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Know-Your-Customer Rule

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know-your-customer rule
A requirement that brokers understand the financial needs and circumstances of a customer before providing investment advice.

Know-Your-Customer Rule
A FINRA rule requiring investment advisers to only make or recommend investments for their clients' accounts that a "prudent person" would make. This means that investment advisers are not allowed to make investments they believe will lose money for the client. It does not require that the investment adviser always make correct decisions; it merely requires him/her to make decisions that will be generally accepted as sound for someone of average intelligence. FINRA codifies the know-your-customer rule in Rule 405. It is also called the suitability rule. See also: Prudent-Person rule.


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Vodafone and Nokia have both been lobbying for a revision of the regulatory framework that would open up the African markets for deposit-taking, clearing systems, and know-your-customer rules to incorporate the activities of mobile operators.
New know-your-customer rules are making the use of traditional anonymous companies and trusts almost impossible.
To avoid regulatory problems, the traditional private client is increasingly stuck into a pooled fund, which comes with best advice and know-your-customer rules.
 
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