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Know your client, or “KYC”, are the ethical and practice guidelines for investment advisors to make detailed assessments about their clients' risk tolerance. Know your client rules are also called suitability rules because they are concerned with the suitability of securities investment for each specific customer. Similar to KYC for brokers, know your client for investment advisors goes beyond appropriateness and know your client requires investment advisors to assess investment clients’ knowledge as well as financial position, tax status, and suitability criteria. Know your client forms are completed by clients who want to be eligible as sophisticated investors for private investments, and know your client rules protect investment advisors in this way. NASD's know your client suitability rule is rule 2310. The NYSE’s know your client is rule 405. Brokerages and other regulators have additional know your client policies and rules. The SEC has enforcement power over brokerages that require them to maintain know your client policies. Know your client rules require collection of suitability information both at account opening and with periodic updates. |
