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25.3.6 Documentation For Managed Accounts

Explore comprehensive documentation for managed accounts, complying with IIROC rules, client agreements, and regular reviews. Learn best practices to ensure fair investment allocation and regulatory compliance.

Managed accounts grant discretionary authority on an ongoing basis; it is a permanent, rather than temporary, arrangement. Dealer members must receive approval from the Investment Industry Regulatory Organization of Canada (IIROC) to handle these accounts and must ensure compliance with all detailed requirements in IIROC rules.

Key Documentation Requirements

In order for a dealer member to approve a managed account, several key documentation steps must be followed:

  1. Managed Account Agreement: The client must sign a managed account agreement, which must then be accepted by the dealer member’s designated supervisor. This agreement clearly states the client’s investment objectives for the account.
  2. Procedures for Fair Allocation: The client must receive a copy of the dealer member’s procedures for fair allocation of investment opportunities among managed accounts.

Quarterly Review

Each managed account must undergo a quarterly review carried out by a designated supervisor. The objective of this review is to ensure that the client’s investment objectives are being diligently pursued and that the account is conducted in accordance with applicable regulations. Reviews may be performed on an aggregate basis, where decisions are made centrally and applied across several accounts.

Termination of Managed Accounts

For discretionary and managed accounts, the termination of the account agreement requires written notice. Clients can terminate the agreement at any time but must provide at least 30 days’ notice if the dealer member wishes to terminate the agreement.

Regulatory Considerations

Regulation and oversight of discretionary and managed accounts are subject to frequent changes. It is essential to stay updated with new amendments in laws and regulations. In managed accounts, discretionary authority cannot be exercised unless the responsible individual is designated and approved as a portfolio manager.

Key Terms and Definitions

  • Managed Accounts: Investment accounts that grant discretionary authority for portfolio management on an ongoing basis.
  • IIROC: Investment Industry Regulatory Organization of Canada, responsible for overseeing investment dealers and their trading activities.
  • Discretionary Authority: The ability to make investment decisions on behalf of clients without obtaining specific client consent for each transaction.
  • Portfolio Manager: A financial professional responsible for making investment decisions and managing portfolios on behalf of clients.
  • Fair Allocation Procedures: Guidelines to ensure that all clients have equal access to investment opportunities, preventing conflicts of interest.

FAQs

What is a managed account agreement?

A managed account agreement is a contract between the client and the dealer member outlining the client’s investment objectives and granting discretionary authority to the portfolio manager.

Who approves discretionary authority in managed accounts?

Discretionary authority in managed accounts must be designated and approved by a qualified portfolio manager.

How often are managed accounts reviewed?

Managed accounts are reviewed on a quarterly basis by a designated supervisor to ensure that the investment strategies align with the client’s objectives and comply with regulatory standards.

Can I terminate a managed account? If so, how?

Yes, clients can terminate a managed account at any time with a written notice. If the dealer wishes to terminate the account, the client must be given a 30-day notice.

Key Takeaways

  • Managed accounts require strict documentation and client agreements to ensure compliance and clear communication of investment objectives.
  • Dealer members must adhere to IIROC rules and conduct quarterly reviews to maintain regulatory compliance.
  • Fair allocation procedures and proper designation of portfolio managers are essential for the ethical management of these accounts.
  • Both clients and dealers have protocols for terminating managed account agreements, ensuring smooth transitions and continuity.

📚✨ Quiz Time! ✨📚

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Welcome to the Knowledge Checkpoint! You’ll find 10 carefully curated quizzes designed to reinforce the key concepts covered. These questions will help you gauge your grasp of the material, identify areas that need further review, and ensure you’re on the right track towards mastering the content for the Canadian Securities certification exams. Take your time, think critically, and use these quizzes as a tool to enhance your learning journey. 📘✨

Good luck! 🍀💪

## What is a key characteristic of managed accounts? - [ ] They grant temporary discretionary authority. - [x] They grant permanent discretionary authority. - [ ] They do not require a client agreement. - [ ] They operate without a designated supervisor. > **Explanation:** Managed accounts grant discretionary authority on an ongoing basis, making it a permanent arrangement. ## What is required for a client to have a managed account approved? - [ ] An agreement signed by the dealer member’s CEO. - [ ] Verbal consent from the client. - [ ] A non-discretionary account approval. - [x] A signed managed account agreement accepted by the designated supervisor. > **Explanation:** The client must sign a managed account agreement, and the dealer member’s designated supervisor must accept it. ## How frequently must managed accounts be reviewed by a supervisor? - [ ] Monthly - [x] Quarterly - [ ] Annually - [ ] Biannually > **Explanation:** Each managed account must be reviewed on a quarterly basis by a designated supervisor. ## What must be provided to clients with managed accounts? - [ ] A detailed fee schedule only. - [ ] Quarterly performance reports only. - [x] The dealer member’s procedures for fair allocation of investment opportunities. - [ ] A list of past investment opportunities. > **Explanation:** Clients must be provided with a copy of the dealer member’s procedures to ensure the fair allocation of investment opportunities among managed accounts. ## Who can terminate a managed account agreement and how? - [x] Both client and dealer member, with written notice. - [ ] Only the client, without any notice. - [ ] Only the dealer member, without client consent. - [ ] Only IIROC, with immediate effect. > **Explanation:** Both the client and the dealer may terminate the managed account agreement as long as the request is submitted in writing. ## What is required if a dealer member wishes to terminate a managed account agreement? - [ ] No prior notice required. - [ ] A verbal agreement only. - [ ] Immediate termination without notice. - [x] At least 30 days' notice to the client. > **Explanation:** If the dealer member is terminating the agreement, the client must be given at least 30 days' notice. ## What must the investment objectives for a managed account be indicated in? - [ ] An oral agreement with the client. - [ ] The dealer member's website. - [x] The managed account agreement. - [ ] Quarterly review minutes. > **Explanation:** The managed account agreement must clearly indicate the client’s investment objectives for this account. ## Who is responsible for managing a managed account? - [ ] Any employee of the dealer member. - [x] A person designated and approved as a portfolio manager. - [ ] The client themselves. - [ ] The IIROC. > **Explanation:** Discretionary authority in managed accounts may only be exercised by a person responsible for the management of the account who is designated and approved as a portfolio manager. ## Which regulatory body's approval is required for dealer members to handle managed accounts? - [ ] CSA (Canadian Securities Administrators) - [ ] MFDA (Mutual Fund Dealers Association) - [x] IIROC (Investment Industry Regulatory Organization of Canada) - [ ] IIAC (Investment Industry Association of Canada) > **Explanation:** Dealer members must be approved by IIROC to handle managed accounts. ## How must changes in regulation and oversight for discretionary and managed accounts be handled? - [ ] By sticking to old practices indefinitely. - [ ] By client approvals only. - [ ] By managing accounts without adjustments. - [x] By staying informed of all regulatory changes. > **Explanation:** It is crucial to stay informed of all changes as regulation and oversight of discretionary and managed accounts is constantly evolving.

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Saturday, July 13, 2024