MIFID Client Pre-Contractual Info Pack
CONTENTS 1 OBJECTIVES AND SCOPE OF NEW LEGISLATION... 2 2 EUROBANK EQUITIES AND ITS SERVICES... 3 2.1 EUROBANK EQUITIES... 3 2.2 INVESTMENT SERVICES OFFERED... 3 2.3 CLIENT RELATIONS COMMUNICATION WITH CLIENTS... 4 2.4 CONFLICTS OF INTERESTS... 5 2.5 MANAGING CUSTOMER COMPLAINTS... 6 2.6 INVESTOR COMPENSATION AND INSURANCE COVERAGE SCHEME... 6 2.7 PROTECTION OF DATA AND CONFIDENTIAL INFORMATION... 6 3 CLIENT CATEGORISATION... 7 3.1 CLIENT TREATMENT PER CATEGORY... 7 3.1.1 Professional clients... 7 3.1.2 Eligible Counterparties... 8 3.1.3 Retail clients... 8 3.2 CHANGE IN CLIENT CLASSIFICATION... 8 3.3 SUITABILITY AND APPROPRIATENESS ASSESSMENT... 9 4 PORTFOLIO MANAGEMENT...11 5 SAFEGUARDING OF CLIENT FINANCIAL INSTRUMENTS OR CLIENT FUNDS...13 6 USE OF CLIENT FINANCIAL INSTRUMENTS...15 7 CHARGES AND RELATED COSTS...16 7.1 EXECUTING ORDERS ON GREEK SHARES...16 7.2 EXECUTING ORDERS INVOLVING CYPRIOT SHARES...16 7.3 RECEPTION AND TRANSMISSION OF ORDERS INVOLVING FOREIGN SHARES...16 7.4 EXECUTING ORDERS INVOLVING GREEK EXCHANGE-TRADED DERIVATIVES...16 7.5 RECEPTION AND TRANSMISSION OF ORDERS INVOLVING FOREIGN EXCHANGE-TRADED DERIVATIVES 17 7.6 CUSTODIAN EXPENSES...17 7.7 EXPENSES RELATED TO DEFAULTED DEBIT BALANCES...17 7.8 SHARE TRANSFER EXPENSES...18 7.9 COST OF GENERATING ENTRY AND ACCOUNT ON THE DEMATERIALISED SECURITIES SYSTEM...18 7.10 INVESTMENT BANKING...18 7.11 GENERAL COMMENTS...18 8 FINANCIAL INSTRUMENTS OFFERED...20 8.1 SHARES ADMITTED TO TRADING...20 8.2 BONDS, OTHER SECURITISED DEBT...22 8.3 MUTUAL FUNDS...24 8.4 DERIVATIVE PRODUCTS...25 8.4.1 Futures...26 8.4.2 Options...27 8.4.3 Forwards...27 8.4.4 Swaps...28 8.4.5 Contracts for Differences...28 9 ORDERS INVOLVING FINANCIAL INSTRUMENTS ADMITTED TO TRADING...29 10 INVESTMENT RISKS...30
1 Objectives and Scope of New Legislation The Law on Markets in Financial Instruments and other provisions (Law 3606/2007) transposes Directive 2004/39/EC on markets in financial instruments into Greek law. The purpose of these provisions is to lay down rules on the carrying out of activities by undertakings which provide investment services and/or perform investment activities in order to protect investor interests and facilitate the provision of such services and/or the performance of such activities throughout the European Union and the EEA Member States. Undertakings which are obliged to comply with the provisions of this Law include, inter alia, investment firms, mutual fund management firms, and investment brokerage firms. Moreover, certain provisions of this Law also apply to credit institutions which provide one or more investment services or perform investment activities. The Law does not apply to the persons and undertakings cited in Article 3(4). 2
2 Eurobank Equities and Its Services 2.1 Eurobank Equities Eurobank Equities (hereinafter Eurobank Equities or the Company ) is a subsidiary of the banking group Eurobank Ergasias S.A. and holds a leading position in the Greek stock market sector based on volume of transactions on the Equities and Derivatives Markets of the Athens Exchange. Furthermore, the Company is among investment banking leaders in Greece and has presence in developments in the countries of New Europe. The Company is a leader in the areas of: Initial and supplementary public offerings of shares in the Athens Stock Exchange. Full range of consulting services in investment banking including merges / acquisitions and restructuring of companies and groups and other innovative transactions. In addition, Eurobank Equities also operates successfully on foreign exchanges offering the possibility of direct execution of equity and derivative trade orders on the largest international exchanges and is also a remote member of the Cyprus Stock Exchange. The Company s particulars are as follows: Corporate name Trade name Address EUROBANK EQUITIES Investment Firm S.A. EUROBANK EQUITIES 10 Filellinon St. & 13 Xenofontos St. Telephone (+30) 210 3720000 Fax: (+30) 210 3720001 Email Website Supervisory Authority info@eurobankequities.gr www.eurobankequities.gr Hellenic Capital Market Commission 1 Kolokotroni & Stadiou St. Athens GR-10562 Tel: +30 210 33.77.100 www.hcmc.gr 2.2 Investment Services Offered Eurobank Equities has obtained authorisation no. 6/149/12.1.1999 from the Hellenic Capital Market Commission for the provision of investment and ancillary services. The services offered by the Company are cited below: 3
Investment services: Reception and transmission of orders, which is analysed as receiving and transmitting orders on behalf of clients to conclude transactions in relation to one or more financial instruments. Execution of orders on behalf of clients, which entails the execution of buy or sell contracts in relation to one or more financial instruments on behalf of its clients. Dealing on own account, which entails the Company dealing using its own capital in one or more financial instruments to conclude trades on them. Portfolio management, which entails management at the Company s discretion, of client portfolios in the context of their orders, which include one or more financial instruments. Investment advice which entails the provision of personal advice to clients on request or on the Company's initiative concerning one or more transactions that involve financial instruments. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis. Placing of financial instruments without a firm commitment basis Ancillary Services: Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management. Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction. Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings. Foreign exchange services where these are connected to the provision of investment services. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments. Services related to underwriting. 2.3 Client relations Communication with clients The language in which the clients may communicate with the Company is the Greek language. In the case of persons residing outside of Greece, or who do not understand the Greek language, the language of communication is the English language. Before transacting with a new client, the client is required to provide the Company with all necessary evidence confirming his identity. This information is held in a hard copy and electronic format in line with the Company s procedures. The minimum information requirements are set out below: For individuals: Name and surname, father's name, date of birth, citizenship, current home address, current work address, occupation, contact phone number, type and number of evidentiary documentation certifying the client's ID, country of main occupational activity, client's capacity, tax registration number. The necessary evidence must be submitted for this data to be placed on file. For legal entities: Registered offices, actual headquarters, business activities, country of main business activity, line-up of the Board of Directors, company Articles of Association, representation, specimen signatures The client is obliged to inform the Company about any change in the said particulars and to submit the appropriate evidence of this. 4
