Canada and the US both expect firms to understand the products they offer before recommending them, and to keep that understanding current. They get there very differently. Canada writes Know-Your-Product into specific rules with named steps: assess, approve, monitor, and understand. The US has no single KYP rule; the obligation is assembled from Regulation Best Interest, the investment adviser fiduciary duty, FINRA's supervision rule and two decades of FINRA product guidance.
For a firm operating in one country, the differences are background. For a firm operating in both - or a firm comparing its own practices against the other country's - they decide what has to be written down, who is responsible, and what an examiner will ask to see.
This paper sets the two frameworks side by side. It describes each one, compares them across the elements of a KYP program, identifies where they differ in ways that matter, maps the terminology, and sets out how a cross-border firm can build one framework that meets both.
Its scope is the product: the obligation to understand what is offered. Client-level obligations are outside it.
Each country's framework in its own terms, before comparing them.
Canada's KYP requirements sit in parallel rules for each type of registrant, all introduced through the Client Focused Reforms: CIRO's Rule 3300 series for investment dealers, CIRO's Mutual Fund Dealer Rule 2.2.5 for mutual fund dealers, and section 13.2.1 of NI 31-103 for other registered firms, including portfolio managers and exempt market dealers.[1][2] The structure is the same in each. Using CIRO's investment dealer rules as the example:
Rule 3301(2) then prohibits an Approved Person from buying or recommending securities the firm hasn't approved, and Rule 3302 requires each Approved Person to take steps to understand the securities they deal in, including the same elements.[1] The result is four named obligations - assess, approve, monitor at the firm level, and understand at the individual level.
Joint CSA/CIRO Staff Notice 31-368, published December 10, 2025 after a review of 105 firms, sets out detailed expectations for each obligation: that the depth of assessment should scale with complexity; that approvals must show "meaningful consideration"; that firms should define what a significant change is; that annual monitoring alone was generally not sufficient; that securities transferred in must be assessed and monitored; and what KYP policies and procedures should contain.[2] The firm's system of controls under NI 31-103 section 11.1 and CIRO Rule 3904 must cover KYP.[2]
Regulation Best Interest applies to "a broker, dealer, or a natural person who is an associated person of a broker or dealer, when making a recommendation." The first component of its Care Obligation is product-level:[3]
Its Compliance Obligation requires the broker-dealer to establish, maintain and enforce written policies and procedures reasonably designed to achieve compliance with the rule.[3] FINRA Rule 3110 separately requires a reasonably designed supervisory system.[6]
What US broker-dealers actually do for product review is shaped less by rules than by FINRA guidance: Notice to Members 05-26 on reviewing new products, including post-approval review;[7] Regulatory Notice 12-03 on complex products;[8] Notice to Members 05-59 on structured products and training;[9] and Regulatory Notices 10-22 and 23-08 on the reasonable investigation of private placements.[10] They describe practices FINRA considers part of a well-designed supervisory system for products.
Registered investment advisers owe a fiduciary duty under the Advisers Act. The SEC's 2019 interpretation says the duty of care requires "a reasonable investigation into the investment sufficient not to base its advice on materially inaccurate or incomplete information."[4] Advisers must also adopt and implement written policies and procedures reasonably designed to prevent violations of the Act, and review them at least annually, under Rule 206(4)-7.[5] There is no product approval requirement for advisers as such; how an adviser evidences its investigation is up to its own procedures.
Placed side by side, the two frameworks aim at the same outcome. The differences are in how explicit each step is, and so in what a firm has to be able to show.
