How do know your client, know your product and suitability fit together?

Know your client establishes relevant facts such as financial circumstances, objectives, time horizon and risk profile. Know your product establishes its risks, costs, liquidity and other features. Suitability assesses whether a recommendation or strategy fits the client using both sets of information. A suitable product can still raise a separate conflict of interest that must be addressed.

What if a client asks to buy an investment that appears unsuitable?

Identify why the trade conflicts with the client’s circumstances, explain the concern clearly, check whether the client information is current, and follow the dealer’s process for documenting and escalating the instruction. A client’s insistence does not erase applicable duties or authorize a prohibited transaction. The handling of an unsolicited order depends on the account, product and applicable rules.

Does passing CPH qualify someone for CIRO investment-dealer approval?

No. CSI states that CPH ceased to be acceptable for that CIRO approval purpose on January 1, 2026. The course remains a way to study Canadian securities conduct, while approval and permitted activities depend on the current proficiency and registration requirements for the role.

Conduct and Practices Handbook Course Study Guide

Start with concept 1 Choose a topic

The Conduct and Practices Handbook Course asks you to apply standards of conduct to ordinary securities work: learning about a client, understanding a product, communicating fairly, handling an order and responding when something goes wrong. Sound decisions depend on keeping several duties separate. Know your client describes the investor’s circumstances and needs; know your product describes what an investment does and costs; suitability brings those findings together for a recommendation or strategy. A conflict needs its own assessment, even when an investment appears suitable. This guide develops those distinctions through short cases with resolved outcomes. It also follows an account from opening through trading and ongoing service, so you can see when new facts require a fresh decision.

Standards of Conduct and Ethics, Ethical Decision Making, and Putting it All Together

1. Rules and ethical judgment

A written rule sets a minimum or a specific procedure, but it cannot anticipate every way a client might be misled. Begin by identifying the rule, the purpose it serves, and the impression a reasonable client would take from the whole communication. Then ask whether important qualifications are prominent enough to affect the client's decision. Approval of a format establishes that a process was followed; it does not establish that every use of the format is fair. Ethical judgment also considers foreseeable harm, the client's ability to understand the message, and whether you could explain your choice openly to a supervisor and the client. The CPH curriculum treats ethics alongside industry rules because both inform conduct. Record the concern and obtain review of material changes.

Worked example: A fund advertisement uses the dealer's approved layout. Its headline promises easy access to cash, while a significant redemption restriction appears in tiny print. A prospective client saving for a purchase next year could reasonably miss that restriction. The representative makes the limitation prominent, checks the revised claim against the actual terms, and seeks review before using the advertisement.

Watch the distinction: A common error is to treat approval as proof that a message is fair. The final impression still depends on its wording, emphasis and omissions.

Reference: [1]; [2]

2. Values in competing duties

A dilemma arises when duties or pressures point toward different actions. Loyalty to a colleague can encourage silence; a sales target can reward speed; honesty requires accurate statements to the client. Separate these influences before choosing. Identify whose interests each proposed action serves and what the client would believe if you used the suggested wording. An uncertain investment return is a possibility, not a promise, even when a colleague is confident. Correct the statement, explain the uncertainty in terms the client can use, and preserve the relevant facts. If pressure continues or the proposed wording signals a wider conduct problem, raise it through the dealer's supervisory or compliance channel. Escalation supports a fair decision; it does not transfer your responsibility for what you personally tell the client.

Worked example: A colleague says, “Call the projected 8% return assured or we will lose the sale.” The 8% is a forecast, so the representative tells the client it is uncertain and explains the assumptions and possible losses. The representative declines to use the colleague's wording, records the request, and alerts a supervisor before the message reaches other clients.

Watch the distinction: Team loyalty does not justify a false assurance. A projected return remains uncertain even if colleagues agree that the investment is likely to perform well.

Reference: [2]

3. A decision sequence for dilemmas

Work through an ethical problem in an order that prevents urgency from deciding the outcome. First establish the facts: what was said, by whom, when, and under what authority? Next identify everyone affected, including the client, other account holders and the dealer. List realistic options, such as confirming an instruction, pausing an order or declining a proposed action. Test each option against applicable duties, the client's interests, conflicts, foreseeable harm and your authority. Resolve missing facts through a reliable channel. Escalate material uncertainty that you cannot resolve, particularly where acting could cause an irreversible loss. Finally, document the facts checked, advice given, decision made and person who authorized it. A clear sequence makes the decision reviewable without pretending every dilemma has a mechanical answer.

Worked example: At 10:00, a client emails “sell all,” then at 10:05 leaves a voicemail saying “hold half.” The representative does not guess which instruction controls. They contact the client through an established number, confirm the security and quantity, check trading authority and suitability implications, and record the clarified instruction. If contact fails, they escalate the uncertainty before entering an order.

Watch the distinction: The newest message is not automatically the valid instruction. Conflicting wording may reflect an error or unauthorized contact, so verify before acting.

Reference: [2]

4. Competence and limits of authority

Competence means understanding enough to explain a recommendation's material features, risks and costs accurately. Authority is a separate question: a person may know a subject yet lack permission to provide a particular service or act for an account. Before answering, distinguish product facts within your role from specialized legal or tax conclusions that depend on a client's circumstances. State what you know, identify the unresolved assumption, and involve a qualified specialist where needed. Do not use a vague disclaimer to cover a specific claim you cannot support. If a recommendation depends on the unresolved point, wait for reliable clarification before presenting the conclusion as suitable. The same discipline applies to unfamiliar securities: obtain the necessary product knowledge and dealer approval before recommending them.

Worked example: A client asks whether buying a particular investment will produce a $4,000 tax deduction. The representative can explain its investment terms but does not know the client's deduction room or the tax treatment of their proposed transaction. They make no $4,000 promise, identify the missing facts, and suggest qualified tax advice before the client relies on the deduction.

Watch the distinction: A general tax disclaimer does not rescue a definite deduction claim. When the answer depends on unknown client facts, describe that dependency instead.

Reference: [2]

5. Honest statements and omissions

A statement can be literally true yet misleading when it omits information that would change the client's understanding. Assess the entire impression, including headlines, qualifiers, comparisons and what the client is trying to achieve. Terms such as “safe” or “guaranteed” need a precise basis: identify what is protected, by whom, under which conditions, and what remains at risk. A bond fund owns securities whose values can move; its units are not the same as a deposit with a fixed repayment promise. Rising market yields can reduce existing bond prices, while issuer credit deterioration can also cause losses. Explain these mechanisms in proportion to their relevance, alongside any income potential. Check that a client could repeat the key trade-off accurately after the conversation.

Worked example: A client needs $25,000 next year. A representative calls a bond fund “safe” because it holds government and corporate bonds. The fund's unit price can still fall as yields rise, and some holdings carry credit risk. The representative replaces the label with a discussion of those risks, the fund's liquidity, and the client's short time horizon.

Watch the distinction: Owning bonds does not make a fund unit a guaranteed deposit. The fund's market value can change even when it continues paying income.

Reference: [2]

6. Finding a material conflict

A conflict exists when an interest other than the client's could influence a decision about the client. To find one, trace who receives compensation, who has an ownership stake, and who benefits if a particular product is chosen. Then ask whether that incentive could affect advice or reasonably appear to do so. The test does not require proof that the representative acted dishonestly. A product may fit the client's profile and still present a material conflict because the representative receives a higher payment for selecting it. Compare the available options on their features, costs and client benefit; identify the incentive separately. Bring the conflict into the dealer's controls before making the recommendation. Suitability analysis and conflict management answer related but different questions.

Worked example: Two funds meet a client's objective. Fund A has an annual cost of 1.2% and pays the representative less; Fund B costs 1.8% and pays more. On a hypothetical $20,000 balance, the stated annual costs are $240 and $360, a $120 difference before returns. The representative examines that difference and the compensation conflict before recommending either fund.

Watch the distinction: The fact that Fund B could be suitable does not erase the payment incentive. Suitability alone does not show that the conflict was properly addressed.

Reference: [2]

7. Responding to a conflict

Once a material conflict is identified, choose a response that deals with its effect on the client. Avoiding the activity removes the incentive from the decision. Controlling it can involve independent review, restricted compensation or removing the conflicted person from the recommendation. Disclosure helps the client understand a conflict, but information alone may leave the incentive intact. Ask whether a reasonable client would see the proposed controls as sufficient and whether the recommendation can still be made in the client's interest. The dealer must assess the conflict, and the representative must follow the resulting direction. Where the incentive is too strong or cannot be managed adequately, avoid the conflicted recommendation. Document both the conflict and the response; recording disclosure by itself leaves the central decision unexplained.

