Corporation Web site.
Deposit-taking institution
A bank, trust company,
credit union / caisse populaire or other
financial institution that accepts
deposits from the public and provides regular banking services, such
as chequing and savings accounts.
Derivative
A financial instrument that derives its value from the performance
of another asset, index or investment. There are various types of
derivatives, such as swaps, options, futures and forward contracts.
For more information, visit the Ontario
Securities Commission Web site.
Discount brokerage
A firm that buys and sells investments for the public without giving
any advice (in contrast with a full-service brokerage, which executes
trades and provides advice). A discount brokerage typically charges
lower commissions or trading fees than a full-service brokerage.
Dividend
A portion of a company's profit paid to shareholders. |
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E
Electronic commerce (E-commerce)
Conducting business communications and transactions over networks
and through computers. Electronic commerce is the buying and selling
of goods and services, and the transfer of funds, through digital
communications. It also includes buying and selling over the Internet,
electronic fund transfers, smart cards, digital cash and all other
ways of doing business over digital networks.
Estate planning
The process of arranging one's personal affairs to provide for death
or mental incapacity. |
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F
Federally regulated financial institution
A financial institution regulated by the federal government. It has
been created or allowed to offer financial services in Canada pursuant
to one of the financial institution statutes established by the federal
government (the Bank Act, the Insurance Companies Act, etc.). Federally
regulated institutions (also called federal financial institutions)
consist of all banks and all federally incorporated or registered
insurance, trust and loan companies and co-operative credit associations.
Financial adviser
An individual who advises clients on one or more aspects of their
finances. Financial advice comes in many forms and from many sources.
It can be from an insurance agent who recommends certain types of
insurance, an accountant who offers tax tips, or a mortgage broker
who suggests a home financing strategy. A financial adviser is not
to be confused with a financial planner,
although their roles may overlap. A financial planner analyses a client's
total financial situation and prepares a comprehensive plan to help
that person attain financial security in the long term.
Financial Consumer Agency of Canada (FCAC)
A new independent agency working to protect and educate consumers
of financial services. The FCAC provides consumer information and
oversees financial institutions to ensure that they comply with federal
consumer protection laws. To learn more, read Know
Your Rights — Consumer Provisions.
Financial institution
A commercial or investment bank, trust company, brokerage house, insurance
company, or other institution that participates in financial transactions
involving cash or financial products. The primary role of such an
institution is to facilitate the financing of investments, from home
mortgages to the raising of funds via the issue of debt or equity
for mega-projects. It may also provide insurance, take on fiduciary
responsibilities, store cash and securities for safekeeping, etc.
Financial planner
A professional who reviews and analyses all aspects of a client's
financial situation — investments, tax situation, insurance,
retirement strategies and estate planning — and prepares a comprehensive
individualized plan to help that person attain financial security
in the long term. A financial planner works with clients to assess
their goals and important personal information, and then provides
written recommendations and implements a financial plan tailored to
their needs. Currently, Quebec is the only province with legislated
standards for financial
planners (i.e., to be a financial planner in Quebec, an individual
must be licensed and fulfil certain educational and experience requirements).
Regulators are in the process of developing common standards that
would apply to financial planners in the rest of the country.
Financial service charge
A fee charged by a financial institution for using its services —
for instance, for making bill payments, writing cheques or using automated
banking machines. Fees vary depending on the service and the financial
institution used. Under per transaction fee plans, you pay as you
go for each transaction; under flat fee plans, you pay a set price
each month for a certain number of transactions. Companies set their
own service charges but federally regulated institutions
must advise clients when they plan to increase or introduce new fees.
To learn more, read Know
Your Rights — Information that institutions must give you.
Financial Services OmbudsNetwork (CFSON)
The Centre for the Financial Services OmbudsNetwork (CFSON) provides
Canadian financial services consumers with single-window access to
high-quality, independent, impartial and effective complaint resolution
services in the banking, life and health insurance, general insurance,
securities and mutual funds industries. For more information, visit
the CFSON Web site.
Foreign bank branches
Legislation permits a foreign bank to operate
in Canada through branches rather than subsidiaries,
and to focus on commercial banking and broader lending activities.
Foreign bank branches are permitted to take only deposits of $150,000
and over, which are defined as retail deposits.
Foreign exchange
Various instruments used to settle payments for transactions between
individuals or organizations using different currencies (e.g., notes,
cheques, etc.).
