Client categorisation policy
This is an English translation of the Slovenian original provided as a reference to aid the understanding of the relevant documents. Equito Brokerage Company, Ltd. shall not be held responsible for any erroneous translations and is presented as is. In case of a discrepancy, the Slovenian original will prevail as an official document and applicable for interpretation.
1. GENERAL PROVISIONS
1.1. Purpose of the policy
With this client categorisation policy (hereinafter referred to as the “Policy”), the Company defines the procedures and policy for classifying its clients into professional, retail and eligible counterparties pursuant to Articles 249 and 276 of the Financial Instruments Market Act (Official Journal of the Republic of Slovenia, No. 77/18, as amended and supplemented; ZTFI-1).
2. PROFESSIONAL CLIENTS
2.1. Definition of professional clients
In accordance with Article 246 of the ZTFI-1, the following are considered to be professional clients:
A. legal persons which have been duly authorised by a competent supervisory authority of a Member State or a third country or otherwise have acquired the right to operate in financial markets and which include:
– credit institutions,
– investment firms,
– other supervised financial corporations,
– insurance, reinsurance and pension companies,
– collective investment undertakings and their management companies,
– pension funds and the persons who manage them,
– persons trading in commodities and commodity derivatives,
– local undertakings within the meaning of point 4 of the first paragraph of Article 4 of Regulation 575/2013/EU,
– other institutional investors;
B. other institutional investors whose regular business is investing in financial instruments, including entities engaged in asset securitisation or other financing transactions;
C. the Republic of Slovenia and other countries or national or regional authorities, public law entities managing public debt, the Bank of Slovenia and other central banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organisations;
D. large enterprises that meet at least two of these criteria at enterprise level:
– the balance sheet value of their assets reaches €20,000,000,
– their annual net turnover reaches €40,000,000,
– their own funds amount to €2,000,000.
2.2 Treatment of professional clients
The Company will inform clients who would meet the criteria set out in Section 2.1 of this Policy before it commences providing investment services to them that:
(1) shall, to the best of its knowledge, consider the client to be a professional client and will treat the client as such unless otherwise agreed between the Company and the client,
(2) the client may request to be treated as a retail client and to have the terms of the investment services contract and the transaction amended accordingly to provide it with the higher level of protection applicable to retail clients.
Professional clients are responsible for keeping the Company informed of any changes that may affect their current categorisation.
If the Company determines that the Client no longer meets the initial conditions that made him/her eligible for professional treatment, the Company shall take appropriate action.
3. NON-PROFESSIONAL CLIENTS
3.1 Definition of retail clients
All other clients that the Company will not treat as professional clients on the basis of the above provisions shall be classified by the Company as non-professional clients.
3.2 Request from a retail client to be treated as a professional client
Notwithstanding the provisions of Section 3.1 of this Policy, non-professional clients may request to be treated as professional clients by the Company. The Company may treat a client making a request as a professional if the quantitative and qualitative conditions set out below are met and if it has dealt with the client’s request in accordance with the procedure set out in this Policy.
3.3 Quantity condition
To be treated as a professional client, the requesting party must meet at least two of the following conditions:
– the client has already executed a number of trades of significant value in the relevant markets, with an average frequency of at least ten trades per quarter over the last year,
– the value of its portfolio of investments in financial instruments, including cash deposits, exceeds EUR 500 000,
– the client has worked or has worked for at least one year in the financial sector in a position requiring knowledge of the business and services provided by the Company.
For the purposes of meeting the criteria set out in paragraph 1 of this Article, the Company will only consider the following types of evidence:
a) in relation to transactions of significant value in the relevant markets:
– copies of transaction statements from the records of brokerage firms for the most recent year;
– copies of transaction statements from the records of management companies and alternative investment fund managers for the most recent year;
– copies of securities transaction certificates for the last year;
– copies of instructions to execute transactions relating to the purchase or sale of securities;
– copies of contracts relating to the purchase or sale of securities carried out in the last year;
– other documents which, in the Company’s judgement, adequately demonstrate the execution of the transactions.
b) on the value of the portfolio:
– copies of extracts from the records of brokerage firms on the current day;
– copies of extracts from the records of management companies and alternative investment fund managers as at the current date;
– copies of bank statements for the last month;
– copies of the deposit accounts of the booklets;
– copies of extracts from the land register and other registers showing ownership of movable property;
– other documents that, in the Company’s judgment, adequately demonstrate the value of the portfolio.
c) experience in the financial sector:
– copies of employment contracts
– copies of extracts from ZPIZ records;
– copies of CVs;
– copies of evidence of education;
– publicly available data;
– other documents which, in the Company’s judgement, adequately demonstrate experience in the financial sector.
3.4. Quality condition
The Company shall only treat a non-professional client who meets the quantitative condition set out in Section 3.3 of this Policy as a professional client if, in relation to such client, the Company determines that the client is capable of making his or her own investment decisions and understanding the significance of the risks associated with those decisions.
The Company shall, in principle, assess the qualitative condition referred to in paragraph 1 of this Article on the basis of a questionnaire forming an integral part of the client review process, whereby the Company may also take into account, in the course of that assessment, evidence provided by the client concerned to the Company for the purpose of demonstrating the quantitative condition referred to in point 3.3 of this Policy.
