Account and Investment Application for Investments

Brokers are required to use due diligence to ensure that “each order accepted or recommendation made for any account of a client is suitable for the client and in keeping with the client’s investment objectives”. To meet this obligation, Brokers must obtain and maintain complete, timely, and accurate KYC information. Without this information, a determination cannot be made as to whether a recommendation is suitable for a client.

Client risk tolerance, investment objectives, and time horizon noted in the KYC information give direct information regarding what is suitable for a client. These three elements must be directly compared against the assets in the client’s account to ensure that the trades are suitable. The other categories (investment knowledge, annual income, net worth, and age) serve two main functions. Firstly, they are used in assessing the suitability of any leveraged loan, and secondly, they can be used as a check against the three categories that give direct information regarding whether the investments are suitable for a client. For example, if a 70-year-old client is shown as having a high risk tolerance and little or no investment knowledge, it is indicative of a situation that would require follow-up.