Know Your Customer (KYC)
The obligation to gather and use essential facts about each client.
What is Know Your Customer (KYC)?
FINRA Rule 2090 requires reasonable diligence to know the essential facts about every customer and anyone authorized to act for them. It underpins suitability, best-interest analysis, and anti-money-laundering compliance.
Know Your Customer (KYC): a worked example
Documenting income, net worth, objectives, and risk tolerance at account opening and updating it periodically.
More terms in Regulation & Professional Duty
Fiduciary Duty
A legal obligation to act in the client's best interest.
Suitability Standard
A recommendation must be appropriate given the client's profile.
Regulation Best Interest (Reg BI)
SEC rule requiring broker-dealers to act in a retail client's best interest.
Registered Investment Adviser (RIA)
A firm registered to give advice for a fee, holding fiduciary duty.
Broker-Dealer
A firm that executes trades as agent (broker) or principal (dealer).
FINRA
The self-regulatory organization overseeing broker-dealers.
Securities and Exchange Commission (SEC)
The federal agency regulating securities markets.
SIPC
Insurance against broker failure - not against investment losses.