3.5. Starting treatment as a professional client
The Company starts treating a non-professional client as a professional client when the client:
(1) submit a written request to the Company to be treated as a professional client and complete a questionnaire forming part of the client screening process and provide evidence that it meets the criteria for a professional client; and
(2) receives from the Company a written warning of the termination of the rights and protections referred to in Chapter 7.2 of ZTFI-1 and of the termination of the right to a guarantee for client claims, and a statement and description of the risks assumed as a professional client; and
(3) provide the Company with a written statement that he/she understands the consequences of the loss of the protection and rights referred to in point (2) of this paragraph.
3.6. Changes to data
Clients who are treated as professional by the Company in accordance with the provisions of this Policy shall keep the Company informed of any changes that affect or may affect their current categorisation.
If the Company, on the basis of the notification referred to in the preceding paragraph or on the basis of other information at its disposal, becomes aware that a particular client no longer meets the conditions on the basis of which the Company began to treat him as a professional client, the Company shall immediately implement appropriate procedures to adjust the terms and conditions for the provision of investment services to such client.
3.7. Termination of treatment as a professional client at the client’s request
Clients who are treated as professional clients by the Company in accordance with the provisions of this Policy (either because they meet the conditions set out in Section 2.1 of this Policy or at their request, in accordance with the provisions of Section 3.2 of this Policy) may at any time request the Company to cease to treat them as professional clients.
If the Company receives a request under the preceding paragraph, it shall promptly implement appropriate procedures to adjust the terms and conditions of the provision of investment services to such client.
4. ELIGIBLE COUNTERPARTIES
4.1 Definition of eligible counterparties
The Company considers the following as eligible counterparties in accordance with the provisions of Article 276 of the ZTFI-1:
A. investment firms,
B. credit institutions
C. other supervised financial corporations
D. insurance or reinsurance undertakings
E. UCITS and the companies that manage them,
F. pension funds and the companies that manage them,
G. the persons referred to in Article 62(2) of ZTFI-1, namely state bodies or public law entities related to public debt management or members of the ESCB, which perform their tasks in accordance with the Treaty establishing the European Community (Official Journal of the Republic of Slovenia – International Treaties, No 7/04) and the Statute of the ESCB and of the European Central Bank (Official Journal of the Republic of Slovenia – International Treaties, No 7/04), or perform equivalent tasks in accordance with the regulations of other Member States.
The Company may also treat as an eligible counterparty another Member State firm that meets predefined proportionate requirements, including quantitative thresholds. In this case, the law of the Member State in which the company has its registered office shall apply to the assessment and treatment of the company as an eligible counterparty. Before executing an order for such a firm, the Company shall obtain the firm’s explicit consent to be treated as an eligible counterparty by the Company, which consent may be given as a general consent for all transactions or for a specific transaction.
The Company may also consider as an appropriate counterparty:
(1) third country persons equivalent to those referred to in the first paragraph of this point 4.1 of this Policy; and
(2) third country companies that meet the requirements set out in the second paragraph of this point 4.1 of this Policy.
4.2. Treatment of eligible counterparties
They do not apply to the execution of an order for an eligible counterparty:
(1) Article 237(7) of the ZTFI-1 (record-keeping and documentation);
(2) Article 250(3) and (4) of the ZTFI-1 (professional due diligence of a brokerage firm);
(3) Article 251(1) and (2) and (10) to (18) of the ZTFI-1 (brokerage firm’s obligations, information to clients and market communications);
(4) Articles 252 to 257 of the ZTFI-1 (protection of clients’ interests, financial instruments of a broker-dealer, explanatory obligations, exemptions from explanatory obligations, equivalent market in a third country, contract for the provision of investment services and transactions);
(5) Article 259 of the ZTFI-1 (exceptions to the explanatory and reporting obligations);
(6) Articles 267 to 270 of the TFI-1 (execution of orders on terms most favourable to the client, client order execution policy, client order execution venue, monitoring and evaluation of the effectiveness of the order execution policy); and
(7) Article 272 of the ZTFI-1 (procedures and measures for the execution of client orders).
If the Company also treats an eligible counterparty as a professional client in accordance with this Policy, the application of other provisions of Section 7.2 of the ZTFI-1 (prudential rules for the provision of investment services and transactions to clients) may also be excluded or limited by contract.
Categorisation as an Eligible Counterparty under paragraph 4.1 of this Policy does not preclude the right of those persons to request, generally or in relation to a particular transaction, that the Company treat them as clients to whom the provisions of this Law referred to in the first paragraph of this paragraph 4.2 of this Policy apply. If that person exercises this right and if that person is treated by the Company as a professional client in accordance with the provisions of this Policy, it is also permitted to exclude or limit by contract the application of Section 7.2 of the ZTFI-1, except for the provisions referred to in the first sentence of the first paragraph of this point 4.2. of this Policy.
5. FINAL PROVISIONS
The compliance department and the management of the Company shall supervise the implementation of all provisions of this Policy.
5.2 Final provision
This Policy shall enter into force on the date of the Company’s authorisation to provide investment services.