The Company contacts the client based on the particulars provided by the client which the Company treats as accurate. The Company is deemed to have sent documents providing information to clients and these are deemed to have been accepted by clients where dispatch is made based on the last updated information existing in the Company s files. Clients may contact the Company by phone, mail, fax and email (see 2.1) or visit the Company's offices in person. Orders may be given for execution in writing, by phone, by email, via the eurobanktrader website (www.eurobanktrader.gr) or by fax. Eurobank Equities reserves the right to request confirmation of a client order when given orally, which should be provided by email or fax. Moreover, the Company informs clients that for the protection of the interests of both transacting parties (i.e. Eurobank Equities and the client s) any phone calls, correspondence (in electronic format or not) and/or use of the website may be monitored and recorded. The Company may act in accordance with instructions given over the phone by clients without any further action. Dispatch of Order Execution Confirmations The Company sends to its clients an order execution confirmation no later than the business day following the date the order was executed or the date on which the Company received a third party s confirmation in those circumstances where the Company receives such confirmations from third parties.. In order for the Company to be able to discharge this obligation, clients should provide a personal email address or fax number or alternative by gaining access to our website (www.eurobanktrader.gr). Moreover, at the end of each calendar month the Company informs clients about all transactions executed in their accounts during that month. 2.4 Conflicts of interests As mentioned in paragraph 2.2 above, the Company provides its clients with a wide range of main and ancillary investment services. In providing those services, conflicts of interest may arise: within the Company itself, or between its employees and/pr companies affiliated with it, and Company clients or between two or more of its clients. The Company has undertaken to handle conflicts of interest in a consistent, responsible and effective manner. Specific examples of the types of conflicts of interest that could arise are listed below: When providing investment advice or portfolio management services to clients, when transactions are proposed / concluded involving specific financial instruments in which the Company has some interest / holding in the issuer; From other business activities of the Company, such as providing financial services to other clients. From the collaboration of the Company with or from the Company s dealings with issuers of financial instruments. When preparing financial analyses about financial instruments offered to clients. However, in certain cases the control mechanisms and procedures adopted by the Company may not be adequate to avoid potential cases of conflicts of interest. In such cases, the Company shall notify clients accordingly. If clients want to obtain more information about the Company s conflicts of interest policy they may submit a relevant request to the Company. 5
2.5 Managing Customer Complaints Eurobank Equities seeks to provide responsible, effective services to its clients. To achieve that objective Eurobank Equities has adopted a procedure for managing isolated cases of complaints about the services it offers. This procedure can be summarised as follows: A client can file a complaint either orally or in writing to his Account Manager or the Customer Service Department. If the complaint can be resolved immediately, the Company s officer responsible will take the necessary steps. If the complaint cannot be resolved immediately or the client is not satisfied with the resolution method proposed, the Company officer will contact Regulatory Compliance to determine the best method for handling the complaint. If considered necessary, Regulatory Compliance will take over the handling of the complaint. In such cases the client may be asked to submit his complaint in writing if he has not already done so. The Company will examine the complaint made by the client and provides information in the most efficient manner available. 2.6 Investor Compensation and Insurance Coverage Scheme Transactions concluded with Eurobank Equities on Greek shares are covered by the Investment Services Guarantee Fund as defined by the relevant responsible authority. Company involvement in this Fund ensures that compensation is paid in line with the provisions of law to principals and counterparties where the Company ascertains final or irreversible failure to discharge its obligations deriving from the provision of the services covered. In addition, the company obtains insurance coverage against professional liability in favour of either their clients or third parties in general, which is renewed yearly 2.7 Protection of data and confidential information Eurobank Equities protects the confidentiality of information received from its clients. The Company has adopted policies and procedures, the effectiveness and proper implementation of which are reviewed on a regular basis. Eurobank Equities ensures the confidentiality of information received from its customers and protects their sensitive data against intentional or inadvertent disclosure to unauthorized persons. 6
