Client Categorisation Policy
Capital Com SV Investments Limited (“we”, “CAPITAL.COM”, “the Company”), a company authorised and regulated by the Cyprus Securities and Exchange Commission (License No. 319/17) with registered office at 6th floor, Lophitis Business Centre II, 237, 28th October Street, Limassol, PC3035, is required to categorise clients, those to which the Company provides, intends to provide or has provided a service in the course of carrying on a regulated activity into one of the following three categories: retail, professional or eligible counterparty.
- Legal Framework:
The Company is operating under the provisions of the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, as the same may be in force from time to time and modified or amended from time to time (the “Markets in Financial Instruments Directive (2014/65/EU)” or “MiFID II”), which was transposed into Cypriot Law, the Investment Services and Activities and Regulated Markets Law of 2017 (Law 87(I)/2017).
According to the above legislation, the Company is required to categorise its Clients into one of the following three categories: “retail”, “professional” or “eligible counterparty”. As a result, the Company should evaluate any application for opening an account and classify any prospective client under any of the categories mentioned above, always based on the information provided by the said client.
Special Statement for Residents of Spain. The Company trades CFDs. CFD is a product that is complex and difficult to understand. The National Securities Market Commission of Spain (Comisión Nacional del Mercado de Valores) has determined that, due to the complexity of the CFDs and the risks involved, the purchase of CFDs by retail investors is not appropriate/suitable. A CFD is also a leveraged product and the losses incurred may be greater than the amount initially invested.
- Notification to the client for its categorisation:
The Company, prior to the provision of services, must notify a new client of their categorisation and inform the client in a durable medium of:
(a) any right that client has to request a different categorisation; and
(b) any limitations to the level of client protection that such a different categorisation would entail.
- Client Categorisation
The client categorisation criteria are outlined below.
- Retail Clients
A retail client is a client who is not a professional client or an eligible counterparty.
- Professional Clients
- A 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 as per the requirements found under the Investment Services and Activities & Regulated Markets Law of the Republic of Cyprus, Law 87(I)/2017.
In order to be considered a professional client, the client must be one of the following criteria:
- a credit institution;
- an investment firm;
- other authorised or regulated financial institution;
- an insurance undertaking;
- a collective investment scheme and a management company of such scheme;
- a pension fund and a management company of such fund;
- a commodity and commodity derivatives dealer;
- a local;
- other institutional investor.
- A large undertaking meeting two of the following size requirements, on a proportional basis:
- balance sheet total at least EUR 20.000.000;
- net turnover at least EUR 40.000.000;
- own funds at least EUR 2.000.000.
- A national or regional government, public body that manage public debt, a central bank, an international and supranational institution such as the World Bank, the Internal Monetary Fund, the European Central Bank, the European Investment Bank and any other similar international organisations.
- Any other institutional investor whose main activity is to invest in financial instruments, including entities dedicated to the securitization of assets or other financing transactions.
The entities mentioned above are considered to be professionals. They must however have allowed to request non-professional treatment and the Company may agree to provide a higher level of protection. Where the client of the Company is an undertaking referred to above, the Company must inform it prior to any provision of services that, on the basis of the information available to the Company, the client is deemed to be a professional client, and will be treated as such unless the Company and the client agree otherwise. The Company must also inform the customer that he can request a variation of the terms of the agreement in order to secure a higher degree of protection.
It is the responsibility of the client, considered to be a professional client, to ask for a higher level of protection when it seems it is unable to properly assess or manage the risks involved.
This higher level of protection will be provided when a client who is considered to be professional enters into a written agreement with the Company to the effect that it shall not be treated as a professional for the purposes of the applicable conduct of business regime. Such agreement should specify whether this applies to one or more particular services or transactions, or to one or more types of product or transaction.
- Clients who may be treated as professional or request:
- Identification criteria:
Clients other than those mentioned above, including public sector bodies, local public authorities, municipalities and private individual investors, may also be allowed to waive some of the protections afforded by the conduct of business rules of the Company.
The Company shall be allowed to treat any of the above clients as professionals provided that the relevant criteria and procedures mentioned below are fulfilled. These clients shall not, however, be presumed to possess market knowledge and experience comparable to that of the categories listed in point A above.
Any such waiver of the protection afforded by the standard conduct of business regime shall be considered valid only if an adequate assessment of expertise, experience and knowledge of the client, undertaken by Company, gives reasonable assurance, in light of the nature of the transactions or services recommended, that the client is capable of making his own investment decisions and undertaking the risk involved.
