Glossary

Alphabetical Listing:

 

J

Joint Tenants with Right of Survivorship (JTWROS)
A type of account owned by at least two people, where each person has equal right to the account's assets. On the death of one account holder, ownership of the account is automatically passed on to the surviving account holder(s). 

L

Letter of Direction (LOD)

With respect to investment or RRSP loans at B2B Bank, a Letter of Direction is the name of the form that instructs us to transfer funds from another financial institution. In all other cases, a letter of direction is simply any written instructions (signed by the account holder) directing B2B Bank to perform a specific request.

Leveraging
Simply put, borrowing money to invest is known as leveraging. Unlike traditional investing – where your client saves their own money to invest gradually – leveraged investing allows them to borrow funds to make a large investment up front. It’s a long-term investment strategy that can magnify their gains, but also their losses.
Liabilities
The debts and obligations of an individual. Current liabilities are debts due and payable within one year. Long-term liabilities are those payable after one year.
Loan-to-Value (LTV) ratio
The relationship between the value of pledged assets (or collateral) and the amount of a loan, expressed as a percentage.
Locked-in Agreement
This is a written agreement sent between financial institutions regarding locked-in RRSP, RRIF or pension transfers. It is normally sent by the receiving institution to the relinquishing institution confirming that the assets received will continue to be administered according to the applicable locked-in regulations which vary by province to province/federal. 

M

Margin call

When the value of a borrower's loan collateral depreciates to a point where the LTV ratio exceeds the agreed percentage (120% of a 100% Loan; 85% of a 2 For 1 or a 1 For 1 Loan), the result is a margin call: a requirement (or demand) by the lender that a borrower deposit additional money or securities sufficient to bring the loan margin to the agreed LTV percentage.

Margin warning

When the value of a borrower's loan collateral depreciates to a point where the LTV ratio exceeds a certain percentage (generally, 110% on a 100% Loan; 75% on a 2 For 1 or 1 For 1 Loan), B2B Bank may issue a margin warning which is simply a notice to the borrower. While action is not required, borrowers and their advisors should monitor the loan to avoid possible margin call situations.

Market Value

Regarding mutual funds, market value is the current net asset value per share/unit times the number of shares or units of each mutual fund.  The market value is the amount that the investor would receive (less any fees or deductions) if they sold their units.

Maturity Date
The date on which the principal amount of a deposit or other financial security is due and payable to the holder.
Multiple Listing Service (MLS)
A computer-based system for relaying information to real-estate agents about properties for sale.
Mutual Fund
An investment entity that pools money from its shareholders (or unit holders) to invest in various securities as determined by the investment objectives of the mutual fund.
Mutual Fund Dealers Association (MFDA)
The Mutual Fund Dealers Association of Canada (MFDA) is the national self-regulatory organization (SRO) for the distribution side of the Canadian mutual fund industry.

N

Net Asset Value (NAV)
The total value of the assets of a mutual or segregated fund, minus any liabilities.
Net Asset Value Per Share (NAVPS)
The total value of the assets of a mutual or segregated fund, minus any liabilities, divided by the number of units outstanding.
Net Worth
Net worth is the difference between an individual’s total assets less their total liabilities.
No Margin Call

An investment loan option where pledged collateral values do not need to be maintained at a specified LTV percentage (see Margin Call).

P

Pledge

A transfer or assignment of an asset to a lender for the purpose of securing debt. The lender generally takes possession or is assigned ownership of the collateral until the loan is paid.

Prepayment

Allows a borrower to prepay a portion or all of the principal mortgage balance, with or without penalty, ahead of schedule. This decreases the total amount of interest paid over the life of the mortgage.

Prime Rate

The interest rate a financial institution charges on loans to its preferred customers.  It is based on the rate established by the Bank of Canada.  Typically, all financial institutions have the same prime rate.

Principal

The face value of a deposit (GIC) or loan obligation (loan, mortgage, etc.).

Probate

Probate is a legal procedure where a deceased individual's Will is approved and the apointment of the executor is confirmed by the courts under provincial legislation.  The courts give the executor documents, call the letters probate, as proof of his or her authority to deal with the estate.

