IROC and MFDA outline proposed guidance to help members understand and comply with amendments to KYC and suitability
Following up on proposed CFR-related amendments they issued late last year, IIROC and MFDA have published a new set of suggested revisions to their suitability guidance.
In a notice to its members, IIROC published new proposed guidance to replace Notice 12-0109 - Know your client and suitability – Guidance.
Aside from providing its interpretation to the amendments associated with the CSA’s client-focused reforms, IIROC said the new guidance conforms in all material respects to the CFRs, notably with respect to the updated Companion Policy 31-103 CP – Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Among other things, the new proposed guidance sets out IIROC’s expectations with respect to KYC information to be collected by dealers to meet suitability determination requirements, interpretations of new terms such as “personal circumstances,” “financial circumstances,” and “risk profile, and how it expects dealers to meet their enhanced suitability determination obligations, including an interpretation of the phrase “put the client’s interest first.”
Stressing that KYC is not a one-size-fits-all process, the self-regulator also set out to clarify areas such as how dealers should focus on collecting the KYC information needed to satisfy IIROC requirements, provide examples of information dealers might want to provide based on their business models, and different methods of KYC information collection.
For its part, the MFDA published CFR conforming changes to rules under MSN-0069 (Suitability), which were still under development when it published its first proposed changes to align with the CFRs in November last year.
“CFR guidance in the area of suitability has been merged with existing concepts under MSN-0069,” the MFDA said, noting an effort to ensure its guidance reasonably reflects its understanding of the CFRs as well as the business models of its members, while remaining consistent with similar guidance under securities legislation.
While the requirements and guidance under CFR changes apply to “securities,” the MFDA said its conforming amendments to regulatory instruments use the term “investment products” as appropriate to encompass all business conducted through MFDA members’ facilities.
The MFDA also updated numerous references and uses of wording in the notice to reflect amendments made to Rules 2.2.1 (Know-Your-Client), 2.2.4 (Updating Client Information), 2.2.5 (Know-Your-Product), and 2.2.6 (Suitability Determination). It also removed content pertaining to KYP considerations from MSN-0069, as those are addressed under MSN-0048, which was published with revisions on November 19, 2020.
Both SROs are accepting written comments to their respective conforming changes for a 60-day period, which will end on August 20.
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