MiFID II Information Note (applicable starting on )

Transcription

1 MiFID II Information Note (applicable starting on ) GARANTI BANK SA (the Bank) offers its clients investment services in connection to the financial instruments subject to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II) hereinafter referred to as MiFID II Directive. MiFID II Directive increases market transparency and investor protection and is aimed at improving the fair competitive terms between market participants. For this purpose, GARANTI BANK SA aligned with the new MiFID II provisions, and the documents elaborated/updated accordingly are published and available to clients at any time on the Bank s official web page. For additional questions or information regarding this note or details related to the impact of MiFID II Directive amendments on your relationship with GARANTI BANK SA you may contact the Treasury and Financial Institutions Directorate at any time, at the Bank s headquarters or by sending an to infomifid@garantibank.ro.

2 CLIENT INFORMATION PACKAGE MiFID II The present information package provides the clients of GARANTI BANK SA with information regarding the financial services provided by the Bank so that the client is able to understand the nature and risks related to investment services, ancillary services and the specifics of the financial instruments offered and to make informed investment decisions. The present information package shall be made available to clients before signing the specific contracts with GARANTI BANK SA and the documents related to the application for account opening. On a regular basis, GARANTI BANK SA shall update this information package, as the case may be, and the updated versions shall be made available to the clients on GARANTI BANK SA webpage,. CONTENTS I. INFORMATION ON GARANTI BANK SA II. III. IV. SAFEKEEPING OF CLIENTS ASSETS CLIENT CLASSIFICATION FINANCIAL INVESTMENT SERVICES OFFERED TO THE CLIENTS OF GARANTI BANK SA V. EXECUTON OF ORDERS RECEIVED FROM GARANTI BANK SA CLIENTS VI. REPORTS TO GARANTI BANK SA CLIENTS VII. FINANCIAL INSTRUMENTS, RISKS RELATED TO INVESTMENTS IN FINANCIAL INSTRUMENTS VIII. INDUCEMENTS PAID TO THE BANK FOR SELLING FINANCIAL INVESTMENT SERVICES IX. BASIC PRINCIPLES FOR MANAGING CONFLICTS OF INTERESTS X. FEES AND RELATED COSTS XI. SOLVING COMPLAINTS

3 Name I. INFORMATION ON GARANTI BANK SA GARANTI BANK SA Registered office București,, Novo Park 3, Clădirea F, Et. 5 si 6, sector 2 Registration number in the Register of Commerce J40/4429/2009 Sole registration code RO Number in the register of credit institutions RB-PJR / Share capital RON 1,208,086,946 Bank account RO33UGBI BNR Centrala Contact details for the communication with GARANTI BANK SA representatives regarding investments and transactions with financial instruments, your assets and reports related to your transactions. Treasury and Financial Institutions Directorate MiFID II Department Treasury Back Office Directorate MiFID II Department Compliance Directorate MiFID II Department Address: București, Sos. Fabrica de Glucoza nr. 5, Novo Park 3, Clădirea F, Et. 5 si 6, sector 2 Telephone: Fax: infomifid@garantibank.ro. Address: Bucuresti, Sos. Fabrica de Glucoza nr. 5, Novo Park 3,, sector 2 Telephone: Fax: mifidbackoffice@garantibank.ro Address: Bucuresti, Sos. Fabrica de Glucoza nr. 5, Novo Park 3,, sector 2 Telephone: Fax: mifid_conformitate@garantibank.ro

