The new regulatory system introduces client rating categories on a compulsory basis depending on the client's experience and financial knowledge, and as a result, the level of protection and the depth of the information must be provided will be determined.
Client rating categories
Suitability and Appropriateness Tests
The law introduces the examination of suitability and appropriateness about the services provided and the transactions that can be concluded. The result of the examination shows which products and services would be suitable for you in accordance with your experience, risk-bearing capacity, and also shows if the transaction that can be concluded would be appropriate for you. Pursuant to the law, it is necessary for the investment firm to get information about your knowledge of investment instruments, risk-bearing capacity, investment targets, wealth, and income position during the examination.
In order to assess your suitability and appropriateness, a questionnaire must be completed. The questions to be answered are laid down in the law. The investment firm can not ascertain your suitability and the appropriateness of the transaction that can be concluded if the test was filled correctly but it was not signed or the questionnaire was mistakenly completed.
The Act CXXXVIII of 2007 on Investment Firms and Commodity Dealers, and on the Regulations Governing their Activities has been in force since December 1st, 2017. This Act – based on European legislative background – defines the rules of how investment firms like Erste Investment Ltd. and PFN-Prestige Financial Ltd. should operate including the regulations of the contracts and transactions made by their clients.
The new regulatory system rests on uniform European rules based on the Directive 2004/39/EC (MiFID) and it's executive regulations, so this is binding for all EU members. The stated aim of it is to protect the investors, to strengthen the competition for the firms operating in the capital market, and to increase transparency across the financial markets.
Why is MiFID good?
By consistent completion of MiFID, you can conclude deals that are appropriate for you, based on your experience and risk-bearing capacity. The global recession has clearly drawn attention to many investments both in the domestic and in the international capital market, which had such construction and risk that was not completely understood by many clients and investment firms. The application of MiFID manages these risks.