The Know Your Client or Know Your Customer or KYC can be explained as a defined rule in the investment sector that makes sure that the investment consultants have the detailed data about their clients' risk tolerance, investment knowledge, and financial positions.
KYC secures both customers and investment advisors. Customers are secured by having their investment consultant recognize what investments best suit their own circumstances.
Investment consultants are secured by realizing what they can and cannot add in their customer's portfolio.
KYC compliance generally includes prerequisites and strategies like risk management, client acceptance policies, and monitoring of transactions.
The Know Your Customer (KYC) rule is an moral necessity for those in the stocks industry who are managing clients during the opening and maintainence of accounts.
There are two principles which were actualized in July 2012 that cover this theme together: Financial Industry Regulatory Authority Rule 2090 and FINRA Rule 2111.
These principles are set up in order to secure both the broker and the client and so that agents and firms manage with customers fairly.
The Know Your Customer Rule 2090 basically expresses that each broker should utilize sensible effort when opening and keeping up of customer accounts.
It is a necessity to know and keep records on the basic facts of every client, just as recognize every individual who has position to act on the client's behalf.