3 Client Categorisation In accordance with Law 3606/2007 Eurobank Equities has categorised its clients as: a) Retail Clients, b) Professional Clients and c) Eligible Counterparties based on the information it has about them. The characteristics of these three categories are show in diagrammatic form below: Eligible Counterparties For the purpose of providing any of the following services: - Order execution - Dealing on own account and - Reception and transmission of orders Eurobank Equities has categorised its clients who fall into one of the categories in Article 30(2) of Law 3606/2007 in the Eligible Counterparty category. This classification means that the Company is released from specific obligations, as provided in Article 30 of Law 3606/2007. Professional Clients A professional client is a client who possesses the experience, knowledge and experience to make its own investment decisions and properly assess the risks that it incurs, and who meets the criteria laid down in Article 6 of Law 3606/2007. Retail Clients A retail client is any client who is not a professional client (Article 2(8) of Law 3606/2007). 3.1 Client treatment per category Each client is treated by Eurobank Equities on the basis of the category to which he has been categorised in line with Law 3606/2007. Retail clients are afforded a higher level of protection compared to the other two categories of clients. The different treatment per client category primarily relates to (a) the information provided to clients, (b) assessment of the appropriateness and suitability of the investment services/financial instruments for the specific client, (c) notices sent to the client about investment services / financial instruments offered to him, and (d) the way in which the obligation to execute client orders on terms most favourable to him is discharged. 3.1.1 Professional clients Professional clients are afforded a lower level of protection than Retail clients. The Company provides these clients with information about: (a) their client categorisation and their right to request a different treatment, (b) the financial instruments and services offered by the Company in summary form, (c) the Company s order execution policy, (d) custodianship of financial instruments and funds in the case where held by a third party on the Company s behalf and (e) the existence of any security interest or lien which the Company has or may have over the clients financial instruments or funds or any right of set-off it holds in relation to those instruments or funds. 7
Moreover, the Company's reporting obligations in relation to order execution and portfolio management services offered to clients who fall in the Professional category are less. Article 13(2) of Hellenic Capital Market Commission Decision No. 1/452/1.11.2007 also states that professional clients are deemed to have the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions for which the client is classified as a professional client. Consequently, the Company is not obliged to assess for such clients the appropriateness of the investment service or product envisaged as per Article 25(5) of Law 3606/2007. When an assessment of the suitability of the investment service or the financial instrument (Article 25(4) of Law 3606/2007) is required, the Company collects data only about the investment objectives and financial ability of its clients (see paragraph 3.3 below: Suitability and Appropriateness Assessment). However, where the service provided entails investment advice, the professional clients in one of the categories in Article 6(1)(a) of Law 3606/2007 will be deemed to have the financial ability to bear any related investment risks consistent with their investment objectives (Article 12(4) of Hellenic Capital Market Commission Decision No. 1/452/1.11.2007). 3.1.2 Eligible Counterparties Eligible Counterparties are clients who fall into one of the specific categories listed in Article 30(2) of Law 3606/2007. The Company only provides to these clients the services of reception and transmission of orders and execution of orders. The law affords a lower level of protection to this category of clients compared to the other two client categories. More specifically, according to Article 30(1) of Law 3606/2007, the Company is not required to provide Eligible Counterparties with the information it is required to provide to the other two categories of clients. Moreover, the Company has limited obligations to provide the order execution notices and information concerning their dispatch time. Furthermore, the Company is not obliged to perform an appropriateness assessment of the investment services and financial instruments offered to Eligible Counterparties (see paragraph 3.3 below: Suitability and Appropriateness Assessment). Lastly, the Company is not obliged to execute the orders of clients who fall within this category on terms most favourable to them. 3.1.3 Retail clients Retail clients are clients (either individuals or legal entities) who do not meet the conditions laid down by law to be categorised as professional clients or eligible counterparties. The law affords such clients a higher level of protection compared to the other client categories. In implementing its obligations deriving from the Law and before actually providing an investment service, the Company provides retail clients with information about: (a) the types of financial instruments, their characteristics and the risks they entail, (b) safeguarding of client financial instruments or client funds by the Company on their behalf, (c) costs and associated charges, (d) its order execution policy implemented, (e) notices the Company will send to such clients and the frequency of their dispatch. Clients who receive portfolio management services in particular are sent periodic statements about the portfolio management activities performed on their behalf unless such statements are provided by a third party. Statements sent to retail clients are more analytical than those sent to the other two client categories. 3.2 Change in client classification Company clients can request in writing a different categorisation than the one they have already been assigned to. Change in category is subject to the conditions and criteria laid down by Law 3606/2007 being met. A request for a change in classification may be submitted in the following circumstances: 8
