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Client Categorisation Policy
CLIENT CATEGORISATION POLICY
I. GENERAL
United Bulgarian Bank - member of the NBG Group of Companies (hereinafter “The Bank”) provides its clients with investment and ancillary services, in a professional, fair and honest manner.
This policy sets the client categorisation principles of the Bank, that apply prior to the provision of investment and/or ancillary services, in line with The Markets in Financial Instruments Act.
Client categorisation is effected according to this policy either prior to signing the contract for the provision of investment and/or ancillary services or prior to the provision of such services, depending on which comes first. This policy is applied to all personnel of the Bank that provide investment and/ or ancillary services to existing or new clients.
This policy can be adjusted according to the changes in legal and regulatory framework that applies to the Bank when providing investment and / or ancillary services.
II. DEFINITIONS
For the purpose of this policy, the following definitions apply:
Investment and Ancillary Services:
(See AppendixΑ1 & Α2)
Client:
Any natural or legal person to whom the Bank provides main or / and ancillary investment services and / or investment and/or ancillary services stated in Appendix A1 & A2.
Professional Client:
Professional client is a client who possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs.
The professional client receives, according to the law, a lower level of protection than a retail client (see Chapter V – ClientCategorisationCriteria).
Professional Clients (credit institutions, investment firms, other authorized and regulated financial institutions, insurance companies, UCITS and their management companies, pension funds and their management companies, commodity and commodity derivatives dealers, locals and other institutional investors) are considered to have the financial ability to bear the investment risks in line with their investment objectives, when the provided investment service concerns the provision of investment advice.
In case of the provision of portfolio management services, Professional Clients as defined above, are not considered to have the financial ability to bear the investment risks in line with their investment objectives.
Eligible Counterparty:
Eligible Counterparty is the Professional Client who is provided with investment services consisting of execution, reception or transition of orders, as well as any ancillary services directly related to these transactions or when the client deals on own account. Eligible Counterparty is considered to have financial ability to bear the investment risks in line with their investment objectives. In the cases mentioned above, Eligible Counterparties do not benefit of a higher level of protection, according to the Law, except for the cases defined otherwise (see Chapter V below - ClientCategorisationCriteria).
Retail Client:
Retail Client is defined as a client who is neither a “Professional Client” nor an “Eligible Counterparty”. Retail Client benefits from the highest level of protection according to The Markets in Financial Instruments Act.
III. SCOPE
The main objective of client categorisation is to define the level of experience, knowledge and expertise of existing and new clients in order to perform investment activities and transactions in financial instruments.
This policy is used to guide the Banks’ Personnel and defines the following:
- how to determine client’s categorisation,
- when and how clients may be opted up from Retail to Professional categorisation,
- when and how clients may be opted down from Professional to Retail categorisation,
- when and how clients may be opted down from Eligible Counterparty to Professional or Retail Client categorisation, and
- the records and information that must be retained in relation to the client’s categorisation.
IV. AUTHORIZATION & GOVERNANCE
The Senior Management is responsible for setting the principles for the client categorisation policy and for monitoring its implementation. This Policy is approved by the Board of Directors of UBB following the prior approval of NBG Group Compliance Division.
The Bank’s Personnel should comply with this policy prior to the provision of investment and/or ancillary services and categorize existing and new clients according to the principles defined in this policy.
V. CLIENT CATEGORISATION CRITERIA
In order to categorize the Bank’s existing and new clients, the following elements should at least be recorded:
- Legal or natural person.
- In case of legal person, the nature of its activity.
Any natural person is automatically categorised as “Retail Client”.
Legal persons, who are considered as “Eligible Counterparties” for the transactions defined in The Markets in Financial Instruments Act, are included in the following table (Table 1):
Table 1
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Eligible Counterparties
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Investment Firms
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Credit Institutions
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Insurance Companies
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UCITS and their management companies
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Pension funds and their management companies
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Private Equities
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Other financial institutions authorised or regulated under Community legislation or the national law of a Member State
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Persons whose main business consists of dealing on own account in commodities and/or commodity derivatives and which are not part of any financial institution
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Firms which provide investment services and/or perform investment activities consisting exclusively in dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deal for the accounts of other members of those markets or make prices for them and which are guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such firms is assumed by clearing members of the same markets
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National governments and their corresponding offices including public bodies that deal with public debt
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Central banks
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Supranational Organizations
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The Legal persons that are considered as Professional clients as per The Markets in Financial Instruments Act for all investment services are defined below:
Table 2
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Professional Clients
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Locals[1]
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Commodity and commodity derivatives dealers
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Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions
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Investment Firms
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Credit Institutions
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Insurance Companies
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UCITS and their management companies
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Pension funds and their management companies
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Private Equities and other institutional investors
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Other authorized or regulated financial institutions
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National and regional governments, including public bodies that manage public debt
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Central banks
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International and supranational institutions (such as the IMF, the ECB, the EIB)
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Professional Client category also includes large corporates that meet at least two of the following size criteria on a solo basis:
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Size Requirements
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Balance Sheet Total
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€20 000 000
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Net Turnover
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€40 000 000
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Own Funds
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€2 000 000
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Legal persons that are not categorized as “Professional Clients” or “Eligible Counterparties”, according to the abovementioned criteria, are categorized as Retail Clients.