R

Redemption of Assets

With respect to mutual funds, advisors may instruct B2B Bank to redeem (or sell) their clients' mutual fund assets on any valuation date at the net asset value price. Proceeds from the redemption of assets may be reinvested or sent to the client (if applicable).

Revolving Credit

A line of credit is an example of a product based on revolving credit.  Once granted, borrowers may use the funds at any time and make repayments (usually interest only or interest plus a spread) monthly.  Any balances carried forward are subject to interest.

S

Securities

Transferable certificates of ownership of investment products such as notes, bonds, stocks, options, mutual funds, etc.

Settlement Date

The date on which an investor must pay for his or her purchase, or a seller must deliver the securities he or she has sold.  Mutual fund trades generally settle on trade date plus three business days (T+3).  Money market trades generally settle on trade date plus one business day (T+1). 

Signature Guarantee

A signature guarantee determines the legitmacy of a signature.  The guarantor verifies that the signature on a transaction request is the true signature of the person named.

Simple Interest
The interest calculated on a principal sum, not compounded on earned interest.
Spouse
The person to whom one is legally married.
Switching (mutual funds)

A mutual fund switch is a transaction where units of a mutual fund are exchanged for those of another mutual fund, generally within the same mutual fund family.

T

Tax Shelter
This is an investment that offers tax savings in some form, such as immediate deductions, credits or income deferral.
Tenants in Common

A type of account owned by at least two people, where each person is entitled to an indivisible share of the whole of an account's assets.  On the death of one account holder, ownership of their share of the account is inheritable by their heir, not by the other surviving account holder(s).

Testate

A person who dies with a will is said to die "testate".

Third-Party Determination

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires financial institutions and others covered by the legislation to identify customers who open accounts or conduct financial transactions.  The law also requires that financial institutions determine whether a client is acting on behalf of a third party, and record certain information about such third party.

Total Debt Service Ratio

A debt service measure that lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is financially able to repay a debt.  The total debt service ratio is calculated by dividing total annual debt payments (mortgage, property taxes, other debts) by the applicant's annual gross income.  It is expressed as a percentage.

Transfer In Cash

A transfer from one financial institution to another financial institution whereby assets that are not currently held as cash are liquidated in order that a portion or the entire account can be transferred in the form of cash.

Transfer In Kind

A transfer from one financial institution to another financial institution whereby assets that are not currently held as cash are not liquidated, but transferred as-is, in ther existing state.

Trustee
Usually a trust company appointed by the company to protect the security behind the company's bonds and to make certain that all covenants of the trust deed relating to the bonds are honored. Also, a person who holds property and securities in trust for another person. 

U

Underwriting (loans)

The detailed credit analysis preceding the granting of a loan, based on credit information furnished by the applicant, such as employment history, salary, and financial statements; publicly available information, such as the applicant's credit history, which is detailed in a credit report; and the lender's evaluation of the applicant's ability to pay the obligation.

W

Wholesale(r)

The business to business sale of products (and services) in large quantity.

Wire Order
An electronic contract between two financial institutions. For example a dealer may place a wire order with B2B Bank if they have a compatible wire order system and arrangement with B2B Bank.

A

Adjudication

This is the term we use to describe the decision making process that includes an in-depth evaluation of an applicant's credit based on capacity, capital, collateral, credit history and character.

Amortization

The actual number of years it will take to repay a loan in full. The amortization may go beyond the term of the loan.

Annual Percentage Rate (APR)

An APR (the effective cost of credit) is the finance charge a borrower actually pays – including the loan interest amount – expressed as a percentage rate (see Cost of Borrowing). 

Annuitant

Generally, an annuitant is the person for whom a retirement plan provides retirement income.

Assets

Anything owned by an individual or business having a monetary value (usually its cost or fair market value). An asset may include: a home, registered plans, mutual funds, stocks, etc.

B

Basis Point (bps)

A unit that is equal to 1/100th of 1%, and is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points and 0.01% = 1 basis point.

Beneficiary

A person to whom an inheritance passes as the result of being named in a will, or a person named to receive income from an insurance policy, endowment, or trust (e.g., registered retirement savings plan).

Book Cost

“Book cost” is the total amount paid to purchase an investment, including the transactional charges related to the purchase, adjusted for reinvested distributions, returns of capital and corporate reorganizations.