4 MiFID II complaints Address: Bucuresti, Sos. Fabrica de Glucoza nr. 5, Novo Park 3, Cladirea F, Et. 5 si 6, sector 2 Telephone: Fax: reclamatiimifid@garantibank.ro GARANTI BANK SA clients may request and obtain any documents or information in Romanian and/or English language regarding the investments and transactions with financial instruments, own assets and reports related to own transactions. The working hours of GARANTI BANK SA is from Monday to Friday between hrs. The communications regarding the agreement with the terms and conditions of each transaction, sending orders and receiving confirmations, as well as any other types of notices/correspondence may be carried out by phone, fax, and/or durable medium. Details regarding the effective communication mean are included in the General Business Terms, as well as in the specific contracts you shall conclude with GARANTI BANK SA, depending on the selected product and service. C. II. SAFEKEEPING OF CLIENTS ASSETS GARANTI BANK SA shall take the appropriate measures to protect the clients financial instruments and funds, and their ownership and rights in connection therewith. GARANTI BANK SA shall keep the records and the accounts so as to endure their accuracy and especially the correspondence with the clients and shall regularly reconcile the internal accounts and its records with the ones of the third parties involved. GARANTI BANK SA may not conclude title transfer financial collateral arrangements with MiFID retail clients for the purpose of securing or covering present or future, actual or contingent or prospective obligations of clients [Directive 2014/65/EE, art. 16 par. (10)].

5 III. CLIENT CLASSIFICATION According to MiFID II Directive, clients are classified in three categories: MiFID retail clients MiFID professional clients MiFID eligible counterparties A. MiFID retail clients This category includes legal entities or individuals that do not meet the criteria regarding the knowledge and experience imposed by MiFID regulations to be classified as professional clients. This client category benefits from the highest protection in terms of the requirements for information, assessment, transparency, appropriateness of products or services provided and communication that the Bank shall observe in relation to them. B. MiFID professional clients This category includes clients who possess the necessary experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs. This category includes: entities which are authorised or regulated to operate in the financial markets (credit institutions, investment firms, other authorised or regulated financial institutions, insurance companies, pension funds, other institutional investors, etc.), unless they choose to be included in the eligible counterparties category; retail clients requesting to be included in the professional clients category. As an example, professional clients may receive less information regarding costs and fees. The Bank does not have the obligation: to inform on the major difficulties in carrying out the orders promptly and in the appropriate manner, to provide the reports with the same frequency as in the case of retail clients. Furthermore, in case of best execution, the Bank does not have the obligation to consider the total transaction costs as the most important factor, and during the opportunity and appropriateness tests, the Bank may assume that a professional client has enough knowledge and experience to understand the related risks and has the financial capacity to bear the related risks, according to its investment objectives.

6 How to become a professional client? In case you were included in the retail client category, you may request the Bank, in writing, to include you in the professional client category if you satisfy minimum two of the following criteria: for individuals: you have carried out transactions at an average frequency of 10 per quarter over the four quarters prior to the start of your business relation with GARANTI BANK SA, at the time of initiating your business relation with GARANTI BANK SA, the size of your investment portfolio is of minimum EUR 500,000 or equivalent (including bank deposits and financial instruments); you have worked for at least one year in a professional position, which requires knowledge of transactions with financial instruments and financial investment services. for legal entities: balance sheet total: EUR 20,000,000; net turnover: EUR 40,000,000; own funds: EUR 2,000,000. Details regarding the inclusion in the Professional Clients category and their assessment shall be provided by GARANTI BANK SA. upon request. C. MiFID Eligible counterparties This category includes the institutions operating in the financial sector, considered to have the necessary experience to make investment decisions based on their corporate profile (credit institutions, investment firms, other authorised or regulated financial institutions, insurance companies, pension funds, other institutional investors, etc.). In case of best execution, the Bank does not have the obligation, while executing the orders, to carry out appropriateness or opportunity tests, to provide information on the Bank and its services, the inducements received by the Bank for providing products and services or the risks related to such products and services.

7 IV. FINANCIAL INVESTMENT SERVICES OFFERED TO GARANTI BANK SA CLIENTS The financial investment services offered by GARANTI BANK SA are exclusively related to execution, as follows: main services o reception and transmission of orders in relation to one or more financial instruments; o execution of orders on behalf of clients; o dealing on own account. NOTE: GARANTI BANK SA does not carry our cross selling practices under which it offers an investment product together with another service or product as part of a package or to condition a deal or offer a package. ancillary services o safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level; o foreign exchange services where these are connected to the provision of investment services to clients. V. EXECUTON OF ORDERS RECEIVED FROM GARANTI BANK SA CLIENTS A) What is Best Execution? The Best Execution is the method by which the Bank makes sure that all the measures needed to obtain the best possible result in the execution of orders received from retail or professional clients are taken, considering the following factors: Price: refers to the price of the financial instrument, excluding the execution costs of GARANTI BANK SA. The price is usually the most important factor when the Bank considers the method to obtain the best possible result when executing clients orders. Costs: refer to the fees, costs and spreads charged for executing the client s order.

