Client Categorization Rules BG

(Amended by a resolution of the BD of 24.08.2022)

These rules are intended to specify the criteria on the basis of which clients of the investment intermediary will be categorized

Applicable regulations:

-> Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU;

-> Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

-> Markets in Financial Instruments Act.

1. A professional client may be accepted as a client who has the experience, knowledge and skills to make their own investment decisions and properly assess the risks associated with investing. Ever Financial AD classifies as professional clients with respect to all investment services, investment activities and financial instruments, clients who meet the requirements under Directive 2014/65 /EU, namely:

1.1. Entities that are required to be licensed to operate on the financial markets, or whose business in those markets is otherwise regulated by the national law of a Member State, regardless of whether it complies with any EU directive, and entities authorized to carry out such activities or are otherwise governed by the law of a third country, as follows:

a) credit institutions;

b) investment intermediaries;

c) other financial institutions subject to licensing or otherwise regulated;

d) insurance companies;

e) collective investment undertakings and their management companies;

f) pension funds and pension insurance companies;

g) persons trading on their own account in goods or commodity derivatives;

h) local companies;

i) other institutional investors.

1.2. Large undertakings that meet at least two of the following conditions:

a) balance sheet total – the equivalent in BGN of at least  EUR 20 000 000;

b) net turnover- the equivalent in BGN of at least EUR 40 000 000;

c) own funds – the equivalent in BGN of at least EUR 2 000 000.

1.3. National and regional public authorities, state authorities involved in government debt management, central banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank, and other similar international organizations.

1.4. Other institutional investors whose main business is to invest in financial instruments, including entities securitizing assets or other financing transactions.

2. Ever Financial AD informs the professional client under the previous item 1, before the start of providing investment services, that on the basis of the information received from the client, they are considered to be a professional client and the rules for professional clients will apply to them, unless otherwise agreed between the investment intermediary and the client.

3. Ever Financial AD provides the opportunity for its professional clients to obtain a higher level of protection, which is provided to retail clients:

3.1. The investment intermediary informs the professional client that they have the right to request a change in the terms of the contract in order to provide a higher level of protection for the client.

3.2. Ever Financial AD provides a higher level of protection for the client under item 1 at their request, when the client considers that they cannot properly assess and manage the risks related to investing in financial instruments.

3.3. The higher level of protection is provided on the basis of a written agreement between the investment intermediary and the client under item 1, which explicitly states the specific services, activities, transactions, financial instruments or other financial products in relation to which the client will be provided a higher level of protection.

3.4. The higher level of protection means that the client under item 1 will not be considered a professional client for the purposes of the regime applicable to the activity of the investment intermediary.

3.5 “Providing a higher level of protection” means that Ever Financial AD will honestly, fairly and professionally carry out all necessary legal actions in the best interests of its clients, including, but not limited  to:

-> actions regarding execution of orders;

-> provision of information required in accordance with the law and the Ordinance on Requirements to the Activities of Investment Intermediaries;

-> a description of financial instruments and risks associated therewith;

-> actions in the assessment of an appropriate investment service;

-> provision of data on the guarantee, if any;

-> provision of the information on prospectuses required by law;

-> provision of the client’s consent in the cases provided for by law;

-> actions to send the confirmations and reports provided for by law.

4. Clients other than those referred to in item 1, including public sector organizations, local public authorities, municipalities and private individual investors, are entitled to request from the investment intermediary to not apply to them some of the requirements applicable to retail investors. The investment intermediary may treat such clients as professional ones, that is, they should not be subject to the rules for conducting activities by II Ever Financial AD, which provides a higher level of protection for the clients.

4.1. Ever Financial AD may treat a client under item 4 as a professional client if the criteria under item 1 of Section II of Appendix 1 to § 1, item 10 of the Supplementary Provisions of the Markets in Financial Instruments Act are fulfilled, namely:

4.1.1. Identification criteria:

Customers under item 4 must meet at least two of the following criteria:

a) in the previous 4 quarters, the person has carried out 10 transactions per quarter, on average, in significant size in the relevant market;

b) the value of the person’s investment portfolio, which includes financial instruments and cash deposits is more than the BGN equivalent of EUR 500,000;

c) the person works or has worked in the financial sector for at least one year in a position that requires knowledge of the transactions or services concerned.

and the procedure under item 2 of Section II of Appendix 1 to § 1, item 10 of the Supplementary Provisions of the Markets in Financial Instruments Act has been complied with, referred to in item 4.2  of these rules.

4.2. Clients under item 4 may request to be treated as professional clients following the following procedure:

4.2.1. The investment intermediary cannot accept that the persons referred to in item 4.1. possess market knowledge and experience comparable to those of the persons under item 1 without carrying out the necessary assessment. The investment intermediary assesses the client’s knowledge and experience in terms of whether the client can make investment decisions and bear the risks associated with specific transactions and services. The assessment is made in respect of the persons who manage and represent the client or who are entitled to carry out the respective transactions on their behalf and for their account.

