• Deborah

On June 21, IIROC published for comment a proposed guidance (the Proposed Guidance) to assist Dealer Members (Dealers) in understanding and complying with IIROC’s Client Focused Reforms rule amendments relating to the know-your-client (KYC) and suitability determination requirements (CFRs Amendments).

The Proposed Guidance is aimed at:

  • Providing IIROC’s interpretation of the CFRs Amendments

  • Clarifying how IIROC’s KYC and suitability requirements should be implemented, and

  • Making the guidance consistent with the IIROC Rules, which will be effective on December 31, 2021.

The Proposed Guidance lists, among others things, the type of KYC information that should be collected by dealers, including:

  • Essential facts relative to each order, client and account

  • Information to establish the identity of clients

  • Information regarding the client reputation

  • Information about the client’s insider status

  • Information to ensure dealers have a sufficient understanding of their clients to enable a discharge of suitability determination obligations.

Specific KYC information that must be collected for suitability determination includes:

  • The client’s personal circumstances

  • The client’s financial circumstances (e.g., liquidity needs, financial assets and net worth, use of leverage or borrowing to finance the purchase of securities, investment needs and objectives, investment knowledge, client risk profile etc.…)

The guidance also includes IIROC’s expectations on how dealers can put the client’s interest first and confirms that KYC requirements are not one-size fits all but depend on the dealer’s business model, service offerings and clients.

The suitability determination requirement is applicable to all investment products offered, and not just securities. The guidance also addresses when it would be acceptable to collect and maintain one set of KYC information for multiple accounts and when separate account applications would be required.

The Proposed Guidance is available in Appendix 1 available and will replace Notice 12-0109 - Know your client and suitability – Guidance.

On the same date, the MDFA also published for comment, CFR Conforming Changes to MSN-0069 (Know-Your-Client and Suitability), proposing revisions to its suitability guidance.

The MDFA guidance provides the various types of KYC information that must be collected by mutual fund dealers (e.g. personal circumstances, investment knowledge, financial circumstances, investment time horizon and risk profile…) to help them meet their suitability requirement.

The proposals are out for a 60-day comment period ending August 20, 2021.

Recent Posts

See All

EU/ECB Now Supervises Systemic Investment Firms

As of June 26, investment firms are subject to a new European regulatory regime, introducing categories of investment firms to identify large bank-like firms and smaller ones. The largest firms will q

BIS Paper on Fintech Impact on Financial Services

On July 16, the Bank for International Settlements (BIS) published an extensive Paper on the digital transformation of financial services that are shaping the market of small fintech, big tech and tra