Free cheat sheet
KYC + KYP Checklist Cheat Sheet
Know Your Client (KYC) and Know Your Product (KYP) are the two foundational pillars of suitability under the CIRO Proficiency Model. KYC is governed primarily by NI 31-103 §13.2 and CIRO Rule 3400 series. KYP operates at two levels: the firm-level product due-diligence process under Rule 3300, and the individual registrant's product knowledge obligation at the point of recommendation. This sheet covers both in full. Last reviewed: 2026-05-08.
1. Mandatory KYC Fields Under NI 31-103 §13.2 (16-Point List)
The registrant must collect all fields below before making any suitability determination. Missing any field does not make suitability impossible - the registrant must document the gap and use reasonable assumptions, but the obligation to collect is ongoing.
| # | Field | Why it matters for suitability |
|---|---|---|
| 1 | Full legal name | Identity verification; PCMLTFA obligation |
| 2 | Date of birth | Age-based time horizon; RRSP/RRIF eligibility; capacity assessments |
| 3 | Residential address | Jurisdiction of residence determines applicable securities law; non-resident status triggers withholding obligations |
| 4 | Investment objectives | Growth / income / capital preservation / speculation - with percentage weighting |
| 5 | Time horizon | Short / medium / long; determines appropriate asset class and liquidity profile |
| 6 | Risk tolerance | Client's stated willingness to accept volatility and potential loss |
| 7 | Risk capacity | Financial ability to absorb loss; derived from income, assets, liabilities, obligations |
| 8 | Annual income | Total gross household income from all sources; affects capacity |
| 9 | Net worth (liquid) | Liquid assets minus liabilities; directly investable |
| 10 | Net worth (total) | All assets (including illiquid: real estate, business equity) minus all liabilities |
| 11 | Investment knowledge | None / limited / fair / good; relevant for product complexity matching and suitability for options/alternatives |
| 12 | Employment status and employer | Income stability; insider status check (works for a reporting issuer); potential conflicts |
| 13 | Number and ages of dependants | Affects cash flow needs, estate planning needs, RESP eligibility |
| 14 | Other accounts and holdings | Accounts at other institutions needed for account-as-a-whole concentration analysis |
| 15 | Specific financial goals | Retirement date, purchase of a home, education funding - drives time horizon specifics |
| 16 | Any material liabilities or fixed obligations | Mortgage, alimony, business debts - directly reduces risk capacity |
2. Trigger Events Requiring KYC Refresh
The KYC obligation is ongoing. Any of the following events requires a prompt update to the KYC file:
3. Firm-Level KYP Under CIRO Rule 3300 Series
Firm-level KYP requires the dealer to understand and approve every product type available for distribution before any rep can recommend it to clients. This is the product due-diligence and shelf-approval process.
Product due-diligence requirements:
- Review the product's structure, features, risks, and costs (including embedded fees)
- Assess the product's intended investor profile (target market)
- Determine the suitability criteria for recommending the product (minimum investment knowledge, risk tolerance, time horizon)
- Determine how the product fits into a diversified portfolio
- Identify conflicts of interest (proprietary product incentives, compensation structures)
- Document the review and approval decision in the firm's product shelf
Shelf approval: A product is only available for distribution once approved for the shelf. Reps cannot recommend products that have not passed the firm's due-diligence process, regardless of how suitable the product may appear for a specific client.
Ongoing monitoring: Products already on the shelf must be monitored for material changes. A material change (fund strategy change, fee increase, change in credit rating of structured product, regulatory action) may require a re-review and potentially removal from the shelf.
4. Rep-Level KYP at the Recommendation Stage
Even after firm-level approval, the individual registered rep must independently understand the specific product before recommending it to a specific client. This is the rep-level KYP obligation.
Rep-level KYP checklist for each recommendation:
- Understand how the product generates returns and the conditions under which it may lose value
- Know the product's cost structure: MER (for funds), trailer fees, commissions, early redemption penalties
- Know the liquidity profile: how quickly can the client exit, and at what cost?
- Know the tax treatment: income, dividends, capital gains - how the product distributes and which T-slips are issued
- Know the product's risk level as classified by the firm or issuer
- Be able to explain the key risks to the client in plain language before the transaction
Documentation: The rep must document that the product was suitable for the specific client at the time of recommendation, referencing both the KYC profile and the product's characteristics. A file note or suitability rationale is required for all recommendations, not only unusual ones.
5. KYP: Proprietary vs Third-Party Products
Proprietary products: Products manufactured or managed by the dealer or its affiliates. Because the firm earns additional revenue on proprietary products (manufacturing margin plus distribution margin), there is an inherent conflict of interest. CIRO requires firms to have conflict-of-interest policies that address proprietary product bias.
The firm must be able to demonstrate that proprietary products are recommended because they are suitable for the client, not because they are more profitable for the firm. Reps must not recommend proprietary products unless they can be justified on the same suitability basis as available third-party alternatives.
Third-party products: Products from external issuers distributed through the dealer. KYP obligations are identical: the firm must conduct due diligence before shelf approval, and the rep must understand the product before recommending it.
Trailer fees and conflicts: Mutual funds pay trailer fees (deferred service charges embedded in the MER) to the dealer for ongoing advice and service. Trailer fees are a conflict: a rep who recommends a high-trailer fund over a lower-cost equivalent must be able to justify the recommendation based on client suitability, not trailer rate. NI 31-103 §14.12 requires disclosure of the conflict.
