This communication provides guidance and reminders regarding HUB Capital Inc.’s (“HCI”) recent Sales Practices Audit with CIRO and updates to the KYC and KYC Update Forms.

Over the past four years, significant regulatory changes have been introduced through Client Focused Reforms. We appreciate your efforts in implementing these changes to enhance policies, procedures, and recordkeeping within your practice.

The recent CIRO Audit identified a few areas requiring updates to the KYC, KYC Update, Trusted Contact Person, and Conflict of Interest Disclosure forms. The updated forms are now available on HUBLink. Please ensure all previous versions are destroyed to maintain compliance.

Below is a summary of the changes to these forms and additional guidance on client disclosure procedures.

1. KYC Form and KYC Update Form – Risk Capacity, Risk Attitude, and Risk Profile

Assessing a client’s Risk Capacity and Risk Attitude is crucial to determining their overall Risk Profile, a regulatory requirement advisors must fulfill before making any client recommendations. This assessment is mandatory for both initial and ongoing KYC requirements and updates.

The HCI Investor Profile Questionnaire (IPQ) was initially provided as a tool to help determine KYC information and risk profiles. However, much of the information overlapped with the KYC form. The newly updated KYC and KYC Update forms now incorporate the client’s Risk Profile (encompassing Risk Capacity and Risk Attitude) to streamline the process and better guide advisors in determining Risk Tolerance at the plan level. These enhancements aim to provide greater clarity for both advisors and clients in understanding how the Risk Profile is established, considering both capacity and attitude toward risk. Use of the IPQ remains optional, as outlined below.

KYC and KYC Update – Risk Profile Questions

Questions regarding a client’s Risk Capacity and Risk Attitude, which together determine the Risk Profile, are now included on page 2 of the updated KYC and KYC Update forms:

KYC Change 1 2024

Risk Capacity

Risk Capacity represents a client’s financial ability to withstand a loss of capital. Key factors such as the client’s age, financial situation (including income and savings), and investment time horizon must all be considered in this assessment.

Risk Capacity is evaluated at the client level and categorized as Low, Medium-Low, Medium, Medium-High, or High. Advisors must indicate the client’s Risk Capacity by selecting the appropriate checkbox on the KYC form.

Risk Attitude

Risk Attitude reflects a client’s comfort level with risk, particularly their tolerance for return volatility. Unlike Risk Capacity, Risk Attitude is assessed at the plan level and may vary across different plans.

Advisors are required to discuss the client’s Risk Attitude for each plan. This assessment is a critical factor in determining the client’s Risk Profile (Risk Tolerance) for each plan.

Risk Profile

The client’s Risk Profile is determined by the lower of their Risk Capacity and Risk Attitude, rather than an average of the two. Once established for a plan, the Risk Profile should be recorded under the “Risk Profile (Risk Tolerance)” section of the KYC form.

KYC Change 2 2024

Note: As outlined above, a client’s Risk Profile (Risk Tolerance) must be determined by the lower of their Risk Attitude or Risk Capacity. For example, if a client’s Risk Capacity is categorized as “Medium-Low,” their Risk Profile (Risk Tolerance) for all plans must not exceed a “100% Medium-Low” risk level.
 
The updated versions of both the KYC and KYC Update forms are now available on HUBLink. We anticipate that these forms will be available on RepVision/WealthServ and Agora as fillable forms in early January. Until then, we will continue to accept the previous versions of the KYC and KYC Update forms, although we encourage you to begin using the new forms immediately.
 
HCI Investor Profile Questionnaire (“IPQ”)
 
The HCI Investor Profile Questionnaire (IPQ) will remain available for advisors as an optional tool to determine and document a client’s Risk Profile. Advisors can use the IPQ as part of their note-taking requirements, without the client’s signature, but the results must align with the information provided in the KYC or KYC Update form.
 
Advisors may also have the client sign and date the IPQ to confirm their review and agreement with the results. However, the information must still be consistent with the KYC or KYC Update form. If the IPQ is signed and dated by the client, it must be submitted to the advisor’s Regional Compliance Officer or Regional Compliance mailbox for review and approval.
 
Client Notes – KYCs and KYC Updates
 
Advisors must maintain detailed notes regarding their discussions, questions asked, and information provided when completing a client’s KYC or KYC Update form.
 
These notes should include information about the client’s financial situation (e.g., assets, liabilities, debts), as well as their long-term and short-term plans (e.g., retirement, home purchase, family planning). Advisors should also record information on investments held outside of HCI, including general details on the types of investments, where they are held, and their approximate value.
 
Client notes must also include any costs related to specific investments, such as MER, trailing fees, and fee-for-service arrangements.
 
The HCI “Client Meeting Notes” template, available on HUBLink, is recommended for advisors to use directly or as a guide for collecting and documenting relevant information during client meetings. The quality of advisor notes was the primary concern identified in HCI’s recent CIRO audit. Maintaining detailed and comprehensive notes is a critical regulatory obligation and serves as the first line of defense in managing client complaints and potential legal actions.
 
2. Trusted Contact Person
 
In accordance with regulatory requirements and section 2.5 of HCI’s Policy and Procedure Manual, advisors must offer clients the opportunity to provide the name and contact information of a Trusted Contact Person (TCP).
 
While clients are not obligated to provide a TCP, advisors must clearly document that the client was offered the opportunity to designate one and chose not to do so.
 
The updated KYC and KYC Update forms now include a section under the Client Agreement where the client must initial to confirm: i) a TCP form has been completed; ii) the client has declined to designate a TCP; or iii) a TCP form is already on file. Note: Clients are not required to sign the TCP form itself if they have initialed the “TCP Form Declined” option in the Client Agreement section of the KYC or KYC Update form.

KYC Change 3 2024 

Important Reminder:

The HCI TCP Form is exclusively for HUB Capital business and is the only approved form for designating a Trusted Contact Person (TCP). It is not intended for use in any other client-related activities outside of HCI, such as insurance or financial planning.

3. Updates to Conflict of Interest (COI) Disclosure Form

Minor revisions have been made to the Conflict of Interest (COI) Disclosure Form. The updated versions are available on HUBLink and should be downloaded and used to reflect your outside activities, businesses, and trade names.

Please ensure these updated forms are used for all future client interactions.

To notify clients of the COI Disclosure changes, HCI will be adding a disclaimer to the Q4 Client Statements. As a result, advisors are not required to distribute the revised form to existing clients at this time.

4. Reporting of Client Complaints to HCI

As a reminder, according to section 2.13 of HCI’s Policy and Procedures Manual, client complaints, including service issues, must be reported to HCI Compliance within 2 business days. This ensures timely review and determines whether regulatory reporting or client acknowledgment is required.

5. 2025 Best Practices Guide

Please refer to the HCI Best Practices Guide for guidance. The 2025 edition will be available in early January. The aim of this guide is to support your compliance with regulatory requirements while allowing you to focus on growing and safeguarding your business throughout the year.

If you have any questions or would like additional training or support, please don’t hesitate to contact your Regional Compliance Officer, who will be happy to assist you.

Best regards,

Cheryl Hamilton
Vice President Risk Management and Chief Compliance Officer