Book Value

The value of the initial purchase of an investment (e.g., mutual funds) plus reinvested distributions minus any withdrawals or fees.

Business Day

Any day in which B2B Bank is open for business – ordinarily most calendar days other than Saturdays, Sundays and legal public holidays.

Business Development (Representative)

The group of individuals at B2B Bank who are responsible for acquiring new – and maintaining existing – relationships with advisors, brokers, dealers and MGAs. For general inquiries and service-related issues, your first point of contact should be client services – for more information,click here.

C

Canada Mortgage and Housing Corporation (CMHC)

The Canada Mortgage and Housing Corporation is a Federal Crown corporation that administers the National Housing Act. CMHC's services include providing housing information and assistance to consumers and providing mortgage default insurance for high ratio mortgages.

Capital Gain or Loss

Capital gain occurs when an asset (capital property) is sold at price greater than its cost. The opposite is true of capital loss, which occurs when an asset (capital property) is sold at a lesser price than its cost.

Cash Flow

We refer to cash flow as simply the managing of  'funds in and funds out' on a regular occurring basis – for example, managing income against expenses such as mortgage payment, bill payments, loan payments, etc.

Collateral

Securities or other property pledged by a borrower as guarantee for repayment of a loan.

Collateral value

This is the collateral value at which your client will be required to pledge additional non-registered eligible collateral or provide cash to pay down the loan.

Common-law partner

A person who is not your spouse, with whom you are living and have a conjugal relationship, and to whom at least one of the following situations applies. He or she: has been living with you in such a relationship for at least 12 continuous months; is the parent of your child by birth or adoption; or has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.

Compound Interest

Interest earned on an investment at periodic intervals and added to the original amount of the investment. Future interest payments are then calculated and paid at the original rate but on the increased total of the investment.

Cost of Borrowing

The amount it costs to borrow money, in particular the interest on a loan.  It may also include certain administrative fees, and charges for services related to the loan.

D

Debt

Money borrowed from lenders for a variety of purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount.  

Default

The failure to promptly pay interest or principal when due, or to abide by other terms of a loan agreement.

Dividend
A mutual fund may earn income in the form of dividends and interest on the securities in its portfolio. The fund then pays its shareholders nearly all of the income (minus disclosed expenses) it has earned in the form of dividends. Investors can opt to have dividends paid to them in cash, or reinvested in the fund to buy more shares.

E

Electronic Funds Transfer (EFT)

An individual may have withdrawal proceeds from their B2B Bank account deposited directly to their bank account via EFT. B2B Bank must be supplied with their banking information in the form of a pre-printed void cheque.

Eligible Collateral

Eligible collateral for our investment loan program must meet certain criteria. Funds must be traded electronically, valued at least weekly and trade in Canadian currency. The following categories do not qualify as eligible collateral: Labour Sponsored Venture Capital, Alternative Strategies and Specialty: Other (e.g., hedge fund products, principal protected notes, etc.)

Equity
The monetary difference between the amount an asset could be sold for and the claim(s) held against it. For example, the difference between what your home could be sold for and the outstanding mortgage held against it equals the equity.
Estate Planning

The process of planning the transfer of all personal assets at death to chosen beneficiaries or heirs.  This may involve drawing wills and creating trusts in order to achieve the maximum benefit for the heirs.

Excess collateral

This is the amount of the collateral available to your client for the non-GMWB or GMWB investment type. If your client wishes to withdraw this collateral, please submit the Investment Loans Redemption/Purchase form found under the Operational Forms section. Redemptions are subject to B2B Bank authorization.

I

Inter-Institution Funds Transfer

Refers to transferring money from an account at B2B Bank to an account held at another financial institution (and vice versa) through electronic means. This service is offered through Advisor’s Choice telebanking and internet.

Intermediary

An intermediary is a conduit between suppliers.  For example, B2B Bank may be an intermediary between an advisor and a mutual fund company; an advisor may be an intermediary between a consumer and a financial institution, etc.

Intestate

A person who dies without a will is said to die 'intestate'.

Issuing Company

An issuing company is a financial institution that offers its own products for sale to investors. B2B Bank distributes GICs from four issuing companies: B2B Bank, Laurentian Bank, Laurentian Trust and LBC Trust.