Glossary of Financial Terms

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S 5970

An external best practices technology audit that CICA (Canadian Institute of Chartered Accountants) compels financial institutions to obtain. This audit pertains to data security, audit, BCP (business continuity practices), privacy and more.

Contact CICA for more information.

Sarbanes-Oxley Act

A bill aimed at curbing improper financial reporting and increasing the liabilities of CEO's and CFO's to "take ownership and responsibility" for reported financial results. Named after sponsors Senator Paul Sarbanes (D–Md.) and Representative Michael G. Oxley (R–Oh.), the Act was approved overwhelmingly by the United States Senate and House of Representatives. The act, itself, was brought on by the collapse of companies due to improper financial reporting. These companies included Enron, Tyco International and Worldcom.

The Sarbanes-Oxley Act is often referred to as "SOX" by consultants and accountants. It is also important to note that large consulting firms have derived significant financial revenues to help companies become "SOX compliant".

Not all CEO's are fans of SOX. As an example, Dominic D'Alessandro, CEO of Manulife Financial (a company with a spotless financial history), outlines in a speech his many issues with SOX compliance.

Savings Account

An account at a bank that does not provide the account holder with chequing priveledges but usually bears a higher interest rate than a chequing account.

· See Also · Chequing Account

Schedule I Bank

In Canada this is a term used to classify a federally regulated Canadian bank.

Note -- Under Bill C-8, which was implemented on October 24, 2001, Schedule I and II bank structures are replaced with a new size-based ownership regime. Under this regime, banks with equity greater than $5 billion are required to be widely held, with no person owing more than 20 per cent of voting shares or 30 per cent of non-voting shares. Banks with $1 billion to $5 billion in equity are allowed to be closely held, subject to a public float of 35 per cent of voting shares, while banks with less than $1 billion in equity have no ownership restriction other than a fit and proper test.

· See Also · Schedule II Bank · Schedule III Bank

Schedule II Bank

In Canada this is a term used to classify a federally regulated foreign bank.

Note -- Under Bill C-8, which was implemented on October 24, 2001, Schedule I and II bank structures are replaced with a new size-based ownership regime. Under this regime, banks with equity greater than $5 billion are required to be widely held, with no person owing more than 20 per cent of voting shares or 30 per cent of non-voting shares. Banks with $1 billion to $5 billion in equity are allowed to be closely held, subject to a public float of 35 per cent of voting shares, while banks with less than $1 billion in equity have no ownership restriction other than a fit and proper test.

· See Also · Schedule I Bank · Schedule III Bank

Schedule III Bank

A Canadian banking term to classify a federally regulated foreign bank branch (lending and full service.

· See Also · Schedule I Bank · Schedule II Bank

Secondary Public Offering

A public share or stock offering, subsequent to the initial public offering, which may be offered by the issuing company or any other entity.

Secured Card

A credit card that is secured by the cardholder with a deposit that matches the limit of that credit card.

Securities

A generic term used to describe bonds, shares, stocks and other forms of investment.

Securitization

The creation of a new investment instrument by combining other financial assets. This new investment is then marketed to investors. For example: bundling of a number of mortgages into a new investment, then selling the new investment to investors as a "mortgage backed investment".

Service Company

An outsourcing arrangement whereby a company "services" a part of a financial institution's business. As an example, a large bank may want to outsource the "servicing" of its mortgages or student loans believing that a more specialized firm could perform similar or better service for a lower amount of expense.

Simple Interest

Interest computed on the balance of the loan outstanding or the amount of the original investment.

Statement

A listing of all transactions made against a specific account over a specific time period.

Stocks

Synonymous with "share", stocks are ownership certificates in a publicly traded company.

Stop Payment

An order issued to a bank by a chequing account holder not to pay a specific cheque issued by that account holder.

Stored Value Card

A card with a specific monetary value assigned to it that contains that reference information stored on a magnetic stripe or computer chip integrated into the card. It is important to note that there is no monetary amount stored on the card itself. Rather, the card is simply a reference to an account number where the "stored value" is retained.

· See Also · Prepaid Card

Syndicated Loan

A, (usually large) loan that is extended to a borrower where two or more banks each provide some of the principal of that loan to the borrower. The reason for multiple lenders is to lower the risk for any single lender.

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