6. Risk Profile Construction
The client's effective risk profile is the lower of risk tolerance and risk capacity. Both must be assessed independently and documented.
| Dimension | Definition | How to assess |
|---|---|---|
| Risk tolerance | Willingness to accept volatility; psychological comfort with loss | Questionnaire; scenario questions ("how would you react to a 20% drop?"); self-report |
| Risk capacity | Financial ability to withstand a loss without impairing goals | Income stability, liquid net worth, debt levels, time horizon, dependant obligations |
| Effective risk level | The lower of tolerance and capacity | Governs all recommendations; document when the two conflict |
Example conflict: A 28-year-old engineer earns $200,000 per year, has $400,000 in liquid savings, no debt, and no dependants. Risk capacity: high. Risk tolerance: stated as low (very uncomfortable with seeing portfolio drop). Effective risk level: low (tolerance governs). The rep should not recommend a high-volatility portfolio even though the client can financially afford the risk; ignoring stated tolerance exposes the rep to complaint.
7. Concentration Analysis at Account-as-a-Whole
Suitability under CIRO Rule 3402 is assessed at the account-as-a-whole level. The account-as-a-whole analysis requires:
- Calculate single-issuer concentration as a percentage of total account value
- Calculate sector concentration across the portfolio
- Assess geographic concentration (domestic vs foreign)
- Assess asset class concentration (equities, fixed income, alternatives, cash)
- Consider accounts held at other institutions if known from KYC
CIRO concentration guidance:
- Single issuer > 10% of total portfolio: document and discuss with client
- Single issuer > 20% of total portfolio: acute concentration; explicit written justification in account file required; heightened supervisory review
- A client who directs concentration above these thresholds: the rep must still document the discussion and ensure the client's KYC supports this risk; client-directed does not remove the rep's documentation obligation
8. Documentation Standards and Common Firm Policy Minimums
CIRO sets minimum documentation obligations; dealer policies typically exceed them. The following standards apply to KYC and KYP records:
| Document | Standard |
|---|---|
| KYC form | Signed or electronically acknowledged by the client; dated; retained 7 years from last update |
| Suitability rationale | Written note in account file for every recommendation; must reference specific KYC elements that support the recommendation |
| KYC update record | When a trigger event occurs, the updated KYC must be filed with the date of the update and the triggering event noted |
| Product knowledge record | Firm's due-diligence approval record for each product on the shelf; retained while product is on shelf and for 7 years after removal |
| Periodic review record | Date of review, findings, and actions taken; retained 7 years; frequency set by dealer policy (annually is common minimum) |
Test Yourself: 5 KYC/KYP Questions
Q1. A registrant's client gets married and the registrant learns about it at a social event. What must the registrant do?
Show answer
Update the KYC file promptly. Marriage is a KYC trigger event under NI 31-103 §13.2. The registrant must contact the client, confirm the change and its impact on financial circumstances, update the KYC form, and conduct a suitability review to confirm existing recommendations remain appropriate.
Q2. A dealer wants to add a new leveraged ETF to its product shelf. What must happen before any rep can recommend it?
Show answer
The firm must complete a product due-diligence review under its Rule 3300 KYP obligations: assess the ETF's structure, risks, costs, target market, and suitability criteria. The product must receive formal shelf approval before any rep can recommend it. A leveraged ETF would typically require a minimum knowledge and risk-tolerance threshold to be defined.
Q3. A client has $500,000 in their account. After a recent purchase, one stock represents $110,000 (22% of portfolio). What is required?
Show answer
At 22%, this exceeds the 20% acute concentration threshold. The rep must document explicit written justification in the account file and the account requires heightened supervisory review. If the client directed the trade, documentation of the client-directed instruction is still required along with confirmation that the KYC supports this concentration level.
Q4. A 58-year-old client states a high risk tolerance. Annual income is $65,000, liquid savings $180,000, mortgage $140,000, retires in 7 years. What effective risk level should the rep use?
Show answer
Medium at most. Risk capacity analysis: 7-year time horizon is medium; liquid net worth = $180,000 - $140,000 mortgage = $40,000, which is modest relative to retirement needs; income is moderate. Capacity is likely medium or below. The lower of tolerance (high) and capacity (medium) governs. Effective risk level = medium.
Q5. What distinguishes firm-level KYP from rep-level KYP?
Show answer
Firm-level KYP is the product due-diligence and shelf-approval process: the dealer must understand and approve each product type before any rep can offer it. Rep-level KYP is the individual registrant's obligation to understand the specific product before recommending it to a specific client. Both are required; a shelf-approved product can still be unsuitably recommended if the rep does not understand it or does not match it to the client's KYC profile.
Related Cheat Sheets
RSE Suitability Checklist
CIRO Rule 3401/3402, concentration thresholds, borrowing-to-invest disclosure
Supervisor Branch Procedures
Rule 3300, complaint handling, AML, audit prep
CIRO Rule Citations
Every rule citation and plain-English summary
CIRE Formula Cheat Sheet
Quantitative formulas for the CIRE exam
Last updated: 2026-05-08. NI 31-103 §13.2 references confirmed against current OSC/CSA consolidated version. CIRO Rule 3300/3400 series references are to the IDPC Dealer Member Plain Language Rules. Verify current CIRO rules at ciro.ca.