Client Meetings & Compliance

• Chapter discusses client discovery and account opening processes, including procedures for accurate record maintenance.

Opening Accounts

• RRs are responsible for the client and the dealer member and must demonstrate high integrity.
• Standards of conduct provide a framework for responsible client dealings, starting with order placement duties.
• KYC rule requires RRs to learn and remain informed of essential facts about every order, account, and client accepted.
• Compliance with the KYC rule ensures firms collect sufficient client information to determine suitability, prioritizing the client’s interests.
• Suitability considers security concentration, liquidity, cost impact on returns, and alternative actions available.
• Consider client variables like age, marital status, occupation, income, net worth, dependents, and risk profile to determine trade suitability.
• Client's age and life stage are important to consider for assessing their KYC profile.
• Skilled advisors must apply robust initial KYC with regular client check ins to update information.
• Follow ups are key with senior investors.

Obtaining Information at the Account Opening Stage

• RRs obtain sufficient client information to ensure suitable recommendations, managing accounts consistently with investment objectives.
• Document client responses to lifestyle questions, like retirement plans, financial needs, dependent children, wills, and financial power of attorney.
• Require in-person meetings to ensure account application accuracy and encourage bringing a trusted family member.
• Frequent updates of new account information should be required on an annual basis.
• Account opening stage processes help firms determine appropriate investments for clients.

Client Identification and Anti-Money Laundering

• RRs play an important role in combating money laundering and terrorist financing.
• All employees with client contact or supervisory roles share this responsibility.
• Failure to fulfill reporting responsibilities under PCMLTFA can result in up to five years imprisonment and $2,000,000 in fines.
• AML/ATF procedures are incorporated into KYC obligations.
• CIRO sets rules requiring dealer members to obtain and maintain customer information for each account opened.
• Procedures should emphasize requesting essential customer information to make risk based assessments of clients and their income.
• Knowledge about customers helps to determine whether accounts require additional monitoring or due diligence.

Account Opening Red Flags

• Evaluating client behavior from a money laundering perspective is vital.
• Red flags are warning signs of potential improper activities, requiring reporting and further action.
• Examples of account opening red flags include reluctance to provide information, altered documentation, opening accounts in other people's names.
• Other red flags: vague information, PO box addresses, unverified phone number, avoiding reporting procedures, plus inquisitiveness about AML procedures.

General Anti-Money Laundering Due Diligence

• AML procedures should be based on risks that types of clients may be involved in money laundering.
• Must use extra due diligence with clients from bank secrecy jurisdictions or countries with corruption.
• Must provide extra information about corporations and trusts, especially offshore entities.
• Must pay attention to clients who deal with cash businesses, are prominent public figures or have suspicious transactions.
• Certain clients in positions of public trust, their family, and close associates are politically exposed persons (PEPs)

Account Updates and Reviews

• Ensure accounts with high money laundering risks are reviewed for significant changes to the client's profile.
• Perform regular reviews on non individual accounts to detect changes to the ownership structure
• A dealer member should categorize all accounts according to their risk level to determine if accounts are at at risk for money laundering activities
• Update client profiles and objectives with significant client changes and unusual activity
• Examples given are increased assets, or unusual transfer patterns.
• Regarding periodic reviews, FINTRAC guidelines suggest regular intervals of two years but high-risk accounts need more frequent updates.
• Routine monitoring and ongoing AML/ATF compliance are key.

Anti-Money Laundering Procedures for Accounts

• When opening accounts for private corporations, trusts, or similar entities, specific information about the entity and beneficial owners is required
• Failing to record or obtain this information can eventually result in the firm restricting the account until liquidation.

Account Application

• Completing an account application electronically or on paper is a critical start to the client relationship.
• It serves as the contract for services between the dealer member and the client.
• RR must include client’s identity, personal and financial information, investment objectives, risk profile, and insider status.
• There are fields in the application where an RR can make notes of material issues
• Account applications are used to establish client identity, meet suitability obligations, judge creditworthiness, and determine insider status.
• To establish the identity of the client, it is important to open an account correctly.
• Client names should not be abbreviated.

Client Records

• Client records should contain client documentation as well as notes taken during the client's discovery process to further explain the relationship from the dealer to client
• When complete they must be approved by the designated Supervisor

Home Address

• At least one residence or business address should be gathered to adhere to both AML/ATF as well as security regulations.
• Under no conditions use ones own address for client mail to avoid conflict of interest.

Mail Confirmations

• Client's mailing address must be valid and true.

Contact Number

• Gather as much contact information as possible for clients that must be reached for immediate communication.

Social Insurance Number

• SIN is required for tax reporting, consult with supervisor if the client can't provide it.

Date of Birth

• Client date of birth is essential for registered accounts to avoid serious deregistration consequences.
• Review client investment objectives through routine discussions and document those discussions.
• If the client fails to respond to a review letter, the dealer member will assume that it is accurate.
• If you see securities received for the first time into the client's account, it is a great time to check for the appropriateness and suitability of the items on that list

Client & Registrant Information

• Employment information helps establish client creditworthiness and evaluate their ability to withstand losses.
• Clients are required to document on the Investment Knoledge portion of the documentation
• The greater a client's knowledge, the better they perform over time so it could make sense to increase their score
• Those with little knowledge of the space may not be eligible to hold investments with high risk profile
• Each component of information in the registration documentation should be reviewed in harmony to determine if all requirements are met
• There are specific questions one can ask to determine a client's risk profile to decide what amount of money the client would willingly part ways with and so on

Account Information

• There are account information types to consider like the Beneficial owner or any payment/delivery procedures in place that are out of the ordinary
• It is essential to determine which accounts will be suitable for each client based on if they are margin accounts, cash accounts etc.
• Unlike cash accounts, DAP accounts are subject to the Cash Account Rule.

Payment and Delivery

• DAP and RAP transactions are the norm for institutional accounts.

Regulatory Compliance

• Registered accounts include RRSPs, RRIFs, registered education savings plans (RESPs), tax-free savings accounts (TFSAs), and various locked-in accounts.
• Investment club acounts require a written Investment Club Agreement that contains individual member data with a few of the members authorized to give trading instructions.
• It is recommended that such accounts send duplicate confirmations and monthly statements to an independent member to verify the account.
• Discretionary Accounts are those where the client can make temporary request for the dealer member to be responsible but may only be valid for 12 months.

Power of Attorney

• By encouraging this step, the RR is preparing the client for what is to come.

Client Acknowledgement

• Documentation must be positively acknowledged by the client.

Disclosures

• Dealers must make important disclosures such as those revolving around reporting requirements.

Registered Accounts

• Disclosure documents are required for each type of derivative, and are usually given to the client when an options or futures account is opened.

Leverage Disclosure

• Clients leveraging borrowed funds will receive an RR that can offer a few safe harbours
• A high reward isn't worth the risk.

Account Types

• Ensure that the account types is appropriate for how the client may be opening the account.

Authorization for Individual Accounts

When more than one person has a financial interest in an individual's account, documentation is collected regarding both parties.

Electronic Delivery

• All clients must provides written consent for electronic communications.

Client Records

• Clients must maintain current records for the accounts of all active clients to verify that a proposed trade is within the client's investment objectives and risk profile.
• The portfolio record to indicate the amount of holdings the client currently has is essential, many of which will hold an average cost basis as well

This lesson explores the importance of in-person client meetings for Registered Representatives. It covers compliance with PCMLTFA, gathering client information, AML/ATF procedures, KYC obligations, and the benefits of having a trusted person present in meetings.