Mr. Lee, a client of a mutual fund representative, informs his representative that he recently sold his primary residence and received a substantial inheritance, significantly increasing his investable assets and changing his financial goals from long-term growth to capital preservation for a down payment on a new home. How should the representative categorize this change in Mr. Lee's circumstances?

Question: Mr. Lee, a client of a mutual fund representative, informs his representative that he recently sold his primary residence and received a substantial inheritance, significantly increasing his investable assets and changing his financial goals from long-term growth to capital preservation for a down payment on a new home. How should the representative categorize this change in Mr. Lee's circumstances?

Answer options:

• A minor adjustment requiring only a quick note in the client file. ✅ A material change that necessitates a full review and update of the KYC information.
• An opportunity to suggest higher-risk investments due to increased wealth.
• A change that only affects his short-term liquidity, not his risk tolerance.

Correct answer: A material change that necessitates a full review and update of the KYC information.

Explanation: A substantial increase in assets, change in financial goals, and shift in investment horizon constitute a material change. This requires a comprehensive KYC update to ensure ongoing suitability of investments.