Business Conduct Requirements

In addition to principles-based obligations, registered firms and individuals are governed by specific business conduct requirements contained in the Securities Act (Ontario) and Regulations, and related rules and instruments. Some examples of key business conduct requirements for registered firms are described below.

Know your client (KYC) and suitability

In general, dealers and advisers must ensure that any security purchase or sale recommended for a client is suitable. In order to meet the suitability obligation, firms should understand:

  • the general investment needs and objectives of their clients and any other factors necessary for them to be able to determine whether a proposed purchase or sale is suitable, and
  • the attributes and associated risks of the products they are recommending to clients (commonly referred to as know your product or KYP).

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All marketing materials, including offering memorandums, term sheets, websites, performance data and other client presentations, must comply with securities law. Marketing materials should have true, clear and adequate disclosure and must not include false or misleading statements or omission.

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Disclosure to clients

Dealers and advisers are required to provide each client with certain information about the client’s relationship with the registrant. This information should include all information a reasonable investor would consider important about the relationship. For more information, see Part 13 and 14 of NI 31-103.

Written policies and procedures

A registered firm is required to establish, maintain and apply written policies and procedures. The firm must consider its scope of operations, size, risks and internal controls when developing its policies and procedures manual. The manual should be sufficiently detailed and customized for the type of business conducted and should be readily accessible by all employees. For more information, see section 11.1 of NI 31-103.

Complaint handling

Dealers and advisers are required to document and respond to complaints made to the firm about its products or services or its representatives. Firms are also required to ensure independent dispute resolution or mediation services are available to clients to resolve certain types of complaints about the firm. For more information, see sections 13.14 to 13.16 of NI 31-103.

Oversight of service providers

A registered firm must have adequate procedures to monitor any functions that it outsources to external service providers. This is to ensure these functions are performed properly. It includes performing a due diligence analysis of prospective third-party service providers. For more information, see Part 11 of NI 31-103CP.

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