Regulation of investment advisory services
The new regulations concerning the securities markets and investment advisory services came into force in November 2007. The regulations affect companies offering investment services in the EU area.
The level of investor protection is determined on the basis of whether an investor is classified as a retail client or a professional client. In addition, some professional clients can be eligible counterparties, for example, pension and investment fund companies. The majority of the investors are retail clients. Investing customers are notified by the bank of their investor classification.
Retail clients have the most extensive protection and from a customer’s point of view it is, as a rule, more advantageous to belong to the group of retail clients, as the bank is obligated to obtain more information about a retail client’s
- investment experience and knowledge
- financial situation and
- investment targets
than when the client is a professional client. Providing the bank with this information is in the customer’s interest, as it helps to assess which services and products suit the customer best.
Investors also receive more information than before on their service provider and on the services they are interested in. Such information includes, for example, risks related to the chosen investment instrument and investing in it, costs charged for orders, principles according to which orders are executed and the method of operation in possible conflicts of interest between the customer and the service provider.
The new regulations are based on the EU Markets in Financial Instruments Directive (MiFID).