Worked example: A representative owns 10% of a private issuer whose securities they are considering recommending. Their gain could rise if clients buy. They disclose the ownership to the dealer and stop the proposed recommendation while it is assessed. If the dealer cannot adequately control the incentive, the representative does not recommend the offering, even if the client says they accept the disclosure.

Watch the distinction: Client consent after disclosure does not automatically cure a material conflict. The incentive may still distort the recommendation and require stronger controls or avoidance.

Reference: [2]

8. Referral incentives

A referral can help a client find a service, but a payment for that introduction changes the adviser's incentives. Follow the flow of value: who pays whom, for what action, and whether the amount depends on the client's decision. Then compare the referred provider with reasonable alternatives and ask whether the arrangement could affect the adviser's judgment. The client needs a clear account of the relevant relationship and compensation under applicable requirements, and the dealer needs to assess and supervise the arrangement. Do not imply that referring a client transfers away your duties concerning statements you make or information you share. Check consent and privacy before passing client details to another business. A referral should be supportable on its merits even when compensation is involved.

Worked example: An adviser can refer a client to either of two comparable estate planning providers. One pays the adviser $300 per completed referral. The adviser tells the dealer about the arrangement, evaluates the client's needs and the providers' services, and gives the client the required information about the payment. Client contact details are shared only with appropriate authorization.

Watch the distinction: Calling $300 a referral fee does not make it irrelevant. The payment may influence which provider is suggested, even if the provider is competent.

Reference: [2]

9. Gifts and hospitality

Gifts and hospitality can create a conflict even when no explicit favour is requested. Consider the value of the benefit, its timing, who offers it, and whether the representative is about to influence client purchases. Repeated modest benefits can also matter in aggregate. The relevant question is whether the offer could impair independent judgment or make clients reasonably doubt it. A representative should not privately decide that an expensive benefit is harmless because they feel unbiased. Bring the offer into the dealer's review process, follow applicable restrictions, and keep product comparisons based on client needs, costs and risks. Refusing a benefit may be the clearest response when its purpose appears tied to recommendations. Record the offer and response so supervision can detect patterns across a sales campaign.

Worked example: An issuer offers a representative airfare and a luxury hotel stay immediately before a campaign for its new fund. The benefit is valuable and closely timed to a recommendation decision. The representative declines it, reports the offer, and evaluates the fund using its terms and the client's profile rather than the issuer's hospitality.

Watch the distinction: Feeling personally immune to influence is not enough. An expensive, well-timed gift can compromise judgment or create a reasonable appearance of preferential treatment.

Reference: [2]

10. Outside activities

Another business role can overlap with securities work in ways clients cannot easily see. It may create competing compensation, access to client information, confusion about whether the dealer stands behind an activity, or transactions outside normal supervision. Identify the role, ownership interests, clients involved, compensation and time commitment before approaching clients. Disclose the activity to the dealer through its required process and wait for the dealer's assessment and directions. Dealer review can lead to conditions or a prohibition; a personal statement that the activity is “separate” does not decide the issue. If a product or service falls outside your permitted activities, do not use your client relationship to bypass that limit. Keep communications clear about who provides the service and which protections apply.

Worked example: A representative helps a friend market a private investment and would receive a fee for each buyer. Several dealer clients seem interested. Before any pitch, the representative reports the role and payment to the dealer. They do not approach those clients while the activity is under review; calling the offer a personal project would not remove the conflict or supervision concern.

Watch the distinction: An outside activity does not become acceptable merely because it occurs after work hours. Its client overlap and compensation can still affect dealer business.

Reference: [2]

11. Personal trading interests

Personal investing creates an incentive to use client information or place your own opportunity ahead of a client's. Keep the roles separate by recognizing what you learned through the client relationship, when a client order is pending, and whether your proposed trade could benefit from that knowledge. Buying before a known large client order can let the representative profit from a price move caused by the client. This is different from ordinary investing based on public information. Follow the dealer's personal trading controls, including applicable reporting, approval and restricted list processes, and do not reveal client instructions to others. If material non-public issuer information is also involved, additional trading restrictions may apply. The client's order and confidentiality take priority over a personal opportunity.

Worked example: A client plans to buy 40,000 shares of a thinly traded security. Before entering the order, the representative considers buying 2,000 shares personally, expecting the client's purchase to lift the price. They do not place the personal trade, protect the client's instruction, and handle the client order under the dealer's controls.

Watch the distinction: A small personal order can still be trading ahead. The issue is the use of a known client order for personal advantage, not only trade size.

Reference: [2]

12. Records that support accountability

A useful record lets someone who was absent reconstruct why a decision was made. Capture the client's relevant facts, the product or transaction considered, material risks and costs discussed, the client's exact instruction where precision matters, and any supervisory direction. Date the record and distinguish what the client said from your interpretation. A phrase such as “client informed” does not show what was explained or whether a changed circumstance was considered. Records also help detect contradictions between an account profile and a proposed trade. Write promptly, correct errors transparently, and preserve original communications according to the dealer's process. When practising scenarios with CPH practice questions, ask what evidence would demonstrate the representative's reasoning after the fact.

Worked example: A $60,000 account already holds $24,000 in one issuer, or 40%. A proposed $6,000 purchase would raise that holding to $30,000, or 50%, assuming no other value changes. The representative records the holdings, the concentration calculation, the risk explained, the client's response, the instruction received and the supervisor's direction. “Client informed” would omit the decision trail.

Watch the distinction: A record of the final order alone cannot show that concentration was recognized. Capture the facts, explanation and authorization that led to it.

Reference: [2]

13. Raising suspected misconduct

Suspected misconduct calls for a factual report, not a private finding of guilt. Identify what you personally observed, preserve the relevant records, and separate observations from assumptions about motive. Repeated unexplained changes to client risk profiles matter because a false profile can make unsuitable recommendations appear supportable. Do not quietly overwrite the entries: that can destroy evidence, obscure which clients were affected, and prevent a broader review. Raise the concern promptly through the dealer's supervisory or compliance channel and follow its instructions on protecting records and clients. If the immediate supervisor may be involved, use another designated reporting route. Continue to handle your own client decisions on verified facts while the concern is investigated. A fair escalation avoids both unsupported accusations and passive silence.

Worked example: A representative sees three client profiles changed from low to high risk without supporting notes or signed updates, shortly before purchases of a volatile fund. They save the dates and account references, avoid editing the profiles, and report the pattern through compliance. The dealer can then verify client instructions, review affected trades and determine the appropriate response.

Watch the distinction: Quietly restoring the old values may feel helpful, but it can hide who changed them and whether clients were harmed. Preserve and report the pattern.

Reference: [2]

14. Putting conduct duties together

A difficult recommendation often engages several duties at once. Establish the client's purpose, cash deadline, ability and willingness to bear loss, and existing holdings. Understand the proposed product's costs, liquidity and downside. Then identify incentives affecting the recommendation, including sales pressure or higher compensation. Explain the trade-offs accurately and decide whether the transaction serves the client on the available facts. If a material fact is unknown, obtain it before presenting a confident conclusion. A manager's request can create urgency but cannot replace client assessment or truthful communication. Escalate pressure that would produce a poor or misleading recommendation, and record the facts and decision. This integrated approach matters because satisfying one check, such as product familiarity, does not settle liquidity, conflict or authority questions.

Worked example: A client needs $35,000 for tuition in eight months. A manager urges an immediate $35,000 purchase of a high-fee product with a two-year withdrawal restriction. The restriction conflicts with the known cash need. The representative declines to recommend it, explains the liquidity problem to the client, records the analysis and raises the sales pressure with supervision.

Watch the distinction: A persuasive return forecast does not offset a known inability to access needed cash. Client needs, product terms and sales incentives must be considered together.

Reference: [2]

The Canadian Regulatory Framework

15. Provincial regulation and coordination

Canadian securities regulation has a jurisdictional layer and a coordinating layer. Provincial and territorial securities authorities exercise responsibilities under the laws in their jurisdictions, including aspects of registration and enforcement. The Canadian Securities Administrators, or CSA, helps those authorities develop and coordinate common approaches; it is not a single national securities regulator replacing them. When assessing an activity, identify where the firm and client are located and which legal and regulatory requirements apply. Harmonized instruments can produce similar rules across provinces, but implementation and administration still involve the relevant authorities. Dealer and self-regulatory requirements may also apply. This framework explains why a representative cannot assume that permission or a process in one province automatically answers every question in another.

