MIFID Policy Client classification

Transcription

1 MIFID Plicy Client classificatin Page 1 f 8

2 Cntents 1. Intrductin Purpse Client Classificatin... 5 a) Eligible cunterparties... 5 b) Prfessinal clients... 6 c) Retail clients... 8 d) Classificatin decisin and dcumentatin... 8 e) Cmpliance 2 nd level cntrls n classificatin... 8 Page 2 f 8

3 1. Intrductin As a Luxemburg financial institutin, East-West United Bank S.A. (hereafter EWUB ), is bund by the laws and regulatins laid dwn by the Luxemburg authrities. The main lcal supervisry bdy fr the Luxemburg financial institutins is the Cmmissin n Supervisin f the Financial Sectr (hereafter CSSF ). In cmpliance with the laws and regulatins gverning the Luxemburg financial sectr, EWUB wuld like t prvide infrmatin n the business rules f cnduct f the financial sectr with regard t investment risk. The rules apply t all Financial Sectr Prfessinals in Luxemburg, and their applicatin underlies the stringent cntrl f the CSSF. These rules f cnduct, defined by the Eurpean Unin directive 2004/39/CE n Markets in Financial Instruments (hereafter MiFID ), entitle EWUB t gather infrmatin n the Client s financial situatin, the Client s experience and knwledge in terms f investment prducts and services prvided by EWUB and his/her main bjectives regarding the services he/she requests frm EWUB. This infrmatin is imprtant fr EWUB t define 3 distinct client categries: The purpse f this classificatin is t prvide the Client with adequate infrmatin regarding investment prducts and the risks invlved in investment transactins. EWUB infrms the Client that he/she might incur lsses and that returns made n previus investments d, n n accunt, guarantee prfits fr the future. 2. Purpse The MiFID aims: - T harmnise the rules gverning investment services: the degree f harmnisatin intended under the MiFID has the advantage f prviding investrs with a high level f prtectin. It als allws investment firms t prvide their services acrss the Eurpean Unin, applying the supervisry regulatins applicable in the Member State frm which a given firm riginates. - T increase transparency and cmpetitin n financial markets: by setting efficiency and transparency rules fr the financial markets, the MiFID aims t imprve the quality f the services prvided. Opening up rder-executin lcatins t cmpetitin leads t mre efficient and cheaper services. - T imprve prtectin fr investrs: the specific rules that apply t the different client categries defined by the MiFID aim t ensure a level f prtectin suited t their specific situatins and financial knwledge. MiFID gverns the activities f investment firms, regulated markets and authrised credit institutins which prvide ne r several investment services and/r cnduct ne r several investment activities. Page 3 f 8

4 The main investment services and activities cncerned are the fllwing: - Receptin and transmissin f rders relating t ne r several financial instruments; - Discretinary Prtfli Management; - Investment advisry (currently nt ffered by EWUB). Financial instruments The MiFID applies t transactins n the fllwing financial instruments: - Transferable securities; - Mney market instruments; - Cllective investment scheme shares; - Optins, futures, swaps, frward rate agreements and any ther derivative cntracts relating t securities, currencies, interest rates r yields, r ther derivative instruments, financial indices r financial measures which may be settled physically r in cash; - Optins, futures, swaps, and any ther derivative cntract relating t cmmdities that can be physically settled prvided that they are traded n a regulated market and/r a Multilateral Trading Facility (MTF); - Optins, futures, swaps, frwards and any ther derivative cntracts relating t cmmdities, that can be physically settled, and nt being fr cmmercial purpses, which have the characteristics f ther derivative financial instruments, having regard t whether, inter alia, they are cleared and settled thrugh recgnised clearing huses r are subject t regular margin calls; - Derivative instruments used fr transferring credit risk; - Financial cntracts fr differences; - Optins, futures, swaps, frward rate agreements and any ther derivative cntracts relating t climatic variables, freight rates, emissin allwances r inflatin rates r ther fficial ecnmic statistics that must be settled in cash r may be settled in cash at the ptin f ne f the parties (therwise than by reasn f a default r ther terminatin event), as well as any ther derivative cntracts relating t assets, rights, bligatins, indices and measures, which have the characteristics f ther derivative financial instruments, having regard t whether, inter alia, they are traded n a regulated market r an Multilateral Trading Facility, are cleared and settled thrugh recgnised clearing huses r are subject t regular margin calls. Varius requirements apply the each MiFID client categries and t the type f financial instruments, as further detailed in this plicy and in the Dealing Manual f Prcedures. Page 4 f 8

