According to the Investment Services and Activities and Regulated Markets Law of L. 87(I)/2017 (“the Law”) Belight Capital Group Ltd (“the Company”) is required to categorise its Clients into one of the following three categories: retail, professional or eligible counterparty. “Retail Client” is a Client who is not a Professional Client by default, as defined in paragraph 2 further below. It is noted that Retail Clients are afforded with the highest level of protection. “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 further detailed below (see paragraphs 2 and 3 below). “Eligible counterparty” is a type of professional Clients, applicable only when the service provided to such Professional Client is of receiving & transmitting and/or executing orders, Portfolio Management and Investment Advice (see paragraph 5 below).
The following entities that satisfy one or more of the following criteria shall be classified as Professional Clients by default:
a) Entities which are required to be authorized or regulated to operate in the financial markets such as:
– 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 derivatives dealers;
– Locals: 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.
– Other institutional investors
b) Large undertakings meeting two of the following size requirements, on a portfolio 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.
c) National and regional governments, public bodies that manage public debt, Central Banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organizations.
d) Other institutional investors 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 Professional Clients by default. So, where the Client fulfils one of the criteria referred to above, the Company shall 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 (see paragraph 4 below).
Clients not mentioned in paragraph 2 above may also be allowed to be treated as Professional Clients and hence waive some of the protections afforded by the Law. The Company is allowed to treat any such Clients as Professionals provided the relevant criteria and procedures mentioned herein below are fulfilled. These Clients should not, however, be presumed to possess market knowledge and experience comparable to that of the categories of paragraph 2. So, any waiver of the protection afforded to them shall be considered valid only if an adequate assessment of the expertise, experience and knowledge of the Client, undertaken by the Company, gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the said Client is capable of making his own investment decisions and understanding the risks involved. For this reason, the Company will apply a fitness test to assess their expertise and knowledge.
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 over the previous four quarters;
– the size of the Client’s financial instrument portfolio, defined as including cash deposits and financial instruments exceeds 500,000 Euros;
– 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.
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 entity.
– The Client states in writing to the Company that it wishes to be treated as a Professional Client, either generally or in respect of a particular investment service or transaction, or type of transaction or product.
– The Company must give it a clear written warning of the protections and investor compensation rights it may lose.
– The Client must state in writing, in a separate document from the main Agreement, that it is 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 above. Clients wishing to be treated as Professionals may use the “Application for Change of Client Status” form found on the Company’s website.
3.4. Keeping the Company Informed
All Clients are responsible for keeping the Company informed about any change which could affect their current categorisation.
However, if the Company becomes aware that the Client no longer fulfils the initial conditions which made it eligible for a professional treatment, the Company should take appropriate action.
It is noted that Professional Clients of paragraph 2 are allowed to request non-professional treatment and instead be treated as Retail Clients, so as to enjoy a higher level 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 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 should specify whether this applies to one or more particular services or transactions, or to one or more types of product or transaction.
An Eligible Counterparty is an undertaking which falls within categories (a), (b) and (c) of the Clients who are considered to be Professionals by default (of paragraph 2 above).
Further, the Eligible Counterparty category is applicable only for the following investment services:
– Reception and transmission of Client orders;
– Execution of orders on behalf of Clients
On request, the Company may also recognise as an Eligible Counterparty which fall within a category of Clients who are to be considered professional Clients in accordance to the fitness test (see paragraph 4 above). In such cases, however, the undertaking concerned shall be recognised as an Eligible Counterparty only in respect of the services or transactions for which it could be treated as a Professional Client.
In the event of a transaction where the prospective counterparty is located in another EU Member State, the Company shall defer to the status of the other undertaking as determined by the legislation of the said Member State in which that undertaking is established.