8 Speed: the "speed" must be construed as the shortest period possible in which the rate at which the Bank is able to execute orders shall be provided to the client, whereas the Bank provides execution only services. Likelihood of execution: the likelihood must be construed as the likelihood that the Bank executes the client s order or at least a substantial part thereof. Likelihood of settlement: our transactions shall be generally settled in an orderly manner and in due time. Size of the client s order: refers to the size of the order pro rata with the average trading volume of a specific financial instrument. The size of the client s order could be an important factor if the order exceeds the daily volume of a specific financial instrument. Large sized transactions could have an adverse effect on the price of the financial instruments involved. Nature of the client s order: sometimes the nature of the client s order determines conditions or restrictions for the Bank when executed. If, for example, the Bank places a limit order, it may face restrictions upon its execution. In certain cases, the trading venues do not accept limit orders. For a retail client, according to MiFID II Directive, the price of the financial instrument and the execution costs shall determine the best execution ( total cost ). For the Bank, the other factors above may have priority in obtaining the best possible result in terms of total cost. For a professional client, according to MiFID II Directive, the price and the costs shall usually be the most important execution factors, but the Bank shall also consider other factors in the context of all the relevant circumstances, including if there is a possibility to optimize the prices. B) Execution factors The Bank must take all the reasonable measures so as to obtain, when executing the orders, the best possible result for its clients, considering the execution factors in the execution of the clients orders. The Bank shall consider a hierarchy of factors listed in terms of their relative importance. The hierarchy of the execution factors is presented in Annex 1. C) Trading venues The Bank executes the clients orders using one of the following methods or combinations of methods:

9 directly on a regulated market (hereinafter referred to as RM ), a multilateral trading facility (hereinafter referred to as MTF ) or an organised trading facility (hereinafter referred to as OTF ), of which the Bank is a member or to which it participates; indirectly on a RM, MTF or OTF, in case GARANTI BANK SA is not registered as direct member or participant to the relevant trading venue. It should be mentioned that GARANTI BANK SA may also execute transactions outside the rules of a RM, MTF or OTF (off-exchange), especially in case of product complex clauses, non-standard maturities, etc. or in case a RM, MTF or OTF is not available for the specific product. The following general rules apply when clients orders are executed outside a MTF, RM or OTF: with high quality counterparties dealing on own account or acting as systematic internalisers; execution on own account; through other alternative trading systems (hereinafter referred to as OTC - over the counter ). GARANTI BANK SA does not have the right to execute the off-exchange clients orders without their prior agreement. The list of the execution venues used by GARANTI BANK is included in Annex 2. D) Best execution for the direct request for quotes (hereinafter referred to as RFQ ) When GARANTI BANK SA provides a price or negotiates with a retail or professional client, it shall assess, from case to case, if the client truly relies on the Bank to protect its interests. In assessing this, the Bank shall rely on the following cumulative factors: 1. Who initiated the transaction? When the client initiates the transaction, it is less probable that it relies on the Bank to protect its interests. 2. The existence of a practice to request quotes from several sources makes it less probable that a client relies on the Bank to protect its interests. 3. Price transparency. In case the Bank has access to market prices, and the client does not, there is a higher probability that the client relies on the Bank to protect its interests.