5 3. Client Classificatin The MIFID II classificatin is applicable t clients nly. Client fr the purpse f this MIFID Classificatin plicy is defined as business relatinships which have an accunt pened with the Bank and whm the Bank ffers investment services. The MiFID regulatin defines the three fllwing distinct client categries: - Eligible Cunterparties; - Prfessinal clients (bth per se and pt-ut); - Retail clients. The purpse f client categrisatin is t establish different levels f client prtectin depending n their knwledge f financial instruments and services and their risk tlerance. The highest level f prtectin ges t clients categrised as retail. This includes services suited t the client s risk prfile (established befrehand) and mre extensive infrmatin. At the ther end f the scale, eligible cunterparties receive the lwest level f prtectin; fr example, they are the nly categry fr which the best-executin bligatin des nt apply. a) Eligible cunterparties The fllwing can be cnsidered eligible cunterparties: - Investment firms, - Credit institutins, - Insurance cmpanies, - Open-ended investment funds (UCITS) and their management cmpanies, - Pensin funds and their management cmpanies, - Other financial institutins authrised r regulated under EU law r the law f a Member State, - Svereign cuntries gvernments and their departments, including public bdies managing public debt, central banks and supranatinal rganisatins. Eligible cunterparties are subject t less regulatry prtectin due t their knwledge, their capabilities and their financial capacities. Hwever, they are nt entirely exempt, in particular they are bund by the rganisatinal rules laid ut in the MiFID. Page 5 f 8

6 b) Prfessinal clients Definitin A prfessinal client is a client wh pssesses the experience, knwledge and expertise t make its wn investment decisins and prperly assess the risks that it incurs. As such, it is prvided a lwer degree f prtectin than retail clients. Being deemed skilled n and knwledgeable abut the markets, the nly prtectin it gets is: An assessment f its investment bjectives. Such assessment will establish whether a service is apprpriate fr a given client befre it is prvided; An rder-executin plicy that defines the client s rder-executin criteria. Such plicy is updated annually. The fllwing are treated as per se prfessinals: - Entities which are required t be authrised r regulated t perate in the financial markets, i.e: Authrised r regulated financial institutins (ther than the nes defined under eligiblecunterparties), Cmmdity and cmmdity derivatives dealers, Lcal cmpanies, Other institutinal investrs. - Large entities meeting tw f the fllwing size requirements n a cmpany basis: Balance sheet ttal: EUR 20 millin, Net turnver: EUR 40 millin, Own funds: EUR 2 millin. - Other institutinal investrs whse main activity is t invest in financial instruments, including entities dedicated t the securitisatin f assets r ther financing transactins. Opt-ut prfessinal clients (nn-prfessinal asking fr Prfessinal classificatin with weaker prtectin) Prfessinal clients that have made an pt-ut request may nly be treated as pt-ut prfessinals by EWUB after the assessment and ntificatin prcedure described belw has been cmpleted. the client states in writing t the credit institutin and investment firm that it wishes t be treated as a prfessinal client, either generally r in respect f a particular investment service r transactin, r type f transactin r prduct; the credit institutin r investment firm must give t the client a clear written warning f the prtectins and investr cmpensatin rights it may lse; Page 6 f 8

