CanadaCIRO Rules 3200 and 3300, know your client and know your product
In force since .
An AI sector rules rule binding private bodies.
- Enforcement body
- Canadian Investment Regulatory Organization (CIRO)
- Instrument type
- a regulation made under an act
- Obligation class
- Governance
- Audit expectation
- periodic
- Who audits it
- Self
As of .
What it requires
- It reaches you if you are a Dealer Member of the Canadian Investment Regulatory Organization (CIRO), which Canada's provincial and territorial securities regulators recognize as a self-regulatory organization, or an Approved Person of one, because a hearing panel that finds a Dealer Member or an Approved Person has contravened a CIRO requirement may impose sanctions on it (Rules 8209 and 8210), and the Rules exclude a Mutual Fund Dealer Member from the term Dealer Member: take reasonable steps to learn and remain informed of the essential facts relative to every order, account and client you accept, including establishing the client's identity and collecting sufficient information about the client's personal circumstances, financial circumstances, investment needs and objectives, investment knowledge, risk profile and investment time horizon to enable you to meet your obligations under Rule 3400 (Rule 3202(1)).
- Within a reasonable time after you receive that information, take reasonable steps to have the client confirm its accuracy (Rule 3202(3)).
- Take reasonable steps to keep the information current, updating it within a reasonable time after you become aware of a significant change in the client's information, and review it no less frequently than once every 36 months, or once every 12 months for a managed account and a discretionary account (Rule 3209(3) and (4)).
- Do not delegate to any other person the know-your-client responsibility, which rests primarily with the Registered Representative, Portfolio Manager or Associate Portfolio Manager assigned to the client account (Rule 3209(1) and (2)).
- Restrict the access of Registered Representatives, Portfolio Managers, Associate Portfolio Managers and other persons to your systems so that material client information cannot be changed without the required approval (Rule 3215(5)).
- Do not make securities or derivatives available to clients unless you have taken reasonable steps to assess their structure, features, risks, initial and ongoing costs and the impact of those costs, to approve them, and to monitor them for significant changes; this does not apply to an account at a Dealer Member that is a carrying broker, or only provides trade execution, clearing, settlement or custody services, for another Dealer Member, portfolio manager, exempt market dealer or their clients (Rules 3301(1) and 3303(1)).
- Do not purchase or sell securities or transact in derivatives for a client, or recommend securities or derivatives to a client, unless the securities or derivatives have been approved by the Dealer Member and you take steps to understand their structure, features, risks, initial and ongoing costs and the impact of those costs; the understanding requirement does not apply to an order execution only account or a direct electronic access account (Rules 3301(2), 3302(1) and 3303(2)).
If you get it wrong
Penalty structure
CIRO states that a Dealer Member found to have violated CIRO rules may be fined up to a maximum of $5 million per contravention or an amount equal to three times the profit made, or loss avoided.
- Rule
- Per violation only
- As of
- Currency
- CAD
- Per violation unit
- Violation
- Per violation amount
- 5,000,000
What this law does
CIRO Rule 3200 requires a Dealer Member to take reasonable steps to learn and remain informed of the essential facts relative to every order, account and client it accepts, including by collecting sufficient information about the client's personal circumstances, financial circumstances, investment needs and objectives, investment knowledge, risk profile and investment time horizon to enable it to meet its obligations under Rule 3400.
Within a reasonable time after receiving the information, a Dealer Member must take reasonable steps to have the client confirm the accuracy of it. A Dealer Member must review the information collected on the client's circumstances no less frequently than once every 36 months, and no less frequently than once every 12 months for a managed account and a discretionary account.
Compliance with the know-your-client requirements is primarily the responsibility of the Registered Representative, Portfolio Manager or Associate Portfolio Manager assigned to the client account, and that responsibility must not be delegated to any other person.
A Dealer Member must restrict the access of Registered Representatives, Portfolio Managers, Associate Portfolio Managers and other persons to its systems so that material client information cannot be changed without the required approval.
A Dealer Member must not make securities or derivatives available to clients unless it has taken reasonable steps to assess their structure, features, risks, initial and ongoing costs and the impact of those costs, to approve them, and to monitor them for significant changes. An Approved Person must not purchase securities or derivatives for, or recommend them to, a client unless the Dealer Member has approved them to be made available to clients.
An Approved Person of a Dealer Member must not purchase or sell securities or transact in derivatives for, or recommend them to, a client unless the Approved Person takes steps to understand their structure, features, risks, initial and ongoing costs and the impact of those costs.
Rule 3301 does not apply to an account at a Dealer Member that is a carrying broker, or only provides trade execution, clearing, settlement or custody services, for another Dealer Member, portfolio manager, exempt market dealer or their clients, and Rule 3302 does not apply to an order execution only account or a direct electronic access account.
A Dealer Member must comply with all relevant Corporation requirements, securities laws and applicable laws that are applicable to its activities, under section 1406 of the Investment Dealer and Partially Consolidated Rules. Under the Investment Dealer and Partially Consolidated Rules the term Dealer Member has the meaning given in the CIRO General By-law and excludes a Mutual Fund Dealer Member.
CIRO states that a Dealer Member found to have violated CIRO rules may be fined up to a maximum of $5 million per contravention or an amount equal to three times the profit made, or loss avoided. The Investment Dealer and Partially Consolidated Rules replaced the IIROC Rules and became effective on . The Client Focused Reforms' enhancements to the know-your-client, know-your-product and suitability determination requirements came into force on .
When LexLint raises it
When your app profile says your app provides financial services.