Client Focused Reforms: What you need to know
Canadian Securities Administrators (CSA) is implementing new rules intended to ensure financial advisors and their firms are providing a high standard of care for their clients. These rules, called Client Focused Reforms (CFR), are based on the concept that client interests should always come first in the client-advisor relationship.
CFRs apply to all registered dealers and advisors, including Edward Jones (and registered investment fund managers under certain circumstances). These organizations have until December 31, 2021 to ensure their internal systems, processes policies and guidance comply with all the new rules. Below is a list of the rules and dates they will be in effect:
Implemented by June 30, 2021:
- Conflicts of interest: The rules require that advisors address material conflicts of interest in the client’s best interest. The CFRs outline how material conflicts are expected to be identified, documented, addressed and disclosed. Conflicts arising from proprietary products and incentive and third-party compensation arrangements in particular must be fully disclosed and documented and a firm must be in a position to substantiate how these products and arrangements are aligned with a client’s interest.
Implemented by December 31, 2021:
- Know your product (KYP): Advisors are required to take reasonable steps to understand any securities that are purchased and sold for, or recommended to, their clients. This includes the structure, features and risks, and initial and ongoing costs and their impact. Registered firms are expected to have policies, procedures and controls in place to appropriately assess, approve and monitor all securities made available to clients.
- Know your client (KYC): Advisors must collect an expanded list of information to meet their KYC obligations. In addition, they must take reasonable steps to obtain the client’s confirmation of the accuracy of any information collected. Client information must be reviewed at minimum intervals and updated if the firm becomes aware of a significant change.
- Suitability determination: Advisors must put their clients' interests first when making a suitability determination. After complying with KYC and KYP, an advisor is expected to have sufficient information to determine whether an investment action is suitable for a client and puts the client’s interest first. An ongoing suitability determination is required when assessing the suitability of the type of account, conducting periodic reviews of a client’s account, acting in response to client instructions and liquidating securities.
- Relationship disclosure information (RDI): The RDI is an important disclosure to the client that describes the available products and services including costs and any restrictions, the nature of the accounts offered, and the responsibilities of the advisor and the firm.
- Ongoing training: Registered firms are required to provide ongoing compliance training to its registered individuals including how to meet CFR obligations.
To learn more about Client Focused Reforms and what these rules mean for you and your advisor, please contact your Edward Jones advisor.