A client, Ms. Chen, informs her registered representative that she received a $500,000 inheritance last month and wishes to invest it entirely into high-growth junior gold stocks. Her existing portfolio is balanced, and her stated risk tolerance on her last KYC form, completed 18 months ago, indicated 'medium'. Ms. Chen is 58 years old and plans to retire in seven years. What is the most appropriate action for the registered representative?

Question: A client, Ms. Chen, informs her registered representative that she received a $500,000 inheritance last month and wishes to invest it entirely into high-growth junior gold stocks. Her existing portfolio is balanced, and her stated risk tolerance on her last KYC form, completed 18 months ago, indicated 'medium'. Ms. Chen is 58 years old and plans to retire in seven years. What is the most appropriate action for the registered representative?

Answer options: ✅ Update Ms. Chen's KYC information and conduct a new suitability assessment considering her new financial situation and investment objectives prior to making any recommendations.

• Proceed with the investment as requested, as Ms. Chen has new funds and clearly stated her preference, provided she signs a risk acknowledgment.
• Advise Ms. Chen that junior gold stocks are too risky and recommend a diversified portfolio of blue-chip equities instead.
• Suggest investing $100,000 in junior gold stocks and keeping the remainder in a GIC, as a compromise.

Correct answer: Update Ms. Chen's KYC information and conduct a new suitability assessment considering her new financial situation and investment objectives prior to making any recommendations.

Explanation: Under NI 31-103, a registrant must take reasonable steps to ensure that an investment action is suitable for the client. A significant change in financial circumstances and investment objectives requires updating KYC information and reassessing suitability before any new recommendations or transactions are processed.