10 4. Agreement. If there is an agreement between GARANTI BANK SA and the client in which the parties agree if the Bank is liable or not for the best execution. After considering these cumulative factors, GARANTI BANK SA may conclude if the best execution rules included herein apply or not to the execution of the client s order. E) Order management and execution In executing the clients orders, the Bank shall make sure that: the orders are sent and allocated in a fast and precise manner, and the clients orders are executed promptly, as soon as received; the clients similar orders are executed in sequences, unless the market conditions prevent the Bank to do so; retail clients shall be notified regarding any major difficulty that could impact on the best execution of their order; the orders sent for off-exchange transactions shall be executed only after obtaining the client s written agreement; the limit orders (buy and sell) shall be immediately placed in the trading system, irrespective if they can be executed immediately according to market conditions, unless the client sends express instructions in writing; there is no wrong application of the information regarding valid but not executed clients orders and all the reasonable measures shall be taken to prevent the inappropriate use of such information by relevant persons ; exceptions shall apply only in the following circumstances: in case the specifics of the client s order or the market conditions need to be managed differently; in case the client s special interests need to be managed differently. F) Monitoring and verification GARANTI BANK SA shall monitor the implementation of the Policy for best execution, and its efficiency shall be assessed on a regular basis (at least annually). G) Inducements and other benefits GARANTI BANK SA shall not receive any remuneration, discount or non-monetary benefit for routing client orders to a particular trading venue or execution venue which would infringe

11 the MiFID Directive requirements on inducements or the internal policy on conflicts of interest. VI. REPORTS TO GARANTI BANK SA CLIENTS GARANTI BANK SA shall send to its clients at least the following reports regarding the main financial investment services provided: confirmation of order execution The confirmation of order execution is sent immediately after the transaction is closed and, in case of retail clients, the latest on the first business day following order execution. If GARANTI BANK SA receives the confirmation from a third party, the report is sent the latest on the first business day following the one in which the confirmation from the respective third party is received. The report shall contain, without being limited to, details regarding the price, date, venue of order execution. In case the Client is a professional client, the Bank shall immediately send to it information regarding the execution of its order. Upon the Client s request, the Bank shall inform it regarding the execution status of its order. portfolio status GARANTI BANK SA shall notify the retail clients holding financial instruments positions with leverage or transactions with contingent liabilities, in case the initial value of each instrument depreciates by 10 % and subsequently by multiples of 10 %. status of the costs for the financial instruments traded through GARANTI BANK SA GARANTI BANK SA shall prepare an annual report, in a durable medium, on the status of the total costs related to the financial instruments traded with GARANTI BANK, as well as the estimate of their total effect on their profitability. The reports shall be sent to the Client using the communication means agreed in the specific contracts. Under the specific contracts, other types of reports to be sent to the Client may also be agreed, including details regarding the nature, frequency and period related to such reports.

12 VII. FINANCIAL INSTRUMENTS, RISKS RELATED TO INVESTMENTS IN FINANCIAL INSTRUMENTS Description of the financial instruments offered to retail and professional clients by GARANTI BANK SA: A) BONDS 1) Definition and main features Bonds are fix income financial instruments in the form of securities by which the investor finances the issuer of the bond over a well determined time period, at a fixed or fluctuating interest rate (coupon). Depending on the type of issuer, bonds may be: - governmental - municipal - corporate At present, GARANTI BANK SA offers its clients only governmental bonds issued by the Romanian state. An alternative classification of bonds may be made according to their maturity, as follows: - bonds with maturities of less than 1 year; - bonds with maturities exceeding 1 year. Being secured instruments, bonds are traded on the so called secondary market, where their holders trade between them without the intervention of the issuer. The price at which the bonds are traded on the secondary market may be different from the price at which the issuer had sold the bonds to the initial investors (primary market). The price at which the bond is traded on the secondary market impacts on the investment yield. The yield is the calculated return of the investment in bonds considering all the cash flows related to such investment (buy price, redemption price upon maturity, coupons). Bonds are addressed to investors with risk appetite or to the ones willing to reduce the risk of investments. 2) Risks related to an investment in bonds An investment in bonds is subject to the following main risk categories:

