EUROPEAN DIRECTIVE ON MARKETS IN FINANCIAL INSTRUMENTS (MIFID)

Transcription

1 EUROPEAN DIRECTIVE ON MARKETS IN FINANCIAL INSTRUMENTS (MIFID) BETTER PROTECTIONFOR INVESTORS

2 CONTENT MORE TRANSPARENCY FOR INVESTMENT SERVICES 3 THE MAIN SUBJECTS COVERED 4 ADVANTAGES OF TRANSPARENCY 6

3 MORE TRANSPARENCY FOR INVESTMENT SERVICES The Markets in Financial Instruments Directive ( MiFID ) is one of the essential mechanisms of the Financial Services Action Plan implemented by the European Union. Its main objectives are to reduce the barriers to crossborder trading in transferable securities, to facilitate investment and consequently to stimulate the European economy. The Directive came into force on 1 November THE SIGNIFICANCE OF MIFID MiFID introduces a comprehensive and harmonised regulatory framework within the European Union, Iceland, Norway and Liechtenstein ( EEA ). It covers a wide range of investment services and financial instruments such as equities, bonds, treasury bills, funds and derivative instruments (e.g. options, swaps, futures). The new provisions apply to all financial intermediaries providing investment services, including credit institutions and investment firms. Under MiFID, a financial intermediary that has been authorised by the competent authority in its home country is able to operate throughout the EEA under the supervision of its national authority. By increasing the efficiency and transparency of the financial markets, MiFID creates new opportunities, which benefits all investors. MAXIMUM PROTECTION MiFID offers more protection to investors as a result of: a greater assurance that products and services meet their risk profile; best execution of orders; higher standards in terms of order processing; and stringent provisions on transparency and the information to be provided. MiFID creates a new commercial dynamics EUROPEAN DIRECTIVE ON MARKETS IN FINANCIAL INSTRUMENTS (MIFID) 3

4 THE MAIN SUBJECTS COVERED BY MIFID MiFID requires financial intermediaries to categorise their clients. For that purpose, BNP Paribas Fortis needs to gather information on its clients financial situation, their investment knowledge, experience and objectives. THIS DIAGRAM ILLUSTRATES THE MAIN AREAS COVERED BY MIFID: Client classification Information to clients Client profiling MiFID Transaction Process Reporting to clients Suitability & Appropriateness Best execution 4 CORPORATE & PUBLIC BANK

5 CLIENT CATEGORISATION On the basis of the criteria laid down by the new EU rules, clients are placed in one of the following categories and informed thereof in writing. Eligible counterparties (ECPs) These are clients that actively trade in financial instruments and have the expertise needed for making investment decisions. Eligible counterparties include investment firms, credit institutions, insurance companies, certain collective investment undertakings and their management companies, pension funds, national governments and their offices, central banks and supranational organisations. The ECP status only applies to certain types of investment services. Professional clients Professional clients have the experience, knowledge and expertise needed to make investment decisions and to properly assess inherent risks. These clients include certain institutional investors and large companies that meet at least two of the following three criteria: a balance sheet total of 20,000,000 EUR, a net turnover of 40,000,000 EUR, own funds of 2,000,000 EUR. Retail clients A retail client is defined as a client who is not a professional client. Retail clients are asked to provide enough information to allow a proper assessment of their investment knowledge and experience. Different levels of protection Retail clients are assured of greater regulatory protection. Financial intermediaries are subject to less restrictive rules when dealing with professional clients and eligible counterparties. Clients can ask to have their category changed from that originally selected by their financial intermediary. It is at the discretion of the financial intermediary whether to agree to the request. All existing clients were informed individually of their categorisation. New clients will be informed of their categorisation before being provided with any investment service. CLIENT PROFILING MiFID provides that financial intermediaries must assess their clients knowledge and experience in the field of financial instruments and investment, and, for certain services, their financial situation and their investment objectives before providing investment services. SUITABILITY & APPROPRIATENESS To ensure that the service offering matches the client s profile, BNP Paribas Fortis tests all the criteria to see whether or not there is a complete match. If the bank considers it not to be the case, BNP Paribas Fortis informs the client or refrains from offering the service. BEST EXECUTION One of the main principles underpinning MiFID is that of best execution. This means that it is up to the financial intermediary to take all reasonable steps to ensure the best possible execution of orders. The elements taken into account are the price, costs, speed and likelihood of execution and settlement, size, nature and any other consideration relevant to the execution of the order. Best execution is not a commitment to the result, but rather to the means. In other words, the financial intermediary must be able to prove that the execution of every transaction complies with its execution policy. Nevertheless, this does not imply that the best result will always be achieved for any individual transaction. If, however, the client gives specific instructions to BNP Paribas Fortis, obliging it to make exceptions to its order execution policy, the application of the best execution principle cannot be guaranteed. The obligation concerning best execution applies to professional clients and retail clients, but does not apply to eligible counterparties. REPORTING TO CLIENTS BNP Paribas Fortis continues to inform its clients once services have been provided. BNP Paribas Fortis reports on the execution of orders and the underlying transactions, value assessments (in the case of portfolio management), of financial instruments, and assets held by BNP Paribas Fortis. Clients are be fully informed on a regular basis of the products and services provided. MiFID lays down specific rules on the content and frequency of these reports to professional and retail clients: Clients must receive confirmation that an order has been executed. At least once a year, clients must receive a statement of their assets held by BNP Paribas Fortis. INFORMATION TO CLIENTS MiFID emphasises that all communication should be fair, clear without being misleading and be provided on time. Communication must also be appropriate to enable the client to assess the risks, costs and anticipated revenue for each product or service proposed. The obligation to inform runs parallel with the protection level related to the client s categorisation. The information given to retail clients is broader than that for professional clients. The obligation to inform doesn't generally apply to eligible counterparties. EUROPEAN DIRECTIVE ON MARKETS IN FINANCIAL INSTRUMENTS (MIFID) 5

6 ADVANTAGES OF TRANSPARENCY MiFID applies to all EU member states + Iceland, Norway and Liechtenstein 6 CORPORATE & PUBLIC BANK

7 CONTACT YOUR RELATIONSHIP MANAGER IF YOU NEED MORE INFORMATION ABOUT MIFID. MiFID offers clients a number of advantages. They have a larger choice of investment products and service providers, who are required to conform to higher standards in turn. This leads to higher quality services at more competitive prices. Clients enjoy the same high level of protection whether they choose a domestic or an EEA provider. EUROPEAN DIRECTIVE ON MARKETS IN FINANCIAL INSTRUMENTS (MIFID) 7

8 CORPORATE & PUBLIC BANK, BELGIUM BNP Paribas Fortis SA/NV, Montagne du Parc 3, B-1000 Brussels, RPM/RPR Brussels, VAT BE , Intermediary authorized under number A by the FSMA Printed on 100 % recycled paper This brochure was created for informative purposes by BNP Paribas Fortis SA/NV. The information contained in this brochure is subject to change. While BNP Paribas Fortis SA/NV takes great care to ensure that the information in this brochure is correct, it may not be held liable for possible errors or omissions, or the direct or indirect damage that might result from this. Responsible editor: Ann Plaetinck І 1017B_NL january