Investment Banking and Securities Dealing

This course explains how the work is done. It is education only and not advice. Consult a licensed professional about your own money.

• Explain that a bank can help a company or government raise money by selling shares or bonds.
• Explain that a securities dealer buys and sells securities for clients or for itself.
• Explain a market in plain words: buyers and sellers who meet at a price.
• Name the main players: issuers, investors, dealers, regulators and exchanges.
• Explain primary market (new sales) and secondary market (resale).
• Describe one way a Canadian company can raise money, such as a first share sale or a bond, in your own words.
• Sort five example businesses into issuer, investor or dealer by what each one does.

Activity. Draw a map of the players in one example share sale and explain each role in one sentence.

Standard to meet. Task: map the players. Condition: one worked example. Standard: every role named correctly with its job and who pays whom.

Dealing in securities is closely regulated in Canada. Know the rules before you do any work.

• Explain that dealers and advisers need registration with the provincial securities regulators; check the current rule with your regulator.
• Explain that a self-regulatory body also sets conduct rules for dealers; look up the current one with the regulator.
• Explain insider trading: using or sharing private facts that could move a price is illegal.
• Explain a prospectus: the legal document a company gives investors; there are exemptions, so check the rule before you rely on one.
• Explain anti-money-laundering duties: know your client, keep records and report suspicious activity.
• Write a one-page do and do-not list for a new trainee: what to share, what to keep private and who to ask.
• Name the compliance contact in a made-up firm and write when you would go to that person.

Activity. Build a rules table with rule, who enforces it, what you must do and a dated official source.

Standard to meet. Task: build a rules table. Condition: official regulator pages only. Standard: each row has an enforcer, action and dated source and no rule is guessed.

Bankers and dealers read financial statements to judge what a company is worth.

• Name the three statements: income statement, balance sheet and cash-flow statement.
• Compute profit margin = profit / sales.
• Compute debt ratio = total debt / total assets.
• Explain that value comes from future cash, and that estimates vary.
• Compare a company to a few similar ones, not to a single one.
• Compute return on equity = profit / owners' equity from a made-up balance sheet.
• Compute price-to-earnings ratio = share price / earnings per share and compare it with similar firms.

Activity. Read a made-up set of statements and write a half-page summary with five ratios.

Standard to meet. Task: summarise a company. Condition: made-up statements. Standard: ratios are correct, similar firms are compared and limits of the estimate are stated.

A deal runs in steps with many checks. Know the steps and who does each.

• List the steps: goal, advisers, due diligence, documents, regulator filing, marketing, pricing, closing.
• Explain due diligence: checking the facts about a company before a deal.
• Explain how a price range is set from comparisons and demand.
• Explain confidentiality: deal facts are private until announced.
• Keep a deal checklist with owners and dates.
• Write a due diligence question list that covers sales, debts, contracts, lawsuits and owners.
• Explain a demand book: investors say how many shares they would buy at each price, and the price is set where demand meets the shares on offer.

Activity. Write a deal timeline and checklist for a made-up share sale.

Standard to meet. Task: plan a deal. Condition: made-up company. Standard: every step has an owner and a date, and the confidential steps are marked.

Dealing means handling orders. Fairness and records matter most.

• Explain order types in plain words: market order and limit order.
• Explain best execution: trying to get the client a fair result on price, cost and speed.
• Explain that client orders come before your own trades.
• Record the time, price and client for every order.
• Explain settlement: the later day when cash and securities change hands.
• Explain the bid and the ask: the best price a buyer will pay and the best price a seller will accept at a moment.
• Explain that settlement timing is set by market rules; check the current settlement cycle with the regulator.

Activity. Walk through five made-up orders and record the details and outcomes.

Standard to meet. Task: process practice orders. Condition: made-up market data. Standard: each record has time, type, price, outcome and reason.

Firms limit losses with rules and checks. Records prove you followed them.

• Explain market risk, credit risk and operational risk.
• Explain limits: a cap on how much risk one person or desk can take.
• Explain separation of duties: one person trades, another checks.
• Keep records of calls, messages and orders for the time the regulator requires.
• Report errors and breaches quickly to compliance.
• Explain liquidity risk: not being able to sell a holding quickly without a large drop in price.
• Explain a stress test: asking how much a desk would lose if prices fell sharply.

Activity. Write a one-page risk register with eight risks, a control for each and an owner.

Standard to meet. Task: write a risk register. Condition: one page. Standard: each risk has likelihood, harm, control, owner and review date.

Trust is the core asset. Honest words and open conflicts keep it.

• Never promise or guarantee results.
• Tell clients about conflicts in writing; examples include a firm that advises a company and also sells its shares.
• Explain information barriers between teams that hold private facts and teams that trade.
• Write research and notes in plain words, with sources.
• Treat clients fairly whatever their size.
• Explain that gifts and perks from clients or issuers must be disclosed and approved; check the firm's policy and the provincial rule.
• Rewrite a promise such as 'this will double' into an honest sentence that states the risk.

Activity. Write a half-page note on a made-up conflict with the steps you would take.