The following requests may be submitted to the Company should a Client wish to change its categorisation:
a) A Retail Client can request to be categorised as a Professional Client. The Client therefore accepts a lower level of protection (see paragraph 3 above).
b) A Professional Client can request to be categorised as a Retail Client. The Client therefore obtains higher level of protection (see paragraph 4 above). A Professional Client can request to be treated as an Eligible Counterparty, obtaining therefore a lower level of protection (see paragraph 5 above).
c) An Eligible Counterparty can request to be categorised as a Professional Client or a Retail Client. The Client therefore obtains higher level of protection (see paragraph 5 above).
It is noted that the Company is not required to agree with a request for non-professional or non-Eligible Counterparty treatment. In addition, the Company may, on its own initiative, treat as a Professional or Retail Client an Eligible Counterparty or treat as a Retail Client a Professional Client.
Clients wishing to change their Client Categorisation may use the “Application For Change of Client Status” form found on the Company’s website.
Retail Clients are the Clients who are entitled to more protections under the Law, than if the Client was treated as a Professional Client. In summary, the protections Retail Clients are entitled to as follows (the list may not be exhaustive):
a) Clients will be provided with appropriate information with regards to the Company, its services, its financial instruments and their performance, the nature and risks of financial instruments, its costs, commissions, fees and charges. The level of detail of the information to be provided may vary according to whether the client is categorised as a Retail Client or, a Professional Client or, an Eligible Counterparty. Clients categorised as Retail Clients will be provided with more information than clients categorised as Professional or Eligible Counterparties.
b) Where the Company is providing the services of Reception & Transmission of orders and/or Execution of Client orders, the Company shall ask a Retail Client to provide information regarding his 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 to a Retail Client, it shall warn the Client accordingly. Please note that the Company is not required to assess appropriateness in certain cases specified by the Law (for example but not limited to the situation where on an execution only basis the financial instrument concerned is not complex).
On the other hand, the Company shall be entitled to assume that a Professional Client and/or an Eligible Counterparty has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the Client is classified as a Professional Client and/or an Eligible Counterparty. Consequently, and unlike the situation with a Retail Client, the Company should not generally need to obtain additional information from the Client for the purposes of the assessment of appropriateness for those products and services for which they have been classified as a Professional Client and/or an Eligible Counterparty.
c) When executing Client orders, the Company must take all sufficient steps to achieve what is called “best execution” of the Client’s orders that is to obtain the best possible result for its Clients. Where the Company executes an order of a Retail Client, the best possible result shall be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which shall include all expenses incurred by the Client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
d) The Company must inform Retail Clients of material difficulties relevant to the proper carrying out of their order(s) promptly upon becoming aware of the difficulty.
e) Retail Clients may be entitled to compensation under the Investor Compensation Fund (“ICF”) for Clients of Investment Firms, while Professional Clients are not entitled to compensation under the ICF.
f) Where the Company executes orders for retail clients, it shall provide those clients with a summary of the relevant policy focused on the total costs they incur.
g) Where the Company holds a retail client account with positions in leveraged financial instruments or contingent liability transactions, the firm must report to the client if the initial value of each instrument depreciates by 10% and thereafter at multiples of 10%.
h) The Company is restricted to conclude title transfer financial collateral arrangements with retail clients for the purpose of securing or covering present or future, actual or contingent or prospective obligations of clients. In respect of Professional Clients and/or Eligible Counterparties, the Company is not subject to such restriction. Where the Company uses title transfer collateral arrangements, it shall highlight to Professional Clients and/or Eligible Counterparties the risks involved and the effect of any title transfer collateral arrangement on the client’s financial instruments and funds.
i) Where the Company provides information, which contains an indication of past performance of a financial instrument, a financial index or an investment service and the indication relies on figures denominated in a currency other than that of the Member State in which the Retail Client is resident, the currency shall be clearly stated to the Retail Client, together with a warning that the return may increase or decrease as a result of currency fluctuations.
j) The Company limits the maximum amount of leverage to Retail Clients while the said limitations may not apply to Professional Clients and/or to Eligible Counterparties.
k) Retail Clients will be provided with negative balance protection and as such, may not lose more than the total amount deposited in their trading account. Professional Clients and/or Eligible Counterparties will not be provided with negative balance protection.