In Slovakia the MiFID is implemented in the law no. 566/2001 Coll. about securities and investment services. Banks and securities dealers are obliged to align their activities with the new version of the law until 1st of May 2008.
The main aims and contributions of MiFID for clients are:
- strengthening the protection and awareness
- Increasing the competition between banks and securities dealers
- again increasing the competition between individual market organizers (most of all between stock-exchange organizers) in order to improve service quality and lower service costs for the client, of mostly small (non-professional) investors, within the framework of the European area and thus improving the service quality and lowering the service costs for the client,
Changes brought by MiFID concern the following areas:
1. Client Categorization
In practice MiFID means that based on their knowledge and experience (i.e. maturity) on financial markets clients will be placed into individual categories:
- non-professional (retail) client
- professional client
- eligible counterparty
The level of protection offered by Tatra banka depends on the respective category the clients are placed into whereas the category of non-professional clients is considered to be a category with the highest level of protection.
Existing clients will be assigned to these categories as well as new clients, who are interested in using the Tatra banka services as a securities dealer.
2. Financial Instruments and Investment Services
In MiFID the products are referred to as "financial instruments" and the services as "investment services".
Among the most known financial instruments concerning the MiFID belong:
- mutual fund shares
- derivatives (e.g. forwards, swaps, options)
The most often used investment services are:
accepting and assigning clients' orders
executing clients' orders,
trading on one's own account,
In connection with the above-mentioned services you might encounter the knowledge and experience test (appropriateness test) and the suitability test (investment advisory).
Tatra banka is obliged to provide you in a comprehensible manner with all information necessary for you to understand correctly the character and the risks of investment services and of specific kinds of financial instruments.
Apart from the basic information about Tatra banka you can find here information regarding:
- language and form of communication between the client and Tatra banka
- statements related to financial instruments and investment services
- management of securities
- investment guarantee funds
- conflicts of interests, earned and paid commission by Tatra banka
4. Strategies of Executing and of Assigning Orders
For the purposes of reaching the best possible results for clients when executing their orders Tatra banka has prepared the Strategy of Executing and of Assigning Orders.
MiFID categorizes clients into three groups:
- non-professional client (retail client),
- professional client,
- eligible counterparty.
The categorization is related first of all to the level of protection and quantity of information the client receives. Tatra banka is responsible for client categorization not only of existing clients but also of all new clients who are interested in using the Tatra banka services as a securities dealer.
Non-Professional Client (Retail Client)
This category of clients contains in particular natural persons and legal persons who do not fulfill the criteria determined by law. In compliance with MiFID these clients are regarded as the least cognizant and experienced on the financial markets and that is why they gain the highest level of protection (e.g. Tatra banka measures the appropriateness or suitability of a respective kind of investment service and financial instrument based on the appropriateness test or suitability test taken by the client) and the maximum amount of information about us, about the financial instruments, the risks connected with them, etc.
Mostly big legal persons are classified as professional clients. In compliance with MiFID the listed clients are considered being sufficiently cognizant and experienced. That is why they get a lower level of protection and information (e.g. Tatra banka does not measure the appropriateness of financial instruments or investment services for clients).
Clients who do not need any protection and neither receive information from us belong into the category eligible counterparty. In compliance with MiFID it concerns first and foremost banks, insurance companies, holding companies, towns, public authorities and similar subjects.
Categorization Model in Tatra banka
At Tatra banka we regard all branch and private-banking clients as non-professional (retail) clients thus they automatically gain according to law the maximum level of protection and maximum amount of information.
A Treasury client can be classified as non-professional client, professional client or eligible counterparty.
According to MiFID every client has the right to request being reassigned to another category. The bank does not have to grant the client's request in his/her own interest as when being reassigned to a category with a lower level of protection the client could get an inadequately lower amount of information.
MiFID services are called investment services and the most well known are:
a) accepting and assigning clients' orders,
b) executing clients' orders,
c) trading on one's own account,
d) investment advisory,
e) management portfolio,
f) management of securities,
Some of the above-mentioned services Tatra banka can provide only via chosen marketable channels.
Investment Advisory (Suitability Test)
The goal of investment advisory is to give the clients personal recommendations on specific financial instrument that exactly corresponds with his/her personal profile (knowledge, experience, investment goals, risk tolerance, investment horizon etc.).
Tatra banka carries out investment advisory also for mutual fund shares of Tatra Asset Management that we know best, thus we are able to secure advisory on the best professional level.
Knowledge and Experience Test (Appropriateness Test)
In case of interest of non-professional clients in more challenging and complex financial instruments (most of all derivatives and certificates) traded via investment services a), b), c), Tatra banka asks the client to fulfill a questionnaire in order to determine whether the given investment instrument or investment service is appropriate for the client. In other words, if the client has enough knowledge and experience with respect to the investment service or financial instrument. In case it turns out that a financial instrument or investment service is not appropriate for the client or if the client refuses to take the test, Tatra banka will give the client notice every time before granting the respective investment service in relation to a particular financial instrument.