Every KYP program rests on one list: the products the firm has approved. Monitoring rules run against it, alerts are routed from it, and reviews update it. If the list is incomplete, out of date or kept in three places, everything built on top of it inherits the problem.
Canadian rules require firms to assess the relevant aspects of a security, approve it before making it available to clients, and monitor it for significant changes.[2] In the US, FINRA's predecessor, NASD, recommended in 2005 that firms selling new products have a formal, written process for vetting new products, including a clear definition of what counts as a new product and follow-up review after approval.[3] Both assume the firm can say, at any moment, exactly what is on its shelf and what state each product is in.
This guide covers product approval across the full life of a product on the shelf. It sets out what the shelf register should hold, the statuses a product moves through, how a product is onboarded and approved, how it is removed, and how the firm matches what clients actually hold against what it has approved. It closes with firm and advisor responsibilities and an example written process.
It is the first of five guides in the Product series. Material Change covers how approved products are monitored and alerts are raised, and From Alert to Decision covers how alerts are reviewed. Client-level follow-up is outside its scope.
The register is the single, authoritative record of every product the firm has assessed, what it decided, and where each product stands today.
Most firms already have a product list. The difference between a list and a register is that a register carries status, ownership and evidence, and is the source every other system reads from. A spreadsheet maintained by one person, a fund list in the order entry system and a separate list of approved alternatives are three registers, and they will disagree.
| Field Group | What It Holds | Why It Matters |
|---|---|---|
| Identity | Legal name, issuer or manager, all identifiers (ISIN, CUSIP, FundSERV code, ticker), every series or share class | Holdings can only be matched to the shelf if every identifier is recorded |
| Classification | Product type, asset class, liquidity profile, complexity tier | Drives which monitoring rules apply and how deep the review is |
| Status | Current status, date set, and who set it | Tells order entry, advisors and supervision what is allowed today |
| Conditions | Any restrictions: eligible advisors, training required, pre-approval, concentration limits | Conditions that live only in a committee minute are not enforced |
| Ownership | Named product owner and analyst | Every alert needs someone to route to |
| Assessment | Link to the current KYP file: structure, features, risks, costs, parties | The baseline every change is tested against |
| History | Approval record, every review and decision, alerts raised and closed | Shows the product has been monitored, not just approved |
| Monitoring | Rule set applied, data sources, last successful check, next scheduled review | Exposes products that are on the shelf but not actually being watched |
Record at the series level, not just the fund level. Series of the same fund can have different fees, trailers and eligibility. If the register says "Example Balanced Fund - approved" without listing which series, the firm can't tell whether a client holding an unusual series is on or off the shelf. Mutual Funds & ETFs covers why series matter.
Depth follows complexity. Canadian regulators have said the depth of product review can scale with the product.[1] A complexity tier in the register lets the firm apply a lighter process to a broad-market index ETF and a deeper one to a private credit fund, and show that it did so on purpose.
Every product in the register has exactly one status. The statuses should match the decision outcomes used in product reviews, so a review decision changes the status directly rather than being translated by hand.
| Status | New Purchases | Monitoring | Moves To |
|---|---|---|---|
| Proposed | No | None yet | Under review, or declined |
| Under review | No | None yet | Approved, approved with conditions, or declined |
| Approved | Yes | Full rule set | Watch, restricted, suspended, wind-down |
| Approved with conditions | Yes, within the conditions | Full rule set | Approved, suspended, wind-down |
| Watch | Yes | Full rule set plus a set review date | Approved, restricted, suspended, wind-down |
| Suspended | No | Continues on existing holdings | Approved, wind-down |
| Wind-down | No | Continues until holdings reach zero | Removed |
| Removed | No | Stops, record retained | Proposed, if resubmitted |
| Declined | No | None | Proposed, if resubmitted |
Status has to reach order entry. A status that lives only in the register doesn't stop anything. The value of a suspension is that the next purchase order is blocked or flagged at the point of entry. Firms that can't connect the register to order entry need a compensating control, such as a daily exception report of purchases in suspended or wind-down products.
Monitoring doesn't stop at suspension. Suspended and wind-down products are still held by clients, and still change. Rules should keep running until the last position is gone.
Onboarding is where the firm builds the baseline that every later alert is measured against. A thin approval record makes every future review harder.
In the KYP HubWhat to assess for each security type: equities, mutual funds and ETFs, structured products, segregated funds and annuities, model portfolios and alternatives and private markets.
Define what counts as new. A new series of an approved fund, a new tranche of a structured note program, or a fund that has merged into another may or may not need full onboarding. The written process should say which changes are treated as a new product, which as a material change to an existing one, and which as administrative. NASD's new product guidance, now carried by FINRA, calls for clear, specific and practical guidelines on this.[3]
Set up monitoring before launch, not after. A product that goes live before its rules run is approved but unmonitored. The simplest control is that order entry stays closed until the register confirms the first successful monitoring check.
