The following summary provides an overview of the MiFID II Directive for informational purposes only. While efforts have been made to accurately represent the key provisions and concepts, it is important to note that this summary may contain typos, errors, or misinterpretations. Therefore, the summary should not be considered as a definitive or legally binding interpretation of the MiFID II Directive.
The information provided herein does not constitute legal, financial, or investment advice and should not be relied upon for making business or investment decisions. It is recommended to consult with qualified professionals or refer to the official MiFID II Directive and relevant legal sources for precise and up-to-date information.
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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. In order to be considered to be professional client, the client must comply with the following criteria:
- Entities that are required to be regulated or authorised to operate in the financial markets:
– Credit institutions;
– Investment firms;
– Other authorized or regulated financial institutions;
– Insurance companies;
– Collective investment schemes and management companies of such schemes;
– Pension funds and management companies of such funds;
– Commodity and commodity derivative dealers;
– Locals;
– Other institutional investors
- Large undertakings meeting two of the following size requirements on a company basis:
– Balance sheet total of at least EUR 20 million
– Net turnover of at least EUR 40 million
– Own funds of at least EUR 2 million
- National and regional governments, including public bodies that manage public debt at national or regional level, Central Banks, International and supranational institutions such as the World Bank, the IMF, the ECB, the EIB and other similar international organisations.
- Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions.
- Clients who may be treated as professional investors on request
Valid only if an adequate assessment of the expertise, experience and knowledge of the client, undertaken by the investment firm, gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making investment decisions and understanding the risks involved.
The fitness test applied to managers and directors of entities licensed under Directives in the financial field could be regarded as an example of the assessment of expertise and knowledge. In the case of small entities, the person subject to that assessment shall be the person authorised to carry out transactions on behalf of the entity.
In the course of that assessment, as a minimum, two of the following criteria shall be satisfied:
— 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.
Eligible Counterparties
This is a distinct category that can be applied to a subset of Professional clients. Eligible counterparties receive the least investor protection.
- Member States shall recognise as eligible counterparties for the purposes of this Article investment firms, credit institutions, insurance companies, UCITS and their management companies, pension funds and their management companies, other financial institutions authorised or regulated under Union law or the national law of a Member State, national governments and their corresponding offices including public bodies that deal with public debt, central banks and supranational organisations.
- Member States may also recognise as eligible counterparties other undertakings meeting pre- determined proportionate requirements, including quantitative thresholds. In the event of a transaction where the prospective counterparties are located in different jurisdictions, the investment firm shall defer to the status of the other undertaking as determined by the law or measures of the Member State in which that undertaking is established.
- Member States shall ensure that the investment firm, when it enters into transactions in accordance with paragraph 1 with such undertakings, obtains the express confirmation from the prospective counterparty that it agrees to be treated as an eligible counterparty. Member States shall allow the investment firm to obtain this confirmation either in the form of a general agreement or in respect of each individual transaction.
- Member States may recognise as eligible counterparties third country entities equivalent to those categories of entities referred to in paragraph 1.
- Member states may also recognise as eligible counterparties third country undertakings such as those referred to in paragraph 2 on the same conditions and subject to the same requirements as those laid down in paragraph 2.
Source: https://eur-lex.europa.eu/eli/dir/2014/65/oj/eng
Disclaimer: Access Restrictions: The information and services provided on this website are exclusively intended for individuals or entities classified as MiFID II professional investors or eligible counterparties. If you do not fall into either of these categories, you are kindly requested to exit this website immediately.
MiFID II Classification: As per the Markets in Financial Instruments Directive (MiFID II), professional investors are individuals or entities who possess the necessary knowledge, expertise, and experience to make independent investment decisions and understand the risks involved. Eligible counterparties are entities classified as the most sophisticated investors, including financial institutions and regulated entities. If you are unsure of your classification, please consult the relevant regulatory guidelines or seek professional advice.
No Offer or Advice: The information provided on this website does not constitute an offer, solicitation, or recommendation to buy or sell any financial instruments. The content is for informational purposes only and should not be construed as financial, investment, or legal advice. The website does not take into account individual investment objectives, financial situation, or risk tolerance.
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