Worked example: A dealer has clients in Ontario and Alberta. The representative identifies the applicable provincial authorities and dealer requirements for each activity. The CSA may coordinate a common policy used in both places, but the coordination does not turn Ontario's authority into Alberta's regulator or eliminate local administration and enforcement responsibilities.

Watch the distinction: The CSA is a coordinating body, not a replacement for provincial and territorial authorities. Common approaches do not erase jurisdiction-specific responsibilities.

Reference: [1]; [2]

16. CIRO’s role

The Canadian Investment Regulatory Organization, or CIRO, oversees investment dealers and mutual fund dealers within its mandate and sets requirements affecting their business and approved persons. A dealer remains responsible for supervising its representatives; an individual remains responsible for their own conduct. Provincial and territorial securities legislation and regulators also matter, so a trading problem can engage more than one layer of oversight. Start with the conduct at issue, identify the dealer category and the person's role, then consider the applicable dealer rules and securities law. Avoid treating course completion as regulatory approval. CSI states that, effective January 1, 2026, CPH is no longer acceptable for CIRO approval with an investment dealer. Broader product foundations in the Canadian Securities Course guide do not themselves confer registration either.

Worked example: A representative at an investment dealer enters an unauthorized trade. The dealer must investigate its supervision and correction process, while CIRO rules and applicable securities law may also be relevant. The representative cannot defend the trade by saying a supervisor usually reviews orders afterward. The authority to trade had to exist when the order was placed.

Watch the distinction: CIRO oversight does not replace dealer supervision or provincial law. Nor does passing CPH, or another course, independently authorize someone to advise clients.

Reference: [1]; [2]

17. Registration and permitted activities

Education, registration, approval and dealer permission answer different questions. A course shows study or completion of an assessment. Registration and approval concern whether a person may perform regulated functions in a particular capacity. The dealer's permissions and supervision determine what that person may do within its business. Before a proposed activity, identify the service, product, account type, jurisdiction and the person's current status. Then check whether the activity fits both the regulatory category and the dealer's authorization. A person cannot acquire independent advisory authority merely by finishing a course or by describing a conversation as informal. The distinction is especially important under the changed investment-dealer proficiency pathway: CSI states that CPH has not been acceptable for CIRO investment-dealer approval since January 1, 2026.

Worked example: Morgan finishes CPH and wants to open a personal website offering paid securities recommendations to Canadian clients. Course completion does not establish a registration category, dealer affiliation or permission to provide that service. Morgan must establish the applicable authority and supervised business arrangement before giving regulated advice; a notice saying “educational only” would not change the substance of personalized recommendations.

Watch the distinction: A certificate records course completion, not permission to practise independently. Match the actual activity to registration, approval and dealer authority before advising.

Reference: [1]; [2]

18. Dealer supervision

Dealer supervision is a system for overseeing business, communications, accounts and trading. It can include review, exception reporting, escalation and correction. The representative's duty operates within that system: they must provide accurate information, follow controls and raise concerns they notice. A supervisor's approval is evidence that a review occurred, but it does not make a false statement true or relieve the representative of responsibility for repeating it. Conversely, an individual representative's failure may reveal a weakness the dealer must address, such as ineffective review or training. Analyze both levels when a problem appears: what did the person do, what should the control have detected, and how should clients be protected now? Preserve the original material and the approval record so the dealer can investigate the cause.

Worked example: A supervisor approves a brochure saying a fund's distribution is “guaranteed,” although its terms allow distributions to change. The representative notices the mismatch before emailing clients. They stop the mailing and raise the wording with compliance. The dealer corrects the brochure and examines why its review missed the claim; approval did not justify sending it.

Watch the distinction: Supervisor signoff is not a licence to repeat a claim you know is misleading. Raise the defect and let the dealer correct the control failure.

Reference: [2]

19. Investor protection coverage

Investor protection arrangements address a defined custody failure, not the ordinary risk that an investment falls in value. For eligible property held by a member firm, protection may matter if the member becomes insolvent and client property is missing, subject to the applicable terms. Begin by asking what happened: did the security lose market value, or is property missing because the dealer failed? Then identify the member, account and property involved before considering coverage. Do not quote a coverage limit without checking its current terms and the account category. A security's issuer can fail while the dealer remains solvent; that is generally an investment loss, not a claim for missing custody property. Explaining this distinction prevents a client from mistaking protection of custody for a promise about returns.

Worked example: A client buys a security for $10,000 and later sees a market value of $7,000 while the solvent dealer still holds every unit. The decline is $10,000 minus $7,000, or $3,000. Because no property is missing after member insolvency, that $3,000 market loss is not an insolvency protection claim.

Watch the distinction: Investor protection does not reimburse every loss shown on a statement. Market decline and missing eligible property after member insolvency are different events.

Reference: [2]

20. Anti-money laundering responsibilities

Anti-money laundering controls help a dealer know who is using an account and detect activity inconsistent with its stated purpose. Identity verification establishes the customer; beneficial ownership work seeks the people who ultimately own or control an entity. Signing authority is another question: an employee may validly sign documents without being an owner or the person directing funds. Gather the required information at account opening, resolve material gaps, and monitor transactions against what is known about the client and source or purpose of funds. Unusual activity is a cue to investigate and escalate, not proof of a crime. Record objective facts and use the dealer's reporting channel, preserving confidentiality. The anti-money laundering specialist guide explores the wider control framework; a CPH representative applies the duties relevant to their role.

Worked example: A corporation applies for an account. Its office manager signs the form, but the documents do not identify who owns the company or directs its money. The representative checks the manager's signing authority separately from beneficial ownership, requests the missing ownership and control information, and escalates any unresolved gap before treating the application as complete.

Watch the distinction: The person signing an application is not necessarily the beneficial owner. Verify both authority to act and ultimate ownership or control.

Reference: [2]

21. Suspicious activity and reporting channels

Suspicious activity is a pattern to assess and escalate, not a crime for a representative to prove. Start with what is known about the client, the expected purpose of the account, the source and destination of funds, and the transactions actually observed. Repeated transfers through unrelated accounts, unexplained third parties, or activity inconsistent with the stated investment purpose can justify closer attention. One unusual transaction may have an innocent explanation, so ask appropriate factual questions without coaching the client toward an answer. Record dates, amounts, accounts, explanations and supporting documents accurately. Then use the dealer's anti-money laundering channel so trained staff can assess any reporting obligation. Keep the concern confidential and continue to follow instructions on account activity. The related anti-money laundering guide explores the broader framework.

Worked example: A client deposits $18,000, sends $17,500 to an unrelated account two days later, and repeats a similar cycle the following week. The representative compares this with the client's stated long-term investing purpose, records both transfers and the client's explanation, and alerts the dealer's anti-money laundering team. The pattern warrants review; the representative does not label the client a criminal.

Watch the distinction: A plausible explanation does not automatically close a concern. The representative should document it alongside the transaction pattern and let the designated team assess the full facts.

Reference: [2]

Working with Clients

22. Clear public communication

A public claim should leave a reasonable reader with a fair impression of the investment. Examine the headline, prominent figures, qualifications and images together: a technically accurate footnote may not correct a misleading headline. State the conditions behind a benefit, then identify the material risks that could prevent it. For an income fund, distinguish a distribution from a guaranteed payment and from investment profit. A distribution may vary, and part of it may represent a return of the investor's own capital. Also consider whether the investment's value can fall while payments continue. Match the detail to the audience and medium, using clear language where the client will see it. The CPH curriculum identifies communication with the public as a course topic; the practical test is the overall impression conveyed.

Worked example: A draft advertisement says, "Steady income every month," for a fund whose distributions can change. Last year's payments do not establish next year's amount. The representative proposes: "The fund has made monthly distributions, but their amount can change and the value of your investment can fall." The revised claim preserves the useful history while making its limits visible.

Watch the distinction: Putting the risk in tiny print does not necessarily repair a strong misleading promise. Judge what an ordinary reader would understand from the entire message.

Reference: [2]

23. Sales literature and approval

Sales literature is defined by its business purpose, not by whether it looks like a formal brochure. A fund comparison in an email, a presentation slide, or a post on a personal social account can influence investment decisions. Check whether the communication uses approved product facts, presents risks and costs fairly, identifies any relevant assumptions, and avoids promises that the product cannot support. Dealer review and recordkeeping allow the firm to supervise statements made on its behalf. An approved template does not make a later edit safe: changing a performance period, removing a qualification, or adding an enthusiastic caption can change the overall claim. Before publication, route the complete version through the dealer's applicable process. After publication, retain the version used and correct material errors promptly through that process.