13 credit risk is the risk of failing to meet the issuer s payment obligations; interest rate risk represents the appreciation/depreciation of the value of an investment in bonds as a result of interest rate volatility. As a general rule, the price of one bond decreases following an increase in the interest rates; liquidity risk refers to certain bonds that, being traded less frequently, have a price lower than the price of some similar bonds that are traded more frequently. B) FX Forward transactions 1) Definition and main features Forward transactions represent the firm agreement between the client and GARANTI BANK to carry out a foreign exchange transaction at a well-defined future date (maturity date) and at a pre-set rate (forward rate). The forward rate is decided based on the exchange rate valid at the time the transaction is initiated and on the interest rates. FX forward instruments are mainly addressed to legal entities exposed to foreign exchange fluctuations (e.g. exporters, importers) willing to cover this risk. 2) Risks related to FX Forward transactions A FX Forward transaction is subject to the following main risk categories: foreign exchange risk upon maturity is the risk that, upon maturity, the forward rate is less favourable than the exchange rate that the client could have obtained at the respective time; foreign exchange risk represents the loss that the client would register in case of an unfavourable evolution of the exchange rate and in case it decides to close the transaction before its maturity; operational risk refers to the malfunction of systems, which may have an adverse effect on all the financial products. C) FX Swap contracts 1) Definition and main features

14 An FX Swap contract represents the firm agreement between the client and GARANTI BANK SA to carry out two opposite foreign exchange transactions, with a similar value, at different times and different exchange rates. The foreign exchange transaction at the closest moment in time is called the spot transaction, while the transaction at the furthest moment in time is called forward transaction. The economic meaning of an FX Swap refers to the fact that a client shall borrow from GARANTI BANK SA in the currency bought by means of the spot transaction and, at the same time, shall grant a loan to GARANTI BANK SA in the currency it sells by means of the spot transaction. The difference in the interest rates of the two loans is covered by the difference between the rate of the forward transaction and the one of the spot transaction. 2) Risks related to FX Swap transactions A FX Swap transaction is subject to the following main risk categories: interest rate risk is the loss that the client would register in case of an unfavourable evolution of the interest rates in both currencies and in case it decides to close the transaction before the maturity; foreign exchange risk represents the loss that the client would register in case of an unfavourable evolution of the exchange rate and in case it decides to close the transaction before its maturity; operational risk refers to the malfunction of systems, which may have an adverse effect on all the financial products. D) Interest Rate Swap contracts (hereinafter referred to as IRS ) 1) Definition and main features Interest rate swap contracts represent the firm agreement between the client and GARANTI BANK SA to exchange two cash flows denominated in the same currency or in different currencies accompanied by an exchange of fix or fluctuating interest rate flows (in case of a fluctuating rate a reference fluctuating rate shall be provided). The two cash flows are equivalent in value in case they are denominated in different currencies. 2) Risks related to IRS transactions An IRS transaction requested by the client is subject to the following main risk categories:

15 interest rate risk is the loss that the client would register in case of an unfavourable evolution of the interest rates and in case it decides to close the transaction before the maturity; foreign exchange risk represents the loss that the client would register in case of an unfavourable evolution of the exchange rate (if the cash flows are denominated in different currencies) and in case it decides to close the transaction before its maturity; operational risk refers to the malfunction of systems, which may have an adverse effect on all the financial products. VIII. INDUCEMENTS PAID TO THE BANK FOR SELLING FINANCIAL INVESTMENT SERVICES AND OTHER REVENUES OBTAINED BY GARANTI BANK SA IN RELATION TO FINANCIAL INSTRUMENTS Inducements may consist in taxes, fees, benefits or other monetary advantages paid or offered by the clients or a third party in connection to the provision of discretionary services or the provision of products. In case the Bank receives such inducements, it shall make sure that these shall be allocated and distributed equally to each client, as soon as possible after the same are received by the Bank. The Bank shall inform the clients about the inducements allocated and transferred to them by means of the regular reports sent to the clients. The bank shall not accept non-monetary advantages/benefits in connection to the provision of an investment service or an ancillary service to or from any person, save for the client or a person acting on behalf of the client, unless the payment or the benefit: aims to improve the quality of the respective service offered to the client; and does not affect the obligation of the investment firm to act honestly, fairly and professionally in accordance with the best interests of its clients.