Standard to meet. Task: process a conflict. Condition: one made-up case. Standard: the conflict is named, disclosed and handled by steps that protect the client.

Run the full cycle in a safe setting: made-up or supervised work with a registered professional.

• Work with a registered supervisor on any real matter.
• Run the cycle: prepare, check, price, execute, settle, record.
• Review the results and lessons within a week.
• Keep all records dated and complete.
• Plan your next training step and check the current exam and registration route with the regulator.
• Hold a short review meeting where each person names one thing that went well and one thing to change.
• Compare the planned timeline with the real one in weeks and explain each gap.

Activity. Run a practice deal end to end and present the review to a panel of three.

Standard to meet. Task: run a practice deal. Condition: made-up data or a registered supervisor. Standard: the cycle is complete, records are dated and the review reasons from evidence.

L1: Finance aware learner. You can define: name the main terms, people and rules of investment Banking and Securities Dealing. Focus module: Know what investment banking and dealing are (Understand, 6 h). This course explains how the work is done. It is education only and not advice. Consult a licensed professional about your own money. Key points: Explain that a bank can help a company or government raise money by selling shares or bonds. Explain that a securities dealer buys and sells securities for clients or for itself. Explain a market in plain words: buyers and sellers who meet at a price. Name the main players: issuers, investors, dealers, regulators and exchanges. Explain primary market (new sales) and secondary market (resale). Describe one way a Canadian company can raise money, such as a first share sale or a bond, in your own words. Sort five example businesses into issuer, investor or dealer by what each one does.

Speaker notes. Teach: open with the worked example. A company sells 2,000,000 new shares at 15 dollars each in the primary market. It raises 2,000,000 x 15 = 30,000,000 dollars before costs. Later, investors resell those shares among themselves in the secondary market, and the company receives none of that money. Then set the activity: Draw a map of the players in one example share sale and explain each role in one sentence. Mark against the standard: Task: map the players. Condition: one worked example. Standard: every role named correctly with its job and who pays whom. Check at this level: What is the primary market? Model answer: The market where new securities are sold for the first time. Level note: Start here if new. Evidence: a one-page glossary and a visit or interview note.

L2: Clerk or assistant. You can describe: explain how investment Banking and Securities Dealing works from first contact to result. Focus module: Know the rules and who must be registered (Apply, 6 h). Dealing in securities is closely regulated in Canada. Know the rules before you do any work. Key points: Explain that dealers and advisers need registration with the provincial securities regulators; check the current rule with your regulator. Explain that a self-regulatory body also sets conduct rules for dealers; look up the current one with the regulator. Explain insider trading: using or sharing private facts that could move a price is illegal. Explain a prospectus: the legal document a company gives investors; there are exemptions, so check the rule before you rely on one. Explain anti-money-laundering duties: know your client, keep records and report suspicious activity. Write a one-page do and do-not list for a new trainee: what to share, what to keep private and who to ask. Name the compliance contact in a made-up firm and write when you would go to that person.

Speaker notes. Teach: open with the worked example. An analyst learns of a coming takeover before it is public. The correct steps are to not trade, not tell anyone and tell the compliance team. She also writes down the time she reported it, so the record shows she acted at once. Then set the activity: Build a rules table with rule, who enforces it, what you must do and a dated official source. Mark against the standard: Task: build a rules table. Condition: official regulator pages only. Standard: each row has an enforcer, action and dated source and no rule is guessed. Check at this level: Who must be registered to deal in securities? Model answer: Dealers and advisers need registration; check the current rule with the provincial regulator. Level note: Evidence: a flow chart and a two-minute spoken explanation.

L3: Bookkeeper or junior analyst. You can apply: carry out a routine task in investment Banking and Securities Dealing to a written standard. Focus module: Read company numbers and judge value (Apply, 10 h). Bankers and dealers read financial statements to judge what a company is worth. Key points: Name the three statements: income statement, balance sheet and cash-flow statement. Compute profit margin = profit / sales. Compute debt ratio = total debt / total assets. Explain that value comes from future cash, and that estimates vary. Compare a company to a few similar ones, not to a single one. Compute return on equity = profit / owners' equity from a made-up balance sheet. Compute price-to-earnings ratio = share price / earnings per share and compare it with similar firms.

Speaker notes. Teach: open with the worked example. Sales 2,000,000; profit 160,000. Profit margin = 160,000 / 2,000,000 = 8%. Three similar firms show 6%, 7% and 10%, so 8% is in the middle. If total debt is 300,000 and total assets are 1,000,000, the debt ratio = 300,000 / 1,000,000 = 30%. Then set the activity: Read a made-up set of statements and write a half-page summary with five ratios. Mark against the standard: Task: summarise a company. Condition: made-up statements. Standard: ratios are correct, similar firms are compared and limits of the estimate are stated. Check at this level: How do you compute profit margin? Model answer: Profit divided by sales. Level note: Evidence: a supervised task record that meets the standard once.