Worked example: A representative writes a personal social post naming Fund A and calling it "ideal for cautious investors." Because the post promotes a security in the representative's business role, it is submitted for dealer review with its image and caption. Review reveals that the fund can hold substantial equities. The claim is revised before posting, and the approved version is retained.

Watch the distinction: A personal account is not a safe exemption for business promotion. If the post solicits or influences clients, its content and distribution still need appropriate supervision.

Reference: [2]

24. Presenting past performance

A return number is meaningful only with its measurement period and calculation basis. For a simple holding-period gain with no cash flows, subtract the starting value from the ending value and divide by the starting value. State whether fees are included and whether income distributions were reinvested. If deposits or withdrawals occurred, that simple calculation can confuse investor cash flows with investment performance; use an appropriate performance method and label it. A particularly strong selected period may give a distorted impression if the broader history is omitted. Comparison also requires a sensible benchmark and consistent periods. Past performance describes an observed result under past conditions, while a forecast depends on future markets and assumptions. Avoid converting one period's return into an expected annual rate without a justified calculation and clear qualification.

Worked example: A portfolio rises from $20,000 to $22,000 over one year with no deposits or withdrawals. Its gain is $2,000, so the pre-fee holding-period return is $2,000 ÷ $20,000 = 10%. If fees were excluded, the representative says so. The result is one historical observation, not a promise of a 10% return next year.

Watch the distinction: Dividing the ending value by the starting value gives 1.10, a growth factor. Subtract one to express the gain as 10%, then disclose the period and fee basis.

Reference: [2]

25. Relationship disclosure

Relationship disclosure helps a client understand what the dealer and representative will do, what the client must authorize, and what the relationship will cost. Explain the account's services, the kinds of investments available, how recommendations and orders work, and whether any discretion is actually granted. Describe charges in terms the client can connect to transactions and ongoing holdings, including costs that may be embedded in products. Explain how the client will receive confirmations, statements and performance information, and where concerns can be raised. A client may hear "managed account" as a promise that someone will monitor and trade continuously; the account documents and actual service model must settle that expectation. Disclosure is useful when it is timely and understandable. A signed form does not substitute for correcting a material misunderstanding discovered in conversation.

Worked example: At opening, a client says, "You will make every trade while I am away." The proposed account is non-discretionary. The representative explains that specific trades require the client's authorization, describes the agreed review service, identifies transaction and product costs, and checks that the client understands. The discussion and delivered relationship documents are recorded before trading begins.

Watch the distinction: A signature confirms receipt or acknowledgment, not necessarily understanding. If the client describes a service the account does not provide, clarify the difference before relying on the paperwork.

Reference: [2]

26. Advice and client instructions

A recommendation originates with the representative's advice; an independent order originates with the client. That distinction matters for reconstructing who proposed the trade, but it does not erase applicable account duties. Establish the security, side, quantity, price instructions and account intended by the client. Check the order against current client information, product understanding and the dealer's suitability requirements. If the trade appears unsuitable, explain the specific concern, explore whether the client has relevant facts that change the assessment, and follow the dealer's process for handling the instruction. Record the client's decision and the action taken. Do not describe a representative's suggestion as "client directed" to avoid scrutiny. Equally, do not assume a client loses the ability to choose merely because the representative would prefer another investment.

Worked example: A client independently requests $12,000 of a speculative security for an account earmarked for tuition next year. The representative confirms the order details, explains the possible loss and timing mismatch, and checks whether the client's circumstances have changed. The client has no new facts. The representative documents the discussion and follows the dealer's applicable suitability and order process before any trade.

Watch the distinction: An unsolicited order is not automatically suitable. Its origin should be recorded accurately, while the representative still applies the duties that govern that account and transaction.

Reference: [2]

27. Clients who may need added support

Added support should respond to observable concerns, not assumptions about age or disability. Look for a sudden departure from the client's usual behaviour, difficulty explaining a transaction, or another person controlling access and answers. Speak directly with the client through an appropriate channel, use plain questions, allow time, and check understanding without pressuring the client toward a preferred choice. Separate a client's deliberate decision from possible confusion, coercion or fraud. Record what was seen and said rather than making an unsupported diagnosis. Escalate the concern through the dealer's process, which can determine what protective steps are available under the account rules and applicable law. Preserve the client's privacy throughout. The aim is to obtain a reliable instruction and protect the client's interests while respecting a capable client's right to make an unpopular choice.

Worked example: A client who usually makes small withdrawals asks for $45,000 while a companion answers every question. The representative arranges a direct conversation with the client, asks where the funds should go and why, and notes that the answers remain unclear. The representative records the observations and escalates the request before release. Age alone is not treated as proof of incapacity.

Watch the distinction: Do not infer incapacity from an older client's unusual choice. The concern is the change in behaviour and possible outside pressure, which require verification and careful escalation.

Reference: [2]

28. Privacy in client conversations

Account information includes balances, holdings, contact details and transaction history. Collect it for a legitimate account purpose, give access only to people whose work requires it, and disclose it only through an authorized route. Family relationships do not create automatic rights to another person's account. Check the account's ownership and any documented authority before answering a request, even when the caller knows personal details. Use an established verification method for the person requesting access and share no more than the authorized purpose requires. In conversation, avoid confirming a balance indirectly by correcting a caller's guess. If the client wants a relative involved, explain the available authorization process and its scope, such as information access versus trading power. Record a material authorization or disclosure so later staff can apply it consistently.

Worked example: A client's adult child calls and says the balance must be about $70,000 for a family loan application. The account is individually owned, and no access authority appears on file. The representative neither confirms the estimate nor provides holdings. The representative explains that the client can arrange documented information access if desired, then records the request.

Watch the distinction: Knowing the client's address or date of birth does not grant access to the account. Identity verification and legal authority answer different questions, and both matter.

Reference: [2]

29. Cybersecurity and instruction verification

A digital instruction may be authentic in appearance yet controlled by an attacker. Warning signs include urgency, a new payment destination, altered contact details, unusual wording or a request to bypass normal checks. Treat the email or message as an instruction to verify, not as proof of identity. Contact the client through a number or secure channel already established independently; do not rely on the phone number or link in the suspicious message. Confirm the exact action, amount and destination, then apply the dealer's authentication and transfer controls. Preserve the message and document the verification. If the client denies the instruction, alert the dealer's security or compliance team promptly so they can assess account access and other pending activity. A successful callback reduces uncertainty only when the channel itself is trustworthy.

Worked example: An email requests that $28,000 of sale proceeds be sent today to a newly named bank account. The representative calls the client using the number already in the account record. The client denies sending the request. No transfer is made; the message, destination details and call are recorded, and the attempted redirection is escalated.

Watch the distinction: Replying to the suspicious email is weak verification because the attacker may control that inbox. Use an independently established channel and confirm the destination as well as the amount.

Reference: [2]

Client Discovery and Account Opening

30. Account ownership and control

Account ownership identifies whose property is held and who bears the account's rights and obligations. Trading authority identifies who may give an instruction. Information access identifies who may receive details. These permissions can belong to different people and must be established separately. Check the account registration and supporting documents before accepting an instruction, especially for spouses, corporations, trustees and agents. A person may be authorized to discuss an account without being authorized to trade, or may be a signatory for an entity without owning its assets personally. Confirm that the authority covers the proposed action and remains effective. If ownership or control has changed, update the records before relying on an older permission. Accurate classification also supports later suitability, tax reporting and protection of confidential information.

Worked example: Maya owns an individual account. Her spouse calls to buy 200 shares, explaining that they share household finances. The representative checks the account and finds no documented trading authority for the spouse. The order is not entered on that call. Maya can give her own specific instruction or arrange valid authority through the dealer's process.

Watch the distinction: A close relationship does not establish account authority. Check the legal owner and the documented permission for the particular action, including whether it permits trading or only information access.

Reference: [2]

31. Registered plan purpose

An RRSP and a TFSA serve different tax purposes. An eligible RRSP contribution may produce an income tax deduction, limited by the individual's available deduction room; investment growth is generally sheltered while it remains in the plan, and withdrawals are generally taxable. A TFSA contribution is made with after-tax money and is not deductible; eligible growth and withdrawals are generally tax-free. For either plan, the client's available contribution room is personal, so a published annual dollar ceiling is not a substitute for checking it. Prior contributions, withdrawals and other circumstances can affect the figure. Separate the tax goal from the investment decision: a plan's tax treatment does not make its holdings suitable. The Canadian securities course guide provides related investment foundations.

Worked example: A client wants to contribute $6,000 and deduct it this year. Assume the client has verified $4,500 of unused RRSP deduction room and adequate cash. At most $4,500 of this proposed contribution fits that stated room; the remaining $1,500 needs separate tax review. A $6,000 TFSA contribution would offer no deduction, even if TFSA contribution room were available.

