Sarah, a registered representative, has a standing instruction from her client, David, to purchase $1,000 of a specific cryptocurrency every month. David's risk tolerance on record is 'high,' and his investment objective is 'growth.' However, the value of his existing holdings in this cryptocurrency has fallen by 80% over the last six months, representing over 50% of his total portfolio. What is Sarah's appropriate next action under NI 31-103?

Question: Sarah, a registered representative, has a standing instruction from her client, David, to purchase $1,000 of a specific cryptocurrency every month. David's risk tolerance on record is 'high,' and his investment objective is 'growth.' However, the value of his existing holdings in this cryptocurrency has fallen by 80% over the last six months, representing over 50% of his total portfolio. What is Sarah's appropriate next action under NI 31-103?

Answer options:

• Continue executing the standing instruction as it aligns with David's high risk tolerance.
• Inform David that she will no longer execute the standing instruction due to the significant loss, and re-evaluate his suitability. ✅ Re-assess David's KYC information, particularly his risk tolerance and ability to withstand further losses, before executing the next transaction.
• Advise David to diversify his holdings and then proceed with the standing instruction.

Correct answer: Re-assess David's KYC information, particularly his risk tolerance and ability to withstand further losses, before executing the next transaction.

Explanation: Registrants must re-assess suitability and KYC information when there is a material change in a client's situation or the investment, such as significant losses, which could impact their ability to bear future losses or their effective risk tolerance.