The fitness test applied to managers and directors or entities licensed under European Directives in the financial field, may be regarded as an example of the assessment of expertise and knowledge. In the case of small entities, the person subject to the above assessment should be the person authorised to carry out transactions on behalf of the Company.
In the course of the above assessment, as a minimum, two of the following criteria should be satisfied:
- The client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter of the previous four quarters;
- The size of the clients’ financial instrument portfolio, defined as including cash deposits and financial insturments exceeds 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 and services envisaged.
- Reclassification Procedure of a retail client into professional client:
The clients defined above may waive the benefit of the detailed rules of conduct only where the following procedure is followed:
- They must state in writing to the Company that they wish to be treated as professional clients, either generally or in respect ot a particular investment service transaction or type or product;
- The Company must give them a clear written warning of the protections and investor compensation rights that they may lose;
- They must state in writing, in a separate document from the contract, that they are aware of the consequences of losing such protections.
Before deciding to accept any request for waiver, the Company must take all reasonable steps to ensure that the client requesting to be treated as a professional client meets the relevant requirements stated in point A above.
However, if clients have already been categorised as professionals under parameters and procedures similar to those referred to above, it is not intended that their relationships with the Company shall be affected by any new rules adopted pursuant to the Appendix 2 of the Law 87(I)/2017.
The Company shall implement appropriate written internal policies and procedures to categories clients.
Professional clients are responsible for keeping the Company informed about any change, which could affect their current categorisation. Should the Company become aware however that the client no longer fulfils the initial condition, which made him eligible for a professional treatment, the Company must take appropriate action.
Certain authorised or regulated entities, governments, international financial institution, as well as exempted undertakings and firms that fall under the criteria for professional clients mentioned in paras i, ii and iii above can be classified as eligible counterparties under the relevant laws and regulations.
The Company recognizes the existing overlap between the way professional clients and eligible counterparties are defined in the relevant laws and regulations and will be addressing this issue on a case by case basis (if necessary). For the time being, The Company will be offering its services exclusively to retail clients that are individuals.
- Transactions with Eligible counterparties:
In case that the Company receives and transmits orders on behalf of clients, may bring about or enter into transactions with eligible counterparties without being obliged to comply with the section 5 above in respect of those transactions or in respect to any ancillary service directly related to those transactions.
The Company, when it enters into transactions with eligible counterparties, obtains the express confirmation from the prospective counterparty that it agrees to be treated as an eligible counterparty. This confirmation may be obtained either in the form of a general agreement or in respect of each individual transaction.
- Option to Change Classification & Request For A Different Categorisation
CAPITAL.COM recognises that clients should be in general allowed to request to be placed into a different category other than retail. In accordance with the aforesaid, the following request may be submitted to the company:
- A Retail Client requesting to be categorised as a Professional Client. In that case the Client will be afforded a lower level of protection.
- A Professional Client requesting to be categorised as a Retail Client. In that case the Client seeks to obtain a higher level of protection.
- An Eligible Counterparty requesting to be categorised as a Professional Client or Retail Client. In that case the Client seeks to obtain a higher level of protection.
The Company reserves the right to decline any of the above requests for different categorisation.
It is noted that an eligible counterparty or professional client is allowed to request non-professional treatment and the Company may agree to provide a higher level of protection. Where the client of the Company is an undertaking, the Company must inform it prior to any provision of services that, on the basis of the information available to the Company, the client is deemed to be a professional client, and will be treated as such unless the Company and the client agree otherwise. The Company must also inform the customer that he can request a variation of the terms of the agreement in order to ensure a higher degree of protection.
In this respect, the Company notifies its clients in a written form of their option to be classified as retail clients. The Company proceeds in this action, in order to offer a uniform level of protection to all of its clients.
The higher level of protection will be provided by the Company when the client who is considered to be a professional enters into a written agreement with the Company, to the effect that it shall not be treated as a professional. It is the responsibility of the client who is classified as a professional client to ask for a higher level of protection when he is not in a position to properly assess and manage the risks involved in the transactions.
