Canadian Securities Course (CSC) Level 1 Practice Exam

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Explain the know your client rule.

Client information is irrelevant for securities transactions
Security dealers must not inquire about client objectives
Clients do not need to provide financial details
Security dealers and IAs must verify client information and ensure recommendations match client needs

The correct answer is: Security dealers and IAs must verify client information and ensure recommendations match client needs

The "know your client" rule in the securities industry requires security dealers and investment advisors to gather relevant information about their clients to understand their financial situation, investment knowledge, risk tolerance, investment objectives, and any other relevant factors. By verifying client information and ensuring that their recommendations align with the client's needs, the rule aims to promote suitability and protect investors. This rule helps to establish a level of trust between the client and the advisor, ensuring that investment recommendations are appropriate based on the client's individual circumstances.