L4: Accountant or adviser. You can analyse: diagnose why an investment Banking and Securities Dealing result missed its target and fix it. Focus module: Follow how a deal is prepared (Evaluate, 8 h). A deal runs in steps with many checks. Know the steps and who does each. Key points: List the steps: goal, advisers, due diligence, documents, regulator filing, marketing, pricing, closing. Explain due diligence: checking the facts about a company before a deal. Explain how a price range is set from comparisons and demand. Explain confidentiality: deal facts are private until announced. Keep a deal checklist with owners and dates. Write a due diligence question list that covers sales, debts, contracts, lawsuits and owners. Explain a demand book: investors say how many shares they would buy at each price, and the price is set where demand meets the shares on offer.

Speaker notes. Teach: open with the worked example. A deal timeline shows 12 weeks: 4 for checks, 3 for documents, 2 for regulator review, 2 for marketing and 1 for closing, and 4 + 3 + 2 + 2 + 1 = 12. If the sale raises 30,000,000 dollars and the made-up bank charge is 5%, the charge is 30,000,000 x 0.05 = 1,500,000 dollars. Then set the activity: Write a deal timeline and checklist for a made-up share sale. Mark against the standard: Task: plan a deal. Condition: made-up company. Standard: every step has an owner and a date, and the confidential steps are marked. Check at this level: What is due diligence? Model answer: Checking the facts about a company before a deal. Level note: Evidence: a fault or gap analysis with a fix and a repeat test. This course targets this level.

L5: Senior adviser or manager. You can evaluate: judge options for investment Banking and Securities Dealing against cost, risk and quality. Focus module: Manage risk and keep records (Create, 6 h). Firms limit losses with rules and checks. Records prove you followed them. Key points: Explain market risk, credit risk and operational risk. Explain limits: a cap on how much risk one person or desk can take. Explain separation of duties: one person trades, another checks. Keep records of calls, messages and orders for the time the regulator requires. Report errors and breaches quickly to compliance. Explain liquidity risk: not being able to sell a holding quickly without a large drop in price. Explain a stress test: asking how much a desk would lose if prices fell sharply.

Speaker notes. Teach: open with the worked example. A trader enters 10,000 shares instead of 1,000. A system limit blocks the order and the check person confirms the error. The incident is logged with the time and the cause, and the extra 9,000 shares are never bought. Then set the activity: Write a one-page risk register with eight risks, a control for each and an owner. Mark against the standard: Task: write a risk register. Condition: one page. Standard: each risk has likelihood, harm, control, owner and review date. Check at this level: Why separate duties? Model answer: One person acts and another checks, so errors and fraud are caught. Level note: Evidence: an options paper with numbers and a recommendation defended to a panel.

L6: Head of finance. You can create: design and pilot a new offer or process in investment Banking and Securities Dealing. Focus module: Communicate honestly and manage conflicts (Evaluate, 6 h). Trust is the core asset. Honest words and open conflicts keep it. Key points: Never promise or guarantee results. Tell clients about conflicts in writing; examples include a firm that advises a company and also sells its shares. Explain information barriers between teams that hold private facts and teams that trade. Write research and notes in plain words, with sources. Treat clients fairly whatever their size. Explain that gifts and perks from clients or issuers must be disclosed and approved; check the firm's policy and the provincial rule. Rewrite a promise such as 'this will double' into an honest sentence that states the risk.

Speaker notes. Teach: open with the worked example. A firm advises a company on a sale and its trading team wants to trade that company's shares. An information barrier blocks the sharing and the trading team is told to stay out. A research note that says 'this stock will double' is changed to 'growth is expected, and the price could also fall', with sources added. Then set the activity: Write a half-page note on a made-up conflict with the steps you would take. Mark against the standard: Task: process a conflict. Condition: one made-up case. Standard: the conflict is named, disclosed and handled by steps that protect the client. Check at this level: What does an information barrier do? Model answer: It keeps private facts from reaching people who trade. Level note: Evidence: a pilot with measured results over at least 30 days.

L7: Partner or chief officer. You can lead: run a team or business in investment Banking and Securities Dealing and develop others. Focus module: Run a supervised practice deal for real (Create, 8 h). Run the full cycle in a safe setting: made-up or supervised work with a registered professional. Key points: Work with a registered supervisor on any real matter. Run the cycle: prepare, check, price, execute, settle, record. Review the results and lessons within a week. Keep all records dated and complete. Plan your next training step and check the current exam and registration route with the regulator. Hold a short review meeting where each person names one thing that went well and one thing to change. Compare the planned timeline with the real one in weeks and explain each gap.

Speaker notes. Teach: open with the worked example. A learner runs a practice share sale on paper. The plan was 12 weeks, but the due diligence list was 2 weeks late, so the real time is 12 + 2 = 14 weeks. She adds an earlier start to the next plan. Then set the activity: Run a practice deal end to end and present the review to a panel of three. Mark against the standard: Task: run a practice deal. Condition: made-up data or a registered supervisor. Standard: the cycle is complete, records are dated and the review reasons from evidence. Check at this level (this question is covered in module 6: Manage risk and keep records): Why separate duties? Model answer: One person acts and another checks, so errors and fraud are caught. Level note: Evidence: a record of results over a year and of people you have coached to a higher level.