16 IX. BASIC PRINCIPLES FOR MANAGING CONFLICTS OF INTERESTS Internal regulations regarding conflicts of interests contain clear identification elements of the types of conflicts of interests that arise in the course of providing investment and ancillary services and whose existence may damage the interests of a client. The Bank shall take into account, by way of minimum criteria, whether the Bank or a relevant person, or a person directly or indirectly linked by control to the Bank, is in any of the following situations: The Bank or the person involved is likely to make a financial gain or avoid a financial loss, at the expense of the client; The Bank or the person/persons involved has/have an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of the client, which is distinct from the client's interest in that outcome; The Bank or the person/persons involved receives/receive a financial or other incentive to favour the interest of another client or group of clients over the interests of the client; The Bank or the person/persons involved carries/carry on the same business as the client; The Bank or the person/persons involved receives/receive or shall receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monetary or non-monetary benefits or services. The Bank shall consider, on a preferential basis, the interest of its clients during the provision of services, which shall come before the interests of the Bank or its employees. The Bank shall implement all the reasonable measures to assure an equal treatment between the clients, avoiding to favour certain persons. The Bank shall not induce to its clients to carry out operations that are not appropriate only with the purpose of generating profit (monetary or otherwise) for the Bank or for another client. The Bank shall establish separate areas and information barriers regarding the activities triggering the risk of conflicts of interests when the exchange of information may hinder the interests of one or more clients. The Bank shall eliminate the direct link between the remuneration of the employees carrying out an activity and the remuneration of the other employees carrying out another activity when a conflict of interests may arise in connection to such activities.

17 X. FEES AND RELATED COSTS Information on all the fees and related costs charged for the financial services offered by GARANTI BANK SA are aggregated so as to allow the client to understand the global cost, as well as the cumulative effect of its yield and to provide the client, upon its request, a detailed breakdown. The maximum costs for each category of financial instrument offered by GARANTI BANK SA are presented below: FX Forward FX Swap Bonds IRS 1% of the nominal value of the transaction 1% of the nominal value of the transaction 1% of the annual yield of the bond 1% of the annual yield XI. SOLVING COMPLAINTS GARANTI BANK SA has established an internal procedure for solving complaints correctly and promptly according to the applicable regulations. In case the client wishes to submit a complaint regarding any aspect of its relationship with the Bank, it shall address the Bank using the contact details included in Chapter 1. After receiving the complaint, the Bank shall analyse, assess and investigate the aspects subject to the complaint and shall send an answer to the client according to the provisions in force.

18 ANNEX 1 Hierarchy of execution factors A) Foreign exchange market instruments: OTC Derivatives 1) Price 2) Cost The foreign exchange derivative instruments are mainly traded on the offexchange market (OTC), where the market makers (high quality counterparties or systematic internalisers) offer prices based on direct requests for quotes (RFQ). 3) Probability of execution, Speed, Size of the order Most of the clients orders shall be executed in full and immediately upon receipt. B) Fix income instruments Bonds 1) Price 4) Cost Bonds are mainly traded on the off-exchange market (OTC), where the market makers (high quality counterparties or systematic internalisers) offer prices based on direct requests for quotes (RFQ). 5) Probability of execution, Speed, Size of the order Most of the clients orders shall be executed in full and immediately upon receipt. C) Interest rate instruments OTC Derivatives 1) Price Interest rate instruments are mainly traded on the off-exchange market (OTC), where the market makers (high quality counterparties or systematic internalisers) offer prices based on direct requests for quotes (RFQ).

19 2) Cost 3) Probability of execution, Speed, Size of the order Most of the clients orders shall be executed in full and immediately upon receipt. Annex 2 List of trading venues A) FX Instruments OTC Derivatives The Bank may execute the clients orders by dealing on own account. Bloomberg MTF Reuters MTF B) Fix income instruments Bonds The Bank may execute the clients orders by dealing on own account. Bloomberg MTF Reuters MTF C) Interest rate instruments OTC Derivatives The Bank may execute the clients orders by dealing on own account. Bloomberg MTF Reuters MTF

20 The present Client Information Package elaborated by GARANTI BANK SA was provided to you for information purposes, to offer credible information when using the services provided by the Bank in connection to one or more financial instruments and shall not be construed as a contract. Thank you.