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• Client discovery encompasses all aspects of the account opening process and maintaining accurate records.

Opening Accounts

• As a Registered Representative (RR), the client and the dealer member are your responsibilities for those you are employed by
• Accept, understand, and display high integrity standards
• Guidelines covered provide a framework for responsible client dealings and order placements
• Keep the client's interests paramount and update all information, ensuring appropriate recommendations based on current information
• Under the Know Your Client (KYC) rule, cautionary advice must be given if an order seems unsuitable based on documentation

The KYC Rule

• Requires the dealer member to learn and stay informed of essential facts for every order, account, and client
• This includes gathering sufficient data on the client's personal and financial situation, investment preferences, and understanding of risk
• Suitability must be determined putting the client's interests first
• Consider the concentration and liquidity of securities, the impact of costs on returns, and potential alternative actions for suitability determination.
• Consider client variables like age, marital status, occupation, income, net worth, dependents, and risk profile.
• Determine investment objectives, knowledge, experience, and time horizon when determining suitability
• Account's portfolio composition, duration, and risk level are important factors
• Regular revisits with clients update KYC information, review advice, and track changes for senior investors
• Document client's responses on their lifestyle, like retirement plans, financial needs, and family dependencies
• Require in-person meetings to ensure application accuracy and obtain regular updates
• Client Identification: Anti-Money Laundering (AML)
• RRs and other staff play a role in combating money laundering and terrorist financing
• Not diligently fulfilling reporting responsibilities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) may lead to penalties of up to five years imprisonment and/or $2,000,000 in fines
• Anti-money laundering (AML) and anti-terrorist financing (ATF) procedures are incorporated into existing KYC obligations following rules set out by the Canadian Investment Regulatory Organization (CIRO)
• Dealer members must obtain and maintain specified customer information regarding essential facts for both the assessment of risk and client’s finances

Red Flags and Due Diligence

• Account opening procedures should make a reasonable assessment based on source of income, and expected activity in the account for extra information needs
• During client discovery and the relationship, RRs can observe and evaluate behavior for money laundering
• Red flags signal potential impropriety and should be reported for actions. This is critical for the KYC and to prevent illegal activities
• Client identification and verification requires professional judgment, especially when suspicions or red flags emerge
• Apply a red flag program and assist the dealer member in performing AML/ATF procedures
• Reluctance to provide complete information, altered documentation, attempts to open accounts in other people's names, providing vague information, or avoiding reporting raise flags
• General AML diligence includes extra caution with clients from bank secrecy jurisdictions and private offshore entities
• Focus attention towards clients who deal with cash businesses, public figures, or had suspicious financials.

Politically Exposed Persons (PEPs)

• Clients holding public trust positions, their families, and close associates are considered politically exposed persons (PEPs)
• Foreign PEP accounts pose greater money laundering concern
• Foreign PEPs include individuals previously or currently in office for a foreign state, their spouse, child, or family
• Accounts for foreign PEPs must be approved by senior management within 30 days and have ongoing monitoring controls

Client Identification

• Anti-money laundering regulations mandate dealer members to verify any person's identity before processing security transactions, and requires verification the authority of individuals for accounts
• CIRO's client identification incorporates KYC and suitability for determining client identity
• Ongoing reviews of accounts considered high risk for money laundering ensure there are no significant changes to the client profile
• Dealer AML/ATF programs should include a risk rating system for all client accounts categories based on risk
• Update client profiles and objectives whenever there is a significant change or unusual activity, such as an increase in account assets beyond the client's means or pattern of transfers
• FINTRAC suggests that a client updates their profile at least every two years
• Accounts should be reviewed to see which ones warrant updates
• You must retain account applications, trade confirmations, guarantees, trade authorizations, powers of attorney, joint account agreements, and correspondence

Corporate and Non-Resident Accounts

• When establishing a private corporation, trust, or entity account, the PCMLTFA requires specific information about the entity and its beneficial owners
• If this information cannot be obtained, the account may be restricted to trades
• Non-resident accounts have additional identity verification requirements, and dealer members should know about the registration requirements of foreign countries
• Determine if their solicitation matters are conducted there
• Dealer members should evaluate jurisdictions for money laundering or potential sanctions, also determining if the account is set up by, or for the benefit of, a PEP
• Institutional accounts are for clients who are sophisticated and purchase/sell securities in large volumes and are publicly held.
• CIRO rules require dealer members dealing with institutions must oversee transactions to detect suspicion of terrorist financing and take action.

Account Application

• In this case, the term "the account application" means the contract for services between the dealer member and the client, executed by the Registered Representative (RR)
• The RR must determine the authority of institutions or intermediaries for the application
• Dealer members must review original personal identification documents to verify identity, due to the internet and electronic signatures are more common
• Account applications require the client's name, address, citizenship, Social Insurance Number, and employment
• Includes personal information, such as marital status, number of dependents, income info, knowledge, objectives, and insider status
• The application helps determine the client's identity and meets all requirements for obligations
• The Designated Supervisor must approve the completed, reviewed, and signed form

Updating Applications

• Update account applications regularly and for any significant changes to a client's account, inlcuding change of name/address, martial status, trading authorization, etc
• Amend it by re-signing to update documentation
• Discuss with clients to determine whether applications should be updated and send out confirmation letters
• Annually confirm and advise dealer members of any changes to the current investment objectives
• You must review a client's account and their KYC info for suitability after securities are received or the dealer becomes aware of a change of information
• Be sure to properly discuss this with your clients in order lend more support

Completing the Account Application

• There are three general categories of information required on the account application:
• Client information
• Account information
• Registrant information

Client Information

• It is vital that the client name be opened with correct legal name to serve as defence against deception with level defence from potentially false data from an AML/ATF perspective
• Obtain residence and business addresses for compliance
• Never use your own address for client mailings. This prohibition includes the postal direction "c/o the RR" at the office due to the presence of a conflict of interet.

Date of Birth

• A client's birth date is required from any and all registered accounts from RRSPs/RRIFs.
• In regards to opening account in minors, it is best to avoid doing so as minors may have their contracts with repudiation reach a reasinable time after the age of majoritiy.
• Note that the Quebec Civil Code contains status of emancipated minor for those under 18 that are married or may have securities trading.

Financial Information

• It should not be considered as fundamental in judging a client. It also includes those regarding marital status as also well.
• A total net worth as well annual income are the major factors when determining which account is the most appropriate.

Investment Knowledge as well Risk Profile

• Discussions with clients will disclose knowledge of investment matters with a guidance and helpful tone.
• It would be wise to inquire as to whether that figure is composed of employment income, investment income, or income from other sources.
• Discussions with your client must include for review the client's investment objectives. Also include risk capacity and tolerance.

Account Information

• Account information consists of the following components:

• Account Type

• Benefical ownershio

• Currency - Special instructions

• Be sure to check with operations determine which of the currencies may be operating with the firm. As an RR, must always consider that a clients investment is dominated by an currency that is also carrying currency risk.

Payment and Delivery

• When a security trades are fairily standard, the payment can be taken directly can be taken from a client. Must have a good understanding of the source of your clients overall financial situation including significant changes.

Investment Club Accounts

• When going and setting up some club account, a legal document and document called should always acoompany the standart form.
• When clients have already opened an account, ask to see if accounts have been delivered to you directly from the client or owner of the estate.

Electronic signatures

• CIRO permits the use of electronic or digital signatures when signatures are necessary for the contracts, the dealer members, clients and registrations as needed.

Client Records

• It is essential to keep the following records handy: -Account Application -Portfolio Record -Security cross reference
  • Correspondences, etca