The Bank has the right to change client’s categorisation, at its discretion in cases where the client no longer fulfills the initial conditions, which made him eligible for his current categorisation. In such cases, the Bank should provide a written notification of the change to the client.
Detailed description of client categorisation is included in Appendix B – Client Categorisation.
VI. INFORMATION TO CLIENT
Professional Clients
Prior to the provision of any services, the Bank informs a Professional Client, in relation to the following:
- his categorisation as a Professional Client, on the basis of the information available to the Bank,
- his ability to request re-categorisation in order to benefit from a higher protection for all investment services or transactions and for all types of products or transactions.
Eligible Counterparties
Prior to the provision of any services, the Bank informs an Eligible Counterparty, in relation to the following:
- his categorisation as an Eligible Counterparty, on the basis of the information available to the Bank,
- his ability to request re-categorisation in order to benefit from a higher level of protection for all investment services or transactions, and for all types of products or transactions.
Retail Clients
Prior to the provision of any services, the Bank should inform a Retail Client, in relation to the following:
- his categorisation as a Retail Client, on the basis of the information available to the Bank,
- the level of protection that results from this categorisation,
- his ability to request re-categorisation that will result to a lower level of protection for all investment services or transactions, and in relation to all types of products or transactions.
VII. RE – CATEGORISATION OF CLIENTS
Re – categorisation of Professional Clients to Retail Clients
A Professional Client has the right to request a higher level of protection by being re-categorized as a Retail Client for all investment services or transactions and for all types of products or transactions.
In order to be treated as a Retail Client, a Professional Client should:
- clearly request in writing re – categorisation,
- sign a written agreement with the Bank, confirming that he will not be treated as a Professional Client.
The agreement specifies that the provision of a higher level of protection applies to all investment services or transactions and to all types of products or transactions.
Professional clients are obliged to inform the Bank regarding any change that could affect their current categorisation.
Re – categorisation of Eligible Counterparties to Professional Clients or Retail Clients
In order to obtain a higher level of protection, an Eligible Counterparty has the right to request a different categorisation and be classified as:
- Retail Client for all investment services or transactions, and for all types of products or transactions,
- Professional Client for all investment services, and for all types of products or transactions.
In order to be treated as a Professional Client or as a Retail Client an Eligible Counterparty should:
- clearly request in writing re-categorisation,
- sign a written agreement with the Bank, confirming that he will not be treated as an Eligible Counterparty.
The agreement states explicitly that the higher level of protection relates to all investment transactions.
Re – categorisation of RetailClientstoProfessionalClients
A Retail Client has the right to waive the protection provided by the Bank by requesting to be re-categorized as a “Professional Client”.
- The Bank may re-categorize the client only if an adequate assessment of his expertise, experience and knowledge, gives reasonable assurance, in light of the nature of the transactions or services envisaged that the client is capable of making his own investment decisions and understanding the risks involved.
- In case of companies, the evaluation refers to the person authorised to execute transactions on company’s behalf.
In order to identify whether a retail client meets the criteria to be re-categorized as a “Professional Client”, the Bank must ensure that at least two of the following quantitative criteria are met:
- the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
- the size of the client’s financial instrument portfolio, defined as including cash deposits and financial instruments exceeds EUR 500,000;
- the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.
The Bank maintains the right to change its client’s categorisation, in cases where based on appropriate documentation it appears that the client does no longer fulfill the abovementioned quantitative criteria.
Classification Process of a Retail Client to Professional Client
The client notifies in writing the Bank that he wishes to be treated as a professional client for all investment services and transactions.
The Bank must provide the client with a clear written warning of the protections and investor compensation rights he may lose from his re-categorisation as professional Client.
The client states in writing, in a document other than the contract, that he is aware of the consequences resulting from his re-categorisation as a Professional Client.
The clients’ request is being forwarded to the responsible Division for evaluation.
The Bank informs the client on the approval or rejection of its request within a reasonable period of time.
All required supporting documentation and certifications are maintained in the clients’ files, in line with the Bank’s and the regulatory requirements regarding record keeping.
A detailed description of clients re - categorisation is presented in Appendix C – Client Re – Categorisation.
This Policy is approved by the UBB Board of Directors on 27.09.2010 and enters into force 3 days after its approval.
[1] A firm dealing only for its own account on a financial-futures or options exchange or for the accounts of or making a price to other members of the same exchange and guaranteed by a clearing member of the same exchange