In the context of investment services, what does the concept of agency refer to?

Agency exists when an Investment Dealer acts on behalf of a client in carrying out an authorized transaction. The client is the principal, and the dealer or its representative functions as the agent for the purpose of executing the client’s instructions. This relationship creates obligations to act diligently, respect client priority, seek appropriate execution and avoid placing the dealer’s interests ahead of the client’s interests.

Agency does not authorize automatic trading without client approval. Unless the account is properly established and approved as discretionary or managed, the representative must obtain the client’s authorization before executing a trade. An Investment Dealer also cannot unilaterally alter a client’s risk profile because market conditions change. Risk-profile information is established through the KYC process and must accurately represent the client’s willingness and ability to accept loss. Option C is incorrect because clients are not legally compelled to accept a representative’s recommendation; a client may reject advice or issue unsolicited instructions, subject to the dealer’s regulatory response.

CIRO’s Retail Securities syllabus includes agency as a central component of the firm–client relationship. CIRO’s market-integrity guidance further recognizes that a dealer handling client orders has overriding agency responsibilities and must act reasonably and diligently in obtaining execution for the client.

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