Scale the depth. An illustrative tiering:
| Tier | Examples | Due Diligence | Approver |
|---|---|---|---|
| Standard | Broad-market index ETFs, money market funds | Standard template; data review; cost comparison against similar products | Product owner |
| Enhanced | Actively managed mutual funds and ETFs, sector and thematic ETFs | Standard template plus manager, process and cost analysis; comparison against approved alternatives | Product committee |
| Complex | Structured products, leveraged or inverse ETFs, alternative mutual funds, private funds | Full review including structure, liquidity, valuation, counterparty and scenario analysis; conditions considered | Product committee, with compliance sign-off |
Canadian regulators have noted that firms should apply added scrutiny to more costly products,[1] so the cost comparison belongs at every tier. Product-specific checklists are in Alternatives & Private Markets and Structured Products.
Canadian regulators expect approval records to show "meaningful consideration" of the key elements assessed.[1] Third-party research can support the assessment, but the firm should document its own analysis.[1] The example below uses a hypothetical fund.
The cost line is the one most often left thin. Recording which approved products it was compared against, and why the firm accepted a higher fee, is what turns a cost figure into an assessment.
Removing a product takes longer than adding one. The decision is quick; the clients who still hold it are the part that takes time.
The removal decision should settle four things at once: the effective date for stopping new purchases, whether existing holdings can stay or should be moved, what advisors are told and when, and the date by which the wind-down should be finished. Leaving any of these open is how products end up suspended for years with no plan.
Illiquid products need their own path. Where a product can't be sold easily because of redemption limits or gates, Canadian regulators note that halting new sales may be the practical response while the firm works through the rest.[1] The wind-down plan should recognize the product's redemption terms rather than set a date that can't be met.
| When | Firm | Advisors |
|---|---|---|
| Decision day | Status set to wind-down; new purchases blocked in order entry; exposure report run by advisor and account | Receive the notice, the reason and the plan |
| Week 1 | Product summary updated to explain the removal and the reasons for it | Read the updated summary and acknowledge |
| Weeks 2 to 8 | Track remaining positions; monitoring continues on the product | Work through affected accounts under the firm's client processes |
| Target date | Review remaining positions; record why any remain and set a follow-up date | Record reasons for any positions that remain |
| Last position | Status set to removed; monitoring stops; record retained | None |
Some positions will stay. Tax consequences, deferred sales charges, redemption gates or a client's own decision can all mean a product remains held after removal. The register should keep these positions visible as known exceptions, with a reason recorded, rather than letting them drop out of view.
Keep the record. A removed product's approval, reviews, alerts and removal decision stay in the register. If a regulator asks about a product the firm offered three years ago, the answer should be a lookup, not a search.
The shelf says what the firm approved. Holdings say what clients actually own. The gap between the two is where KYP programs quietly break.
Mapping takes each position in every account and links it to a product record in the register. Once a position is mapped, alerts on that product reach the right advisors, exposure reports are accurate, and suspended products can be tracked down to the account. A position that isn't mapped is invisible to all of it.
Match on the most specific identifier. Matching a mutual fund on its name, or an ETF on ticker alone, will map different series or listings to the same record. Use FundSERV codes for Canadian mutual fund series, ISIN or CUSIP for listed securities and notes, and a firm-assigned identifier for private products that have none.
Run it daily. New accounts transfer in, corporate actions create new identifiers, and funds merge. Mapping that runs monthly means a month in which new positions receive no alerts.
Measure the match rate. The share of positions and of assets mapped to the register is one of the simplest measures of whether a KYP program covers what clients actually hold. The fifth guide, Supervising a KYP Program, sets out how to track it.
| Exception | Typical Cause | Owner | Resolution |
|---|---|---|---|
| Identifier gap | The product is approved but a series, listing or new identifier is missing from the register | Product operations | Add the identifier; confirm the series is covered by the approval |
| Corporate action | Merger, split, name change or conversion created a new security | Product operations | Map to the successor product; if the successor isn't approved, open a review |
| Transferred in | A client brought a product from another firm that isn't on the shelf | Product owner | Decide whether to assess it, hold it as a known off-shelf exception with monitoring, or apply the firm's process for unapproved holdings |
| Legacy holding | A product was removed but positions remain | Product owner | Keep in wind-down status with a reason and a follow-up date |
| Unidentified | The position can't be identified from the data available | Data owner | Fix the source data; escalate if unresolved within a set period |
Off-shelf doesn't mean unmonitored. A transferred-in product that the firm decides to hold as a known exception should still have basic monitoring, so that a significant change still reaches the advisor. The register can carry these products with their own status, such as "held, not approved for new purchases", rather than leaving them outside the system altogether.
Exceptions age. An exceptions list that grows every month is a sign that onboarding or data setup is falling behind. Aging buckets (under 30 days, 30 to 90, over 90) make that visible.
Most of the shelf is the firm's to run. The advisor's part is smaller but not optional: knowing what is on the shelf, in what status, and acting within it.