7 the client must state in writing, in a separate dcument frm the cntract, that it is aware f the cnsequences f lsing such prtectins. Befre deciding t accept any request fr waiver, the credit institutin r investment firm must be required t take all reasnable steps t ensure that the client requesting t be treated as a prfessinal client meets the relevant requirements stated belw (client assessment sectin). - Client assessment In rder fr applicants t be granted a lwer level f prtectin than that affrded by best-executin regulatins, an assessment f their skills, experience and knwledge must prvide reasnable assurance that they are capable f taking the required investment decisins and understanding the risks they run, in relatin t the srt f transactins they plan t carry ut and the services they expect t use. In accrdance with Annex III sectin B f the amended Law f 5 April 1993 n the financial sectr, EWUB is authrised t treat any such clients as an pt-up prfessinals, prvided they satisfy at least tw f the fllwing criteria: The size f the client s financial instrument prtfli, defined as including cash depsits and financial instruments, exceeds 500,000 eurs, The client has carried ut transactins, in significant size, n financial instruments at an average frequency f 10 per quarter ver the previus fur quarters, The client wrks r has wrked in the financial sectr fr at least ne year in a prfessinal psitin, which requires knwledge f investment in financial instruments. - Client ntificatin Once all reasnable steps have been taken t ensure the retail client wh wishes t be granted pt-ut prfessinal status fulfils the criteria described abve, EWUB may start the prcedure fr classifying the client as prfessinal as the client must state in writing that they wish t be treated as a prfessinal client, acknwledge and accepts the written warning f the prtectins and investr cmpensatin rights they may lse, and the cnsequences f lsing such prtectins as per GTCs. Prfessinal clients are respnsible fr keeping the credit institutin r investment firm infrmed abut any change, which culd affect their current categrisatin. Shuld the credit institutin r investment firm becme aware hwever that the client n lnger fulfils the initial cnditins, which made him eligible fr a prfessinal treatment, the credit institutin r investment firm must take apprpriate actin. Page 7 f 8

8 Fr Request, Ntificatin & Cnsent template letter fr pt-up prfessinals, please refer t MIFID client pt up request Template Letter and MIFID client ntificatin and cnsent Template Letter - pt ut prfessinals n EWUB s internal server. c) Retail clients Retail clients are thse wh fall neither in the eligible cunterparty nr in the prfessinal clients categries, and include thse wh have applied fr "pt-dwn" status, i.e. prfessinal clients wh have requested in writing t be treated as nn-prfessinal (retail) clients. d) Classificatin decisin and dcumentatin Client classificatin is dne by PAM as part f accunt pening prcess during the KYC files preparatin and is derived frm the KYC infrmatin cllected (included but nt limited t Investr Questinnaire frm cmpleted and signed by Clients. The latest versin f this frm must be taken frm the EWUB s internal server fr every single new pening. Please refer t Frnt manuals r prcedures fr MiFID classificatin assessment and dcumentatin detailed prcess and steps perfrmed by PAMs as first level. In case f empty r incmplete Risk Prfile questinnaire, the Clients will be classified by default as Retail, ffering the maximum prtectin. Ffinancial institutins and Prfessinals f the Financial Sectr ( FSPs ) accunts will be by default classified as Eligible Cunterparty. e) Cmpliance 2 nd level cntrls n classificatin At accunt pening Cmpliance will review the client classificatin dne by PAM (Retail, Prfessinal, Opt ut fr Prfessinal r Eligible Cunterparty categry) based n the infrmatin prvided by the client and relevant recrd made in a respective line f Investr Questinnaire. The classificatin by PAM is dne in accrdance with criteria detailed in sectin 3) f this current MiFID Plicy. During KYC review r ad hc in case f classificatin change (e.g. client pt-ut request) Cmpliance will review the new classificatin dne by PAM based n the updated infrmatin prvided by the client and relevant updated recrd made in a respective line f Investr Questinnaire, still in accrdance with criteria detailed in the abve sectin f this current MiFID Plicy. In case f discrepancy r disagreement n the classificatin r insufficient infrmatin r crrbratin dcumentatin, Cmpliance will return the file t PAM fr discussin. Page 8 f 8