CIRE Element 2: Prospective Client Relationships
Quick answer
Element 2 covers what happens before and during onboarding: the client relationship model, telling retail clients from institutional clients, accredited investors under NI 45-106, the know-your-client information a dealer must collect, third parties in the client's life, the role of cost, and the documents in the account agreement and welcome package. The official blueprint assigns 11 of 110 indicative questions to this element.
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- Element
- 2 / 9
- Weight
- 11 of 110 questions
- Outcomes
- 11
- Practice Qs
- 354+
Coverage
What is tested in Element 2
Element 2 tests the boundary between approaching a prospect and onboarding them as a client. The key threshold tests revolve around client classification. An Accredited Investor under NI 45-106 s. 1.1 is, among other things, an individual whose financial assets exceed $1,000,000 (alone or with a spouse, before taxes but net of related liabilities), or whose net assets are at least $5,000,000 (alone or with a spouse), or whose net income before taxes exceeded $200,000 alone (or $300,000 combined with a spouse) in each of the two most recent calendar years, with the same expected this year. An Institutional Client under CIRO IDPC Rule 1201(2) includes a non-individual with more than $10,000,000 in securities and precious metals bullion under administration or management, and an individual above that level who requests and consents to be classified as an institutional client.
Onboarding is the other half of the element. For a retail client, the dealer collects the client's financial and personal circumstances, investment knowledge, risk profile (risk tolerance and risk capacity), investment objectives and needs, and time horizon (outcome 2.6). CIRO Bulletin 26-0200 (September 10, 2026) says the risk profile should reflect the more conservative of risk capacity and risk tolerance, with both assessed and documented. The dealer also documents third parties such as a power of attorney, lawyer, accountant, insurance agent and trusted contact person (2.7), and provides the account agreement and welcome package: fee schedule, CIRO account opening brochure, conflict of interest disclosures and complaint-handling brochure (2.10).
Cost is part of this element too. Outcomes 2.8 and 2.9 cover the role of cost in product selection and how fees, turnover and taxes reduce a client's returns. Prospecting and anti-money-laundering laws such as Canada's Anti-Spam Legislation and the PCMLTFA sit in Element 1 (outcomes 1.10 and 1.11).
Outcomes
Outcomes covered (11)
These follow the learning outcomes for Element 2in CIRO's January 2025 CIRE syllabus, in the same order. Each outcome has practice questions in the Registrant Prep bank with the rule citation behind every answer.
- 2.1The client relationship model: relationship disclosure, conflicts, suitability and performance reporting
- 2.2Who qualifies as an institutional client under CIRO rules
- 2.3The difference between retail and institutional clients
- 2.4Exemptions under NI 45-106, including accredited investors
- 2.5The Investment Dealer onboarding process: KYC rules, institutional exceptions and permitted client waivers
- 2.6Retail client information to collect, including risk tolerance and risk capacity
- 2.7Third parties in the client's life: powers of attorney, lawyers, accountants, insurance agents, trusted contact person
- 2.8The role of cost in product selection
- 2.9The impact of fees, turnover and taxes on returns
- 2.10Account agreement and welcome package documents
- 2.11Documenting, filing and maintaining client records
Rule citations
Rule citations to know cold
The rules behind Element 2. CIRO's official CIRE practice exam tests what the rules require, not their numbers, so learn the obligation first and use the number to find the rule text.
- §NI 45-106 (Prospectus Exemptions, including the accredited investor definition)
- §CIRO IDPC Rule 1201(2) (Institutional Client definition)
- §CIRO IDPC Rule 3202 (know-your-client, including the trusted contact person in 3202(4))
- §CIRO IDPC Rule 3216 (relationship disclosure)
- §CIRO Bulletin 26-0200 (risk profile, risk capacity and risk tolerance, September 2026)
Study approach
How to study Element 2
Build a memorized table of the three accredited-investor prongs for individuals (income, financial assets, net assets) with the exact dollar figures from NI 45-106 s. 1.1. There is no $500,000 standalone financial-assets prong in NI 45-106; the lowest financial-assets threshold is $1,000,000, satisfiable alone or with a spouse.
