MiFID – Markets in Financial Instruments Directive

MiFID (Markets in Financial Instruments Directive) refers to Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, i.e. collective investment undertakings, investment securities, financial instruments, and derivatives. MiFID and Commission Decision 2006/73/EC have been implemented into the legal system of the Czech Republic through national laws, particularly Act No. 256/2004 Coll. on Capital Market Undertakings. One of the most important objectives of MiFID is to harmonize investor protection throughout Europe and to adapt client protection to the level of their investment-related knowledge and experience.

Rules for Providing Investment Services

MiFID proposes three main rules for providing investment services. These rules must be observed by securities traders:

You can find relevant documents here.

Categories of Clients

The rules for dealing with clients set out in the directive are much more extensive than in the past. MiFID introduces client categories and classifies clients as professional and retail. In line with this categorization, securities traders face stricter requirements for collecting information from clients – the directive describes in detail the methods for giving information to clients, handling and processing clients’ instructions, etc. Before providing an investment service to you, we are required under the law, specifically Act No. 256/2004 Coll. on Capital Market Undertakings, to classify you in one of the following categories: The objective of this categorization is to protect clients who have a lower level of investment knowledge and experience. The highest degree of protection is provided to retail clients. It means that clients in this category receive the largest amount of relevant information on investment products and services and, at the same time, are warned of the potential risks posed by a specific investment service. Most clients will be classified in the retail client category because this segment includes the majority of private individuals. Eligible counterparties and professional clients mainly include banks, governments, pension funds, large corporations, and, exceptionally, private individuals. Clients in this segment are judged to be able to make their own investment decisions and to evaluate potential risks without needing such a high degree of protection as retail clients. A client has the right to demand to be classified in a different category in accordance with the conditions set out in the applicable laws and regulations. If reclassified from the retail status to a different category, a client might be no longer entitled to compensation from the foreign guarantee system (its purpose is similar to the Securities Traders Guarantee Fund). In addition, some of the obligations securities traders have to retail clients may expire or be reduced following such reclassification.

Categories of Investment Services

MiFID also defines conditions for provision of investment services and classifies these services into three categories: Expobank CZ a.s. will send all clients a letter informing them of the category in which they have been classified (retail client, professional client, or eligible counterparty). Together with this letter, clients will receive a new investment services agreement that includes the new requirements introduced by MiFID. For more information about the obligations and benefits introduced by MiFID, visit the European Securities and Markets Authority website – MiFID: Consumer Guide – Investing in Financial Products.

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