Retail client requesting to be included in the Professional client category: The retail client should meet at least two of the three criteria contained in Article 7(3) of Law 3606/2007. In all events, the Company retains the right to accept or refuse the client's request and must be reasonably assured, after an adequate assessment of the client's expertise, experience and knowledge, that in light of the transactions or services envisaged, the client is capable of making his own investment decisions on his own and understanding the risks involved. Professional client requesting that he be included in the retail client category: A professional client who considers that he is unable to properly assess or manage the risks involved may request that he be treated as a retail client in order to achieve a higher level of protection. Provided that the Company accepts the client s request, an agreement to that effect will have to be signed. Eligible Counterparty requesting that he be included in the professional or retail client category: An Eligible Counterparty may request that he be treated as a Professional or Retail client (Article 5(3) and (4) of Hellenic Capital Market Commission Decision No. 1/452/1.11.2007). In the last two cases the Company may make the change on its own initiative after informing the client accordingly. 3.3 Suitability and Appropriateness Assessment To protect its clients Eurobank Equities performs an assessment whether the investment services and financial instruments it offers them are suitable and appropriate for them and correspond to their needs and investment objectives. More specifically: Suitability assessment When providing investment advice or portfolio management services Eurobank Equities will recommend or enter into a transaction only where it has obtained the necessary information regarding the client's knowledge and experience in the investment field relevant to the specific type of financial instrument or service, his financial situation and his investment objectives so as to enable it to recommend to the client the investment services and financial instruments that are suitable for him (assessment of suitability). If the client does not provide the information which the Company considers necessary, the Company cannot provide him with the aforementioned services. Appropriateness assessment When providing investment services other than investment advice or portfolio management, Eurobank Equities asks its client to provide information regarding his knowledge and experience in the investment field relevant to the specific type of financial instrument or service offered or demanded so as to enable it to assess whether the investment service or product envisaged is appropriate for the client (assessment of appropriateness). Where the client does not provide the information required or where the information provided is insufficient or where the Company considers, based on the information received, that the said financial instrument / investment service is not appropriate with his knowledge and experience, the Company shall warn the client accordingly. Exception from the obligation to assess the appropriateness of the investment service or product envisaged when providing Execution Only services Eurobank Equities provides, among others, investment services which consist solely of executing client orders or receiving and transmitting orders with or without ancillary services, which relate to noncomplex financial instruments, in line with the provisions of Law 3606/2007 (execution-only service). The Company may provide the said investment services without carrying out an assessment of the appropriateness of the financial instrument / investment service in accordance with the foregoing points, provided all the following conditions are met: 9
(a) the above services relate to shares admitted to trading on a regulated market or in an equivalent thirdcountry market, money-market instruments, non-complex bonds, UCITS and other non-complex financial instruments. (b) the service is provided at the initiative of the client or potential client. (c) the client has been clearly informed that in the provision of this service the Company is not required to assess the appropriateness of the instrument or service provided or offered and that therefore he does not benefit from the corresponding protection of the relevant conduct of business rules. (d) the Company complies with its obligations under Article 13 which relate to the conflicts of interest policy. Clients are informed that when execution-only services are provided in relation to any of the aforementioned non-complex financial instruments, the Company is not obliged to assess the appropriateness of the financial instrument offered or the service provided and that they do not benefit from the relevant conduct of business rules set out in Article 25(5) of Law 3606/2007. 10
4 Portfolio Management Eurobank Equities may offer selected clients portfolio management services after a special agreement is reached with the client. When providing this service Eurobank Equities will perform the necessary suitability assessment having obtained the necessary information regarding the client's knowledge and experience in the investment field relevant to the specific type of financial instrument or service, his financial situation and his investment objectives so as to enable it to recommend to the client the investment services and financial instruments that are suitable for him (suitability assessment). The Company manages the client s portfolio in the context of the client s orders and at the Company s discretion without being required to contact the client before concluding each transaction, provided that pre-agreed limits and restrictions are observed for each type of portfolio and, in certain cases, specific client instructions are observed, in accordance with the provisions of the agreement between them. Relying on its experience in the Greek stock market and major partnership agreements concluded with reliable investment firms abroad, the Company offers its clients the ability to spread investment risk, by enriching their portfolio with a range of financial instruments which are available on both the Greek and international capital markets. The assessment of suitability (see section 3.3. Compatibility and Suitability Assessment) which the Company performs determines the type of portfolio which is appropriate for each client. Each type of portfolio invests in specific financial instruments with set percentage limits per type of portfolio and specific currency. The Company places each type of portfolio in 4 categories depending on the risk the client is willing to assume: low, average, high and very high. The financial instruments that can be included in the portfolio, among others, include: Cash, debt instruments and related financial instruments: repos, reverse repos, time deposits, debt instruments of the Greek Government, the Bank of Greece, international organisations and other issuers with a high credit rating (at least BBB-), mutual fund units and derivative products. Shares & related financial instruments: shares admitted to trading (or in the process of being admitted to trading) on a regulated market, warrants or covered warrants, mutual fund units and derivative products. The types of financial instruments that can be included in each type of portfolio