Watch the distinction: The annual TFSA or RRSP dollar figure is not the client's personal room. Verify individual records and keep contribution room distinct from an RRSP deduction claim.

Reference: [2]

32. Identity and beneficial ownership

For an entity account, three questions must be answered separately: what entity is the customer, who may act for it, and which people ultimately own or control it. Confirm the entity's legal identity and the signer's authority using appropriate records. Then gather the beneficial ownership and control information required for that entity type. The employee who signs an application may have valid authority to operate the account while holding no ownership interest. Conversely, an owner may control the entity without being an authorized account signatory. These distinctions help the dealer understand whose funds are involved and who can direct activity. If ownership or control cannot be established reliably, record the gap and escalate it before treating the account review as complete. Revisit the information when credible changes arise.

Worked example: North Company applies for an account. Its treasurer signs under a board resolution, while a separate shareholder controls the company. The representative verifies the company's identity and the treasurer's signing authority, then obtains the required information about the controlling individual. The resolution answers who may sign; it does not answer who ultimately controls the customer.

Watch the distinction: A valid signature does not complete beneficial ownership review. Signing authority and ultimate ownership or control serve different purposes and may point to different people.

Reference: [2]

33. Financial circumstances

Financial circumstances show whether a client can bear a loss without jeopardizing important obligations. Look beyond a single asset figure. Identify income stability, liquid and illiquid assets, debts, required payments, dependants and expected cash needs. Net worth can be calculated as assets minus liabilities, but even positive net worth may be tied up in property or needed soon. Separate money available for a long investment horizon from money reserved for an imminent bill. Ask how a proposed loss would affect the client's ability to meet that bill, rather than simply whether the client has investments. Recheck material changes such as job loss or new borrowing. This assessment informs risk capacity; it does not replace the client's objectives or willingness to experience volatility.

Worked example: A client has $80,000 in readily saleable investments and a $60,000 debt due in three months, with no other cash assumed. After setting aside $60,000 for repayment, only $20,000 remains for other needs. A proposed $40,000 high-risk purchase would expose money needed for the debt. The representative revisits the purchase size and timing.

Watch the distinction: An $80,000 portfolio is not automatically $80,000 of risk capital. Near-term liabilities and liquidity needs can sharply reduce the amount available to withstand loss.

Reference: [2]

34. Objectives and time horizon

An investment objective describes what a pool of money must accomplish; time horizon describes when it is needed. A client can have several pools with different purposes, so one account-wide label may hide an important conflict. Establish the amount, intended use, expected date and flexibility of each goal. A near-term payment needs assets that can reasonably be converted to cash when required, with a loss profile the client can bear. A distant retirement goal may allow more time to recover from market fluctuations, subject to the client's other circumstances and willingness. Liquidity and marketability are related but distinct: an asset may trade daily yet still have an uncertain price at the required date. Reassess when a goal accelerates, grows or becomes non-negotiable.

Worked example: A client has $30,000 reserved for a home deposit in one year and a separate $90,000 retirement account intended for use decades later. A broad equity strategy may merit discussion for the retirement pool. Applying it to the entire $120,000 would also expose the deposit to a possible short-term decline, so the goals are assessed separately.

Watch the distinction: A long horizon for one goal does not lengthen every goal. Match each pool to its own spending date and flexibility before choosing the investment strategy.

Reference: [2]

35. Risk capacity and risk willingness

Risk capacity is the financial ability to absorb a loss while meeting obligations. Risk willingness is the client's informed comfort with loss and volatility. Evaluate them independently. Capacity depends on resources, liabilities, income security and when money is needed. Willingness emerges from a discussion of possible outcomes, including how the client would respond to a decline rather than an abstract label such as "moderate." A client can afford a loss yet be likely to sell in panic, or welcome risk that their finances cannot support. Neither answer should be inflated to justify a product. Use concrete loss scenarios to test understanding, record the response, and resolve inconsistencies before forming a risk profile. Reassess both dimensions when life circumstances or the purpose of the account changes.

Worked example: A client has substantial liquid assets and could meet all obligations after a $20,000 portfolio decline. When shown that scenario, the client says they would sell immediately after any loss. The representative records strong financial capacity but low stated willingness, asks follow-up questions to confirm understanding, and does not classify the client as high risk merely because the loss is affordable.

Watch the distinction: Wealth does not establish appetite for volatility. A suitable assessment considers both what the client can afford to lose and what risk the client knowingly accepts.

Reference: [2]

36. Trading authority

A trade needs authority for the account and for the action taken. In a non-discretionary account, the client normally decides whether to proceed with a particular transaction after any advice. A broad invitation to "choose something" does not by itself turn the account into a discretionary one. Confirm who may instruct, the security or agreed transaction, quantity or amount, order conditions, and any account-specific limits. An authorized agent's power must cover trading, not merely access to information. Discretionary management requires its own properly established account arrangement and supervision; a casual message cannot create it. If an instruction is ambiguous, clarify it before entry and keep a record of the final authorization. Once the order is placed, changes outside the granted terms require fresh authority.

Worked example: Before travelling, a client writes, "Buy whatever looks best while I am away." The account is non-discretionary and no specific purchase is identified. The representative may prepare a recommendation, but does not enter a chosen trade on that message alone. The client must authorize the particular transaction, or a valid discretionary arrangement must already be in place.

Watch the distinction: Client trust is not a substitute for documented trading authority. The scope of permission must match the specific transaction and the account's permitted service model.

Reference: [2]

37. Opening disclosures and records

Opening records create the factual basis for later account decisions. Capture legal ownership, identity and authority, financial circumstances, objectives, time horizon, risk information and other material facts required for the account. Resolve blanks and contradictions before treating a profile as reliable. A word such as "growth" is too broad when the same money may be needed next year. Deliver the applicable account and relationship disclosures so the client can understand services, costs, risks and responsibilities. Record what was provided and any material clarification, using dated updates when facts change. Keep source documents and acknowledgments through the dealer's record process. Good records let another reviewer reconstruct why an account was opened and how later advice was assessed; a completed form with guessed answers does not provide that foundation.

Worked example: An application states "growth" and lists $25,000 to invest, but gives no spending date. The representative asks and learns that $15,000 is needed for education in eighteen months. The record is updated to distinguish that amount from the remaining $10,000, and applicable disclosures are delivered. The representative then evaluates investments against the clarified purposes.

Watch the distinction: Filling a blank with a plausible guess creates false certainty. Obtain the client's answer, record the date and meaning, and reassess any decision that relied on the missing fact.

Reference: [2]

Product Due Diligence, Recommendations, and Advice

38. Know your product

Knowing a product means understanding how it produces returns and losses, not memorizing its headline yield. Identify the underlying assets or reference measure, payoff formula, issuer or counterparty exposure, fees, liquidity and conditions on principal repayment. For a structured note, distinguish a stated coupon from the total possible result: the coupon may depend on conditions, and the redemption amount may fall if the reference asset crosses a specified level. Read the actual offering terms because similar names can conceal different outcomes. Then compare the product's downside, complexity and exit terms with the client's profile before recommending it. If a feature cannot be explained accurately, pause the recommendation and obtain the needed information. The CPH practice questions can help test this reasoning after the mechanism is clear.

Worked example: A hypothetical note pays an 8% annual coupon on $10,000 but returns only $7,000 of principal in a stated downside scenario after one year. Even if the $800 coupon is paid, total proceeds are $7,800, a $2,200 loss or 22% of the initial investment. The representative checks whether this possible outcome and any exit limits fit the client.

Watch the distinction: A high coupon is not a principal guarantee. Calculate the combined coupon and redemption amount under adverse scenarios, and check whether the stated payment is conditional.

Reference: [2]

39. Strategy suitability

Suitability applies to the proposed strategy's effect on the client, not just to each security viewed alone. Begin with current client facts: purpose, horizon, financial ability to bear loss, willingness to take risk, knowledge and existing holdings. Then examine what the strategy changes in the whole account, including concentration, leverage, liquidity, costs and possible tax effects where relevant. A diversified basket of widely traded equities can still be unsuitable for money needed soon because its price may be lower at the withdrawal date. Compare realistic alternatives against the client's objective, and explain material trade-offs. If the client supplies new facts, update the profile and test them rather than fitting the facts to a preferred sale. Document the reasoning and any unresolved mismatch before making a recommendation.

Worked example: A client needs $40,000 for a home deposit within one year and says a $5,000 decline would disrupt the purchase. A proposed all-equity strategy could fall by more than that before the deadline, despite holding many liquid shares. The representative identifies the horizon and loss-capacity conflict and evaluates options designed to preserve access to the deposit.