Fraternal benefit society
An institution that has a representative form of government and is
operated for fraternal, benevolent or religious purposes, including
the insurance of members or the spouses, common-law partners or children
of members against accident, sickness, disability or death.
Full-service brokerage
A firm that buys and sells investments, provides investment advice
and helps manage portfolios. It typically charges higher commissions
or trading fees than a discount brokerage, which doesn't offer investment
advice. |
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Guaranteed investment certificate (GIC)
An investment that offers a guaranteed rate of return over a fixed
period of time, usually between 30 days and 5 years.
General Insurance OmbudService (GIO)
The General Insurance OmbudService assists in resolving differences between home, car and business insurance companies and their customers. When disputes arise, GIO's professional mediators and experienced customer services officers help insurance companies and customers work toward a solution that is in the best interest of all parties in a fair, independent and impartial environment. For more information, visit the GIO Web site.
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H
Health insurance
Insurance that pays for specified expenses related to medical treatment.
Holding company
A company that has control over other companies through ownership
of a sufficient proportion of those companies' common stock. |
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I
Index
A statistical measure of the state of the stock market or economy.
There are indexes that measure changes in the prices of consumer goods
and services (e.g., consumer price index) and others
that measure the value of groups of stocks or bonds (e.g., stock market
index).
Index-linked deposit (ILD)
A term deposit that pays a rate of return based on the performance
of one or more financial indicators such as the level of a stock market
index (e.g., Toronto Stock Exchange [TSX] 60 or 35) over the term
of the deposit. It differs from a savings product that pays a fixed
rate of interest and assures a guaranteed return on the investment,
such as a traditional GIC or term deposit. With an ILD, the original
deposit is guaranteed but any return is not. An example is a market-linked
GIC: if the stock market rises over the term of the investment, the
investor benefits from the rise up to a maximum return. If there is
no rise in the stock market, the original deposit remains fully protected
but the investor will receive no return (i.e., no interest is payable).
To learn more, read Index-linked
Deposits.
Inflation
The average rate of increase in prices. When economists speak of inflation
as an economic problem, they generally mean a persistent increase
in the general price level over a period of time, resulting in a decline
in a currency's purchasing power. Inflation is usually measured as
a percentage increase in the consumer price index.
Insurance claim
A request for payment of benefits under the terms of an insurance
policy.
Insurance claimant
A person or party requesting payment of benefits under the terms of
an insurance policy.
Insurance Companies Act
Federal legislation governing the structure and operation of federally
incorporated or registered insurance companies in Canada.
Insurance company
A financial institution (either federally or provincially regulated)
that engages primarily in the business of insuring risks. Insurance
companies are generally divided into two categories: life and health
insurers, and property and casualty insurers.
Insurance policy
A written document that serves as evidence of insurance coverage and
contains pertinent information about the benefits, coverage and owner,
as well as its associated obligations.
Interac Association
National organization of financial institutions and technology service
providers, allowing Canadians convenient access to their deposit accounts
through the shared network of automated banking machines and Interac
Direct Payment, the debit card service. For more information, visit
the Interac Association
Web site.
Interac Direct Payment
A means of paying for goods and services with a debit card that authorizes
transfer of the funds, via the Interac Direct Payment network, directly
from the purchaser's account to the merchant's account.
Interest
The cost of borrowing money; the price that a lender charges a borrower
for the use of the lender's money. Interest is paid on deposits because
they are, in effect, loans to the bank or other
deposit-taking institutions.
Interest rate
Rate charged or paid for the use of money, normally expressed as a
percentage.
Investment
Money put into a form that earns a return or profit. In essence, the
money is being used to make money.
Investment dealer
A firm that trades securities for its clients and offers other investment
services. Also known as a securities dealer or brokerage house.
Investment Dealers Association (IDA)
Formed in 1916, the IDA is the national self-regulatory organization
of the securities industry. It monitors and regulates the activities
of investment dealers, and promotes the interests of the securities
industry. For more information, visit the IDA
Web site.
Investment income
The income received from investment in securities and property. It
includes rent from property, dividends from shares in corporations,
and interest from bonds, guaranteed investment certificates, bank
accounts, certificates of deposit, Treasury bills and other financial
securities. |
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J - K
Joint venture
A project undertaken by two or more parties to achieve a mutual objective.
