Know-Your-Product (Rep Level): The registrant's personal obligation to understand any product they recommend to a client.

Know-Your-Product (Rep Level)

The registrant's personal obligation to understand any product they recommend to a client.

Definition

Even if the firm has approved a product for its shelf, the individual registrant must independently understand the product before recommending it. This means knowing the product's structure, fees, risk factors, and the types of clients for which it is or is not appropriate. Under the Client Focused Reforms, the registrant cannot recommend a product they do not understand even if the recommendation would otherwise match the client's KYC profile. The rep-level KYP obligation is assessed at the time of the recommendation.

Source

CIRO IDPC Rule 3300 series; CSA Notice 31-336; Client Focused Reforms

Where this shows up on the CIRE

Outcome 3.5

Test yourself

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

1
A client wants to open an account where they can make their own investment decisions without advice and without the dealer assessing suitability on each trade. Which account type best fits this description, and what must occur before it is opened?
Outcome 3.5 · click for answer
A.A managed account, opened only once the dealer secures written discretionary authority
B.An advisory account, opened after the client signs a waiver excusing per-trade suitability review
C.An order execution only account, opened after written disclosure of no advice or suitability reviewCorrect
D.A discretionary account, opened once the client and portfolio manager sign a formal trading authority letter
An order execution only account is the account type where the dealer executes client-directed orders without providing advice or conducting ongoing per-trade suitability assessments. Before opening an OEO account, IDPC Rule 3219 requires three specific written disclosures: (1) no advice will be provided, (2) suitability will not be assessed on an ongoing basis, and (3) the client is responsible for their own investment decisions. These disclosures ensure the client understands the self-directed nature of the account before the first trade.
2
An elderly client with 'conservative' investment objectives and a two-year time horizon asks her registrant to purchase a speculative junior mining stock because 'my grandson says it will double.' The registrant believes the trade is unsuitable. Under IDPC Rules, what is the registrant's obligation?
Outcome 3.5 · click for answer
A.Decline the order outright since conservative mandates bar all speculative purchases
B.Send the order to compliance for approval within 24 hours and hold off on talking to the client at all
C.Warn the client in writing, log the order as client-directed, then act on her insistenceCorrect
D.Place the trade with no warning since the client's own instruction settles the matter
Under IDPC Rule 3402, the registrant must assess suitability and, where a trade is unsuitable, inform the client of that determination. For client-directed orders (where the client insists on proceeding despite the warning), the registrant must document the client's instruction, note the suitability concern in the file, and then execute the order. Simply refusing all unsolicited orders or bypassing the client to seek compliance approval are not the prescribed responses. Documenting the client-initiated nature of the order is essential to protect both the client and the registrant.

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