MiFID Information for Companies - Bank Pekao S.A.

MiFID – Information for Companies

MiFID (short name for Markets in Financial Instruments Directive) is a directive adopted by the European Parliament regarding the market of financial instruments. Its overarching goal was to strengthen the integration, competitiveness and effectiveness of financial markets in the European Union. The purpose of the Directive was to create a safer, better-functioning, more transparent and responsible financial system.

For Bank customers, the implementation of the MiFID Directive signified the introduction of higher market standards and increased their safety.
The Directive obligates investment companies, including the Bank, to act in the best interest of the Client. In particular, it is focused on the safety of Clients who decide to invest in risk-bearing financial instruments, where understanding of the rules of operation of such instruments is necessary for taking informed decisions. The implementation of the Directive was also conducive to the creation of an integrated financial market in the European Union.

In addition, MiFID obligates investment companies to:
  • deal honestly, justly and professionally with Clients, in accordance with their best interest,
  • present the rules according to which investment services are provided in a clear and understandable way,
  • provide comprehensive, non-misleading information about financial instruments, investment risk and investment services provided, 
  • assess the Client's expertise and experience in investing in financial instruments as well as to assess the Client's financial standing and investment objectives in the case of investment advisory services.
The requirements of the MiFID Directive have been implemented in Poland by amending the Act on Trading in Financial Instruments, the Act on Investment Funds and the Act on Public Offerings. The technical, organisational and procedural requirements for investment firms (banks) are also regulated in the executive Regulations i.e.: Regulation of 24 September 2012 on the mode and conditions of operation of investment firms and banks, which are referred to in Article 70 par. 2 of the Act on Trading in Financial Instruments, and custodian banks, as well as the Regulation of 24 September 2012 on determination of the detailed technical and organisational conditions for investment firms, banks, which are referred to in the Article 70 par. 2 of the Act on Trading in Financial Instruments, and custodian banks and the conditions of assessing internal capital by brokerage houses. 
 

  • Application
    • The Directive was intended to provide common legal standards for investment services and financial markets in the European Union, Iceland, Norway and Liechtenstein. The regulations apply to investment firms, i.e. legal persons whose regular business activity involves the provision of investment services to third parties.

      The MiFID Directive includes in particular the following types of investment services:
      • execution of orders on behalf of the Client or on the Bank's account,
      • purchase or sale of financial instruments on own account,
      • portfolio management, consisting of one or more financial instruments,
      • general advice,
      • offering financial instruments and other.

      Regulations also include some additional services, e.g.:
      • granting of loans or credits enabling the Client to enter into transactions involving financial instruments, if the enterprise is involved in the transaction,
      • foreign exchange services, if they are related to the provision of investment services.

      The MiFID Directive specifies in detail the financial instruments subject to the regulation. These include:
      • securities,
      • money market instruments,
      • participation units in collective investment undertakings (including investment funds),
      • FX and interest rate derivatives (both on the regulated and Over-the-Counter markets).
       

  • Benefits
    • The MiFID Directive changed the Bank's obligations towards Clients and potential Clients. The Bank's key responsibilities relate to areas such as:
      •classification of clients,
      • assessment of adequacy and appropriateness of investment services or financial instruments,
      • reliable and full information on financial instruments, investment risk and services provided,
      • xecution of orders in the most beneficial way for the Client,
      • preventing conflicts of interest,
      • analysis of received and transferred cash and non-cash benefits by the investment firm in terms of their admissibility.
       

  • Classification of Clients

    • In accordance with the provisions of the MiFID Directive, before concluding an agreement for the provision of investment services, the Bank carries out the classification of Clients. Each of them is assigned one of three categories: Retail Customer, Professional Client or Eligible Counterparty. The criteria underlying the classification include the legal form, knowledge and investment experience of the Client and the value of assets held. The individual categories differ in terms of the scope of information provided to the Client and the level of protection that the Bank applies to them in the course of providing investment services.

      In accordance with the assigned category, the bank must provide customers with the relevant information on specific products, so as to give them the opportunity to understand the nature of the product and the risks associated with it. The scope of protection of Client's interests, applied to a given Customer's category, and the classification criteria are described in detail in the Policy of Classification and Re-classification of Customers at Bank Pekao S.A.

      The Clients are classified separately in the Bank and in the Brokerage House of Bank Pekao S.A. Therefore, it cannot be excluded that the same Client may be classified to another Client category in relation with the Bank and to another in relation with the Brokerage House.

      The Client has the right to submit an application for changing the category assigned by the Bank. For this purpose, you should complete the appropriate form and then submit it to the Bank's branch.
       

  • Appropriateness assessment
    • Assessment of adequacy is the assessment of knowledge about investing in financial instruments and the Client's investment experience, performed based on the information provided by the Client in the Appropriateness Questionnaire. The assessment is aimed at determining whether the brokerage service or financial instrument being the subject of the transaction is appropriate for a given Client, taking into account his individual situation, i.e. whether the Client has the opportunity to assess and accept the risk associated with the investment.

  • Suitability assessment
    • The suitability assessment is performed in the case of investment advisory services. It involves examining the Client's investment knowledge and experience, as well as investment objectives and financial situation of the Client in order to determine whether the financial instrument recommended by the Bank is appropriate for the client, i.e. whether the Client is able to assess and accept investment risk, or whether the recommended financial instrument meets Client’s  investment goals, and the financial situation allows the Client to bear the risk of capital loss.

  • Execution of orders and acting in the best interest of the Client
    • The Bank executes orders in a mode allowing to achieve the best possible result for the Client. The Client will be informed about the execution of the order, and in particular about the market on which the order will be executed, before the transaction is performed, unless the Client specifies the place and conditions for order execution in the order.

      If there is more than one place for a given type of financial instruments, where the order can be executed, the Bank selects the one that will ensure the best result to the Client.

      The following factors are taken into account when selecting the place of execution of the order:
      1. the price of the financial instrument,
      2. costs related to the order,
      3. time of placing the order,
      4. probability of the order / transaction execution,
      5. probability of settlement,
      6. size and nature of the order,
      7. other conditions related to the execution of orders.
      After the purchase or sale of a financial product, the financial institution sends a confirmation containing the most important information, i.e. the product name, price, date and time of the transaction and the sum of fees and commissions.
       

  • Preventing conflicts of interest

    • Conflicts of interest are circumstances known to the Bank that may lead to a conflict between the interest of the Bank and the Bank's obligation to act in a reliable manner and taking into account the best interest of the Client, as well as circumstances known to the Bank that may lead to a conflict between the interests of several clients of the Bank. In order not to adversely affect the interests of Clients, the Bank undertakes actions to effectively identify, manage and monitor situations that could potentially lead to a breach of the Client's interest. Detailed information defining the circumstances that may lead to a conflict of interests between the bank and its clients, as well as organizational procedures and measures aimed at effective management of such conflicts can be found in the document "Policy of management of conflicts of interest at Bank Pekao S.A.".