and the types of transactions are specifically set out in the portfolio management agreement concluded by the client and Company. This agreement also includes the management objectives, the risk level and any special restrictions. Lastly, an investment performance benchmark can be also agreed for each type of portfolio against which the performance of the client's portfolio will be compared from time to time. Portfolio valuation All financial instruments included in the investor s portfolio are valued each day using the method and policies adopted by Eurobank Equities. More specifically, to value shares and derivatives admitted to trading the closing prices officially announced on each regulated market are used. Debt instruments are valued using the prices announced by Bloomberg (Bloomberg Price BGN). Lastly, the value of mutual fund units is calculated daily by the relevant management company and as a rule is published in the press two business days later. Provision of information to clients Clients are informed about transactions and the status of their portfolio periodically. This update takes the form of statements provided every three months which include, among other things, the portfolio valuation and details of each financial instrument comprising the portfolio, its market value or fair value, if market value is unavailable, and the cash balance at the beginning and at the end of the reporting 11
period, and the performance of the portfolio, also compared to any investment performance benchmark agreed, during the reporting period. Moreover, clients receive confirmations of each transaction concluded in the context of portfolio management during the reporting period. If the Company s agreement with a retail client for a portfolio management service authorises a leveraged portfolio, the periodic statement is provided at least once a month. Moreover, retail clients may elect to receive information about executed transactions on a transaction-bytransaction basis. In such cases, the Company will provide promptly to such clients, on the execution of a transaction, the essential information concerning that transaction in the form of a transaction confirmation. This confirmation will be sent out no later than the first business day following execution, or if the confirmation is received by the Company from a third party, no later than the first business day following receipt of the confirmation from the third party, unless same information is promptly dispatched to the retail client by another person. Lastly, when the Company provides portfolio management transactions for retail clients or operates retail client accounts that include an uncovered open position in a contingent liability transaction, the Company will also report to the retail client any losses exceeding any predetermined threshold, agreed between the Company and the client, no later than the end of the business day in which the threshold is exceeded or, in a case where the threshold is exceeded on a non-business day, the close of the next business day. 12
5 Safeguarding Of Client Financial Instruments or Client Funds Eurobank Equities provides custodianship services to all its clients. These services are provided directly by the Company when custodianship relates to financial instruments traded on the Athens and Cyprus exchanges or via Eurobank Ergasias S.A. when custodianship relates to financial instruments traded on other regulated markets. Moreover, Eurobank Equities, in line with the rules of due care laid down by the applicable laws, may deposit financial instruments it holds on behalf of a client into an account or accounts opened with a third party, provided the client has agreed to such an arrangement. These third party custodians may be established in a Member State of the European Union or outside the EU. In the latter case, the third party custodian should be subject to specific regulations and supervision within that State. To be noted that the Company does not deposit financial instruments held on behalf of clients with a third party in a third country that does not regulate the holding and safekeeping of financial instruments for the account of another person, unless one of the following conditions is met: (a) the nature of the financial instruments or of the investment services connected with those instruments requires them to be deposited with a third party established in that third country; or (b) where the financial instruments are held on behalf of a professional client, that client requests the Company in writing to deposit them with a third party in that third country. In order to deposit financial instruments for safekeeping with a third party custodian, the Company selects and appoints the third party custodian using a specific in-house procedure which takes into account a series of criteria and conditions that need to be met. Financial instruments from abroad are deposited for safeguarding with Eurobank Ergasias S.A. (and any other custodian) in the name of each client, at his responsibility and at his cost, and all risks associated with these actions are assumed exclusively by the client. Company clients reserve the right to appoint a different custodian if they so wish. In this case the Company bears absolutely no liability in relation to the acts or omissions of the custodian selected by the client. As part of the safekeeping services the Company provides itself, the Company takes all appropriate measures to protect the interests of its clients and to minimise any risks related to this service. More specifically, the Company keeps individual accounts for clients both in-house on its computer systems and on the relevant clearing and settlement systems (such as the Dematerialised Securities System). Consequently, the Company ensures that the financial instruments of each client are segregated from its own financial instruments or those of other clients. In addition, the Company carries out regular checks on its in-house computer systems concerning the corresponding systems operated by external organisations to avoid any errors or omissions, and if such are found, they are immediately corrected. In relation to the financial instruments for which Eurobank Equities uses a third party custodian, the third party custodian may maintain an omnibus account on its system for all client financial instruments. In this case too, the Company keeps internal individual accounts for its clients so that the financial instruments of each client are segregated from its own financial instruments, those of the custodian and those of other clients. In addition, the Company carries out the relevant checks, just as when it acts as custodian, on its in-house computer systems in relation to the equivalent third party custodian systems, to avoided any errors or omissions, and if such are found, to be immediately corrected. As far as safeguarding of client funds is concerned, the credit institution where funds are deposited by the Company is selected and appointed via a specific in-house procedure which takes into account a series of criteria and conditions that need to be met. Furthermore, the Company takes all necessary measures to 13
