Canadian Securities Course (CSC) Level 1 Practice Exam

What is the function of the passport system?

1. To restrict access to capital markets

2. To standardize financial reporting

3. To streamline access to multiple capital markets

4. To monitor insider trading activities

The correct answer is: To streamline access to multiple capital markets

The function of the passport system is primarily to streamline access to multiple capital markets. This system allows issuers to raise capital in various jurisdictions without needing to undergo the full registration process in each one. Instead, when a security is approved in one jurisdiction, that approval can be recognized by other jurisdictions within the system. This approach reduces redundancy, saves time, and lowers the costs associated with the capital-raising process, making it easier for companies to access broader markets and investors. By facilitating a more efficient method for cross-border offerings, the passport system encourages investment and enhances market liquidity, providing businesses with the ability to attract capital from diverse sources. This has significant implications for economic growth, as it enables companies to scale and expand more easily across regions. The other options refer to more specific aspects of securities regulation and market oversight, such as financial reporting standards, capital market access restrictions, and monitoring insider trading, which are not the main focus of the passport system.