New Brunswick Securities Commission

Canadian securities regulators stress suitability requirements for dealers, advisers (09/09/02)

NB 1258

Sept. 2, 2009

TORONTO (CNB) - A staff notice has been issued today the Canadian Securities Administrators (CSA) that reminds dealers and advisers to satisfy their suitability obligations to clients. These obligations include the requirement for them to understand fully the products they recommend to clients.

The CSA outlined this reminder in CSA Staff Notice 33-315, Suitability Obligation and Know Your Product.

To meet their obligation to clients, anyone selling or advising in securities must determine whether a purchase or sale of a security recommended to an investor is suitable for that investor.

Dealers and advisers have an obligation to understand the general investment needs and objectives of their client (referred to as, know your client) as well as the attributes and associated risks of the products they are recommending to clients (referred to as, know your product).

"Both individual representatives and firms owe a duty to their clients to ensure the suitability of investment products, and we expect dealers and advisers to consider carefully product attributes and the investment objectives of their client before recommending any product," said Jean St-Gelais, CSA chair and president and chief executive officer of the Autorité des marchés financiers. "Any registrant that does not meet these obligations is in breach of securities law."

Canadian regulators require that dealing and advising representatives understand the structure and features of each investment product they recommend, including costs, risks and financial position and reputation of the issuer and other parties involved in key aspects of the product. They should explain the risks of products they are recommending to clients and must determine the suitability of each transaction for a client.

Additionally, firms should have a product review process in place that includes procedures for identifying, reviewing and approving (or rejecting) new products and for monitoring existing products for significant changes to those products.

CSA Staff Notice 33-315 Suitability Obligation and Know Your Product is available on various CSA-member websites.

The CSA, the council of the securities regulators of Canada's provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.


MEDIA CONTACT: Wendy Connors-Beckett, New Brunswick Securities Commission, 506-643-7745.