Watch the distinction: Daily trading does not make an equity portfolio safe for a fixed near-term expense. Liquidity addresses the ability to sell; suitability also considers the price available then.

Reference: [2]

40. Concentration risk

Concentration measures how much of a portfolio depends on one issuer, sector, asset type or shared economic risk. For a proposed trade, calculate exposure after the trade using the position's value divided by the relevant portfolio value. Check whether cash is being exchanged for the new holding, whether new money is entering, and whether other holdings have correlated exposure. A 50% position in one issuer can dominate the account's result even if that security is familiar and actively traded. The client may knowingly seek a concentrated position, but the representative must assess the whole account against the client's objectives and risk profile, explain the specific downside, and consider whether a smaller position or broader exposure better serves the purpose. Recalculate after major price moves or new purchases.

Worked example: A $50,000 account holds $15,000 of Issuer A and $10,000 cash. Buying $10,000 more of A with that cash leaves total account value at $50,000 before price changes and charges. A becomes $25,000, so concentration is $25,000 ÷ $50,000 = 50%, up from 30%. The representative assesses that issuer risk before recommending the purchase.

Watch the distinction: Buying with existing cash does not increase the portfolio denominator. Using $60,000 would understate the new concentration; the account still totals $50,000 before market changes and costs.

Reference: [2]

41. Costs and expected benefit

A recommendation should improve the client's position after its costs, not merely look attractive before them. Separate ongoing product expenses from commissions, account charges and costs of selling an existing holding. Compare products on the same assumptions, time period and risk basis. A simple first-year estimate is opening balance multiplied by the assumed gross return, minus estimated annual expenses and one-time charges. Actual expenses may be calculated on changing asset values, so this estimate is only a comparison. Also consider whether switching triggers taxes or forfeits useful features. A cheaper product is not automatically suitable if its risks, liquidity or investment purpose differ. Explain which costs are known, which are estimates, and why any additional cost is expected to benefit this particular client. The CPH curriculum places product due diligence and suitability within the course.

Worked example: Assume two comparable $10,000 investments each earn 6% before costs over one year, with no balance changes or taxes. Gross gain is $600. At 1%, estimated cost is $100, leaving $500; at 2%, cost is $200, leaving $400. If switching to the cheaper option also costs $30, its estimated first-year advantage falls from $100 to $70. Neither projected return is assured.

Watch the distinction: Choosing the highest stated return ignores what the client keeps. Compare returns after relevant costs using consistent assumptions, then check whether the products carry comparable risks and benefits.

Reference: [2]

42. Liquidity and exit limits

Liquidity means being able to obtain usable cash when it is needed, at an acceptable cost. Examine contractual redemption dates, notice periods, withdrawal gates, penalties and whether a secondary market actually offers reliable buyers. A security can be legally saleable yet difficult to sell without a steep discount. Map each known cash need to both its amount and date, then identify which assets can fund it under plausible adverse conditions. Do not rely on an attractive yield to compensate for a mismatch that could force a distressed sale. Consider whether the client has other accessible funds, but verify that those funds are available for this purpose. A recommendation should also address what happens if redemption is delayed or the quoted market price falls. Product liquidity and client liquidity needs are separate facts that must fit together.

Worked example: A client needs $40,000 for a home purchase in six months and has $15,000 in accessible cash. The unfunded need is $25,000. A proposed investment locks withdrawals for two years, so placing that $25,000 in it cannot meet the six-month obligation. The representative looks for an appropriately liquid source and assesses its risk, rather than treating the proposed return as a solution.

Watch the distinction: A stated redemption value does not mean the client can receive it on demand. Check timing, restrictions and likely sale conditions against the date cash is needed.

Reference: [2]

43. New issues and prospectuses

A new issue offers securities to investors under stated terms, often before a trading history exists for those securities. Read the offering document to understand the issuer's business, use of proceeds, financial position, major risks, security rights, dilution and any underwriting arrangements. Distinguish historical results from management forecasts, which depend on assumptions that may fail. Ask whether the issue price is reasonable in light of comparable investments and the client's objectives, risk capacity and time horizon. A prospectus supplies disclosure for assessment; it does not certify investment quality or guarantee the forecast. Identify any concentration the purchase would create and whether the client can sell later. If a material point remains unclear, obtain reliable clarification before recommending the issue. Disclosure only helps when its implications are interpreted for the client's circumstances.

Worked example: A new issuer forecasts strong revenue growth but its offering document shows that one customer provides 60% of current revenue. If that customer leaves, the forecast could fail even if the overall market grows. The representative examines the contract dependence, proceeds and selling restrictions, then considers whether this concentrated business risk fits the client's portfolio. The forecast alone cannot support the recommendation.

Watch the distinction: A filed prospectus is not an endorsement of the security. Its purpose is to provide information; the representative must still assess the offering and its fit for the client.

Reference: [2]

44. Prospectus exemptions

A prospectus exemption permits an offering without the usual prospectus requirement when the applicable legal conditions are met. First identify the exemption the issuer proposes to use, then verify the client's eligibility and any required representations or documents. Exempt securities may have limited disclosure, restricted resale, sparse pricing information and little liquidity. Those features can increase the importance of independent product analysis, issuer financial review and a clear assessment of how much the client can lose. Availability under an exemption is a legal access question; suitability is a separate client decision. Exemptions and related requirements can differ by jurisdiction and transaction, so the representative must apply the rules governing the actual offering. Do not infer that a private placement is safer because fewer public documents are required, or that an eligible client should buy it.

Worked example: An issuer tells a representative that a client qualifies for its private offering. The representative identifies the claimed exemption and verifies the client's eligibility under the applicable terms. The security cannot be readily resold, and the issuer has little operating history. Even if eligibility is confirmed, the representative assesses those risks against the client's cash needs and portfolio before deciding whether to recommend it.

Watch the distinction: Meeting an exemption's eligibility condition does not establish investment suitability. It changes how the security may be offered; product risk and the client's circumstances still require separate assessment.

Reference: [2]

45. Take-over and issuer bids

A take-over bid is an offer by an outside bidder to acquire another issuer's securities. An issuer bid is an offer by the issuer to buy back its own securities. For either, identify the consideration, expiry, conditions, minimum or maximum number sought, withdrawal rights and any possibility that tendered shares will be accepted only in part. Cash and share consideration carry different risks; a share offer exposes the client to the bidder's future value. Compare the offer with the current market price, but do not treat the quoted premium as guaranteed profit. The client may sell in the market, tender or retain the holding, subject to the actual terms. Explain deadlines early enough to allow a deliberate choice and obtain the client's instruction. Potential tax effects depend on the client and transaction.

Worked example: Company A offers $24 cash per share for Company B, whose shares trade at $22. For 100 shares, a fully accepted tender would pay $2,400 before charges or taxes, $200 above a $2,200 market sale at the quoted price. Acceptance may depend on bid conditions. If Company B instead offers to repurchase its own shares, that is an issuer bid; the representative checks its distinct terms.

Watch the distinction: A bid price above today's market price is not a guaranteed gain. Conditions, timing, possible partial acceptance and price changes affect the client's available choices.

Reference: [2]

Trading, Settlement, and Prohibited Activities

46. The trade life cycle

Follow a trade as a sequence of distinct events. The client first gives an authorized instruction, including the security, side, quantity and relevant price conditions. The order is entered and routed; execution occurs only when it matches available trading interest under its terms. The execution creates a transaction at an actual price, which may differ from a quote seen when the instruction was given. A confirmation lets the client check the executed quantity, price and charges. Settlement later exchanges the required cash and securities. Record the instruction and material changes so they can be compared with the execution. If the order is unfilled or partly filled, do not describe it as a completed purchase. The Canadian Securities Course guide offers related market mechanics, while this conduct decision turns on authority, accurate communication and follow-through.

Worked example: At noon, a client authorizes a limit purchase of 100 shares at no more than $24.50. The order executes at 2 p.m. for 100 shares at $24.40. The share cost is $2,440 before charges, based on execution rather than the noon quote. The representative checks that the confirmation shows the right security, quantity, price and charges, then ensures settlement funding is addressed.

Watch the distinction: An accepted instruction is not an executed trade. Price and quantity become firm only to the extent the order executes; settlement obligations then follow.

