Client Discovery and Account Opening

• Chapter discusses client discovery and all facets of account opening, including consistent procedures for maintaining accurate records

Opening Accounts

• As an RR, you must maintain high standards of integrity and act responsibly when dealing with clients
• Client's interests must always be paramount, and all information should be current
• Advisors must give cautionary advice if order is unsuitable based on client documentation
• Firms must collect enough data about client's financial situation, investment needs, risk profile, knowledge, and time horizon
• Client age, marital status, occupation, income, net worth, dependents, goals and risk profile are factors for determining suitability
• Skilled advisors ensure KYC compliance initially and through regular client revisits

Obtaining Information

• RR's need enough client information for suitable recommendations aligned with goals
• RRs use the account opening to ask questions:
  • When do you plan to retire?
  • How much money do you need to retire?
  • Do you have other expenses that we should contemplate?
  • Do you have children or grandchildren who are dependent on you financially?
  • Do you have a will and power of attorney?
• Meetings are best in person, information must be accurate
• Encourage a trusted contact to meetings
• Update information regularly, annually

Anti-Money Laundering

RRs play a role in combating money laundering and terrorist financing activities

• Employees who don't diligently fulfill PCMLTFA reporting might face prison and large fine
• Anti-money laundering/terrorist financing procedures align with KYC, where CIRO sets the rules needed to open an account
• Procedures should provide necessary information to make a risk-based assessment of clients and assess their income to find extra information
• Determine whether accounts like offshore accounts need increased monitoring and due diligence

Account Opening Red Flags

• Reluctance to offer adequate information or supporting documentation
• Documentation that appears altered, counterfeit, or has recent issue dates
• Attempts to open accounts in other people's names
• Supplying vague or untrue information
• Using an address outside the local service area
• Providing a phone number where the client cannot be reached
• Inquiries suggest the desire to avoid reporting
• Attempts to use aliases or open accounts in different names
• Use extra due diligence with clients from bank secrecy jurisdictions or countries with high levels of corruption
• Provide extra information about corporations and trusts

Politically Exposed Persons (PEPs)

• Foreign PEP accounts are generally a bigger concern from a money laundering perspective than domestic PEP accounts
• Category includes any person holding an office or position in a foreign state, their spouse, child, mother, father, brother, or sister
• An account for a foreign PEP must be approved by senior management within 30 days of opening Anti-money laundering regulations:
• Dealer members verify the identity and date of birth of any person opening a securities account
• This must be established before any transactions
• There is no expectation to repeat the client identity verification process, unless there is some doubt as to the client's identity

Account Updates and Reviews

• Dealer member's compliance regime should ensure higher-risk of money laundering accounts are reviewed regularly for significant changes
• AML/ATF regime includes risk rating, categorizing client accounts
• High-risk accounts includes offshore and PEP accounts and will have a stringent supervisory system

Corporate Accounts

• Under the PCMLTFA, when opening accounts for private corporations and trusts, you must gather specific information about the entity and beneficial owners
• For trusts, beneficial owners are the trustees, known beneficiaries and setllors
• For coporations, beneficial owners are entities who own or controll +25%, and information must be recorded
• Liquidating trades and transferring assets are necessary to occur before obtained information within 30 days from the account's opening

Non-Resident Accounts

• Non-resident individual accounts have additional identity verification
• Members must also know the registration of countries in which they intend to business
• Members should evaluate the country's money-laundering and any UN sanctions

Institutional Accounts

• Procedures are required to have AML/ATF procedures, and are opened and operated for those who usually have financial literacy
• Institutions accounts are usually widely known, in volume, and are regulated
• Members may little or no direct contact with beneficiary clients, instead with intermediaries, like investments and hedge funds

Personal Identity Documents

• Verification by PCMLTFA applies regardless of the method used to open the account
• Must still review the original copies of documents when opening an account
• Photocopies are not acceptable

Account Application

• Client must complete paperwork before opening account, either paper or electronically
• Contract for services includes client's identity including name, address, citizenship, social insurance number Includes personal information, such employment status, dependents, ,income net worth, liquidity and investment knowledge, and insider status
• Important to specify material issues like the identity of the client and collect suitability obligations
• Must be approved by the Designated Supervisor after reviewed and signed
• A copy must be available to all those responsible, like a sales manager or compliance officer

Account Application Updates

• Existing records require and regular change in client
• Change of name and changes to address or employment status require update
• New investment objectives or risk factors also require update
• Reviews are excellent opportunities for enhanced discussions with clients

Client information

• Consists of basic identifying information
• Legal names provides security
• Firms are allowed to maintain accounts clients identified only by number or symbol to maintain confidentiallity
• Address needs to to comply with securities regulations
• Residence and business numbers are needed to be verified

Other Important Information

• Date of birth is required, and must take special care with elders or minors
• Only Canadian citizens resident in Canada can purchase a share of Canadian companies
• Employment is required for to establish credit
• Marital status has both a financial and legal impact, and helps determine the client, determine objectives, and insider status

Account Information

Consists of:

• Account type
• Beneficial ownership
• Currency
• Payment and delivery procedures
• Special instructions

Account Types

• Cash accounts require full client transaction payments where members don't provide financing
• Margin accounts require partial payment and must make an initial deposit called the client margin, with a financing agreement, called a margin agreement
• Delivery against payment (DAP) accounts involve payments on settlement date with some limitations
• Receipt against payment (RAP) accounts, operate as described above for DAP accounts -Registered accounts are registered in an ividual's name
• Pro Accounts are any that is a non-client
• Invement clubs require a special Investmnet club agremeent
• discretionary account has not been solicited where members has authority, valid for 12 months
• Managed account is made on a contuing basis by the dealer -All clients must provide written consent to communicate electorniscally
• Account applications and portfolios must be easily accessible

This chapter discusses client discovery and all facets of account opening, including consistent procedures for maintaining accurate records. It also outlines advisor responsibilities, data collection, and KYC compliance. Skilled advisors ensure compliance initially and through regular client revisits.