3403. Institutional client suitability determination requirements

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    1. Subject to the applicable exemptions set out in section 3404, a suitability determination must be made for an institutional client:

      1. before any order is accepted from the client, and

      2. before a recommendation is made to the client to purchase, sell, exchange or hold a security.

    2. When a suitability determination must be made for an institutional client pursuant to subsection 3403(1), a Dealer Member must make a determination whether the client is sufficiently sophisticated and capable of making its own investment decisions in order to determine the level of suitability owed to that institutional client. In making a determination whether a client is capable of independently evaluating investment risk and is exercising independent judgment, relevant considerations include:

      1. any written or oral understanding that exists between a Dealer Member and its client regarding the client’s reliance on the Dealer Member,

      2. the presence or absence of a pattern of acceptance of the Dealer Member’s recommendations,

      3. the use by a client of ideas, suggestions, market views and information obtained from other Dealer Members, market professionals or issuers particularly those relating to the same type of securities,

      4. the use of one or more investment dealers, portfolio managers or other third party advisors,

      5. the general level of experience of the client in financial markets,

      6. the specific experience of the client with the type of instrument under consideration, including the client’s ability to independently evaluate how market developments would affect the security and ancillary risks such as currency rate risk, and

      7. the complexity of the securities involved. 

    3. Once each suitability determination has been made and:

      1. the Dealer Member has reasonable grounds for concluding that the institutional client is capable of making an independent investment decision and independently evaluating the investment risk, then the Dealer Member’s suitability obligation is fulfilled for that transaction, or

      2. the Dealer Member does not have reasonable grounds for concluding that the institutional client is capable of making an independent investment decision and independently evaluating the investment risk, then the Dealer Member must take steps to ensure that the institutional client fully understands the investment product, including the potential risks.

    4. A Dealer Member must determine, on a reasonable basis and putting the institutional client’s interest first, that:
      1. it is suitable for the institutional client to continue having an account with the Dealer Member, and
      2. the scope of products, services and account relationships which the institutional client has access to within the account are suitable for the institutional client.

    There is no history log for this rule.

    There is no history log for this rule.