Reference: [2]

47. Market and limit orders

A market order prioritizes prompt execution against available orders, but its final price is uncertain, especially in a thin or fast market. A limit order specifies the worst acceptable price: a buy cannot execute above its limit, and a sell cannot execute below its limit. It may receive no fill or only a partial fill. Ask whether the client's chief concern is obtaining the position promptly or respecting a price boundary, and explain the resulting trade-off. A current quote is information about the market at a moment, not a promise that the full order will execute there. Record the client's chosen order terms, including any duration condition, and monitor the order according to the dealer's process. Never substitute a market order for a client's price-limited instruction merely to make the trade happen.

Worked example: A client wants 100 shares but will pay at most $25 each. The available ask is $25.20, so a buy limit at $25 cannot immediately take that quoted offer. If sellers later offer 60 shares at $24.95, only 60 may fill, costing $1,497 before charges; 40 remain unfilled. A market order might fill sooner but would not preserve the $25 ceiling.

Watch the distinction: A buy limit at $25 does not promise a purchase at $25. It sets a maximum execution price; available supply determines whether and how much fills.

Reference: [2]

48. Execution price and total trade cost

For a purchase, multiply executed quantity by execution price, then add stated commissions and other applicable transaction charges to find cash outlay. For a sale, multiply quantity by price and subtract those charges to find net proceeds. Keep product expenses separate from trade charges so a client can see both the immediate and ongoing costs. If an order fills at several prices, calculate the total across fills or use a correctly weighted average execution price. A quoted price alone is insufficient to compare alternatives when charges differ. Check the confirmation against the authorization and the cash movement, and retain the units in every calculation: shares times dollars per share yields dollars. Taxes, spreads and future price movements may matter to a broader decision, but do not silently add an unstated amount to the trade arithmetic.

Worked example: A hypothetical order buys 100 shares at $24.80 per share. Share cost is 100 × $24.80 = $2,480. Adding a stated $9 commission gives a total cash outlay of $2,489, or $24.89 per share including that commission. If the client had authorized a $2,480 maximum total spend, the order would exceed that cash limit even though the share price was $24.80.

Watch the distinction: Multiplying shares by price gives the security value, not necessarily the client's total outlay or proceeds. Apply stated charges in the correct direction.

Reference: [2]

49. Order authorization and changes

Authority must match the order actually entered. In a non-discretionary account, a representative cannot independently change the security, side, quantity or a material price condition because a different trade seems better. Clarify ambiguous instructions before entry, and obtain fresh client authorization for a substantive change. Formal discretionary authority, where available and properly established, has its own conditions; casual phrases such as “use your judgment” do not create it. Keep a reliable record of who instructed the trade, when, and on what terms. If market conditions change after authorization, explain the new choice rather than silently adapting the order. A supervisor's preference also cannot replace the client's authority. This protects the client's control over the account and lets later reviews distinguish a recommendation from an instruction.

Worked example: A client authorizes a purchase of 100 shares of X with a $30 limit. Before entry, the representative prefers 150 shares of Y at $28. Neither the different security nor the larger quantity is covered by the instruction. The representative explains the alternative, checks its suitability and obtains the client's specific new instruction before entering any Y order.

Watch the distinction: A client's broad trust in a representative does not authorize any trade the representative chooses. The recorded account authority and the specific instruction govern.

Reference: [2]

50. Inside information and trading ahead

Material non-public information is information a reasonable investor would consider important that has not been generally disclosed. Trading or tipping another person while possessing it can misuse an informational advantage. Trading ahead of a client is a separate abuse: a representative uses knowledge of a pending client order to seek a personal benefit before the client's order is handled. The same situation can raise both concerns, but either can arise alone. Stop the proposed personal trade, preserve confidentiality, and escalate through the dealer's compliance controls. Do not test whether the information is “probably true” by trading on it. Even publicly known issuer news does not justify putting a representative's personal order ahead of a client order. Examine the source, timing and intended use of the information when identifying the problem.

Worked example: A representative hears confidential merger terms from an issuer contact and learns that a client plans a large purchase of the target's shares. Buying personally before the announcement would use non-public information; buying before the client's pending order would also put personal interest first. The representative makes neither trade, does not tip a friend, protects the information and promptly raises the facts through compliance.

Watch the distinction: Avoiding a personal trade does not make tipping acceptable, and public issuer information does not permit trading ahead of a client. The duties address different advantages.

Reference: [2]

51. Manipulative trading signals

Manipulative trading seeks to create a false impression of price, demand or activity rather than genuine transfer of investment risk. Matched orders between coordinated accounts and wash trades can make reported volume appear stronger than real independent interest. Repeated orders placed without a genuine intention to execute can also distort the visible order book. Look for common control, coordinated timing, offsetting trades and an economic purpose that does not fit the pattern. A high volume alone does not prove manipulation; the intent and circumstances matter. A representative should not enter an order designed to mislead the market and should promptly report suspicious instructions through the dealer's surveillance or compliance process. Preserve the proposed instructions and relevant communications so the concern can be reviewed accurately.

Worked example: A trader controls two accounts and proposes buying 5,000 shares from one while selling the same 5,000 shares from the other at a coordinated price. Beneficial exposure would barely change, but reported volume would rise by 5,000 shares. The stated aim is to make a thinly traded security look active. The representative rejects the plan and escalates the communications.

Watch the distinction: The presence of two accounts does not make coordinated trades genuine market demand. Assess common control, economic effect and the intended impression.

Reference: [2]

52. Settlement obligations

Execution establishes a trade; settlement completes the exchange of cash and securities under its applicable terms. A buyer must provide funds, and a seller must be able to deliver the securities. Confirm those resources early, particularly where funds are moving from another account or a holding is restricted. The applicable settlement schedule depends on the security and transaction, so use the actual trade terms rather than assuming one universal period. A funding shortfall does not disappear because the market order filled. Promptly tell the dealer through its process, identify the amount and source of the shortfall, and communicate accurately with the client about available remedies. Do not promise that a late deposit, cancellation or sale will be costless. Keep the execution, funding discussions and resolution documented.

Worked example: A client buys securities for $5,000 including charges, but only $3,200 is available in the cash account. The shortfall is $1,800. The representative identifies when payment is required under this trade's settlement terms and promptly addresses the missing $1,800 with the client and dealer. The executed purchase remains a real obligation while the funding issue is resolved.

Watch the distinction: A trade confirmation does not mean the buyer has paid or the seller has delivered. Settlement is a later obligation requiring preparation.

Reference: [2]

53. Trade errors and corrections

An order error should be identified, reported and corrected through the dealer's controlled process. Compare the client instruction with the entered order and execution to isolate the error: security, side, quantity, price condition or account. Preserve the original records and timestamps. Notify the responsible supervisor or trading desk promptly so they can assess market exposure and the permitted remedy. A second trade may be part of a correction, but it must be approved and recorded as such; an unexplained offsetting order hides what happened and can create further loss. Explain material effects to the client through the appropriate channel, without promising a particular price or reimbursement before the facts are established. The goal is an auditable remedy that fairly addresses the client's authorized position.

Worked example: The client authorizes 100 shares, but the representative enters 1,000 and the whole order executes. The excess is 900 shares. The representative immediately reports the instruction, entry and execution details, then follows the dealer's correction direction for the 900-share error. The record distinguishes the authorized 100 shares from any remedial trades and resulting charges or price differences.

Watch the distinction: Silently selling the excess shares does not erase the original error. It creates another transaction and obscures responsibility, timing and any client impact.

Reference: [2]

Maintaining Client Accounts and Relationships

54. Accounting for transactions

Reconcile each transaction across three records: the client's instruction, the trade confirmation and the account's cash and security positions. For a purchase, cash decreases by the security cost plus applicable charges while the holding increases by the executed quantity. For a sale, the holding decreases and cash increases by proceeds after charges. Check whether the account had enough available cash, and distinguish available cash from the market value of securities. Dividends, interest, deposits, withdrawals and other transactions can also change balances, so investigate differences in date and cause rather than forcing the account to match one trade in isolation. The CPH practice questions can help rehearse the arithmetic; in a real account, an unexplained discrepancy calls for a prompt review of records and the client's instructions.

Worked example: An account starts with $5,000 cash and no shares of Z. It buys 50 Z shares at $40 each with a $10 charge. Security cost is 50 × $40 = $2,000; total cash used is $2,010. Ending cash is $5,000 − $2,010 = $2,990, and the position is 50 shares. Their later market value may differ from $2,000.

Watch the distinction: The purchase price of securities is not the full cash reduction when charges apply. Reconcile both the cash balance and the new share quantity.

