The Client Focused Reforms (CFRs) came into effect in 2021. The first set of rule requirements, which came into effect on June 30, 2021, introduced enhanced standards pertaining to the management of Conflicts of Interest. The remaining CFR rule requirements came into effect on December 31, 2021 and focused on Know Your Client (KYC), Product Due Diligence (PDD), Know Your Product (KYP), and Suitability. Together, these principles-based requirements were introduced to strengthen investor protection by helping dealers and approved persons better understand their clients, better understand the investment products they offer, make recommendations that are suitable for each client when suitability obligations apply, and to address all conflicts of interest in the best interest of clients.
To assess how dealers implemented the CFRs, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) conducted two compliance reviews of firms across a range of registration categories and business models. The first sweep, conducted in 2022, focused on Conflicts of Interest. The findings were published in Joint CSA-CIRO Staff Notice 31-363, Client Focused Reforms: Review of Registrants’ Conflicts of Interest Practices and Additional Guidance. The second sweep, conducted in 2023/2024, focused on KYC, PDD, KYP, and Suitability. The findings and guidance from that review were published in Joint CSA/CIRO Staff Notice 31-368, Client Focused Reforms: Review of Registrants’ Know Your Client, Know Your Product and Suitability Determination Practices and Additional Guidance.
Targeted Guidance for CIRO Dealers
CIRO has developed a series of targeted compliance bulletins that build on Staff Notice 31-368 and focus on practical issues commonly encountered by CIRO-regulated dealers. The bulletins are intended to support dealers and approved persons in meeting their CFR obligations in a way that is practical and proportionate to the dealer’s business model, product shelf, and client base. The bulletins provide practical steps and examples of acceptable practices that may help dealers strengthen their CFR compliance processes, where needed. They should be read together with the applicable rules and related guidance. They do not replace the rules or related guidance and are not intended to prescribe minimum standards or checklists.
CIRO has also released an introductory webcast that provides an overview of the bulletins and explains how the guidance can assist dealers in applying the CFRs in practice.
The bulletins address the following topics:
- Know Your Client (KYC) and Risk Profile
- Product Due Diligence, Product Monitoring, and Know Your Product
- Suitability and the Reasonable Range of Alternatives Requirement
Use these resources to:
- Review your firm’s policies, procedures, and controls against the applicable CFR requirements.
- Consider whether your processes are tailored to your business model, products, and client base.
- Identify practical ways to strengthen supervision, documentation, training, and ongoing monitoring, where needed.
For any additional CFR-related questions not addressed in the Staff Notices or bulletins, dealers should reach out to their Business Conduct Compliance manager at CIRO.