Client categorisation at Floreat

Please note that we only deal with Professional Clients and Eligible Counterparties. We do not have permission to deal with retail clients.

Any clients are catergorised as ‘retail’ unless they meet the eligible counterparty or professional client categories, as defined by the FCA Handbook COBS 3.

Professional clients

Professional clients are those who possess the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that they incur.

The client must meet the definition of a professional client in their own right or they are an elective professional client where the procedures to opt-up a client to professional client status have been satisfied.

Professional per se:

Each of the following is a per se professional client unless and to the extent they are an eligible counterparty or are given a different categorisation under COBS 3:

1. An entity that is required to be authorised or regulated to operate in financial markets. Examples of entities carrying out the characteristic activities are:

• Credit institutions
• Investment firms
• Other authorised or regulated financial institutions
• Insurance companies
• Collective investment schemes and management companies of such schemes
• Pension funds and management companies of such funds
• Commodity and commodity derivatives dealers
• Locals : firms that provide investment services and/or perform investment activities consisting exclusively in dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deal for the accounts of other members of those markets or make prices for them and which are guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such firms is assumed by clearing members of the same markets
• Any other institutional investors

2. A large undertaking meeting two of the following size requirements on a company basis:

a. balance sheet total at least EUR 20,000,000

b. net turnover at least EUR 40,000,000

c. own funds at least EUR 2,000,00

3. Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions.

Elective professional:

We may treat a client as an elective professional client if the following process is followed:

a) We undertake an adequate assessment of the expertise, experience and knowledge of the client that gives reasonable assurance, in light of the nature of the transactions or services envisages, that the client is capable of making their own investment decisions and understanding the risks involved (‘the qualitative test’). If the client is an entity, the test should be performed in relation to the person authorised to carry out transactions on its behalf

b) At least two of the following criteria are satisfied:

• The client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters
• The size of the client’s financial instrument portfolio exceeds
  EUR 500,000
• The client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged (the quantitative test)

c) The following procedure is followed:

• The client must state in writing to the firm that they wish to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product
• We must give the client a clear written warning of the protections and investor compensation rights the client may lose; and
• The client must state in writing, in a separate document from the contract, that they are aware of the consequences of losing such protections.

Eligible counterparties:

We may treat a client as an eligible counterparty when conducting eligible counterparty business:

a) Dealing on own account, execution of orders on behalf of clients, or reception and transmission of orders; or

b) Any ancillary service directly related to a service or activity referred to in (a); or

c) Arranging in relation to business which is not MiFID or equivalent third country firm business

Eligible counterparty clients are either per se eligible counterparties where they meet the definition of an eligible counterparty in their own right or they are an elective eligible counterparty where the procedures to opt-up to eligible counterparty status have been satisfied.

Per se eligible counterparties:

Each of the following is a per se eligible counterparty where it is in the business of executing orders of behalf of clients and/or dealing on its own account and/or receiving and transmitting orders:

a. an investment firm

b. a credit institution

c. an insurance company

d. a collective investment scheme authorised under the UCITS Directive or its management company

e. a pension fund or its management company

f. another financial institution authorised or regulated under European Community legislation or the national law of an EEA State

g. an undertaking exempted from the application of MiFID under either Article 2(1)(k) (certain own account dealers in commodities or commodity derivatives) or Article 2(1)(l) (locals) of that directive

h. a national government or its corresponding office, including a public body that deals with the public debt

i. a central bank

j. a supranational organisation.

Elective eligible counterparties

We may treat a client as an elective eligible counterparty if:

1. The client is an undertaking and:

a. Is a per se professional client, and:

i. Is a body corporate which has called up a share capital of at least £10 million; or

ii. Meets the criteria in the rule on meeting two quantitative tests; or

b. Requests such categorisation and is an elective professional client, but only in respect of the services or transactions for which it could be treated as a professional client; and

2. We have, in relation to MiFID business, obtained express confirmation from the prospective counterparty that it agrees to be treated as an eligible counterparty.

Our policy

Professional clients and eligible counterparties have the right to request re-categorisation as a client that benefits from a higher degree of protection. It is the responsibility of the client to ask for a higher level of protection. We reserve the right to cease business with the client if different client categorisation is requested. If a new client category is applied by us, new written agreement will be issued.

We will inform our clients in a durable medium about any right they have to request a different categorisation and about any limitations to the level of client protection that a different categorisation would entail. We will provide to clients prior to any provision of services.

Under the COBS 3 of the FCA rules, we are required to notify new clients and existing clients that we have newly categorised, of their categorisation as a retail client, a professional client or an eligible counterparty in accordance with Directive 2014/65/EU (MiFID II).