MiFIDInvestor protection

POTEZA BPD d.d.

Goals

Offer European passport for investment firms allow sales of financial products and services throughout

EU

Harmonise investor protection driven by rapid increase in both number and

sophistication of financial services and products

POTEZA BPD d.d.

Impact – wider coverage

Financial and investment services

Financial instruments

Execution venues

POTEZA BPD d.d.

Whom does it apply to?

INVESTMENT FIRM/BANK

Investm

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Fin

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Asset M

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DISTRIBUTIONRetail, Private Banking, Institutional Sales

Markets

MTFs

Syst. int.

POTEZA BPD d.d.

Impact - areas

Organisation

Market Transparency

Recordkeeping

Conduct of Business

Best Execution

General Organisation, Compliance, Internal Audit, Risk Management, Outsourcing, Conflict of Interest, ...

Transaction Data, Contracts, ...

Client Classification, Information to Clients, Suitabilityand Appropriateness Tests, Reporting to Clients, ...

Best Execution Policies, Monitoring of Policies

Pretrade – Posttrade Transparency, TransactionReporting to Regulators

POTEZA BPD d.d.

Client protection

Client clasification “Official” classification

Retail clients Professional clients Eligible counterparties Movement between groups on request

“Unofficial” classification Firm specific policies Breakdown by groups or/and financial products and

services

POTEZA BPD d.d.

Client protection

Suitability Test (Investment advice and Portfolio management) Obtain necessary information

About knowledge and experience About financial situation

Source and extent of regular income Total, liquid assets, investments, real property Regular financial commitments

About investment objectives Duration Risk profile and preferences Purpose

Appropriateness test (Other products and services) Based on knowledge and experience

Insufficient information for appropriate judgementEXECUTION ONLY – Suitability/appropriateness does not apply

POTEZA BPD d.d.

Client protection

Information to clients Depends on client classification

Retail – full and extensive information Professional – on request

Information on nature and extent of risk Proof of disclosing all information

Reporting to clients Timeliness and comprehensiveness of reports

POTEZA BPD d.d.

Client protection

Best execution Principle not strict rule Implementing and monitoring policy that enables all

necessary steps to be taken in order to insure best execution

Criteria for best execution Price Costs Spreads/Liquidity Market regulation Execution and settlement risks Ease of doing business, ....

POTEZA BPD d.d.

Final thoughts

Does increased client protection increases firms risks?

Cost vs. benefits

Sales efficiency

Post MiFID landscape?“ ..., because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don't know we

don't know.” Donald Rumsfeld