Client Classification Policy, when Rendering Investment Services and Ancillary Investment Services

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1 Client Classification Policy, when Rendering Investment Services and Ancillary Investment Services Objective The Client Classification Policy, when Rendering Investment Services and Ancillary Investment Services (hereinafter- the Policy) objective is to: - ensure compliance with requirements of the Commission Regulation (EC) No. 1287/2006, European Commission Delegated Regulation (EU) No. 2017/565 and the Financial Instruments Market Law, when rendering investment services and ancillary investment services to Bank clients; - to ensure protection of Bank client interests when receiving investment services and accompanying investment services at the Bank establishing criteria for assigning client status and general principles for ensuring client status. Acronyms and Definitions Bank - AS Expobank, unified registration number Client a person willing to receive or receiving investment services and/or accompanying services at the Bank as determined in the Law. Law the Financial Instruments Market Law of the RL. Service an investment service and/or accompanying investment service determined in the Law. Policy this Client classification policy rendering investment services and accompanying investment services. FI financial instruments. RL the Republic of Latvia. Description 1. KEY PRINCIPLES OF POLICY 1.1. The Policy was elaborated in compliance with requirements of RL and international regulatory enactments, it is revised when necessary but at least once a year, and the Policy (a description hereof) is available to Bank Clients The Policy determines principles for assigning and changing Client status; the process for establishing, assigning, and changing Client status is regulated by the Bank s procedures The Board of the Bank is in charge of execution of this Policy. 2. CLIENT STATUS CONTENT Approved on Effective as of th edition Page 1 of 5

2 2.1. The Bank grants Clients a status based on the Clients provided information about their operations, knowledge, and experience in transactions with FI. Clients may be granted a private client, professional client, or eligible counterparty status. The private client status provides for the highest legal investor protection, the eligible counterparty status for the lowest Depending on the Clients status, the Bank applies Client interests protection actions provided for in RL regulatory enactments in transactions with the Client The Bank only renders Services to professional clients or eligible counterparties. The Bank only renders such Services to Clients regarding which Clients have the professional client or eligible counterparty status. The Bank shall reject or terminate rendering such Services, conclusion of such transactions and investment products regarding which Clients do not have the professional client or eligible counterparty status When rendering Services and throughout business relations with professional client or eligible counterparty status, the Bank is entitled not to apply individual Client interests protection actions because Clients with said status are deemed to have the required experience and knowledge and to be financially able to undertake the risk of any losses that might result from their concluded transactions Clients with the professional client status are not subject to the established legal investor protection in place for private clients, i.e. the Bank is not obliged to: analyse and determine whether Services the Clients receives from the Bank are suitable for them and meet their interests; inform the Clients of any material obstacles occurring during execution of their orders; provide a detailed order execution policy based on the total clients costs; provide detailed information as it should be provided to private clients about reports, peculiarities of financial instruments, costs of services, about the Bank and its services When ensuring execution of FI transactions of a Client with the professional client status, the Bank, in order to achieve the best result for the Client, primarily evaluates the speed and accuracy of execution of the Client s order; besides, the price is not a priority Clients with the eligible counterparty status are not subject to the established legal investor protection in place for private clients or professional clients, i.e. the Bank is not obliged to take actions mentioned in clauses regarding eligible counterparties, as well as to ensure best results in execution of such Clients orders and to inform such Clients of the Bank s rendered Services, of execution and places of execution of such Clients orders The Bank is entitled to apply a higher level of protection to all or some Services (to apply the professional client service mode to eligible counterparties) without special notice to Clients. 3. CLIENT STATUS ASSIGNING RULES 3.1. The Bank assigns the eligible counterparty status to Clients if they are: a credit institution; an investment brokerage company; an investment management company; an insurance company; a pension fund; a pension fund managing company; Approved on Effective as of th edition Page 2 of 5