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L
Lease
An agreement to rent for a period of time at an agreed price.
Life and health insurance company
A financial institution that offers life and health
insurance products and a range of other financial products
and services, such as annuities and Registered Retirement
Savings Plans. The federal and provincial governments
share jurisdiction over life and health insurers. In
general, the provinces regulate licensing and marketing,
while the Office
of the Superintendent of Financial Institutions
conducts prudential reviews of the companies to determine
their financial soundness. Federal supervision covers
Canadian-owned insurers and branches of foreign companies
that hold more than 90% of industry assets.
Life insurance
An insurance policy that pays a set amount to those
named in the policy (the "beneficiaries")
when the policy-holder dies.
Line of credit
A type of loan in which a borrower draws down funds as needed, up to a specified maximum.
Liquidity
The ease with which assets or investments can be converted
into cash — that is, made "liquid." Liquid investments
include savings accounts, Canada Savings Bonds, Treasury
bills and money market mutual funds. In contrast, a
home is not considered a liquid investment because it
cannot be easily transformed into cash.
Loan company
A financial institution that operates under either provincial or federal
legislation and conducts lending activities similar to those of a
bank.
Locked-in Registered Retirement Savings Plan
A Registered Retirement Savings Plan set up to receive funds transferred
from a registered pension plan on the condition that it is used solely
for retirement income purposes. The pension monies are usually "locked
in" (unless otherwise permitted by the legislation of the province
in which the employer is registered).
A locked-in RRSP can also be an investment bought through
a financial institution, with the monies locked in for
a specific period as agreed by both parties (the financial
institution and the client) at the time of the purchase.
Low-fee account
Eight banks in Canada have each signed a memorandum
of understanding (MOU) with the federal government,
agreeing to offer a standard low-fee account to their
customers. The names and features of the accounts differ
by bank, but the accounts all meet certain standards,
including: a low monthly fee; the availability of some
in-branch transactions; no charge for deposits; and
a free monthly statement or passbook. Negotiating MOUs
with the banks is an approach the government has taken
to ensure that Canadians have access to an account at
an affordable price. The eight banks are the Bank of
Montreal, Royal Bank of Canada, National Bank of Canada,
HSBC Bank Canada, Laurentian Bank of Canada, Canadian
Imperial Bank of Commerce, Bank of Nova Scotia and TD
Canada Trust.
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M
Maturity
The time at which a loan, insurance policy or annuity
reaches the end of its span.
Merger
The joining together of two companies to form one entity.
Micro-credit
The allocation of small loans, usually under $5,000,
to individuals to allow them to sustain self-employment
or start up small businesses.
Monetary policy
The process of managing the supply of money and credit
to contribute to economic performance. The Bank
of Canada manages Canadian monetary policy mainly
through its influence on short-term interest rates,
though it is ultimately answerable to the federal government
for its actions. The Bank influences short-term interest
rates by adjusting its own bank rate. A rise in the
bank rate "tightens" the supply of money and credit,
at once restraining elements in the economy that contribute
to inflation and elements that contribute to economic
performance. A lowering of the bank rate does the reverse.
The bank rate and the money supply influence interest
rates and the exchange rate of the Canadian dollar,
and determine the monetary conditions under which the
Canadian economy operates. For more information on monetary
policy, visit the Bank
of Canada Web site.
Monoline
A financial company that specializes in a single line
of products, such as credit cards, mortgages or home
equity loans, and that may use direct marketing practices
and statistical models to target specific customers.
In many cases, monolines have no expensive overheads
from large branch networks and have low-cost financing
open to them by securitizing their loans on the capital
markets. These features make such companies highly competitive.
Moral suasion
A type of approach used by an authority to get members
to adhere to a policy, goal or initiative. It involves
applying pressure on members, rather than using legislation
or force, to achieve a desired result.
Mortgage
A loan with a property pledged to guarantee repayment.
Mortgage broker
An independent contractor who offers the loan products
of different lenders. A mortgage broker is an agent
for lenders in much the same way that an insurance broker
is an agent for insurance companies. Mortgage brokers
act as agents for banks, trust companies, credit unions,
mortgage corporations, finance companies and individual
private investors. Some mortgage brokers are exclusively
lenders of their own money and provide a direct source
of mortgage funds.
Mutual fund
A type of investment in which the money of many investors
is pooled together to buy a portfolio of different securities.
