RESP Dealers Association Of Canada Sales Representative Proficiency Course August 2007 RESP Dealers Association of Canada Sales Representative Proficiency Course FOREWORD These course materials have been prepared by the RESP Dealers Association of Canada as part of the Association’s ongoing effort to establish the highest standards of knowledge and conduct among those who distribute scholarship plans in Canada. This course includes materials from several sources. We would like to thank: • The members of the RESP Dealers Association of Canada • The British Columbia Securities Commission • The Canadian Securities Administrators • Canada Revenue Agency • Human Resources and Skills Development Canada • Ken Goodwin, C.A. • Dean Holley, CMC Capital Market Consulting Corp. These course materials are the property of the RESP Dealers Association of Canada and are not to be reproduced with prior permission. August 2007 1 RESP Dealers Association of Canada Sales Representative Proficiency Course TABLE OF CONTENTS 1. INTRODUCTION ...............................................................5 A. Who is this course for?....................................................5 B. What will be covered in the material................................6 C. The RESP Dealers Association of Canada .....................6 2. DEFINITIONS....................................................................8 3. CODE OF SALES PRACTICES......................................13 A. Purpose of the Code .....................................................13 B. Standards......................................................................14 C. Breach...........................................................................18 4. SAVING FOR EDUCATION............................................19 5. REGISTERED EDUCATION SAVINGS PLANS.............22 A. Introduction of the RESP...............................................22 B. Registration of a Plan ....................................................22 C. Types of RESP..............................................................23 D. RESP Distributors .........................................................24 E. RESP Eligible Investments............................................24 F. RESP Rules ..................................................................26 6. GRANT PROGRAMS......................................................30 A. Canada Education Savings Grant (CESG).....................30 B. Additional Canadian Education Savings Grant (ACESG) payments for first $500 .........................................................32 C. Canada Learning Bond (CLB) ........................................32 D. Alberta Centennial Education Savings (ACES) Plan (Alberta residents ONLY)......................................................34 7. KEY BENEFITS OF RESPS ...........................................36 8. HOW SCHOLARSHIP PLANS WORK ...........................40 A. Structure of Scholarship Plans ......................................40 B. Administration of Scholarship Plans ..............................42 C. How Scholarship Plans Derive Value ............................44 D. Investment Mandate of Scholarship Plans ....................45 E. Investment Strategies....................................................46 9. SCHOLARSHIP PLAN DISCLOSURE DOCUMENTS ...49 August 2007 2 RESP Dealers Association of Canada Sales Representative Proficiency Course A. The Prospectus .............................................................49 B. Financial Statements.....................................................50 C. Other Scholarship Plan Information...............................55 D. Accessing Disclosure Documents .................................55 10. FEES AND EXPENSES ..................................................56 A. Enrolment or Membership Fees ....................................56 B. Enrolment Fee Refunds.................................................57 C. Withdrawal Fees............................................................58 D. Administration and Management Fees..........................58 E. Other Charges...............................................................59 F. Completion Insurance ...................................................59 11. SCHOLARSHIP PLAN DEALERS..................................60 A. Role of the Scholarship Plan Dealer..............................60 B. Internal Policies and Procedures...................................61 C. Supervisory Systems.....................................................61 12. ROLE OF THE SALES REPRESENTATIVE ..................64 A. Registration ...................................................................65 B. Knowledge of Securities Laws.......................................65 C. Compliance with Dealer Policies ...................................66 D. Compliance with the Code of Sales Practices...............66 E. Fair Dealing ...................................................................66 F. The Know Your Client (KYC) Rule ................................67 G. The Suitability Rule .......................................................70 H. Completing an Application Form ...................................70 I. Trade Confirmation........................................................70 J. Disclosure......................................................................71 K. Confidentiality of Client Information...............................72 L. Record Keeping.............................................................72 M. Cold Calling ...................................................................73 N. Selling Out of Province/Country ....................................74 O. Transfers .......................................................................74 P. Plan Adjustments ..........................................................75 Q. Withdrawals...................................................................76 R. Commission Rebates ....................................................78 August 2007 3 RESP Dealers Association of Canada Sales Representative Proficiency Course S. Client Complaints ..........................................................78 13. ADVERTISING ................................................................80 A. Role of Advertising ........................................................80 B. Definition of Sales Communication and Advertising ......80 C. National Instrument 81-102 ...........................................80 D. Misleading Sales Communications and Advertising ......82 E. Performance Data .........................................................82 F. Business Cards and Letterhead ....................................83 14. FEDERAL REGULATION...............................................85 A. Income Tax and CESG Legislation ...............................85 B. Proceeds of Crime Legislation.......................................85 C. Competition Act .............................................................91 D. Criminal Code................................................................91 15. SECURITIES REGULATION IN CANADA .....................93 A. Securities Regulators ....................................................94 B. Securities Law ...............................................................97 C. Regulations, Rules, Instruments and Policies ...............99 D. Forms, Notices, Decisions and Settlements................100 E. Investigations and Enforcement ..................................101 F. Registration .................................................................103 G. Prospectus Requirements ...........................................110 H. National Policy 15........................................................114 I. National Instrument 33-102 .........................................120 16. THE ECONOMY............................................................124 A. Understanding the Economic Environment .................124 B. Measuring the Economy..............................................124 C. Inflation........................................................................127 D. Economic policy ..........................................................127 17. UNDERSTANDING FINANCIAL MARKETS ................131 A. Understanding Securities ............................................131 B. Other Financial Products.............................................146 C. Understanding Investment Risk...................................148 18. APPENDICES ...............................................................152 August 2007 4 RESP Dealers Association of Canada Sales Representative Proficiency Course 1. INTRODUCTION A. Who is this course for? The RESP Dealers Association of Canada has This course is the initial developed this Sales Representative Training Program training and proficiency as the initial training and proficiency requirement for new requirement for all new sales representatives. The Association’s goal is to have sales representatives of this course accepted by the securities regulators in each scholarship plan dealers. province and territory as the educational prerequisite to licensing as a sales representative for a scholarship plan dealer. People who invest in scholarship plans expect excellent service, expert knowledge and absolute trustworthiness from sales representatives and dealers. You will be entering into long-term relationships with your clients and they will be relying on you when making important investment decisions. Your clients and your dealer must always have confidence in your integrity.