Know Your Product
As a dealing representative, it is your responsibility to understand each product well enough to explain to your client the product’s risks, key features, and initial and ongoing costs and fees.
To fulfill the KYP obligation, you should have in-depth knowledge of all products that you recommend to your clients.
Your mutual fund dealer is required to perform a reasonable level of due diligence on products, prior to approving the products for sale by dealing representatives. Mutual fund dealers must develop an investor profile or guidelines for each of the products that are considered generally suitable, including risk levels, time horizon, and investment objectives.
Inclusion of a product on your mutual fund dealer’s list of approved products does not diminish in any way your obligation to ensure that each recommendation you make or order you accept is suitable to the client. Nor does inclusion on the list indicates that a product is suitable for all clients.
What You Must Know About Your Products
As a dealing representative, it is your responsibility to know the following about each product you buy or sell for your clients, or recommend to your clients:
- Key features of the product
- How the product is structured
- Initial, ongoing, and back-end fees
- Product restrictions
- How the product is taxed
- How the product generates returns
- Risk factors
- The role that the product can play in a portfolio
It is important for you to understand any product you recommend, but it is equally important to ensure that your client understands the product. Although your client may profess to know the product, you may need to ask some probing questions to verify that your client understands the information you have provided.
|MFDA Member Regulation 0048||mfda.ca/regulation/notices/MR-0048.pdf|
|MFDA Member Regulation 0069||mfda.ca/regulation/notices/MR-0069.pdf|
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