4.2.2. Clients must request in writing from the investment intermediary to treat them as professional clients in general or in connection with certain investment services or transactions, or with a particular type of transaction or investment product;

4.2.3. The II is obliged to warn the client in writing that they will not be entitled to benefit from the higher level protection in the provision of services and activities by the investment intermediary, as well as the right to be compensated by the Investor Compensation Fund in financial instruments;

4.2.4. The client must declare in a document separate from the contract that they have been informed of the consequences under item 4.2.3.;

Before deciding to treat a client as a professional client, the investment intermediary must take the necessary steps to ensure that the client meets the requirements of paragraph 4.1.

4.3. The investment intermediary shall implement appropriate written internal policies and procedures to categorize clients. Professional clients should inform the investment intermediary of any change that may lead to a change in their categorization. If the investment intermediary finds that a client has ceased to meet the conditions under which they have been categorized as a professional client, it shall take the necessary measures to reflect the change.

4.4. If a client is already categorized as a professional client according to the internal client categorization policies and procedures of the investment intermediary, their relationship with the investment intermediary shall not be affected by new rules adopted under these Categorization Rules.

5. Ever Financial AD considers as retail clients in respect of all investment services, investment activities and financial instruments, clients who do not meet the requirements for a professional client under item 1 of these Rules.

6. Ever Financial AD informs all its clients of the conditions and criteria under which it defines them as professional or retail, as well as the circumstances in which they can be determined as eligible counterparty. Customers shall be informed on a durable medium of their right to request to be categorized in a different manner and of the limitations of their protection if they are differently categorized.

6.1. Pursuant to Article 89, Paragraph 2 of the Markets in Financial Instruments Act “eligible counterparty” means an investment intermediary, a credit institution, an insurance company, a collective investment scheme, a management company, a pension company, a pension fund, other financial institutions licensed or regulated by European Union law and the Member States, national governments, public authorities involved in government debt management, central banks and international institutions, as well as third-country entities that apply requirements equivalent to those of the EU laws. Other persons may also be considered eligible counterparties if they meet the requirements set forth by Article 71 of Delegated Regulation (EU) 2017/565 requirements, including persons from third countries.

6.2. II Ever Financial AD on its own initiative or at the client’s request may:

6.2.1. designate as a professional or retail client, who in other cases would be determined as eligible counterparty within the meaning of Article 89(2) of the MFIA;

6.2.2. to designate as a retail client who is considered a professional client within the meaning of item 1 of these Rules.

6.3. When a person designated as an eligible counterparty requests not to be treated as such and the II agrees, that person would be treated as a professional client, unless they have explicitly requested to be treated as a retail client.

6.4. In cases where an eligible counterparty explicitly requests to be treated as a retail client, the investment intermediary shall treat the eligible counterparty as a retail client by applying the provisions in respect of requests for treatment as a retail client, items 3.1. -3.4. of these Rules shall apply.

6.5. When a client requests to be treated as an eligible counterparty in accordance with Article 71, Paragraph 1 of Delegated Regulation (EU) 565/2017, the following procedure shall apply:

a) the investment intermediary provides the client with a clear written warning of the consequences to the client of such a request, including the types of protection that the client may lose;

b) the client acknowledges in writing the request for treatment as an eligible counterparty, either as a whole or in respect of one or more investment services or transactions, or types of transactions or products, and that they understand the consequences of the loss of protection resulting from the request.

ADDITIONAL PROVISIONS

§ 1. “Client” means a natural or legal person to whom an investment intermediary provides investment or ancillary services.

§ 2. “Professional client” means a client who has the experience, knowledge and skills to make investment decisions independently and to properly assess the risks associated with investing, and who meets the criteria in accordance with Appendix No. 1 to § 1, item 10 of the Supplementary Provisions of Markets in Financial Instruments Act.

§ 3. “Retail client” means a client who does not meet the requirements for a professional client.

§ 4. “Eligible counterparty” means an investment intermediary, a credit institution, an insurance company, a collective investment scheme, a management company, a pension company, a pension fund, other financial institutions licensed or regulated by European Union law and the Member States, national governments, public authorities involved in government debt management, central banks and international institutions, as well as third-country entities that apply requirements equivalent to those of the EU laws. Other persons may also be considered eligible counterparties if they meet the requirements set forth by Article 71 of Delegated Regulation (EU) 2017/565 requirements, including persons from third countries.

FINAL PROVISIONS

1. If the II establishes issues in its practice that require amending or supplementing these Rules, in order to resolve them, the Board of Directors of the II shall make the appropriate revisions.

2. These Rules are provided for information and implementation to the employees of the II.

3. The Rules were adopted by the Board of Directors of II Ever Financial AD by resolution of 31 January 2020 and amended by a resolution of BD on 24 August 2022.