Reference: [2]

55. Cash account funding

A cash account purchase requires a way to pay the full obligation under the applicable trade terms. Compare available cash and reliably incoming funds with the executed or proposed cost, including commissions and other charges. Securities already held are not automatically cash available for a new purchase. If the client plans to sell another holding, account for whether that sale will execute and settle in time; do not assume it will. A shortfall should be addressed through the dealer's procedures before representing the purchase as funded. Explain the client's funding responsibility and record the agreed source and timing. Margin borrowing, where permitted, belongs to a different account arrangement and cannot be silently treated as a feature of a cash account. A price movement after execution does not remove the payment obligation.

Worked example: A cash account has $3,000 available. A proposed purchase costs $3,180 for securities plus a $20 charge, or $3,200 total. The shortfall is $200. The client says another investment is worth $500, but it has not been sold. The representative cannot count its market value as cash; the $200 funding gap must be resolved under the account's actual terms.

Watch the distinction: Owning other securities does not automatically fund a cash purchase. Count available cash and dependable incoming proceeds on the required settlement timeline.

Reference: [2]

56. Margin and amplified loss

Margin borrowing lets a client buy securities with both personal funds and a loan secured by the account. Client equity equals the current market value of the holdings minus the outstanding loan, before considering interest and charges. When holdings fall, the loan does not fall automatically, so the client's percentage loss on contributed cash is larger than the security's percentage decline. A maintenance requirement may trigger a demand for additional funds or collateral, or a sale under the account agreement. The exact requirement depends on the securities and applicable dealer terms; do not assume a universal rate. Assess whether the client can meet a call quickly and withstand a forced sale at an unfavourable price. Borrowing also adds interest expense even when the investment price is flat.

Worked example: A client buys $10,000 of securities using $5,000 cash and a $5,000 loan. If the securities fall to $8,000, equity becomes $8,000 − $5,000 = $3,000. The holdings lost 20%, but the client's $5,000 contribution lost $2,000, or 40%, before interest and charges. Whether a margin call occurs depends on the account's applicable maintenance terms.

Watch the distinction: A 20% fall in a margined holding does not necessarily mean a 20% loss on the client's cash. Subtract the unchanged loan before calculating equity.

Reference: [2]

57. Confirmations and statements

A trade confirmation shows the details of a particular execution; an account statement summarizes positions, cash and transactions over a period. Use both to compare what the client authorized with what occurred and what remains in the account. Check security, side, quantity, execution price, charges, dates and any unexpected activity. An error should be reported promptly even if its current market value appears favourable, because authorization and account records still need correction. A discrepancy may arise from a partial fill, multiple executions, a corporate action or an entry mistake; investigate before assigning a cause. Encourage clients to review communications and report unfamiliar transactions, while the representative also follows the dealer's controls. Keep the instruction and communications so a later review can reconstruct the sequence.

Worked example: A client authorized 100 shares at market, but the confirmation lists 200 shares at $30. Excluding charges, the confirmed trade is $6,000 versus $3,000 for 100 shares, a $3,000 quantity difference. The representative checks the recorded instruction and execution, reports the discrepancy and follows the dealer's correction process. A later rise in the share price does not validate the extra 100 shares.

Watch the distinction: A profitable unauthorized trade is still unauthorized. Compare the confirmation with the instruction, then investigate and correct any discrepancy through proper channels.

Reference: [2]

58. Refreshing client information

Client information is useful only while it reflects the client's circumstances. A change in income, employment, debt, dependants, cash needs, investment objective or willingness to bear loss may alter the fit of existing holdings and future recommendations. Ask what changed, when the client will need money, and how much loss the client can both afford and tolerate. Update the relevant know-your-client record and reassess the account or proposed strategy in light of the new facts. Do not change a risk profile merely to justify a product already selected. A shorter horizon can make an otherwise reasonable long-term holding inappropriate for the funds needed soon. Explain any proposed adjustment and obtain the required client instruction rather than treating a profile update as trading authority. Record the reasoning and follow-up.

Worked example: A client expected to work for ten more years but retires now and needs $2,000 monthly from the account. Twelve months of planned withdrawals total $24,000. The representative identifies how much accessible cash and suitably liquid holdings can support those payments, updates income and horizon details, and reassesses concentrated or volatile positions before proposing changes for the client's approval.

Watch the distinction: An annual review date is not the only reason to refresh client facts. A material life change can require immediate reassessment of recommendations.

Reference: [2]

59. Complaint handling

A complaint is an expression of dissatisfaction about the dealer's service, advice, transaction or account handling, whether it arrives formally or in ordinary conversation. Listen without arguing, capture the client's account in their words, and preserve confirmations, disclosures, notes and relevant communications. Route the matter promptly to the dealer's designated complaints process so it can be investigated and answered consistently. The representative may clarify facts, but should not promise a payment, deny wrongdoing before review, alter records or discourage the client from using the formal channel. Distinguish the client's requested remedy from the facts still to be established. If ongoing activity could compound the problem, raise that concern as part of the escalation. A clear record supports a fair review and helps identify any broader supervisory issue.

Worked example: A client says a $150 fee was never disclosed and asks for the $150 back plus compensation for a related loss. The representative records the fee, the client's explanation and requested remedy, preserves the account documents, and sends the matter to the complaints team. The claimed loss and disclosure history require investigation; the representative does not promise reimbursement or erase the fee entry.

Watch the distinction: A complaint need not arrive on a formal form to count. Treat a clear expression of dissatisfaction as a matter for the dealer's complaints process.

Reference: [2]

60. Account transfer requests

An account transfer starts with valid client authorization and an accurate inventory of cash, securities and any liabilities or restrictions. An in-kind transfer moves an eligible holding without selling it; a cash transfer generally requires a sale first. Check whether the receiving account can hold each asset, whether any position is restricted, and whether pending trades, charges or loans affect what can move. Explain choices and likely consequences before obtaining instructions for an asset that cannot transfer as requested. Selling may change market exposure and may have tax consequences depending on the account and client; do not assume those consequences are identical across account types. Track the transfer until positions and cash reconcile at the destination, and address missing or delayed assets through the dealer's process. The client controls the disposition decision.

Worked example: A client requests an in-kind transfer of a $12,000 account. The receiving dealer accepts $9,000 of listed securities but cannot hold a $3,000 restricted asset. The representative explains that $9,000 may transfer in kind while the remaining asset needs a separate decision, such as retaining it where permitted or selling it if possible. The representative obtains the client's instruction and tracks both portions.

Watch the distinction: “Transfer all holdings” does not authorize selling an asset that cannot move in kind. Explain the restriction and obtain the client's decision.

Reference: [2]

Official references and further reading

All study guides

Standards of Conduct and Ethics, Ethical Decision Making, and Putting it All Together

1. Rules and ethical judgment

2. Values in competing duties

3. A decision sequence for dilemmas

4. Competence and limits of authority

5. Honest statements and omissions

6. Finding a material conflict

7. Responding to a conflict

8. Referral incentives

9. Gifts and hospitality

10. Outside activities

11. Personal trading interests

12. Records that support accountability

13. Raising suspected misconduct

14. Putting conduct duties together

The Canadian Regulatory Framework

15. Provincial regulation and coordination

16. CIRO’s role

17. Registration and permitted activities

18. Dealer supervision

19. Investor protection coverage

20. Anti-money laundering responsibilities

21. Suspicious activity and reporting channels

Working with Clients

22. Clear public communication

23. Sales literature and approval

24. Presenting past performance

25. Relationship disclosure

26. Advice and client instructions

27. Clients who may need added support

28. Privacy in client conversations

29. Cybersecurity and instruction verification

Client Discovery and Account Opening

30. Account ownership and control

31. Registered plan purpose

32. Identity and beneficial ownership

33. Financial circumstances

34. Objectives and time horizon

35. Risk capacity and risk willingness

36. Trading authority

37. Opening disclosures and records

Product Due Diligence, Recommendations, and Advice

38. Know your product

39. Strategy suitability

40. Concentration risk

41. Costs and expected benefit

42. Liquidity and exit limits

43. New issues and prospectuses

44. Prospectus exemptions

45. Take-over and issuer bids

Trading, Settlement, and Prohibited Activities

46. The trade life cycle

47. Market and limit orders

48. Execution price and total trade cost

49. Order authorization and changes

50. Inside information and trading ahead

51. Manipulative trading signals

52. Settlement obligations

53. Trade errors and corrections

Maintaining Client Accounts and Relationships

54. Accounting for transactions

55. Cash account funding

56. Margin and amplified loss

57. Confirmations and statements

58. Refreshing client information

59. Complaint handling

60. Account transfer requests

Official references and further reading

Frequently Asked Questions

Related Study Guides

Accredited Business Valuation (ABV)

Accredited Estate Planner (AEP)

Accredited Senior Appraiser (ASA - Valuation)