3402. Retail client suitability determination requirements

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    1. Before a Dealer Member purchases, sells, withdraws, exchanges or transfers‐out securities for a retail client’s account, takes any other investment action for a client, makes a recommendation or exercises discretion to take any such action, the Dealer Member must determine, on a reasonable  basis, that the action satisfies the following criteria:
      1. the action is suitable for the retail client, based on the following factors:
        1. the retail client’s information collected in accordance with section 3202,
        2. the Dealer Member’s assessment of and an Approved Person’s understanding of the security required in accordance with Rule 3300,
        3. the impact of the action on the retail client’s account, including the concentration of securities within the account and the liquidity of those securities,
        4. the potential and actual impact of costs on the retail client’s returns, and
        5. a consideration of a reasonable range of alternative actions available to the Registered Representative, Portfolio Manager, or Associate Portfolio  Manager through the Dealer Member at the time the determination is made, and
      2. the action puts the retail client:’s interest first.
    2. A Dealer Member must review the retail client’s account and the securities in the retail client’s account to determine whether the criteria in subsection 3402(1) are met, and take reasonable steps, within a reasonable time, after any of the following events:
      1. securities are received or delivered into the client’s account by way of deposit, or transfer-in,
      2. a Registered Representative, Portfolio Manager or Associate Portfolio Manager is designated as responsible for the account, 
      3. the Dealer Member becomes aware of a change in the retail client’s information collected in accordance with subsection 3202(1) that could result in a security or the retail client’s account not satisfying subsection 3402(1),
      4. the Dealer Member becomes aware of a change in a security in the retail client’s account that could result in the security or account not satisfying subsection 3402(1), or
      5. the Dealer Member reviews the retail client’s information in accordance with subsection 3209(4).
    3. A Dealer Member must determine, on a reasonable basis and putting the retail client’s interest first, that:
      1. it is suitable for the retail client to continue having an account with the Dealer Member, and
      2. the scope of products, services and account relationships which the retail client has access to within the account are suitable, for the retail client
    4. When making a suitability determination pursuant to subsection 3402(1), a Dealer Member must determine, on a reasonable basis, that the retail client’s account portfolio of investments that would result from the investment action the Dealer Member takes, recommends or exercises discretion to take is suitable for the retail client and puts the retail client’s interest first.
    5. Despite subsection 3402(1), if a Dealer Member receives an instruction from a retail client  to take an action that, if taken, does not satisfy subsections 3402(1), the Dealer Member may carry out the retail client’s instruction if the Dealer Member has:
      1. informed the retail client of the basis for the determination that the action will not satisfy subsection 3402(1) and advised the client against proceeding with the order,
      2. recommended to the retail client an alternative action that satisfies subsection 3402(1), and 
      3. received recorded confirmation of the retail client’s instruction to proceed with the action despite the determination referred to in clause 3402(5)(i).

    There is no history log for this rule.

    There is no history log for this rule.