The fund is managed by a professional who invests in
stocks, bonds, options, money market instruments or
other securities.
Mutual fund company
A company that uses its capital to invest in other companies. Its capital is a pool of funds gathered from a number of investors and placed in securities selected to meet specific criteria and goals. Mutual fund companies fall under the jurisdiction of the provincial securities commissions.
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N
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O
Office of the Superintendent of Financial Institutions (OSFI)
A federal agency established under the Financial Institutions and
Deposit Insurance System Amendment Act to supervise all federally
regulated financial institutions. These include all banks,
all federally incorporated or registered insurance,
trust and loan companies,
co-operative credit associations,
and fraternal benefit societies.
OSFI is also responsible for monitoring federally regulated pension
plans. For more information, visit the Office
of the Superintendent of Financial Institutions Web site.
Ombudsman
An individual appointed to receive, investigate, report on and (in
some instances) resolve complaints against institutions. The Ombudsman for Banking Services and Investments (OBSI) is an example.
Ombudsman for Banking Services and Investments
(OBSI)
The Ombudsman for Banking Services and Investments (OBSI) is an independent organization that investigates customer
complaints against financial services providers, including banks and other deposit-taking organizations, investment dealers, mutual fund dealers and mutual fund companies.
Visit www.obsi.ca or call 1-888-451-4519.
Ownership rules
Federal rules and restrictions governing the ownership of financial
institutions. For example, the Bank Act prohibits control of any large
financial institution by any single shareholder or group of shareholders.
Large banks (those with equity greater than $5 billion) must be "widely
held" — that is, no one investor can own more than 20% of
any class of voting shares or 30% of non-voting shares. |
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P
Payments system
An electronic clearing and settlement system that enables cheques
and other methods of payment to be used in transactions throughout
the economy. This financial network includes the cheque payment system,
the Visa and MasterCard credit card systems, the automated banking
machine and debit card networks of Interac, and the separate clearing
systems for debt and equities and for mutual funds. One part of the
financial network was established in 1980 under the Canadian
Payments Association Act to operate a national clearing and settlement
system.
Personal identification number (PIN)
A secret code intended for the sole use of its user. For example,
the PIN is used in conjunction with a debit card to confirm the identity
of the cardholder and to authorize debit card transactions.
Policyholder
An individual or organization with an insurance policy. Pre-authorized
debit A withdrawal from an account made by a company with
the written authority of the account holder. A convenient substitute
for issuing cheques to pay the same bill every week or month.
Premium (insurance)
Payment made at fixed intervals for an insurance policy.
Prime rate
The interest rate banks charge to their most credit-worthy (low-risk)
customers.
Property and casualty (P&C) insurance
Also known as "general" insurance because it provides insurance protection
for risks other than those related to life or health. Examples include
home, automobile, travel and liability insurance.
Property and casualty insurance company
A company that provides insurance coverage for risks other than life
and health. The P&C; insurance industry provides insurance protection
for most homes, motor vehicles and commercial enterprises throughout
the country.
Property and Casualty Insurance Compensation Corporation (PACICC)
An industry-funded, non-profit corporation that, in the event of the
failure of a property and casualty insurer in Canada, will respond
to claims of policyholders. It covers most policies issued by P&C;
insurance companies. All property and casualty insurers licensed in
a province or territory of Canada are required to be members of PACICC,
except for insurers licensed to sell only specialty lines of insurance
such as surety, fidelity, marine and aviation, as well as auto insurers
in British Columbia, Manitoba and Saskatchewan. For more information,
visit the PACICC
Web site.
Provincially regulated financial institution
A financial institution regulated at the provincial level. Includes
all securities dealers, credit unions and caisses populaires, and
all provincially incorporated or registered insurance, trust and loan
companies, and fraternal benefit societies.
Public Accountability Statement
A statement that must be published yearly by any bank, trust or loan
company, or domestic insurance firm with more than $1 billion in equity,
describing its contribution to Canada's economy and society. The statements
are filed with the Financial Consumer Agency of Canada and are available
to the public from the financial institution. To learn more, read
Know Your Rights —
Public Accountability Statements.
