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An investor contacts a Registered Representative (RR) to purchase a speculative stock that does not align with the investor's low-risk tolerance. What is the RR's primary obligation?
A client-directed order remains subject to suitability obligations even when the investment idea originated entirely with the client. The RR must assess the instruction against the client's KYC information and recognize that a speculative stock conflicts with the stated low-risk tolerance. The RR must advise the client against proceeding, explain the nature and extent of the risk, and normally recommend a suitable alternative.
If the client nevertheless insists on proceeding and the dealer permits the transaction, the RR must accurately record the instruction as unsolicited and document the risk warning, the suitability concern, any alternative presented and the client's decision. Option A most closely represents these obligations.
Option B is incorrect because client instructions do not eliminate the RR's duty to perform and document the required assessment. Option C is too absolute: an unsuitable unsolicited order is not automatically prohibited in every circumstance, although the dealer may decline it under its policies or where legal or regulatory concerns exist. Option D would corrupt the KYC record. KYC information must reflect the client's genuine circumstances and risk profile and cannot be altered merely to rationalize a transaction.
CIRO guidance expressly states that marking an order unsolicited is not, by itself, sufficient.
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