protect those funds. In particular, the Company credits client funds to individual accounts which have been generated on its in-house computer system and thus segregates its funds from those of its clients. In addition, the Company maintains client funds in special bank accounts which are different from the bank accounts in which it keeps its own funds. The Company reconciles on a daily basis the bank accounts and relevant accounts on its in-house computer systems to avoid any errors or omissions and, if such exist, they are immediately corrected. Lastly, it should be noted that Eurobank Equities places client funds in repos or/and time deposits. Such placements are made in the case of clients with a cash balance over the relevant limit set from time to time by the Company and for those cash balances which are available for deposit. 14
6 Use of Client Financial Instruments Eurobank Equities does not enter into securities financing transactions related to the financial instruments held on behalf of clients nor does it use those financial instruments in any other way for its own account or for the account of other clients unless: (a) the client has provided his previous express consent for the use of his financial instruments on specific terms, and (b) use of the client s financial instruments is made in accordance with the terms and conditions to which the client has agreed to. 15
7 Basic Charges and Related Costs 7.1 Executing orders on Greek shares The overall cost payable by the client for transactions on Greek shares consists of the following charges: The value of the financial instrument: The value of the financial instrument at the time the client order is executed. Company commission: The client is charged a commission on the net value of the transaction based on the commission category the Company has placed him in. Regardless of the commission category, clients are charged with a minimal commission. Stock Exchange (Hellenic Exchanges) expenses: Clients are charged stock exchange expenses for orders executed which are calculated as a percentage of the net value of the transactions. Part of this figure is set by Hellenic Exchanges and is payable to the Athens Exchange and/or the Depository, while the remaining portion is collected by the Company as expenses. The Company is not involved in any way in how Hellenic Exchanges-related charges are set. Transfer expenses: Clients are charged transfer expenses for orders executed which are calculated as a percentage of the net value of the transactions. Part of this figure is set by Hellenic Exchanges and paid to the Athens Exchange, while the remaining portion is collected by the Company as expenses that compensate for the cost of the internal transfer process. The Company is not involved in any way in how Hellenic Exchanges-related charges are set. Tax: The tax set by the Ministry of Finance is imposed on behalf of the Greek State and is paid to it via Hellenic Exchanges. Tax is calculated as a percentage of the net value of the transactions. 7.2 Executing orders involving Cypriot shares The overall cost payable by clients for transactions involving Cypriot shares consists of similar charges to those outlined above for executing orders involving Greek shares. Note that at the time this info pack was published there were no transfer expenses and the relevant Cyprus Exchange expenses were paid in full to the Cyprus Exchange. The Company is not liable in any way or involved in any way in how Cyprus Exchange related charges are set. 7.3 Reception and transmission of orders involving foreign shares The overall cost payable by clients for transactions involving foreign shares consists of similar charges to those outlined above for executing orders involving Greek shares. Note that the commission categories which apply in the case of foreign shares may be different from those which apply to the execution of orders involving Greek shares. In addition, the relevant stock exchange and transfer expenses are set by the markets where the client trades. Finally, to be noted that the client may be subject to additional local taxes depending on the market he trades on. 7.4 Executing orders involving Greek exchange-traded derivatives The overall cost payable by the client for transactions involving Greek exchange-traded derivatives consists of the following charges: Company commission: Clients are charged commission which is set depending on the value and type of derivative in conjunction with the commission category in which the Company has placed him. This commission relates both to execution and clearing of transactions. Derivatives Market ADECH Hellenic Exchanges expenses: Clients are charged with expenses payable to these bodies which are set by these companies and are paid over to them. These expenses are calculated depending on the type of derivative combined with the type of client 16
order. The Company is not liable in any way or involved in any way in how charges are set by these companies. Daily cash settlement: Depending on their position in the derivatives market and the daily cash settlement for the said position, each day clients will either collect their profits or be required to pay any losses in cash only. Margin: Depending on their position in the derivatives market, clients may be required to provide additional collateral to cover the margin required (in cash or shares). It should be noted that clients who purchase options do not pay the relevant daily cash settlement cost as they do for other derivatives but pay the value of the financial instrument which is set as the value of the financial instrument at the time the client order is executed. 