| Element | Canada | US Broker-Dealer | US Investment Adviser |
|---|---|---|---|
| Assess the product | Explicit rule: structure, features, risks, initial and ongoing costs and their impact | Understand risks, rewards and costs (Reg BI Care Obligation) | Reasonable investigation into the investment (fiduciary duty of care) |
| Approve for the shelf | Explicit rule; individuals may only recommend approved securities | No rule; new product review is a FINRA-described practice | No requirement |
| Monitor for change | Explicit rule: monitor for significant changes | Implied by the need to understand at each recommendation; post-approval review in FINRA guidance | Implied by the duty of care |
| Individual obligation | Separate rule for each registered individual to understand the product | Reg BI applies to associated natural persons as well as the firm | Fiduciary duty applies to the adviser; supervised persons covered by its policies |
| Depth of review | Scaled to complexity and risk (31-368) | Heightened for complex products (FINRA 12-03) | Heightened scrutiny for high-risk products (IA-5248) |
| Written policies | Detailed KYP policy content described in 31-368 | Reg BI Compliance Obligation; FINRA 3110 procedures | Rule 206(4)-7, reviewed at least annually |
| Training | Required on KYP obligations (NI 31-103 s.11.1(2)) | Expected in FINRA guidance; required for variable annuities (Rule 2330) | Through compliance program |
| Transfers-in | Must be assessed within a reasonable time and monitored | No specific requirement | No specific requirement |
| Detailed regulator guidance | Joint Staff Notice 31-368 (2025), CIRO 09-0086 and 20-0238 | FINRA Notices 05-26, 05-59, 10-22, 12-03, 23-08 | SEC interpretation IA-5248 (2019) |
A Canadian dealer must approve what it makes available, and its registered individuals can only recommend approved securities.[1] A US broker-dealer has no equivalent rule; many operate a product approval process along the lines FINRA's guidance describes,[7] but the obligation is the firm's own procedures. A US adviser has no approval requirement at all. For a cross-border firm, the Canadian approval record is the higher bar.
Canadian rules require monitoring for significant changes in terms, and the notice expects a written definition of what a significant change is.[1][2] In the US, ongoing product monitoring follows from the need to understand a product at the time of each recommendation, and from FINRA's post-approval review guidance, but no rule names it. See Material Change: When to Reopen a KYP Assessment for how each country's approach translates into triggers.
Canada gives each registered individual a separate KYP rule of their own.[1] Reg BI reaches the same people by applying directly to associated natural persons making recommendations.[3] The practical effect is similar - individuals are personally accountable for understanding what they recommend - but the Canadian notice goes further in describing what firms should provide to support it, including access to the firm's KYP information, training and tools.[2]
The Canadian notice expects securities transferred in, or acquired through client-directed trades, to be assessed within a reasonable time and brought into monitoring, and expects monitoring to cover securities held in client accounts even after they leave the shelf.[2] There is no specific US counterpart. A cross-border firm's monitored population should be defined by the Canadian standard.
The 31-368 notice lists what KYP policies and procedures should contain, down to describing automated processes in detail and naming who is responsible for each step.[2] US rules require written policies reasonably designed to achieve compliance,[3][5] but leave their content largely to the firm. Canadian documentation is the more prescriptive template.
| Concept | Canadian Term | US Term |
|---|---|---|
| Understanding the product | Know-Your-Product (KYP) | Reasonable diligence to understand risks, rewards and costs (Reg BI); reasonable investigation (advisers) |
| Deciding what can be offered | Approval; making securities available to clients | New product review; product approval |
| A change that requires another look | Significant change (older guidance: material change) | No single term; post-approval review, periodic reassessment |
| The individual who recommends | Registered individual; Approved Person (CIRO) | Associated person; registered representative; investment adviser representative |
| Detailed regulatory expectations | Staff notices and guidance | Regulatory Notices, Notices to Members, Commission interpretations |
A firm operating in both countries can run two KYP programs or one. One program, built to whichever standard is more demanding on each element, is simpler to operate and easier to evidence.
On most elements the Canadian framework is the more explicit, so it usually sets the design: a documented approval for every product, a written definition of significant change, a monitored population that includes transfers-in and off-shelf holdings, and detailed written procedures. The US adds specific expectations in some areas - FINRA's guidance on complex products, structured products and private placements, and training rules for variable annuities - that should be layered in for the products they cover.
The example below shows what a cross-border firm's KYP framework document might cover. It is illustrative; each firm's framework should reflect its registrations, products and legal advice in each jurisdiction.