The strengthening of investor protection
Markets in Financial Instruments Directive and Regulation (MiFID2 and MiFIR) regulation will come into force on January 3rd 2018.
What impact will it have on the client / private bank relationship?
The first MiFID European directive, in force since November 2007, was aimed at improving investor protection. The impacts of the 2008 financial crisis led European authorities to review the existing regulatory framework and propose enhancements, including greater protections for investors. Investor protection and increased transparency are at the core of the new rules governing the markets for financial instruments as defined by MiFID2/MIFIR, a regulation that applies to investment products and services sold by investment service providers within the European Economic Area (EEA). In the same spirit the Packaged Retail and Insurance-based Investment Products (PRIIPS) regulation aims to standardise the documentation linked to packaged products for retail clients.
When providing investment services, a financial institution’s primary obligation is to ensure that they offer clients appropriate or suitable investment products.. The three existing client categories – individual or retail, professional and eligible counterparties – provide clients with progressive levels of protection.
Progressive levels of protection
* partner banks, insurance companies…
A more rigorous evaluation of risk profiles and skills
The investor profile questionnaire has been enhanced to enable a greater understanding of the client’s investment profile including their objectives in terms of investments, their previous knowledge and experience and theirappetite for risk, capacity for loss and the financial capacity to support their choice of investing.
In relation to Regulators……
Financial institutions have the regulatory obligation to report the names of parties involved in all transactions involving financial instruments to their local regulator. For individual clients, the identification required in addition to the surname, first name and date of birth depends on the nationality (passport, identity card or national identification number). For a legal entity client, the Legal Entity Identifier (LEI) must be provided. In the case of a representative acting on behalf of a client, their surname, first name and identification number must also be reported. Exchanges between client / financial institution must be recorded and kept for between 5 and 7 years.
… and Investors
In the client / financial institution relationship, transparency is achieved through providing greater information throughout that relationship, both at onboarding and at regular intervals. In compliance with regulatory provisions, a client enters in to a services agreement for all the investment services selected. This agreement sets out the general terms by which the relationship will be governed and includes information on the protections afforded to clients. MiFID2 also provides greater transparency through more regular and increased scope of reporting, including where your portfolio may fall in value below certain thresholds.
INFORMATION IS THE PILLAR OF A TRANSPARENT BANKING AND INVESTMENT RELATIONSHIP
Specific information according to the service selected
Societe Generale Private Banking offers three services in relation to your investment portfolio:
- Discretionary portfolio management: you would like our experts to manage your portfolio;
- Advisory: you would like to access market information and take advantage of our expert advice while remaining in control of your investment decisions.
- Execution only: you make your investment decisions independently without the support of our experts and we undertake their execution.
- As part of the last two services we provide clients with the key information document (KID) for packaged products and the outcome of the assessment of suitability or appropriateness respectively.
- As part of our advisory and discretionary management services we also send you a report outlining how we have assessed the advice or the management of your portfolio as suitable in accordance with your risk profile.
BUILDING TOGETHER A RELATIONSHIP THAT AIMS TO ADD VALUE TO YOUR WEALTH
The introduction of MiFID2 gives us the opportunity to review our relationship with our clients and provide clients with additional protections. We will aim to improve our understanding of your needs, goals and risk appetite and define with you the level of interaction that suits you best. We will thus be able to formalise our commitments in terms of services and ensure a regular follow up.
Our ambition: to be your private bank of reference combining expertise and proximity.
Regulation governing the markets in financial instruments.
Regulation concerning key information documents relating to retail packaged investment products based on insurance.
EUROPEAN ECONOMIC AREA
The 28 European Union member States plus Iceland, Liechtenstein and Norway.