Which statement best describes the Know Your Customer requirement?

• A. It ensures the advice given is suitable by gathering sufficient information about the client.
• B. It is solely about verifying identity.
• C. It applies only to corporate clients.
• D. It requires the client to provide performance data of investments.

Answer: (A)

Know Your Customer focuses on collecting enough information about the client to understand their financial situation, objectives, knowledge and experience, and risk tolerance so that any investment advice can be assessed for suitability. It goes beyond simply confirming identity, since you need to know why the client is investing and what they can tolerate in terms of risk and time horizon. It applies to all clients, not just corporate ones. It also isn’t about providing or demanding investment performance data; performance data relates to evaluating investments, not the KYC process. So the best description is that KYC ensures the advice given is suitable by gathering sufficient information about the client.