Master Element 9 of the RSE exam - the second largest section at 21% (26 questions). Learn CRM2 performance reporting, MWRR vs TWRR, complaint handling timelines, OBSI process, and continuing education requirements.
RSE Exam Element 9: Monitoring & Client Relationships (~21%, 26 Questions)
This is the second-largest section of the RSE exam. While Element 1 is about opening accounts and initial recommendations, Element 9 is about keeping the relationship compliant over time.
Performance & Cost Reporting (CRM2)
Performance Reporting Requirements
Firms must provide an Annual Investment Performance Report including:
- Total market value
- Total deposits/withdrawals
- Change in value
- Annualized total percentage return
MWRR vs TWRR - Critical Distinction
| Method | Perspective | Use | Impact of Cash Flows |
|---|---|---|---|
| MWRR (Money-Weighted) | Client-Centric | Client statements (CRM2 required) | Accounts for timing and size of deposits/withdrawals |
| TWRR (Time-Weighted) | Manager-Centric | Fund marketing (Fund Facts) | Eliminates impact of cash flows |
Example: If a client adds $100k right before a crash, their MWRR will look terrible because their specific dollars lost value. TWRR shows how the fund performed objectively.
Fee and Charge Reporting
Annual Report on Charges and Compensation must show:
- Total dollar amount paid to the firm
- Commissions and trailing commissions
- Admin fees and bond markups
Account Statements
- Frequency: At least Quarterly; Monthly if there is trading activity
- Content: Must list all assets at "Market Value," not "Book Value" (cost)
Relationship Review Triggers
Under CFR, you must review the client's account when:
- A significant market event occurs (e.g., market drops 20%)
- A material change in the client's KYC occurs (e.g., job loss)
- The portfolio drifts significantly from target asset allocation
Complaint Handling
The Timeline
- Step 1 (5 Business Days): Acknowledge receipt of complaint
- Step 2: Investigate fairly
- Step 3 (90 Days): Provide substantive response (final decision)
Advisor's Duty
- RRs cannot be the judge of their own case
- Must report complaints to Branch Manager/Compliance immediately
- Violation: Hiding a complaint leads to fines, suspension, or termination
- Prohibition: Advisors cannot settle complaints directly with clients
OBSI (Ombudsman for Banking Services and Investments)
What is OBSI?
The national, independent dispute resolution service for the investment industry.
When Can Clients Escalate to OBSI?
- Not satisfied with the firm's Substantive Response
- Firm has not responded within 90 days
OBSI Details
- Can review claims up to $350,000
- Historically recommendations were "non-binding" (Name and Shame)
- Free for clients
CIRO Arbitration Program
- Alternative to OBSI for disputes
- Maximum claim: $500,000
- Decision is legally binding on both parties
- Involves costs (unlike OBSI)
Operations & Record Keeping
Updating KYC
- Periodic: Regular reviews (e.g., annual check-in)
- Material Change: Immediate update required (e.g., retirement, divorce)
Record Keeping
- Records (trade tickets, KYC forms, statements) must be kept for 7 years
- Electronic communications (email, chat, text) must be captured and archived
- RRs generally cannot use personal email for client business
Professional Conduct & Ethics
Continuing Education (CE)
- Cycle: 2-year cycles
- Requirements: Compliance course (12 hours) + Professional Development (30 hours)
- Failure: Results in suspension
Outside Business Activities (OBA)
RRs must update their firm immediately if their OBA changes. Firms usually require annual attestation.
Personal Trading (PRO Accounts)
Pre-Clearance: RRs usually must get permission from Compliance before trading for themselves to ensure they aren't front-running clients.
Registration & Legal Issues
Registration Categories
- RR (Registered Representative): Can give advice and trade
- IR (Investment Representative): Can trade (take orders) but cannot give advice
Client Mobility
To advise a client, you must be registered in the province where the client resides.
Unclaimed Property
If a client "disappears" (no contact, mail returned) for a set period (e.g., 3 years), the account is deemed dormant. Eventually, assets may be sent to provincial administrator.
Estate Settlement
- Upon death, account is "Frozen" (no trading allowed)
- Documents needed: Death Certificate, Notarized Will, Letter of Direction from Executor
- Step-up: Assets deemed sold at FMV on date of death (triggering taxes), estate gets assets at new cost base
RSE Exam Tips for Element 9
- MWRR for client statements; TWRR for fund marketing
- Complaint timeline: 5 days acknowledge, 90 days substantive response
- OBSI limit: $350,000 (free, historically non-binding)
- Arbitration limit: $500,000 (binding, has costs)
- Records kept for 7 years
- CE cycle: 2 years (12h compliance + 30h professional development)
- RR can advise and trade; IR can only take orders