Legislation on securities transactions
Act No. 108/2007, on Securities Transactions, transposed into Icelandic law the European Union's Markets in Financial Instruments Directive, generally known as MiFID, and the Directive on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, known as the Transparency Directive.
The MiFID Directive applies to the entire EEA, i.e. EU Member States plus Iceland, Norway and Liechtenstein. The Act on Securities Transactions makes changes to a number of important rules concerning the conduct of securities transactions. The purpose of the Act is to harmonise rules on consumer protection and create a common internal market in financial services. Emphasis is placed on increased surveillance, professional execution and information disclosure. The legislation is intended to ensure that clients of financial undertakings concluding securities transactions always receive appropriate information and advice. To accomplish this, additional obligations are placed on the client to provide information to financial undertakings.
More about MiFID
According to Act No. 108/2007, on Securities Transactions, financial undertakings are required to classify clients based on their knowledge and experience. There are three main categories: retail investors, professional investors and eligible counterparties.
Landsbankinn's clients classified as retail clients enjoy the full protection provided for by the new legislation. This includes, for instance, provision of information by Landsbankinn to clients classified as retail clients on the bank, the services it offers, the investment options open to them and the risk involved in each case, as well as information on the cost and fees charged for each investment option. If a retail client is provided with service in the form of investment advice or asset management, an assessment must be made as to whether a specific type of financial instrument coincides with his or her interests. In such instances, Landsbankinn is to assess the client's knowledge, experience and financial strength, as well as investment objectives.
If Landsbankinn's services include other types of securities-related services than asset management and investment advice, the bank will assess the client's knowledge and experience in order to determine whether he or she possesses sufficient information to appreciate the risk involved in a transaction. Note that Landsbankinn clients classified as retail clients may request that the bank classify them as professional clients. In requesting such classification, clients will lose some of the rights and protection they would otherwise enjoy under the Act on Securities Transactions, while gaining additional possibilities of investing in complex financial instruments.
For such a request to be considered, clients must provide Landsbankinn with certain information. Classification is made at the bank's discretion.
Professional clients shall mean customers who possess the experience, knowledge and specialised expertises to make their own investment decisions and properly assess the inherent risks.
The following are regarded as professional clients:
- Legal entities authorised or regulated to operate in financial markets, such as financial undertakings, insurance companies, undertakings for collective investment, and pension funds.
- Large corporations fulfilling specific requirements concerning their balance sheet, annual turnover and equity.
- National and regional governments, central banks and international institutions.
- Other institutional investors whose main activity is to invest in financial instruments.
- Parties approved as professional clients based on the client's application.
Landsbankinn will therefore not assess the knowledge and experience of clients classified as professional clients who fulfil the requirements in Points 1 to 4 above when they conduct securities transactions.
The financial strength of Landsbankinn's clients, who request to be classified as professional clients and have been accordingly classified as such, is assessed when services involving investment advice or asset management are provided to them, cf. Point 5 above.
Clients classified as professional clients can request to be reclassified as retail clients and thereby enjoy more protection. If a client requests to be reclassified as a retail client, he or she relinquishes the possibility of concluding transactions in complex financial instruments. Professional clients may also request to be classified as eligible counterparties, but such classification means that they lose part of the protection enjoyed by professional clients. Such classification is made at Landsbankinn's discretion.
Those clients classified as eligible counterparties enjoy the least protection under legislation on securities transactions. This is because they have the greatest financial strength, experience, knowledge and expertise of all the clients and therefore do not require as extensive protection as do retail clients. Clients classified as eligible counterparties may request to be reclassified, as either professional clients or retail clients, in order to enjoy wider protection.
Most individuals, smaller companies and organisations will automatically be classified as retail clients, and as such enjoy the greatest protection by law. Larger institutions and companies are classified as eligible counterparties and benefit from more limited protection, since such parties are better equipped to make investment decisions and assess the risk involved. Institutional investors and parties who so request and fulfil the minimum requirements concerning financial status, experience and knowledge will be classified as professional clients.