For the Institutional Client threshold, lock in more than $10,000,000 in securities and precious metals bullion under administration or management. A non-individual qualifies at that level; an individual qualifies only if they also request and consent to institutional classification (CIRO IDPC Rule 1201(2)). Don't confuse it with the $5,000,000 net-asset test for accredited investors.
Personal financial dealings are tested in Element 9 (outcome 9.7), but learn the rule number here too: it is Rule 3115, not Rule 3200 (which is KYC and client accounts). The Related Person exception requires Related Person status under the Income Tax Act, handling under the dealer's policies and, for Registered Representatives, Investment Representatives and portfolio managers, the dealer's written approval in advance. Friendship, long client tenure or a market interest rate do not, on their own, override the prohibition.
Traps the exam catches
Common mistakes on Element 2
- Quoting a $500,000 standalone financial-assets threshold for accredited investor status. NI 45-106 has no such prong, the lowest financial-assets test is $1,000,000.
- Citing CIRO IDPC Rule 3200 (KYC) for personal-financial-dealings prohibitions. The correct rule is Rule 3115.
- Using a $5,000,000 Institutional Client threshold. CIRO IDPC Rule 1201(2) uses more than $10,000,000, and an individual must also request and consent.
- Treating risk tolerance alone as the risk profile. CIRO Bulletin 26-0200 says the risk profile should reflect the more conservative of risk capacity and risk tolerance.
- Confusing the PCMLTFA cash-reporting threshold as 'above $10,000.' It is '$10,000 or more,' so a transaction of exactly $10,000 triggers the obligation.
Memory hooks
Facts to memorize cold
- Accredited investor: $200K solo income / $300K with spouse / $1M financial assets / $5M net assets
- Institutional Client: more than $10M securities and bullion under administration or management
- Individuals become institutional clients only on request and consent
- Risk profile = the more conservative of risk capacity and risk tolerance
- Personal financial dealings = Rule 3115 (not 3200)
- PCMLTFA LCTR: $10K or more, file within 15 calendar days
Common questions
CIRE Element 2 FAQ
What is the accredited investor threshold in Canada?
Under NI 45-106 s. 1.1, an individual qualifies as an accredited investor by meeting any one of these tests: net income before taxes above $200,000 alone, or above $300,000 combined with a spouse, in each of the two most recent calendar years, with a reasonable expectation of exceeding it in the current year; financial assets (cash, securities, contracts of insurance, deposits) with aggregate realizable value above $1,000,000, alone or with a spouse, before taxes but net of related liabilities; or net assets of at least $5,000,000, alone or with a spouse. There is no $500,000 standalone prong.
What is the Institutional Client threshold under CIRO?
CIRO IDPC Rule 1201(2) defines an Institutional Client to include a non-individual with total securities and precious metals bullion under administration or management exceeding $10,000,000. An individual above that level is an Institutional Client only if they request and consent to that classification. The definition also covers acceptable counterparties, acceptable institutions, regulated entities, non-individual registrants and qualifying hedgers.
Which rule governs lending to a client in Canada?
CIRO IDPC Rule 3115 (personal financial dealings with clients) governs lending to and borrowing from clients. Both are prohibited unless an exception applies. Lending is allowed only where the client is a Related Person under the Income Tax Act, the arrangement follows the dealer's policies and, for Registered Representatives, Investment Representatives and portfolio managers, the dealer approves it in writing beforehand. Borrowing has the same Related Person exception, and is also allowed from a client that is a financial institution lending in its normal course of business.
What is the cash-reporting threshold under PCMLTFA?
The PCMLTFA requires reporting entities, including investment dealers, to file a Large Cash Transaction Report with FINTRAC for any single cash transaction of $10,000 or more (not 'above $10,000'). The report must be filed within 15 calendar days after the day the cash is received.
All 9 CIRE elements
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354+ practice questions on Element 2 alone, with the rule citation behind every answer.