On December 17, the Investment Industry Regulatory Organization of Canada (IIROC) released a Guidance Note clarifying its requirements relating to the Know-your-client (KYC) and suitability rules for retail clients.
Effective since December 31, the Guidance sets out IIROC’S expectations regarding the “know-your-client” (KYC) and suitability determination obligations in the IIROC Rules applicable to retail clients. and in accordance with Companion Policy 31-103 CP – Registration Requirements, Exemptions and Ongoing Registrant Obligations issued by the Canadian Securities Administrators (CSA).
The Guidance Note clarifies some of the following:
The types of KYC information that must be collected: Essential facts such as biographical information, client identification, client reputation, client insider status, credit worthiness of the client etc.…
KYC information that must be collected for suitability determination purposes: Information relating to the client’s personal circumstances, client’s financial circumstances, client’s investment needs and objectives, client’s investment knowledge, client risk profile, etc.…
Situations where the KYC obligation will not be the same for all accounts
Person responsible for carrying out the KYC process
The manner in which an entity should interact with clients that includes the need for meaningful interaction with the client regardless of tools or technology.
The necessity to meet KYC, product due diligence and know-your-product (KYP) obligations before determining suitability.
How a suitability determination should be carried out.
IIROC’s dealers’ members can resort to alternative methods to comply with the KYC and suitability determination obligations as long as the latter meet IIROC Rule compliance.