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Lesson 1: Overview of Know Your Client and Suitability

Topics covered in this chapter are:

  • Introduction
  • Overview of KYC and Suitability
    • Interplay Between KYC, KYP, and Suitability
  • Regulatory Developments
    • Client Focused Reforms (CFRs)
    • Summary of Key KYC and Suitability Amendments
  • Exemptions from KYC and Suitability Requirements
  • Summary

Lesson 2: The Know Your Client Rule

Topics covered in this chapter are:

  • Introduction
  • General Backgrounder
  • Client’s Personal Circumstances
  • Client’s Financial Circumstances
    • Annual Income
    • Liquidity Needs
    • Client’s Financial Assets and Net Worth
    • Use of Leverage to Finance the Purchase of Securities
  • Client’s Investment Needs and Objectives
  • Client’s Investment Knowledge
  • Client’s Risk Profile
    • Risk Capacity
    • Emotional Considerations for Determining a Risk Profile (Risk Tolerance)
    • Resolving conflicts between a client’s expectations and risk profile
  • Client’s Investment Time Horizon
  • Client Confirmation and Updating KYC Information
  • Tailoring the KYC Process
  • Summary

Lesson 3: Suitability Determination

Topics covered in this chapter are:

  • Introduction
  • Suitability Considerations
    • Concentration and Liquidity Considerations
    • Impact of Costs
    • Reasonable Range of Alternatives
    • Client’s Interest First
  • Account Type Suitability or Appropriateness
  • Other Conditions That Trigger Suitability
  • Client- Directed Trades and Receiving Unsolicited Orders
  • Ongoing Management of Client Accounts
    • Periodic Reviews of Client Accounts
    • Client Instructions and Liquidations of Securities
    • Unavailable Accounts and Services
  • Portfolio Approach to Suitability
  • Vulnerable Clients
  • Delegation of Suitability Responsibility and Registrable Activities
  • Preventing and Dealing with Unsuitable Investments
    • Importance of Supplemental Information
  • Consequences of Noncompliance
    • Disciplinary case
  • Summary