WHO IS DEFINED AS A PROFESSIONAL CLIENT
A professional client is an investor who has the experience, knowledge and expertise to make his own investment decisions and properly assess the risk he is taking.
WHO CAN BE CLASSIFIED AS A PROFESSIONAL
Apart from special cases of legal entities that are categorized by definition as professional clients (banks, investment funds, etc.), any natural or legal person that meets the criteria of the legislation can choose to be categorized as a professional client.
WHICH PRODUCTS ARE FOR PROFESSIONALS
The products designated for professionals are usually the high denomination corporate bonds. In any case, the issuer of the financial instrument determines the target market of the product, whether it is suitable for professional or private customers.
PROCEDURE
Step 1
The investor requests in writing to the investment firm his desire to be treated as a professional client, either in general, or for a specific investment service, or for a type of products or for a specific portfolio.
Step 2
The investment company examines whether the quantitative and qualitative criteria defined by law are met.
Quantitative criteria (at least two must be met):
- the customer made an average of 10 transactions/3 months during the last four quarters
- the value of the investor's portfolio, defined as cash deposits plus financial instruments, exceeds 500,000 euros
- the customer holds or has held for at least 1 year a professional position in the financial sector
Qualitative Criteria:
- the investment firm assesses the investor, regarding his expertise, experience and knowledge, to make sure that the investor is capable of making investment decisions on his own and understands the risks involved.
Step 3
The investor accepts that he is aware of the consequences of losing the protections of the rules of conduct prescribed by the law, about which he has been warned by the investment company.
The main difference lies in the content and type of information that the company is obliged to provide to retail customers in relation to professional customers. The company informs the retail customer fully about every service it provides and about every financial instrument that this service concerns. The briefing covers, among other things, the risks associated with the financial instruments, costs and fees for carrying out transactions. In contrast, for professional customers the level of information at this stage is clearly lower as the customer is presumed to know their markets, products and risks. In addition, where it is required to assess the compatibility or appropriateness of a transaction, in relation to the professional client, the company will assume that he has the necessary knowledge and experience to understand the risks to which he is exposed, for the transactions in respect of which he will have requested to be treated as a professional client.
The professional client has access to a wider range of financial instruments, while the retail does not, due to not meeting the criteria set by the legislation.
