MiFID

MiFID (Markets in Financial Instruments Directive) is an European directive in the area of markets in financial instruments  including provision of investment and ancillary services in relation to financial instruments that mainly strengthens consumer protection.

About directive

In Slovakia, the MiFID is implemented via the Act No. 566/2001 Coll. about securities and investment services.

The main aims and contributions of MiFID for clients are:

  • strengthening the protection and awareness of mostly small (retail) clients,
  • increasing competition among providers of investment and ancillary services within the framework of the European area and thus improving the service quality and lowering the service costs for the client,
  • increasing 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.

MiFID relates to the following areas:

1. Client Categorization

In practice, MiFID means that based on their knowledge and experience (i.e. maturity) on financial markets, clients are placed into individual categories:

  • 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 retail clients is considered to be a category with the highest level of protection.
All clients that are interested in using investment and ancillary services of Tatra banka are assigned to these categories.

2. Financial Instruments, Investment and Ancillary Services

In MiFID, the products are referred to as "financial instruments" and the services as "investment services" or “ancillary services“.

Among the most known financial instruments concerning the MiFID belong:

  • mutual fund shares
  • stocks
  • bonds
  • investment certificates
  • derivatives (e.g. forwards, swaps, options)

A detailed description of the financial instruments and risks associated with them can be found in: 

The most often used investment services in Tatra banka are:

  • accepting and assigning clients' orders,
  • executing clients' orders,
  • trading on one's own account,
  • investment advice, 

The most often used ancillary services in Tatra banka are:

  • securities custody (Investment account) 

In connection with the above-mentioned investment services you might encounter the knowledge and experience test (appropriateness test) and the broader suitability test (in connection with investment advice).

3. Information on the bank and provided investment and ancillary services

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 and ancillary 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 and ancillary services,
  • investment account,
  • investment guarantee funds,
  • conflicts of interests
  • earned and paid commission by Tatra banka,
  • conditions of provision of investment advice.

Detailed information about the bank and its investment and ancillary services can be found in:

4. Best Execution Policy

For the purposes of reaching the best possible result for Clients when executing their orders, Tatra banka is obliged to introduce and observe the Best Execution Policy referred to in this document

Detailed information on the best execution policy can be found in: 

5. Information on Costs and Associated Charges

The Scale of fees of Tatra banka, a. s. for the services provided in securities area and Examples:

Information on costs and associated charges for investment and ancillary services provided in relation to derivative financial Instruments and securities at Capital Markets of Tatra banka, a.s. and Examples:

Client Categorization

MiFID categorizes clients into three groups:

  • 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 of all new clients who are interested in using the Tatra banka investment or ancillary services.

Retail Client

This category of clients contains in particular natural persons and legal persons who do not fulfill the criteria determined by law for categorization into another category. 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 in case of provision of investment advice also suitability of a respective kind of investment service and financial instrument for the client based on the appropriateness test taken by the client or by another person authorised to act on behalf of the client or on the broader suitability test taken by the client during provision of investment advice) and the maximum amount of information about us, about the financial instruments, the risks connected with them, etc.. 

Professional Client

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. the appropriateness of financial instruments or investment services for clients is not measured).

Eligible Counterparty

Clients who do not need almost any protection and neither receive information belong into the category eligible counterparty. In compliance with MiFID it concerns first and foremost banks, insurance companies, asset management companies, other financial institutions, central banks, public authorities, international organizations and similar subjects.

Categorization Model in Tatra banka

At Tatra banka, we regard all branch and private-banking clients as retail clients thus they automatically gain according to law the maximum level of protection and maximum amount of information.

A Capital Markets client can be classified as retail client, professional client or eligible counterparty.

According to MiFID client under conditions stated in MiFID 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 because the client could get an inadequately lower amount of information.

Provided services

MiFID services are called investment or ancillary 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 advice,
e) portfolio management (Tatra banka does not provide),
f) securities custody (in Tatra banka Investment account),
g) other.

Some of the above-mentioned services Tatra banka does not have to provide or can provide only via chosen distribution channels.

Investment Advice (Suitability Test)

The goal of investment advice is to give the clients personal recommendations on specific financial instrument that exactly corresponds with his/her personal profile (knowledge, experience, financial situation, risk bearing capacity,  investment goals, risk tolerance, etc.).

Tatra banka carries out investment advice for securities (e.g. mutual fund shares of Tatra Asset Management) that we know the best, thus we are able to ascertain advice on the best professional level.

Knowledge and Experience Test (Appropriateness Test)

Prior to provision of investment services a) or b), if it is not upon client's initiative or if they relate to more complex financial instruments (e.g. investment certificates) and also prior to provision of other investment services (except d) and e) which require broader testing of suitability), Tatra banka asks the client to fill in the test with the purpose of finding out whether the particular financial instrument and investment service are appropriate for him/her. In other words, if the client has enough knowledge and experience in relation to the investment service and the financial instrument. If the financial instrument and investment service are not appropriate or if the client rejects filling in the test, Tatra banka gives him/her the proper notice, but if in spite of this notice the client insists on provision of the particular investment service in relation to the particular financial instrument, the bank is entitled to meet the client's request.

Tatra banka is not obliged to provide all investment services and ancillary services and neither to provide them in relation to all financial instruments nor for all client categories.

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https://www.tatrabanka.sk/en/business/financial-markets/mifid/