Information about client classification
Clients of DNB Markets must be classified in different client categories depending on professionalism.
Buying and selling different securities is strictly regulated. Brokers and banks are required to classify you as a customer based on knowledge, experience and financial ability. Which classification you get is decisive for which products and services you can buy.
Clients of DNB Markets must be classified in different client categories depending on professionalism. Clients are to be classified as retail clients, professional clients or eligible counterparties.
The classification may apply in general, or only in relation to a particular service, transaction or product. The client's classification may decide the range of products and services the client may get access to.
The level of investor protection depends on the client category. In the following is an account of the main features of the investor protection applicable to each client category. This account is not exhaustive.
To a certain extent, the legislation allows clients to request the investment firm for a transfer to a different client category. We underline that the investment firm must approve a transfer to a different client category. Even if the conditions for a reclassification as stated below are met, we are nonetheless free to decide whether or not we wish to comply with the request.
2. Retail client
2.1 Degree of investor protection
Clients classified in this client group have the highest level of investor protection. The investment firm is obliged, to a greater extent than for the other client categories, to adapt the services it provides to the client’s individual needs and qualifications.
In addition to the investment firm’s services to the client being subject to the general code of good business conduct, the investment firm will consider whether a service/transaction, including a financial instrument, is appropriate or suitable for the client before any trading takes place or advice is given. Investment advice will be given on the basis of the information provided by the client on his/her investment goals, financial position and experience and knowledge of the service/transaction in question.
Should the client wish to carry out a transaction that the investment firm does not believe to be appropriate, taking into account the client’s knowledge and experience, the investment firm has a duty to advice against this. However, the transaction may nonetheless be carried out if the client so wishes despite the warning. The investment firm’s duty to consider whether a service/transaction is appropriate does not apply in all cases. Among other things, there is an extensive exception for trading through electronic channels, including online trading.
Status as a retail client also entails an extensive right to receive information from the investment firm. The investment firm is obliged, among other things, to inform the client of the financial instruments in question and of the risks relating to these, of the trading systems and marketplaces the investment firm uses, and of the prices and other costs of all transactions so that the client is enabled to make an informed investment decision.
2.2 Opportunity to be reclassified
Retail clients may request to be treated as professional clients provided more detailed conditions are met and a further specified procedure is followed. Such a reclassification results in a lower level of investor protection.
2.2.1 From retail client to professional client
1) The absolute requirements
The client must meet at least two of the following criteria:
1. 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,
2. the size of the client’s financial instruments portfolio, defined as cash deposits and financial instruments, exceeds an amount which equals € 500,000,
3. the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the relevant transactions or investment services.
Clients must inform the investment firm in writing that they wish to be treated as a professional client. Clients will be asked if they seek to be treated as a professional client generally,i.e. for all future transactions and investment services, or in respect of a particular investment service or transaction, or type of transaction or product. The client will be asked to document that the requirements stated in item 1 above are met. In addition, clients must in a separate documentdeclare in writing that they know the consequences of losing the protection which is afforded by being classified as a retail client and which are mainly stated in this letter. The investment firm may be contacted for further information.
The investment firm must carry out a concrete assessment of whether the client – based on the client’s expertise, experience and knowledge and the planned transactions – is capable of making own investment decisions and understands the risk involved.
3. Professional client
3.1 Level of investor protection
Clients classified as professional clients are protected by the legislation to a slightly less extent than retail clients. Professional clients are in some areas regarded as able to safeguard their own interests, and the services provided will therefore to a lesser extent be adapted to suit the client’s individual needs.
Basically, the code of good business conduct applies in full to professional clients. However, the extent of the investment firm’s obligations is slightly reduced. Among other things, professional clients are normally expected to have sufficient knowledge to assess whether a transaction is appropriate. Our investment advice will thus be based on the investment goals stated by the client and we will not use the information on the client’s financial position or knowledge/experience.The investment firm will not assess whether carrying out the transactions in question is appropriate, and it thus also has no duty to advise against a transaction as it has in relation to retail clients. The execution of transactions will thus be slightly less elaborate than it is for retail clients. This may affect the rate at which the transaction in question is executed. Another consequence will be that professional clients can have access to a wider range of products.
Professional clients are also assumed to be able to determine the information that is necessary in order to make an investment decision. This means that professional clients must, to a greater extent than retail clients, themselves obtain the information they regard as necessary. However, professional clients will receive reports on services that have been carried out and other important information, such as the investment firm’s order execution policy and security rights or possessory liens in financial instruments or assets.
3.2 Opportunity to be reclassified
Professional clients may request to be classified as retail clients and thus achieve a higher level of investor protection. Professional clients are responsible for the investment firm being kept continuously informed of any change that may affect their classification.
3.2.1 From professional client to retail client
It is the professional client’s duty to request a higher level of protection when the client feels unable to make a correct risk assessment. Such a change of client classification is to be documented by a written contract between the investment firm and the client.
4. Eligible counterparty
4.1 Level of investor protection
An eligible counterparty has the lowest level of investor protection.
Clients with the status of an eligible counterparty basically have the same protection as a professional client, refer to item 3. However, the investor protection for this group is significantly reduced when the investment firm provides the following investment services: the reception and transmission of orders, execution of orders for the client’s account and the own-account sale of financial instruments. When providing such services to eligible counterparties, the investment firm is not subject to the Norwegian Securities Trading Act’s provisions regarding good business conduct, best execution (including the investment firm’s order execution policy) and certain rules linked to order processing.
As regards the requirement of assessing suitability and appropriateness, the rules applying to professional clients will apply correspondingly to eligible counterparties.
The exemption from the provision regarding good business conduct means, among other things, that some of the rules stipulating requirements as to information and reporting are not applicable to this client category. This basically also applies to the rule that the investment firm must ensure that the client’s interests are safeguarded in the best possible way. However, the requirement of good business conduct as a general principle must apply irrespective of the exemption from the Securities Trading Act provision, and eligible counterparties will thus to a certain extent be protected by general principles of good business conduct.
4.2 Opportunity to be reclassified
Eligible counterparties may request to be reclassified as a professional client or retail client and thus achieve a higher level of investor protection.
4.2.1 From eligible counterparty to professional client
Eligible counterparties may request to be treated as a professional client if they wish a higher level of investor protection and to be covered by the rules regarding good business conduct.
4.2.2 From eligible counterparty to retail client
Should clients that are initially classified as eligible counterparties wish a higher level of investor protection, they may request to be treated as a retail client. Item 3.2.1 above will apply correspondingly in the case of such a request.