Opening your Investment Account
When you decide to open an account, you and your advisor will complete a new account application. This application will require you to provide personal information as well as ask you to make certain decisions about your account. Your advisor will use this information to learn about you and your financial needs and to meet regulatory obligations. This information sheet sets out the basic information that will be collected from you on account opening and explains why it is necessary to open and operate your account.
Suitability and Know-Your-Client Requirements
Securities legislation and MFDA Rules require that each recommendation your advisor makes be suitable for you in relation to your investment objectives, risk tolerance and other personal circumstances. In order to meet this requirement, your firm and advisor need to understand your financial situation, investment needs and objectives, and tolerance for risk. This is referred to as the "Know-Your-Client" (KYC) Rule under securities law. This Rule requires your firm and advisor to collect the following information from you:
- Age - Your date of birth will be recorded.
- Annual Income - Your approximate annual income from all sources.
- Net Worth - An estimate of the value of your assets less your liabilities.
- Investment Objectives - The specific characteristics of investment products and how they relate to the achievement of your investment goals.
- Time Horizon - This is the period from now to when you will need to access a significant portion of the money you invest in the account.
- Investment Knowledge - This is your understanding of investing, investment products, and their associated risks.
- Risk Tolerance - This is your willingness to accept risk and your ability to withstand financial losses.
For certain types of investment strategies, you may be asked for more detailed information on your income, expenses, and net worth. Your firm and advisor will assist you in understanding what these terms mean and how they relate to the specific investments recommended to you. After you open your account, you need to notify your advisor of any significant events that may change your investment objectives, time horizon, investment knowledge, risk tolerance, income and net worth. For example, your advisor needs to know about:
- Changes to marital status
- Relocation to another province or territory
- New job or job loss
- Long-term illness
- New debt financing New debt financing
- Major increase or decrease in your financial resources, for example due to inheritance
Other Information Requirements
In addition to information requirements under the MFDA KYC Rule, your firm and advisor must also comply with obligations under other legislation and regulations. Your firm and advisor may be restricted from opening your account if you do not provide this information.
- Full Legal Name and Date of Birth
This is required by MFDA Rules and the Proceeds of Crime (Anti-Money Laundering) and Terrorist Financing Act. This legislation is designed to prevent the use of the financial system for hiding proceeds of criminal activity or financial terrorist activity.
- Proof of Identity
This is required for certain accounts by Anti-Money Laundering legislation. To verify your identity, you may be asked to provide a driver's license, citizenship card, passport, or birth certificate.
- Residential Address and Contact Information
This is required by Anti-Money Laundering legislation and MFDA Rules. This information will allow your firm to contact you to provide investment advice or notify you of any changes with respect to your investments. This information is also required for account reporting.
This is required for tax reporting and may be used to determine if you are permitted to purchase certain types of securities.
- Social Insurance Number
This is required for tax reporting.
This is required by Anti-Money Laundering legislation and MFDA Rules.
- Employment Information
This is required by Anti-Money Laundering legislation and MFDA Rules in order to help your firm and advisor determine suitable investments for you.
- Number of Dependants
This is required by MFDA Rules in order to help your firm and advisor determine suitable investments for you.
- Politically Exposed Persons
This is required to meet requirements under Anti-Money Laundering legislation. Your firm will need to determine whether you or a member of your immediate family have ever held a position with a foreign government that qualifies any of you as a "Politically Exposed Person". You can find more information on this requirement at www.fintrac-canafe.gc.ca
- Other Persons with Trading Authorization on the Account/Financial Interest in the Account
This is required by Anti-Money Laundering legislation and MFDA Rules. Your firm is required to maintain the names, dates of birth, employment information and the relationship of any individuals with trading authority or a financial interest in your account.
- Source of Funds
This is required to meet requirements under Anti-Money Laundering legislation.
If your account is jointly owned by two or more persons, some of this information may need to be collected with respect to each owner. If your account is owned through a corporation, trust or other type of legal entity, there may be additional information your advisor will need to collect in order to operate the account and ensure that all investments are suitable.
When providing this information, be as accurate as possible, as your firm and advisor will use this information to understand your financial needs and determine what investments are suitable for you. Read the application and the accompanying agreements and other documents your firm gives you carefully and ask questions about anything you do not understand.