Suitability Agreement Definition

“If [the intermediary] asks or advises you to sell a financial product, the financial product must suit you based on your financial situation, experience and investment objectives. No other provision of this agreement or any other document that we may ask you to sign, nor any declaration that we may ask you to withdraw from this clause. People can confuse the notions of aptitude with agent. Both are designed to protect the investor from foreseeable damage or excessive risk. However, the standards for investor support are different. An attorney is anyone who is legally responsible for managing another person`s money. Investment advisors, who are generally subject to royalties, are subject to fiduciary standards. Brokers who are generally compensated by commissions generally have to fulfill only one adequacy obligation. The consultation`s findings also state that the SFC would not expect the ISDA management contract, which is a master service contract for derivatives transactions between demanding institutional clients, to include the new clause. In the conclusions of the consultation, the CFS confirmed that the new clause would apply to all intermediaries, although it would become redundant in practice if the intermediary`s activity is not to request or recommend the sale of financial products. An intermediary acting under a limited mandate that does not involve the recruitment of the sale of financial products or the recommendation will have the power to consider whether the inclusion of the new clause is necessary under 6.4 of the Code. In paragraph 6.4 of the Code, it is necessary that customer agreements adequately reflect the services to be provided, but if the services to be provided are limited, the customer agreement may be limited accordingly.

The findings of the consultation state that the requirement to include the new clause in a standard corporate financing mandate that does not involve the recruitment of the sale or the recommendation of financial products is unlikely to apply.6 However, the CFS provides that the situations in which intermediaries can avail themselves of point 6.4 of the code are limited.

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