Suitability Determination

Test yourself

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

1. 1

   A client opens a margin account and immediately requests a leveraged position equal to three times her net liquid assets. The registrant processes the order because the client signed the margin agreement and insists she understands the risks. Which statement best reflects the registrant's obligation?

   Outcome 3.4 · click for answer

   A.The registrant has no further obligation once the client has signed the margin agreement and acknowledged the risks.

   B.The suitability obligation is suspended for margin accounts because clients self-certify their understanding.

   C.The registrant must still assess whether the leveraged strategy is suitable for the client's KYC profile; client acknowledgment of risk does not discharge the suitability obligation.Correct

   D.The obligation is fully discharged if the registrant provides a written risk disclosure document at account opening.

   Signing a margin agreement and acknowledging risks transfers some responsibility to the client but does not extinguish the registrant's suitability obligation under NI 31-103 and CIRO rules. The registrant must still assess whether the leveraged strategy is appropriate given the client's financial situation, risk tolerance, and investment objectives. Suitability analysis applies to each order or recommendation, not only at account opening.

2. 2

   Under IDPC Rule 3206, which of the following must be included in the written relationship disclosure information provided to a new retail client?

   Outcome 3.4 · click for answer

   A.The products, services, and account types offered (and their limits), fee and charge structures, how the account operates, the suitability process, and the account reporting the client receives.Correct

   B.Only the commission and fee schedule the firm charges, with no description of available products, services, account types, or how suitability is assessed.

   C.A signed waiver confirming the client has read and agrees not to file complaints with CIRO about the registrant's advice or account handling.

   D.The registrant's personal investment track record and historical account returns over the past three years, offered as proof of expertise.

   IDPC Rule 3206 specifies the required content of the Relationship Disclosure Information: the products, services, and account types available at the firm; the limitations on those; the charges, fees, and compensation guidelines; how the account will operate under regulatory and firm-based rules; a description of how suitability is determined; and what account reporting the client will receive. It is a comprehensive onboarding document, not a legal waiver or a marketing piece. The registrant's personal track record is not a required element, and the RDI covers far more than just fees.

Related terms in KYC and Suitability

• Know Your Client (KYC)

  The mandatory client-information collection rule under CIRO IDPC Rule 3402.

• Know Your Product (KYP)

  The firm-and-individual obligation to understand every product the dealer offers.

• Account Appropriateness

  The pre-suitability check on whether the client should open the account at all.

• Trusted Contact Person (TCP)

  A non-trading contact a client designates so the dealer can address concerns about exploitation or capacity.

• Know-Your-Product (Firm Level)

  The dealer's obligation to conduct product due diligence before placing a security on its approved shelf.

• Know-Your-Product (Rep Level)

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