7.5 Reception and transmission of orders involving foreign exchange-traded derivatives The overall cost payable by clients for transactions involving foreign exchange-traded derivatives consists of similar charges to those outlined above for executing orders involving Greek exchange-traded derivatives. Note that the commission categories which apply in the case of foreign exchange-traded derivatives may be different from those which apply to the execution of orders involving Greek exchange-traded derivatives. Also note that the expenses payable to stock exchange and clearing organisations and additional taxes are set by the local regulators for the markets on which the client trades. 7.6 Custodian expenses The Company charges clients with custodian expenses for Greek shares. These expenses are calculated based on the philosophy underlying the equivalent pricing policy of the Greek Exchanges and are determined as a percentage of the daily average valuation of the client s portfolio. Note that the daily average valuation of the client s portfolio is calculated for all calendar days in the calculation period and the overall client portfolio regardless of sub-accounts. In addition, it should be noted that clients with an overall portfolio regardless of sub-accounts- below the limit set by the Hellenic Exchanges pricing policy are exempt from such charges. The lowest 6-month charge applies for other clients. Greek share custodian expenses are charged every six months. As far as foreign shares are concerned, custodian expenses as a percentage of the client portfolio depend on the country where the securities comprising the said portfolio are traded. Note that the relevant cost is expressed on an annualised basis and the relevant expenses are calculated on the daily value of the share portfolio and charged every quarter by the custodian. 7.7 Expenses related to defaulted debit balances If a client has signed a credit agreement with the Company for the purchase of shares (margin agreement) and has a default debit balance he will be charged with interest on a quarterly basis at the rate of the agreed contractual charge combined with the average annual balance of the client over the quarter. If the client has not signed such an agreement with the Company and has a default debit balance he will be charged with interest on a quarterly basis at the rate set based on the company s pricing policy applicable from time to time. 17
7.8 Share transfer expenses Based on the philosophy underlying the Hellenic Exchanges pricing policy, the Company charges client accounts with the cost per transaction related to transfers to and from the client's special account. These charges are not applicable in cases where transfers are mandatory under the operating rules of the Dematerialised Securities System (such as share transfers to consolidate an investor account). In addition, the Company has a specific pricing policy for the joint investment account services which follows the same philosophy as that underling the Hellenic Exchanges pricing policy, taking also into account the relevant operating cost and organisational expenses which arise from offering this service. More specifically: to transfer securities from an individual account to a joint investment account, only the client s individual account is charged with the relevant cost, which is calculated as a percentage of the value of the securities transferred, with a minimum and maximum limit per transaction applying. to transfer securities from the joint investment account, the relevant cost is calculated as a percentage of the value of securities transferred per transaction and per account, without limit. 7.9 Cost of generating entry and account on the Dematerialised Securities System If an investor wishes to generate an entry and account on the Dematerialised Securities System for the first time, regardless of the operator, the Company relying on the relevant Hellenic Exchanges pricing policy, charges the cost of generating the entry and account on the Dematerialised Securities System to the client's stock exchange account. 7.10 Investment Banking Costs, commissions, fees and other charges on services offered by the Company, are agreed in writing with customers, according to Company current pricing policy and applicable legal and tax codes and they are available to customers upon request. Inducements The company within the provision of investment services may pay or receive payment or commissions or non-monetary benefits to / from companies of Eurobank Group or any third party with whom it cooperates in the execution of transactions. Payment or receipt of a fee, commission or financial benefit has no impact on the customer's interests and attainment of the best possible result on his/her investment choices. The Company upon client s request provides detailed information regarding fees or commissions or any non monetary benefits that may obtain regarding the investment or ancillary services/ products. 7.11 General Comments The relevant costs and related charges included in this section can be itemised if the client so requests. Eurobank Equities has posted a detailed price list, with total charges, on the company's cashier desks, as well as on its website Where commission is payable to the Company, that commission may include commission payable to third parties if orders are transmitted via such parties and can be itemised if the client so requests. 18
The value of the financial instrument is deemed to be a cost only in the case of purchase of the financial instrument and not in the case of sale when it constitutes income for the client. 19
8 Financial Instruments Offered Eurobank Equities trades on behalf of its clients transferable securities and derivatives listed on the Athens Exchange and other regulated markets abroad. Overall, the large range of financial instruments offered by the Company seeks to cover the various needs of each and every investor. All financial instruments offered to investors are either simple (non-complex) or complex financial instruments. Simple (non-complex) financial instruments are: Money market instruments, in other words those classes of instruments which are normally dealt in on the money market, such as treasury bills, certificates of deposit and commercial papers and excluding instruments of payment. Shares admitted to trading on a regulated market or on an equivalent third country market. Bonds or other forms of securitised debt, which do not embed derivatives. Shares in undertakings for collective investments in transferable securities (UCITS) Other non-complex financial instruments in accordance with the applicable legislation. Any financial instruments not falling into any of the above categories are considered complex. Eurobank Equities clearly warns its clients that, when providing the services of order execution or reception and transmission of orders in relation to one or more non-complex financial instruments mentioned above, the Company is not required to assess the suitability of the instrument or service provided or offered in relation to client knowledge and experience in each of those financial instruments and that therefore clients do not benefit from the corresponding protection of the relevant conduct of business rules set out in Article 25(5) of Law 3606/2007. The above services are provided to clients on their own initiative and, consequently, clients should make their own assessment in respect of an investment in these financial instruments and the risks associated with such an investment. The various financial instruments are described in the sections below. 