Table of Contents
1. Client Categorisation: An Overview
2. Retail Clients: Qualification and Corresponding Protection
3. Professional Clients: Qualification and Corresponding Protection
4. Eligible Counterparties: Qualification and Corresponding Protection
5. Changing your Categorisation: Eligibility criteria and Corresponding Protection
1. Client Categorisation: An Overview
The Markets in Financial Instruments Directive (EU Directive 2014/65/EU active from 2017) ('MiFID II') as this has been transposed in Law 87(I)/2017 for the provision Investment Services and exercise of Investment Activities is intended to regulate the activities of firms providing services relating to financial instruments. Certain hedging products offered by Ebury fall under the scope of MiFID II and Lay 87(I)/2017, meaning they must be treated as investment products and managed accordingly.
Products provided by Ebury that fall under the scope of MiFID II are:
• Non-deliverable FX Forwards ('NDFs');
• Deliverable FX Forwards for Balance Sheet hedging;
• FX Options;
The implementation of MiFID II legislation has made firms that offer investment services covered and subject to specific regulatory requirements, including the requirement to categorise clients. Clients are categorised under the following classifications:
1. Retail Clients;
2. Professional Clients Per Se;
3. Eligible Counterparties Per Se;
4. Elective Professionals;
5. Elective Eligible Counterparties;
Categorising Clients under these groupings is intended to ensure that Clients are offered the necessary level of protection afforded them by the implementation of MiFID. Through the categorisation, Ebury ensures that individuals with limited knowledge of and involvement in market activity are afforded greater protection with regard to the regulated activity that they can participate in.
Firms that offer Investment Services to these Clients are required to take greater responsibility for shielding the client from certain levels of exposure.
By contrast, Clients with frequent and substantial market activity are granted greater autonomy with regard to which services they can access and the protections extended lower.
It is important to understand which category applies to you and which protections you will be afforded as a Client of Ebury. It is possible to request re-categorisation subject to meeting the criteria and accepting the terms outlined in this notice.
Clients will be asked to sign to confirm their agreement and understanding of their final categorisation and the level of protection it affords as is outlined in this notice.
2. Retail Clients: Qualification and Corresponding Protection
A Retail Client is defined as a Client that does not meet the criteria for categorisation as a Professional Client or an Eligible Counterparty. Retail Clients are therefore limited in scale (typically individuals) and engage in smaller scale market activity.
Retail Clients are afforded the greatest level of protection under Law 87(l)/2017. These protections include:
1. Providing the Client with more information in relation to the company, services provided, costs, fees, commissions, charges, investments and safeguarding of Client assets and funds.
2. Requiring the Client to provide information about the knowledge they have of a particular service provided or requested and where Ebury is in doubt about the suitability of a particular product or service, they are required to warn the Client accordingly.
3. Providing the Client with Best Execution, meaning that Ebury must provide the Client with the best possible result from the service for the Client. In its simplest form this means the best price and the lowest possible costs and fees.
4. Requiring Ebury to ensure that any action taken on behalf of the Client with relation to services provided must meet the Client's investment objectives, meet the Client's risk appetite and be suitable with regard to the Client's knowledge and experience.
Clients we are assessed as being 'Retail' in nature must pass the Suitability and Appropriateness test part of their onboarding process. This is to ensure that our products and services are within their knowledge, experience and overall risk appetite.
3. Professional Clients: Qualification and Corresponding Protection
A Professional Client is a client who is deemed capable to make their own investment decisions, with the ability to assess the risks associated with their investment decisions and the ability to decide on the suitability of the products to their needs.
As found in the Law 87(I)/2017, Second Appendix, these are authorised or regulated:
1. Credit Institutions
2. Investment Firms
3. Other authorised or regulated financial institutions
4. Insurance Companies
5. Collective investment schemes or the management company of such a scheme
6. Pension fund or the management company of a pension fund
7. A commodity or commodity derivatives dealer
8. A local authority
9. Other institutional investors
Alternatively, if the none of the above apply, Professional Per Se categorisation can be achieved through:
1. Clients that meet two or more of the following three criteria relating to MiFID business:
(a) A balance sheet total of EUR 20,000,000
(b) A net turnover of EUR 40,000,000
(c) Own funds of EUR 2,000,000;
2. A national or regional government, including a public body that manages public debt at national or regional level, a central bank, an international or supranational institution (such as the World Bank, the IMF, the ECB, the EIB) or another similar international organisation
3. Another institutional investor whose main activity is to invest in financial instruments (in relation to the firm's MiFID or equivalent third country business) or designated investments (in relation to the firm's other business). This includes entities dedicated to the securitisation of assets or other financing transactions
Professional Clients are not afforded the same protections that are enjoyed by Retail Clients because it is expected that they possess sufficient experience and knowledge of the instruments and the services on offer as well as sufficient financial resources to withstand possible market volatility.