- Protection Rights
- Where the Company treats the Client as a retail client, he/she/they will be entitled to more protections under the law than if the Client was entitled to be a professional client. In summary the additional protections retail clients are entitled to are as follows:
- client will be given full, precise and easy to comprehend information/disclosures concerning CAPITAL.COM, its services and any investments, its cost, commissions, fees and charges and the safeguarding of client financial instruments and client funds;
- CAPITAL.COM will request the client to provide information regarding his/her knowledge and experience in the investment field relevant to the specific type of product or service offered or demanded so as to enable the Company to assess whether the investment service or product envisaged is appropriate for the client. In case the Company considers, on the basis of the information received, that the product or service is not appropriate for the client, the Company will alert the client accordingly. For a professional client the Company is entitled to assume that in relation to the products, transactions and services for which the client is so classified, the client has the necessary level of experience and knowledge;
- when executing orders CAPITAL.COM will take all reasonable steps to achieve what is called “best execution” of the client’s orders that is to obtain the best possible result for their client as defined in the Company’s Order Execution Policy. It is noted that clients who are classified as professional clients are also subject to the protections under the Best Execution Regime. However, the Company is not obliged to comply with this obligation with respect to eligible counterparties;
- CAPITAL.COM will inform clients of material difficulties relevant to the proper carrying out of their order(s) promptly upon becoming aware of such difficulties;
- CAPITAL.COM will provide clients with full and explicit information on the execution of the relevant client orders;
- CAPITAL.COM will enter into the Terms & Conditions with the client, that outline the essential rights and obligation of both parties;
- CAPITAL.COM will make adequate arrangements for financial instruments held on behalf of a Client to prevent their use by the Company for its own account by depositing them with a third party in manner that would make them identifiable from the Company’s financial instrument held with that third party (if any) and identifiable from the financial instruments held by that third party as well;
- clients may be entitled to compensation under the Investor Compensation Fund for Clients of Investment Firms;
- CAPITAL.COM will make adequate arrangements to not use client funds for its own account by depositing them entirely into segregated bank accounts.
- With respect to eligible counterparties, the Company is not obliged to comply with the conduct business obligations (including inter alia, information about costs, associated charges, assessment of appropriateness, specific reporting towards clients), and client handling rules;
- Professional Clients:
Where the Company provides an investment service to a professional client it shall be entitled to assume that, in relation to the products, transactions and services for which it is so classified, the client has the necessary level of experience and knowledge. In addition, under certain circumstances, the Company shall be entitled to assume that a professional client is able financially to bear any investment risks consisted with its investment objectives.
General Provisions in respect of Professional Clients
- The aforementioned entities are considered as “professional clients.” Nevertheless, it shall be stated that such entities are allowed to request non-professional treatment and the Company may agree to provide a higher level of protection.
- In instances where the client is an “undertaking”, the Company will inform such client (prior to any provision of services that, on the basis of the information available to the Company, the client is deemed to be a professional client and will be treated as such unless otherwise agreed.
- The Company must also inform the customer that he can request a variation of the terms of the agreement in order to secure a higher degree of protection.
- It is the responsibility of the professional client to ask for a higher level of protection when it deems it is unable to properly assess or manage the risks involved.
- This higher level of protection will be provided when a client who is considered to be a professional enters into a written agreement with the Company to the effect that it shall not be treated as a professional for the purposes of the applicable conduct of business regime. Such agreement shall specify whether this applies to one or more particular services or transactions, or to one or more types of product or transaction.
- Eligible Counterparties:
- Where the Company treats the Client as an eligible counterparty, the Client will be entitled to fewer protections under the law than they would be entitled to as a professional client. In particular, and in addition to the above:
- The Company is not required to provide the Client with the best execution of the Client’s orders;
- The Company is not required to disclose to Client information regarding any fees or commissions that the Company pays or receives;
- The Company is not required to assess the suitability or appropriateness of a product or service that it provides to the Client but can assume that the Client has the expertise to choose the most appropriate product or service and that Client is financially able to bear any investment risks consisted with their investment objectives;
- The Company is not required to provide the Client with information about the Company, its services and the arrangements through which the Company will be remunerated;
- The Company is not required to provide the Client with risk disclosures on the products or services that they select from the Company; and
- The Company is not required to provide reports to the Client on the execution of their orders or the management of their investments.
- Retail and Professional Client agreements
The Company, by virtue of the recent MiFID II implementation, and as stated in Article 58 of the Commission Delegated Regulation (EU) 2017/565, hereby informs its clients that written agreements will be provided, setting out the essential rights and obligations of both the Company and the client.
Client Categorisation Policy V4.0 20180801