Core Regulatory Obligations Exemptions Chart
Do the Core Regulatory Obligations apply in the following scenarios?
Scenario: | Core Regulatory Obligation: | |||||
Account Appropriateness |
Account Suitability1
|
Product Due Diligence (PDD) |
Know your product (KYP) |
Know your client (KYC) |
Portfolio Suitability |
|
(i) Type of Account: | ||||||
Order Execution Only Account |
Partially2
|
Partially3
|
Yes | No (see 3303(2)(i)) |
Partially4
|
No (see 3404(1)(i)) |
Direct Electronic Access Account |
Partially2
|
Partially3
|
Yes | No (see 3303(2)(ii)) |
Partially4
|
No (see 3404(1)(ii)) |
Advisory Account | Yes | Yes | Yes | Yes | Yes | Yes |
Discretionary Account/Managed Account |
Yes | Yes | Yes | Yes | Yes | Yes |
(ii) Type of Client: | ||||||
All Institutional Clients |
Yes5 |
Yes6
|
Yes | Yes |
Partiall4
|
Yes6
|
Subcategories of Institutional Clients |
No5
|
No6
|
Yes | Yes |
Partially7
|
No6
|
(iii) Service Provider8 : | ||||||
Carrying Broker | No (see 3211(3)(i)) |
No (see 3404(2)) |
No (see 3303(1)) |
No (see 3303(2)(iii) |
Partially4
|
No (see 3404(2)) |
Trade Execution, Clearing, Settlement (e.g., to a PM) |
No (see 3211(3)(i)) |
No (see 3404(2)) |
No (see 3303(1)) |
No (see 3303(2)(iii) |
Partially4
|
No (see 3404(2)) |
Custodian | No (see 3211(3)(i)) |
No (see 3404(2)) |
No (see 3303(1)) |
No (see 3303(2)(iii) |
Partially4 (see 3208(1)(iii)) |
No (see 3404(2)) |
- 1The Account Appropriateness and Account Suitability obligations mirror each other. However, Account Appropriateness is conducted prior to account opening and Account suitability is an ongoing obligation conducted after the account has been opened.
- 2 a b Order Execution Only Accounts and Direct Electronic Access Accounts are subject to 3211(1)(i) [that the action [of opening the account with the Dealer] would be appropriate for the person]. However, they are exempt from 3211(1)(ii) [that the scope of products, services and account relationships which the person would have access to within the account are appropriate for the person].
- 3 a b The applicability of Account Suitability for Order Execution Only Accounts and Direct Electronic Access Accounts tracks the applicability of Account Appropriateness for these account types.
- 4 a b c d e f Subsection 3208(1) provides an exemption only from the KYC provisions relating to suitability (3202(1)(iii) and 3202(4)). Dealers remain obligated to collect other types of KYC information (e.g., AML/Client ID information, institutional client status, etc.).
- 5 a b Note that as the account appropriateness determination is conducted prior to account opening, 3211 uses the language “person” rather than “retail client” or “institutional client”.
- 6 a b c d The Portfolio Suitability and Account Suitability obligations set out in Rule 3402 apply only with respect to “retail clients”. As such, Rule 3402 does not apply to “institutional clients”. However, Rule 3403 sets out the institutional client account and portfolio suitability obligations (and applicable exemptions) with respect to institutional clients.
- 73208(1)(ii) uses the term “institutional client” and therefore captures all subcategories of institutional clients.
- 8Service providers are Dealer Members who provide certain back-office services to another Dealer Member, portfolio manager, exempt market dealer or their respective clients. In these cases, the other Dealer Member, portfolio manager or exempt market dealer is generally responsible for the core regulatory obligations.