The Mutual Fund Dealers Association of Canada (MFDA) has published a discussion paper on the use of investor questionnaires.
On July 21, the MFDA released Improving the Know Your Client Process (PDF), a 23-page paper discussing the appropriate use of investor questionnaires. It outlines general principles as well as the various steps involved in designing and implementing a questionnaire, as well as the potential benefits and limitations. The document also includes a sample questionnaire which the MFDA says was developed through extensive research and investor testing.
"The KYC process is one of the most fundamental obligations under securities legislation and one of the most important elements of investor protection," says the MFDA. "However, the process can be challenging for both clients and financial advisors. Measuring risk tolerance is complex and as a result risk profiling is not an exact science. Nevertheless, a well-designed questionnaire can make an important contribution to the KYC process."
The MFDA points out, however, that the use of these materials is not mandatory and says they are being provided as guidance for mutual fund dealers who wish to use questionnaires.