Markets in Financial Instruments Directive (MiFID)

The MiFID (Markets in Financial Instruments Directive) is a European directive that regulates the provisions of investment services and, therefore, directly affects how credit institutions or investment companies advise on or sell financial products to their customers or potential customers.

This directive came into force on 1 November 2007, and has the following objectives:

1. Protect the customer, so that they know and understand the product being purchased and how to assess the risk incurred, thus helping them to make an informed decision.
   
   
2. Regulate the behaviour of the financial institution.
   
   
3. Increase competition among financial institutions.

It is important to distinguish between these two concepts:

1. Advisory Services

This consists in providing personalised recommendations to a customer, based on their individual circumstances (financial situation, risk profile, knowledge or experience in financial instruments and investment objectives).

When this is provided recurrently, it will always be conducted through the signing of an investment advice agreement.

2. Sales

CaixaBank will only offer the financial instruments that it deems suitable for you. To do this, the company will assess your knowledge and prior experience in similar financial instruments.

Notwithstanding the above, when, at your own initiative, you ask to contract a non-complex financial instrument, CaixaBank is not obliged to assess your knowledge and experience.

Not all clients have the same level of information, training and experience in terms of investments. For this reason, the MiDIF classifies clients into:

1. Eligible counterparties. These are specialist clients who do not need any kind of protection, given their market knowledge and experience. This is the case with other financial institutions, for example.
2. Professional clients. This category applies to those who have the experience and knowledge needed to understand and take on the risks incurred with the investment services or financial products that they want to contract. Therefore, they are given less protection and fewer rights to information than a retail client. Nevertheless, this classification offers certain rights, including but not limited to:
   
   - The right to information regarding the nature and risks of financial instruments, order execution centres, incentives, expenses and costs associated to the contracting process or the service provided.
   
   - The right to know the Policy on best execution, Policy on conflicts of interest and the Policy on safeguarding assets.
   
   - The right for the contracts entered into with CaixaBank and the orders executed on their behalf by CaixaBank to appear in the corresponding registries.
   
   
3. Retail clients. This category covers all remaining clients, who are given the maximum level of protection so that they can make informed decisions on their investments. These rights include:
   
   - The right to information regarding the financial instruments and the investment strategies, order execution centres and associated expenses and costs, so that they can understand the nature and risks of the investment service and the specific type of financial instrument being offered.
   
   - The right to know the policy on execution, the policy on conflicts of interest and the policy on safeguarding assets.
   
   - The right for the contracts entered into and the orders executed to appear in the corresponding registries.

When a client wants to contract a financial instrument for the first time, they must sign an agreement that details all the core rights and obligations derived from regulations. In CaixaBank, the aforementioned agreement is called the 'Addendum on financial instruments'. Clients have the right to request a change of classification given to them by CaixaBank, i.e. (i) from a Retail Client to a Professional Client, which would carry the assumption that they have sufficient knowledge and experience; (ii) from a Retail Client to an Eligible Counterpart, in which case, along with the aforementioned assumption, they will no longer be considered a client for the purposes of information obligations, contract registrations and obligations regarding the management and execution of orders; and (iii) from a Professional Client to an Eligible Counterpart, whereby they will also no longer be considered a client for the aforementioned purposes.

CaixaBank's acceptance of the request will be subject to the client's compliance with legal and regulatory requirements in place at any time with respect to such a change. In all other cases, classification changes that give greater protection to the customer do not need to be approved by CaixaBank.

This request must be made in CaixaBank branches.

Not all products have the same complexity or risk level. For this reason, the MiFID distinguishes between two product types that are classified according to their complexity, and in accordance with legislation in force at any time:

Non-complex products

1. Shares admitted to trading on a regulated market or on an equivalent market in a third country. The European Commission publishes a list of markets that are considered equivalent.
2. Money market instruments.
3. Bonds and other forms of securitised debt, unless they incorporate an embedded derivative.
4. Shares in collective investment institutions harmonised at the European level.

In addition to the above, products with the following characteristics are also considered non-complex products:

1. There are frequent sale or reimbursement possibilities, or the possibility of any other kind of liquidation for the financial instrument, at publicly available prices for members in the market, which are market prices, or prices offered or validated by independent evaluation systems.
2. There are no real or potential losses for the client that exceed the acquisition cost of the instrument, and...
3. There is sufficient information on their characteristics available to the public.

Complex products

1. Transferable securities or those that give rise to a cash settlement, determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures.

2. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivative financial instruments, financial indices or financial measures which may be settled physically or in cash.

3. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties, otherwise than by reason of a default or other termination event.

4. Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF.

5. Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in the previous section and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls.

6. Derivative instruments for the transfer of credit risk.

7. Financial contracts for differences.

8. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in the previous sections of this article, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.

The following products, inter alia, are not affected by the MiFID:

1. Current accounts
2. Sight savings books
3. Fixed term deposits
4. Term deposits of equities with guaranteed capital
5. Pension plans
6. Savings insurance (P2000, PVI, Unit Linked, etc.)

The MiFID establishes two types of evaluation or test, which, depending on the circumstances, the client must carry out.

1. Suitability test

This assesses the client's knowledge and experience, investment objectives and financial capacity. In any case, this test is taken when there is an investment advisory service taking place (through an agreement).

Notwithstanding the above, for certain financial instrument contracts, and sporadically, CaixaBank will also assess the client's knowledge and experience, investment objectives and financial capacity.

2. Appropriateness test

This assesses the client's knowledge and experience with respect to the instrument that may be contracted. This is applied with complex products, and when the desire to take out the contract is at the client's initiative; or, with non-complex products, when the client indicates that the initiative for the operation was taken by CaixaBank.

CaixaBank has trained all its professionals and adapted all its processes to ensure compliance with the MiFID across all its contracting chan