Slovakia: MiFiD

Slovakia has implemented EU law to harmonise its financial markets with those of all other EU member states in accordance with the framework, principles and targets laid down by the EU directive known as MiFiD.

MiFiD aims to improve the transparency of services offered in financial markets, boost competition, increase investor protection and build a single financial market for the EU.

The changes to the Securities Act and other regulations required to implement MiFiD have brought about a new distinction between investment services and financial instruments (previously known as investment instruments).

In addition:

• main investment services have been extended by the inclusion of investment advice while investment surveys and financial analyses are now auxiliary services;
• multilateral trading facilities have been created allowing large numbers of sellers or buyers to trade in financial instruments using a platform operated by an investment firm broker or a regulated market operator;
• clients must be identified as retail and professional clients or an eligible counterparty, and investment firms must implement written internal guidelines and procedures for classifying clients in these categories and notifying them accordingly;
• certain bodies are automatically classified as professional clients or counterparties, while others may opt to be classified as such;
• those automatically classified as professional clients include regulated financial institutions or institutional investors active in financial markets, state organisations and institutions, central banks, international financial organisations and large corporations;
• other clients can choose to be classified as professional clients if they meet certain criteria related to their trading activities in financial markets, satisfy an evaluation by an investment firm and give written confirmation that they are aware of the consequences of losing the protections available to retail clients;
• professional clients are obliged to inform their investment firms of any change which could affect its status as a professional client;
• those automatically classified as an eligible counterparty include financial institutions, state institutions, central banks and international financial institutions who have this status by law;
• investment firms can agree (in writing) to treat a professional client or an eligible counterparty as a retail client either generally or in relation to a specific service or financial instrument;
• those permitted to provide investment services to clients and provide investment activities without permit by the Slovak National Bank now includes those:
  • providing solely intra-group services,
  • providing investment services occasionally as part of their professional activities (such as tax advisors or lawyers) where permitted by regulations or their professional code of ethics,
  • whose business consists of trading in commodities or commodity derivatives on their own account.

MiFiD also sets out the obligations and principles governing the relationship between investment firms and their clients, including requiring investment firms to:

• act honestly and fairly and professionally in the client’s best interests;
• obtain the best possible result for its clients ( the ‘best execution’ principle) in carrying out an instruction;
• include information about the risks associated with the services it provides in marketing communications to its clients;
• to obtain all information necessary (having regard to the client’s level of knowledge and experience) for the investment services to be provided before giving investment advice;
• have the necessary level of knowledge before giving advice to retail clients;
• maintain records of documents setting out agreements with clients and regulating mutual rights, obligations and conditions of service;
• enter into a framework contract with clients (in writing or other permanent medium) regulating the basic rights and obligations of each party and;
• give clients basic information about each instruction after carrying it out;
• giving regular statements to clients about investment portfolios under its management and annual statements about all financial instruments or monies it holds on the client’s behalf;
• disclose any limited client orders which it failed to execute under prevailing market conditions unless expressly instructed otherwise.

Law: amended Securities Act no. 566/2001 Coll.