Anyone with idealing got this mail?

cepheus

Today I received this Email from my broker suggesting they will treat me as a professional client. Any idea if there are any important implications ? (I am not worried about mis-selling etc). From memory I think non-professional clients can get compensation if the firm goes bust or they run off with your money. Should I ask them to stay as a retail client?


The Markets in Financial Instruments Directive ("MiFID") comes into effect on
November 1, 2007. MiFID introduces a new client categorisation regime, which will replace the current FSA categories (private client, intermediate client, and market counterparty) with the MiFID categories: retail client, professional client and eligible counterparty.

Effective 1 November 2007, we will categorise you as a "professional client"
under the MIFID transitional grandfathering provisions (Article 71(6)). You may request a different categorisation than professional client, but we will not be able to continue to provide a service to you in the event that you request to be treated as a retail client, and we have the right under MiFID to refuse a request to change your categorisation.

The protections available to you under MiFID differ depending on your
categorisation, and we will provide those protections available to you as a
"professional client".

The main differences in regulatory protections afforded retails clients vs.
professional clients are:

Communications, including financial promotions made by us with
professional clients are not subject to all of the requirements
imposed by MiFID on communications with Retail clients

Information provisions about iDealing (hereafter, "the Firm"), its
services, and remuneration that are required with respect to retail
clients are not all required with respect to professional clients

Professional clients are not eligible complainants with respect to
the Financial Ombudsman Services ("FOS")

Pre-requirements for the entry into written basic agreements for
designated investment business may not apply to professional clients

If the Firm makes a personal recommendation or manages investments
professional client in the course of MiFID or equivalent third party
business, it is entitled to assume that, in relation to the products,
transactions and services for which the professional client is so
classified, the client has the necessary level of experience and
knowledge for the purposes of suitability assessment, and where the
Firm is required to provide suitability reports to a retail client,
in many cases they are not be required to provide them to a
professional client

With respect to non-advised services, the Firm is not required to
request information or adhere to the same procedures when assessing
the appropriateness of a given service or product for a professional
client, and The Firm may not be required to give warnings to the
professional client if the Firm can not determined appropriateness
with respect to a given services or product

The Firm must provide certain product information to retail clients,
but not professional clients, when selling packaged products, cash
isas, or cash Child Trust Funds

There is no right to cancel a non-distance contract to buy a unit in
a regulated collective investment scheme if the consumer is not a
retail client

When managing investments for a client, a firm must provide the
client with a periodic statement. For retail clients, the content of
the statement is prescribed, but for professional clients, it is not

The firm may take into consideration the classification of the client
in following its Order Execution Policy, as well as in providing
information, including product information, to clients

gt94sss2

cepheus wrote: »

Today I received this Email from my broker suggesting they will treat me as a professional client. Any idea if there are any important implications ? (I am not worried about mis-selling etc). From memory I think non-professional clients can get compensation if the firm goes bust or they run off with your money. Should I ask them to stay as a retail client?

I'm not an idealing customer but am very surprised they are classifying their customers as 'professional clients'.

All my brokers have written to me to say I would be a 'Retail Client' under MiFID

HSBC say:

Why have you categorised me as a Retail Client and what does this mean?

For many years we have had to categorise clients when they do business with us. With the introduction of MiFID, we now have to advise customers of the categorisation we have given them.
Under MiFID, there are three categories of customers:

• Retail Clients - typically private investors or small corporate investors
• Professional Clients - typically investment firms, insurance companies and other authorised institutional investors
• Eligible Counterparties - typically governmental bodies and authorised institutional investors

Selftrade said in their email:

You will note that you have been re-classified from a Private Customer to a Retail Client (section 4.3 of the General Terms and Conditions), which means that you will continue to benefit from the highest degree of regulatory protection. Whilst you are entitled to request re-categorisation as a customer that is afforded a lower level of protection, it will be our policy to normally decline such requests.

Do you really meet the 'Professional Client' criteria or want to be classified as one, given the views of all these other brokers?

Regards
Sunil

egamar

It seems to me they spelled out pretty clearly what the implications were in their email.

All you have to do is go through them one by one, see if they are to your benefit or detriment and decide whether you want to be a professional client or not.

(I think probably not as all the changes seem glaringly obviously to be to your detriment).

Then write to them accordingly. I imagine they've made a !!!!-up.

cheerfulcat

cepheus wrote: »

Should I ask them to stay as a retail client?

Were you classed as a private client before? IIRC if you had a CFD or spreadbetting account you will almost certainly have been classed as an intermediate client ( now " professional " ).

If all you did was trade shares I don't see why they would have reclassified you.

purch

Should I ask them to stay as a retail client?

Maybe they don't want to service 'Retail' clients under this new regime....

cheerfulcat

They don't really have a choice, purch, unless they ditch the standard stock broking service. Retail clients are largely those who don't trade on margin ( which is why I asked about the CFD/spreadbet account ).

cepheus

Yes, officially I still hold a spread betting account with them, but have hardly ever used it, and not at all for a long time. Perhaps I need to check if
FSCS and indemnity insurance cover still applies

Idealing are a member of the London Stock Exchange and are regulated by the Financial Services Authority (FSA). iDealing's private clients are protected by the Financial Services Compensation Scheme (FSCS). For details of the Scheme, please go to www.fscs.org.uk In addition, iDealing has Professional Indemnity insurance cover of £1,000,000 per claim.
http://www.ukcitymedia.co.uk/stockbrokers/idealing.php

The Financial Services Compensation Scheme (FSCS Investments

The scheme covers two kinds of investment loss:

• When an authorised investment company goes out of business and cannot return your investments or money.
• Loss arising from bad investment advice or poor investment management

The maximum level of compensation you may receive from the scheme for a claim against an investment firm is £48,000 (100% of the first £30,000 and 90% of the next £20,000).
http://www.moneyextra.com/dictionary/financial-services-compensation-003470.html

I am nor sure if 'professional' is different to 'private', but there seem no advantages to being a professional .

cheerfulcat

Yes, officially I still hold a spread betting account with them

That's why you're classed as professional then. When you opened the account you will have been asked to confirm that you were an experienced investor ( this is the case with all margin accounts ). This made you an intermediary ( not private ), now called professional investor. BTW the distinction should have been made clear at the time because you lost the protection afforded to private investors then, not now that the names have changed.

I am nor sure if 'professional' is different to 'private', but there seem no advantages to being a professional .

Yes, there is a difference though unless you think that the broker is going bust I think that it's largely academic ( this is opinion only! ). The advantage is that you can use spread bets and CFDs, which are not available to the retail/private investor.