4. Eligible Counterparties: Qualification and Corresponding Protection
An Eligible counterparty is one which can be either a Per Se Eligible Counterparty or an Elective Eligible Counterparty.
A client may only be categorised as Eligible Counterparty in relation to Eligible Counterparty Business:
(a) dealing on own account, execution of orders on behalf of clients or reception and transmission of orders; or
(b) any ancillary service directly related to a service or activity referred to in (a); or
(c) arranging in relation to business which is not MiFID or equivalent third country firm business;
but only to the extent that the service or activity is carried on with or for an eligible counterparty.
A client may be considered for Eligible Counterparty categorisation if they meet the following criteria:
1. CIFs, other Investment Firms;
2. Credit institutions;
3. Insurance undertakings;
4. UCITS and their management companies;
5. Pension funds and their management companies;
6. Other financial institutions authorised by a Member State or regulated under Community legislation or the national law of a Member State;
7. Other undertakings and third country entities indicated in Sections 31 (3) and (4) of the Law;
8. National governments and their corresponding offices including public bodies that deal with public debt;
9. Central banks and supranational organisations.
Eligible Counterparties, much like Professional Clients, are not afforded the protections of Retail Clients.
5. Changing your Categorisation: Eligibility criteria and Corresponding Protection
Elective Professional
Clients who are categorised as Retail at the time of their assessment maintain the right to be Elective Professionals, provided that they do so through a written request and after accepting the reduction in protections afforded to them.
Upon the request, Ebury will undertake the assessment of the expertise, experience and knowledge of the client in accordance with Ebury's internal policies and procedures and will consider the risks involved prior to making the decision.
In the course of that assessment, as a minimum, two of the following criteria will need to be satisfied:
1. 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;
2. The size of the client's financial instrument portfolio, defined as including cash deposits and financial instruments exceeds EUR 500 000;
3. 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.
It is important to note that by choosing an Elective Professional Categorisation, the client forfeits the protections previously granted to them as Retail Clients and they are treated as Professional clients under MiFID II legislation.
During re-categorisation, the following procedure is followed:
- The client must state in writing to the firm that it wishes to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product;
- The firm must give the client a clear written warning of the protections and investor compensation rights the client may lose; and
- The client must state in writing, in a separate document from the contract, that it is aware of the consequences of losing such protections.
Professional Clients are responsible for keeping EPM CY informed about any change which could affect their confirmed categorisation.
If Ebury becomes aware that the Client no longer fulfils the initial conditions which made them eligible for a professional categorisation and treatment, then the Company can take appropriate actions, such as re-categorisation.
Elective Eligible Counterparty
EPM may allow a client to be re-categorised as an Elective Eligible Counterparty if they:
1. Write to EPM requesting to be re-categorised as an Elective Eligible Counterparty having read this notice and understood the reduction in protections afforded to them.
2. Meet the following criteria:
- The client is an undertaking and;
- Is a per se professional client (except for a client that is only a per se professional client because it is an institutional investor) and;
- Is a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) called up share capital of at least £10 million (or its equivalent in any other currency at the relevant time).
Subject to an initial assessment, the client may be invited to complete the required further forms to assess the client's suitability for re-categorisation as Elective Professional or Elective Eligible Counterparty at Ebury.
The client will not be able to access re-categorisation without stating their intent in writing, having read this notice.
Re-categorise for Higher Protection
Clients holding 'Professional' or 'Eligible Counterparty' status, may also request for categorisation to 'Retail' if they wish, noting that by doing so they will be offered higher level of Protection and trades may be rejected if Ebury believes they are not suitable for the client.
Ebury Partners Markets Cyprus Limited is authorised and regulated by the Cyprus Securities and Exchange Commission ('CySEC') under license number 459/25. Registered address: DOMS Assets Business Centre, 33 Neas Engomis Street, 2409 Engomi, Nicosia, Cyprus.