Public Interest Impact Assessment
A report that must be submitted to the Minister of Finance for proposed
mergers between large banks (i.e., banks with more than $5 billion
in equity). The Assessment must (a) describe their business
plan and objectives; (b) clearly identify the benefits and
costs to the nation and the public; and (c) outline any steps
to mitigate public interest costs and any assurances in respect of
public interest benefits. |
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R
Registered Education Savings Plan (RESP)
An investment plan that allows savings to grow tax-free until a child
is ready to pursue a post-secondary education, at which time the money
is withdrawn to help finance the costs. For more information, visit
the Human
Resources Development Canada Web site.
Registered Retirement Income Fund (RRIF)
A maturity option available for Registered Retirement Savings Plan
assets to provide a stream of income at retirement.
Registered Retirement Savings Plan (RRSP)
A government-approved savings plan designed to encourage Canadians
to save money for retirement. Contributions to an RRSP, along with
the earnings they generate, are allowed to grow tax-free until the
money is withdrawn.
Retail branch
A location where banking services are provided to individuals.
Reverse mortgage
Unlike an ordinary mortgage, which involves payments by the borrower
to the lender, a reverse mortgage involves payments by the lender
to the borrower. It is an arrangement whereby homeowners get cash
(usually in the form of monthly payments or a lump sum) in return
for a mortgage on their home, which is used as security against the
loan. This is a strategy sometimes used by retired homeowners who
need to supplement their income. A reverse mortgage is one way of
tapping into the value of a home.
Risk
The potential of losing one's money or the uncertainty of future returns.
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S
Securities commission
A government agency that administers provincial securities legislation.
Examples include the Alberta Securities Commission and the Ontario
Securities Commission. To learn more, read Other
Regulators.
Securities dealer
A firm that trades securities for its clients and offers other investment
services. Also known as an investment dealer or brokerage house.
Security
A transferable certificate of ownership of an investment product such
as a note, bond, stock, futures contract or option. A security can
also be defined as "property, which is pledged as collateral
for a loan or other credit, and subject to seizure in the event of
default."
Segregated fund
A pooled investment fund, much like a mutual fund, established by
an insurance company and segregated from the general capital of the
company. Its chief distinction from a mutual fund is its guarantee
that, regardless of fund performance, at least a minimum percentage
of the investor's payments into the fund will be returned when the
fund matures.
Self-regulatory organization (SRO)
An organization that has been given the responsibility and authority
to regulate its members. Examples include the Toronto Stock Exchange
and the Investment Dealers Association.
Service charge/fee
Fees established by financial institutions for certain transactions.
Stock
Unit of ownership in a company, which is bought and sold on a stock
exchange. The terms "share" and "stock" are often used interchangeably.
Stock exchange
The marketplace where stocks are traded. Examples are the Toronto
Stock Exchange, the Montréal Exchange and the Canadian Venture
Exchange.
Subsidiary
A company that is legally controlled by another company. |
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T
Treasury bill (T-bill)
A short-term, low-risk investment issued by a federal or provincial
government. It is sold in denominations ranging from $1,000 to $1
million, with terms to maturity of one month to a year. The difference
between the purchase price and the face amount represents the return
to the investor.
Trust
An arrangement under which money or other property is held by one
person or company (often a trust company) for the benefit of another
person or persons. These assets are administered according to the
terms of the trust agreement. Each province has a trustee act, which
regulates the kinds of investments that can be made by the trustees
of a trust fund.
Trust and Loan Companies Act
Federal legislation governing the structure and operation of federally
incorporated or registered trust and loan companies in Canada.
Trust company
A financial institution that operates under either provincial or federal
legislation, and conducts activities similar to those of a bank. However,
because of its fiduciary role, a trust company can administer estates,
trusts, pension plans and agency contracts, which banks cannot do
directly.
Trustee services
Services associated with administering and managing a trust on behalf
of a client. They can include the establishment of a trust, handling
tax issues and distributing assets to the client's beneficiaries.
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U - Z
Venture capital
Funds that are invested by a third party in a business venture, as
either equity or a form of debt.
Voluntary code
Non-legislated guidelines that one or more organizations agree to
follow. Also referred to as a "code of conduct" or "code
of practice," it typically outlines service standards that you
can expect in dealings with a company subscribing to that code.
Widely held bank
A bank owned by many shareholders, with no individual owner holding
sufficient shares to exercise control over the bank. Under the Bank
Act, institutions with over $5 billion in equity and Schedule I banks
must be "widely held" by the public, with no single shareholder
owning more than 20% of any class of voting shares or 30% of any class
of non-voting shares. |
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