Minimum Standards for Institutional Account Opening, Operations and Supervision

GN-3400-21-002
Type: Rules Notice> Guidance Note
Rule connection:
IIROC Rules
Distribute internally to:
Institutional
Internal Audit
Legal and Compliance
Operations
Registration
Senior Management

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Effective Date: December 31, 2021

  1. Suitability determination obligations for institutional clients

IIROC Rules 3200 and 39001 set out minimum standards for institutional account opening, operation and supervision. Section 3403 specifically imposes a suitability determination obligation; however, it is different from the type of suitability determination owed to a retail client under section 3402. The suitability determination owed to an institutional client does not require the Dealer Member (Dealer) to be aware of the customer’s entire portfolio, and the Dealer will not have to inquire about the investment objectives or financial situation of an institutional client.

Suitability determination in an institutional setting entails making sure the client can and does understand the investment products involved. The Dealer must have reasonable grounds in believing that the client is making an independent investment decision and is capable of independently evaluating the investment risk. In many cases, a Dealer’s suitability determination obligation may be easily fulfilled. For example, when recommending a relatively simple product to an experienced buyer at a large pension fund, the Dealer would have the necessary reasonable grounds for concluding that the suitability obligation has been satisfied. On the other hand, when dealing with a new or complex product, or an inexperienced buyer, a Dealer may have to take additional steps to fulfill its suitability obligation by educating the client about the product.

A determination of an institutional client’s sophistication and capability can only be made on a case-by-case basis taking into consideration the facts and  circumstances of a particular Dealer/client relationship, assessed in the context of particular types of transactions.

  1. Application of Universal Market Integrity Rules

IIROC wishes to make clear that Dealers subject to UMIR must still comply with all UMIR requirements regardless of any similar provisions contained in Series 3000 of the IIROC Rules.

  1. Applicable Rules

IIROC Rules this Guidance Note relates to:

  • Rule 3400.
  1. Previous Guidance Note

This Guidance Note replaces MR0384 - Policy No. 4 Minimum Standards for Institutional Account Opening, Operation and Supervision

  1. Related Documents

This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.

  • 1In this Guidance, all rule references are to the IIROC Rules unless otherwise specified.