Clients of Landsbankinn must approve the following terms and conditions prior to engaging in securities transactions:
General Terms and Conditions for trading Services
Order Execution Policy
Summary of Landsbankinn's Conflicts of Interest Policy
Information from Customers for Provision of Advice
Risk Description for Market Trading in Financial Instruments
Parties classified as professional clients and eligible counterparties must consent to their classification. Clients must also grant consent for the execution of orders for financial instruments which have been admitted to trading on a regulated securities market or multilateral trading facility (MTF) outside such markets. In addition, Landsbankinn is obliged to obtain clients' consent if they do not make public immediately unexecuted client limit orders. This accords with current market practice and Landsbankinn's order execution policy.
Individuals can approve these terms through Personal Internet Banking or contact the bank's financial advisors by phone, at +354 410 4040.
The consumer protection offered clients varies and decreases as clients' assumed knowledge and experience of transactions in financial instruments is greater. Landsbankinn must conclude an agreement with its clients to provide services in connection with securities transactions, which provides for the rights and obligations of the contracting parties. In addition, a list is kept of all services provided by Landsbankinn and all securities transactions where Landsbankinn acts as intermediary. An agreement must be concluded between Landsbankinn and the client regardless of whether a long-term business relationship or only one specific transaction is involved.
Landsbankinn must provide comprehensive information on the bank itself, its services, the investment options available to the client and the risk inherent in such investments. The information provided by Landsbankinn must be clear and fair, and may not be misleading in any way. This information should be prepared to enable clients to make informed decisions on investments.
Increased consumer protection obliges Landsbankinn to know its clients. An assessment must be made of the knowledge, financial strength and experience of clients before they are provided with services related to securities transactions. If Landsbankinn does not obtain the prescribed information, it may not provide clients with advice on securities transactions.
Retail clients of Landsbankinn and other financial undertakings should thus be prepared for more detailed questions than before when concluding securities transactions. Landsbankinn's employees request that clients show consideration and understanding when they encounter questions employees are required to ask under the Act on Securities Transactions.
Landsbankinn has adopted an order execution policy with regard, for instance, to the price, cost, speed and other significant aspects. In executing orders, Landsbankinn will make every effort to ensure the best possible outcome for its clients while complying at all times with client orders, however. Landsbankinn will take the necessary steps to satisfy the requirements for best execution, for instance, by adopting an order execution policy.
Order Execution Policy
The following lists the markets Landsbankinn most frequently utilises to achieve best execution in accordance with the bank's order execution policy.
Landsbankinn has direct access to the following markets:
- OMX Nordic Exchange Iceland
- OMX Nordic Exchange Helsinki
- OMX Nordic Exchange Copenhagen
- OMX Nordic Exchange Stockholm
- Oslo Børs
- OMX First North (MTF)
- OMX Nordic Exchange Iceland
Units in listed collective investment funds
- OMX Nordic Exchange Iceland
In its Order Execution Policy, Landsbankinn reserves the right to use other markets than those listed above to achieve the best possible results. This includes authorisation for Landsbankinn to turn to off-shore brokers to execute orders when transactions involve foreign financial instruments.
Conflicts of interest
Landsbankinn has a comprehensive policy on conflicts of interest intended to prevent any conflict of interest resulting in a material risk of detriment to the bank's clients. Where the measures taken do not satisfactorily ensure sufficient protection for clients' interests, Landsbankinn will inform the clients concerned of the nature and causes of the conflicts of interest before undertaking transactions.
Summary of Conflicts of Interest Policy
Disputes and legal recourse
In the case of dispute between a client and the bank concerning securities transactions, the client may submit a complaint to the bank. Clients may also refer disputes to the Complaints Committee on Transactions with Financial Undertakings, which operates under the auspices of the Financial Supervisory Authority, Iceland (FME). Applications to refer complaints to the Committee are available from the bank and on FME's website.
For further information about the effects of the Act on Securities Transactions on your relationship with Landsbankinn, please contact the bank's financial advisors by calling +354 410 4040 or your own securities contact at the bank. Inquiries may also be directed to firstname.lastname@example.org .