8.1 Shares admitted to trading Shares are units of ownership in an undertaking, ownership of which entitles the investor to certain rights, such as voting rights at the relevant company s general meetings and a participation in the profits, if the company decides to distribute dividends. The Company gives its clients the opportunity to invest in shares in companies which are admitted to trading on regulated markets. The prices of these securities are determined by the degree of supply and demand on those markets. The capital of a company organised as a société anonyme is divided into shares which may be unregistered or registered and which take the form of certificates incorporating one or more shares. In Greece, in accordance with the applicable legislation, the shares of specific categories of companies (such as, e.g., banks, insurance and telecom companies) must be registered. The main categories of shares are ordinary shares and preference shares. Ordinary Shares: This is the most common form of share. In most cases, holders of ordinary shares are entitled to vote at a company s general meetings and to collect a dividend if the company distributes such. Preference Shares: Holders of preference shares have a special preference, under certain circumstances, to collect a dividend before ordinary shareholders in accordance with the specific provisions contained in the company s Articles of Association. Moreover, preference shares may be issued as shares convertible to ordinary shares in line with the provisions of a company s Articles of Association. However, preference shares do not entail voting rights at the company's General Meeting. 20
Companies are usually categorised depending on their capitalisation (in other words, the product of their share trading price times the total number of shares). On the Athens Exchange (ATHEX), companies are classified as either Main Market, Low Dispersion, Surveillance, Under Deletion or In Suspension. Shares of listed companies are also classified based on their field of business activity. In each regulated market, there are determined certain main indexes the composition of which encapsulates the performance of shares included in those indexes in a representative manner. For example, shares traded on ATHEX which are highly merchantable and fall into one of the aforementioned sectoral categories are included in indexes such as the FTSE/Athens Large Cap index for high cap companies. Other categories of shares admitted to trading on ATHEX are special brokerage shares and shares under surveillance. These categories include shares in companies which have made significant changes to their business activities and/or which have reported major changes to their financials. A special category of shares are those of portfolio investment firms. Companies in this category are comprised of a specific number of shares (closed-end funds) which are traded on regulated markets. Their share prices behave in a similar way to the prices of other shares admitted to trading and are determined on the basis of the supply and demand. Consequently, they can be traded above or below their net value. Initial Public Offerings (IPO) One of the basic conditions for admitting shares of a company to official listing on a regulated market is that the company meets the criterion of share distribution across a large number of shareholders. To comply with this criterion, the companies in cooperation with investment firms acting as underwriters commence initial public offering procedures with investors for those shares. The public offering terms and conditions (number of shares to be admitted to trading, number of shares to be made available as part of the public offering, best (non-binding) number of shares in subscription applications per investor category, share price range, etc.) are set out in the public offer prospectus which is submitted for approval to the supervisory authority of the regulated market. Opening Price, Closing Price and the Volatility Interrupter Most international exchanges use a specific method to calculate the opening and closing prices and a price volatility interrupter. On ATHEX in particular, the opening price of a share is today the price of the first trade in that share (which is determined either by the opening auction or by the price of the first transaction, whenever it occurs). If there is no transaction involving that share, then no opening price is stated. Calculation of the closing price is the same for all shares (with the exception of those that are in surveillance, conditional training or under deletion). Price is calculated after the auction procedure once normal trades for the continuous trading period have been completed. If a share is in the under surveillance category, the closing price is the price of the last call auction during which it was traded. If there are no transactions during the session, the closing price is taken as the start price (which is primarily the previous day's closing price). Activation of the volatility interrupter means the automatic change in the normal flow of trading for a security when its stock exchange price is to be directly changed to a specified extent (percentage). The purpose of the volatility interrupter is to limit sudden price changes to ensure adequate and correct market information so as to bolster transaction security and investor protection. This volatility interrupter is applied by a large number of international exchanges and by the Athens Exchange. Investment risks Investments in shares may be affected from time to time by some of the following risks, such as market risk, liquidity risk, issuer risk, currency risk, systemic and special (non-systemic) risk. Consequently, investments in shares have no guaranteed return since investors could incur losses to the capital invested. There are special cases involving leverage risk for investors: 21