2.1.5) Recatagorising Clients and Providing lower levels of Protection

Question 1

A retail client may be treated as an “Elective Professional” when:

(Qualitative Test)

Answer 1

The firm has assessed their (or it’s) expertise, experience and knowledge and believes that they can make their own investment decisions and understand the risks involved

(This is called the qualitative test)

Question 2

A retail client may be treated as an “Elective Professional” when any two of the following are true:

(Quantitative Test)

(MiFID 2 Business)

Answer 2

• the client carried out on average ten significant sized transactions on the relevant market in each of the past four quarters
• the size of the client’s financial portfolio exceeds €500,000 (identified as including cash deposits and financial instruments)
• the client works or has worked as a professional in the financial services sector for at least a year on a basis which requires knowledge of the transactions envisaged

Question 3

Client passing the qualitative and quantitative test for MiFID business

Answer 3

The client must put in writing to the firm their wish to be reclassified and the specific services and / or products the reclassification will apply to

• the firm has to respond with a clear written warning to the investor, outlining to the investor protections which will be lost, and the client must state, separately, in writing, that they are aware of the consequences of losing such protections

Question 4

Elective Professional Clients: Circumstances

Answer 4

It’s up to the professional client to keep the firm up-to-date with their circumstances and notify the firm if there are any changes to their circumstances which may affect their classification

(If a firm becomes aware that a client no longer fulfils the conditions under the elective professional client classification, the firm must take appropriate action)

• involves recategorising the client as a retail client, the firm must notify the client of its new categorisation

Question 5

Elective Eligible Counter-parties:

Answer 5

A professional client may be treated as an elective ECP if it is a company and it is:

• a per se professional client (other than one which is only a professional client because it is an institutional investor) or
• it asks to be treated as such and is already an elective professional client (but only for the services for which it could be treated as a professional client), and
• it expressly agrees with the firm to be treated as an ECP