Know-Your-Client (KYC) & suitability

This is the part of the element the exam almost always tests as a scenario. Learn the sequence as well as the definitions.

A trusted contact person is someone the firm may call when it has a concern about the client's health, capacity or possible financial exploitation, and when it cannot resolve the concern with the client. The role is narrow on purpose.

What it permits: the firm may contact the person to confirm facts, such as where the client is, who else is helping, or whether a recent request sounds like the client. It may help the firm understand a situation it cannot otherwise read.

What it does not permit: the contact cannot trade, cannot give instructions, cannot see the account, cannot change the account, and cannot act as attorney. It is not a power of attorney and it does not replace one. A candidate who gives the contact any authority over the account has answered the question wrongly, however sensible the answer sounded.

Every client is offered the opportunity to name one. A client may refuse, and the firm records the refusal and proceeds. Refusal is not a red flag by itself.

The signs that start this machinery are behavioural, not demographic. Age alone is not evidence of anything. Look for a sudden interest in account details from a new acquaintance, withdrawals that do not match the client's history, a client who stops taking calls and lets someone else speak for them, documents signed under pressure, or an instruction that contradicts everything the file says about the client.

When the concern is serious, the firm may place a temporary hold on the account for a limited period while it investigates. The conditions are the answer to a scenario question:

• A reasonable belief that exploitation or diminished capacity is affecting the account.
• A hold placed to protect the client, not to punish or to stall.
• Notice handled as the rules and the firm's procedure require, including to the client.
• A written record of the reasoning, the steps taken, and what was concluded.