IDPC Rule 3200 Series

Test yourself

Two real CIRE-bank questions on this exact outcome. Click to reveal the answer and the rule citation.

1. 1

   A new client, age 68, indicates she is retired and relies on her investment portfolio for monthly income. She describes her risk tolerance as 'low.' Her registrant recommends a portfolio of 90% equity growth funds on the basis that equities outperform over the long term. Which KYC principle is most clearly violated?

   Outcome 3.1 · click for answer

   A.The account opening requirement, because the client's age disqualifies her from holding equity products.

   B.The identity verification requirement under NI 31-103, because the registrant did not confirm the client's date of birth.

   C.The suitability obligation, because the recommendation is inconsistent with the client's stated risk tolerance, investment objectives, and income needs.Correct

   D.The product due diligence obligation, because equity growth funds are not approved for retail distribution.

   NI 31-103 and CIRO rules require that recommendations be suitable having regard to the client's KYC profile, including risk tolerance, investment objectives, time horizon, and financial circumstances. A 90% equity allocation for a retired client with low risk tolerance and income dependency is inconsistent with those KYC factors on its face, triggering a suitability violation. There is no age restriction on holding equities, and equity growth funds are not categorically prohibited for retail clients.

2. 2

   Under NI 31-103, a registrant must take reasonable steps to keep KYC information current. Which event most clearly triggers an obligation to update KYC before making a new recommendation?

   Outcome 3.2 · click for answer

   A.The registrant transfers the client's account to a different branch office

   B.The client calls to request a duplicate copy of a recent account statement

   C.The client reports losing their job, which changes their income and risk capacityCorrect

   D.The client's account simply reaches its twelve month anniversary since being opened

   NI 31-103 requires registrants to take reasonable steps to keep KYC information current and to update it when they become aware of a material change in the client's circumstances. A significant life change such as job loss directly affects financial situation, income, and risk capacity and is a textbook trigger for a KYC update. The passage of 12 months alone may prompt a periodic review under dealer policy but does not automatically trigger an update obligation independent of any change in the client's circumstances.

Related terms in Regulatory

• CIRO

  The Canadian Investment Regulatory Organization, created January 1, 2023 when IIROC and the MFDA amalgamated; named CIRO June 1, 2023.

• CIRE

  Canadian Investment Regulatory Exam, the entry-level CIRO exam.

• CSA (Canadian Securities Administrators)

  Umbrella organisation of Canada's 13 provincial/territorial securities regulators.

• Canadian Investor Protection Fund (CIPF)

  Investor protection fund covering client property at CIRO investment dealers and mutual fund dealers up to $1 million per account category.

• NI 31-103

  National Instrument on Registration Requirements, Exemptions and Ongoing Registrant Obligations.

• Ontario Securities Commission (OSC)

  Ontario's provincial securities regulator and the largest CSA member by market participants.