3 another financial institution licensed and operating according to regulatory enactments on financial services in a European Union member-state or a European Economic Area state or foreign laws and regulations; a commercial company executing transactions on options, futures, or derivative financial instruments markets or derivative instrument base assets markets at its own expense with the sole purpose to limit financial risks on the derivative financial instruments market, or who executes transactions at the expense of other players or such market, which are guaranteed and liability ensuring execution of concluded agreement for which is taken by the settlement system participants of such market; a person whose core business is executing transactions with commodities or derivative commodity instruments at their own expense (commodity dealer); a government or another government institution managing the government debt, the central bank or a supranational organisation; a country or municipality, government institution that manages the government debt, the national central bank, the World Bank, The International Monetary Fund, European Central Bank and other international financial institutions The Bank may apply the professional client status to the persons listed below with prior consent of such persons: institutions licensed for operations on the financial market and supervised in the Republic of Latvia or another state as stated in clauses 3.1.8, and 3.3.3; commercial entities stated in clause 3.3.2; institutions stated in clause The Bank assigns Clients the professional client status regarding all Services and instruments if they are: an institution or commercial entity licensed for operations on the financial market (in any state) and supervised accordingly; a commercial entity meeting at least two of the three requirements below: equity capital at least 2 million euros; net turnover - at least 40 million euros; balance value - at least 20 million euros; a commercial entity whose principal activities lie with investments in financial instruments and who makes such investments in large amounts; a person who is recognised as a professional client in another European Union member-state or European Economic Area; a person who is recognised as a professional client according to a procedure similar to the one specified in the Law Clients who do not meet the criteria set in clauses 3.1. and 3.3. are private clients Prior to starting rendering Services, the Bank informs its Clients of their status The Bank may assign the professional client status to the persons listed in clause In order to apply the eligible counterparty status to the persons mentioned in clause 3.2, the Bank should receive consent of such persons. The consent may be received regarding the Services rendered in general or regarding individual transactions The Bank and the Client shall sign a written arrangement when granting eligible counterparty status to the Client. Approved on Effective as of th edition Page 3 of 5

4 3.9. If a potential Client of the Bank is a commercial entity mentioned in clause 3.2. and registered in another member-state, the Bank applies the client status that applies to it according to legal acts of the respective state. The Bank is entitled to set the client status based on the information provided by such commercial entity regarding legal acts of the respective member-state. 4. CLIENT STATUS CHANGE 4.1. Clients may request the Bank to assign them a different client status The Bank recognises as a professional client any Client who expressed such will, whose experience and knowledge the Bank has evaluated, and who meets at least two of the following criteria: the Client has carried out substantial transactions on the respective market at least 10 transactions per quarter in four preceding quarters; the value of the Client s financial instruments portfolio, including funds and financial instruments, exceeds 500,000 euro; the Client has at least one-year experience on a position in the financial sector, which requires knowledge about transactions and Services they plan to carry out as a professional client. An eligible position in this case is a position directly related to financial instruments, derivative financial instruments, or requiring or providing for understanding thereof in an organisation meeting features listed in clauses 3.1. or Prior to recognising a Client as a professional client according to clause 4.2, the Bank evaluates their competence, experience, and knowledge in order to make sure that, considering the specific estimated transactions or Services, the Client would be able to independently make investment decisions and understand respective risks The Bank assigns the professional client status in general to all Services the Bank renders or, if agreed upon specifically, to certain types of Services or transactions, or specific transactions or products. The Client willing to be recognised as a professional client should submit a respective application to the Bank where they may also specify individual types of Services, transactions, or products regarding which they are willing to receive the professional client status. Prior to assigning the professional client status, the Bank should warn the Client in writing about the investor protection rights the Client might lose in the professional client status; the Client signs an acknowledgement that they have been warned thereof and understand consequences of loss of such rights. The Bank and the Client shall enter a written arrangement about assigning the professional client status, which also may contain said Client acknowledgement The Bank is entitled to change a Client s status to a lower investor protection level if the Bank detects that the Client s knowledge, experience, volume of resources, or other features of the Client do not meet their requested status If after commencing rendering Services the Bank establishes that a Client meets the criteria listed in clause 3.1 or 3.2, the Bank and the Client shall sign a written arrangement on granting eligible counterparty status to the Client according to provisions of the Policy A professional client willing to be assigned a private client status submits a respective application to the Bank stating the Service, transaction, or product type regarding which they would like to receive the private client status. In this case, the Bank terminates rendering respective Service, transaction, or product type to the Client or terminates cooperation with the Client in general according to provisions of the Agreement. Approved on Effective as of th edition Page 4 of 5

5 4.8. A Client with the eligible counterparty status is entitled to request the Bank to assign them the professional client status and if such Client does not specify which status the professional client status or the private client status they want to receive, the Bank assigns them the professional client status. 5. CLIENT STATUS MONITORING 5.1. Clients must notify the Bank of any facts and changes to the previously submitted information, which might affect the client status If the Bank finds out that a Client does not meet the client status criteria set out in legal acts of the Republic of Latvia and in the Policy, the Bank respectively changes the Client s status with notice to the Client. Related Documents Commission Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading, and defined terms for the purposes of that Directive Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive Financial Instruments Market Law of the Republic of Latvia Approved on Effective as of th edition Page 5 of 5

CLIENT CATEGORISATION

CLIENT CATEGORISATION Table of Contents 1 CLIENT CATEGORISATION... 3 1.1 Retail Client... 3 2 PROFESSIONAL CLIENT... 3 3 CLIENTS WHO MAY BE TREATED AS PROFESSIONALS ON REQUEST... 4 3.1 Procedure... 5 3.2