So what is your risk as a dealing representative?
I am a defence lawyer for dealing representatives and
EMDs who have been subject to regulatory audits followed by
enforcement proceedings and litigation by clients suing for
unsuitable investments, failing to “know your client” and failing
to “know your product”. The problem I see is that both regulators
and judges (who may be nearing retirement themselves) perceive
this sector of the population as vulnerable and in need of their
protection. Accordingly, the perception and assumption of
the panel or person judging the matter, is that the senior client
never lies and was likely taken advantage of by the dealing with
promises of high returns and comfortable retirement.
Complaining clients know how to play up their alleged
vulnerability to dig the hole deeper for the judges and arbitrators
to punish dealing representatives and leading to public decisions
circulated on the internet, damaging their future in this industry.
The CSA Staff Notice 33-315 (2009) 32 OSCB 6890 –
Suitability Obligation and Know Your Product (KYP) sets out the
obligations of dealing representatives and EMDs in respect of their
duties under securities laws to satisfy their obligations to clients,
including to obtain a full understanding of products recommended
so they can determine which products are suitable for each client.
I have developed a two page KYP tool to assist you with your KYP
obligations that can be found at www.casselsbrock.com/files/file/
So how can a dealing representative pursue this growing
sector of the population while protecting their reputation and
business? By following this five step process, each of which
could be the subject of a separate article:
Five steps to protecting your business
Understand your product
before you sell it.
Ensure the person who
you are meeting is indeed
a prospect according to
the securities laws of the
jurisdiction in question
(see National Instrument
45-106 Prospectus and
Part 2, s.2.3, 2.9).
Get to know your client-what is the client’s
what are her assets,
beyond the strict
that permit him or her
to invest in the product.
Does he or she have
an appetite for risk?
Could the client afford
to lose the money
being invested? What
is the client’s true time
horizon? Does the
client have the ability to
understand the nature
of the investments
proposed? If there is
the product, does the
client understand the
risks associated with
borrowing to invest?
After you get to
know the client,
as a dealing
do you think that
the investment is
truly suitable for
the client? Can the
client understand the
product to ensure
the decision to
invest is made with
of the risks? Do you
think that a judge or
regulator, with their
biases, would agree?
Finally, if you fulfill the
requirements of 1-4, have
you documented the
client meetings, the fact
that you know your client,
that he or she has the
ability to understand the
product and the product
risks and that the client
can afford and wants
to take the risk (beyond
the client’s greed- which
is a topic for a different
article). In other words,
do you have a paper trail?
If you can fulfill all these requirements then proceed. Yes, it sounds like a lot of work, however, there is great opportunity and
risk selling to seniors, just don’t ruin your reputation and career in the process.
For more information contact: