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MiFID

Under the “MiFID” title we refer to the legal framework that affects all individuals and legal persons operating in the financial market and that provides greater protection through a series of rules of conduct that all investment services companies must comply with in defence of their clientes.

PROFIM Asesores Patrimoniales, Empresa de Asesoramiento Financiero, S.L. is an investment services company that by virtue of its business activity (advisory services in investments) is subject to this regulation.

A consequence of this specific regulation is that all investment services companies must previously classify its clients into one of the following categories: Retail Client, Professional Client or Eligible Counterparty, with the purpose of assigning each one of them the most appropriate measures and levels of protection. At any given time, the client may request from PROFIM a change in the classification given if the MiFID requirements are met.

Knowing the clients, in the sense of being able to adjust the investment service to their needs, is one of the main aspects that the MiFID considers. This knowledge lies within discovering their degree of experience in and knowledge about investing in financial products/instruments.

To obtain this knowledge PROFIM has a specific form called Appropriateness Test, which the client must fill in.

Any client or potential client must fill in the Appropriateness Test before contracting any of the advisory services offered by PROFIM. The information obtained shall only be employed for the intended purpose.

  • Your information rights
  • At this link there is a summary of the pre-contractual, contractual and post-contractual information established by the MiFID. Therefore, PROFIM provides detailed information about the essential aspects of the services contracted by the client, which can be facilitated in paper format at our branches.

    Classification of Clients:

    As mentioned above, the MiFID establishes three categories of clients according to their degree of experience in and knowledge about the financial market, as well as their capacity to understand and assume the risks involved in the investment of financial instruments.

    As a result, we differentiate between:

    • Retail Client: Mainly individuals, including SMEs. These clients receive a maximum level of protection, both as a result of the compulsory nature of signing the appropriateness test and of the reach and content of any legal or contractual documentation they receive and are made available to them.
    • Professional Client: Basically large enterprises and institutional investments. Starting from the premise that these clients have an optimum level of knowledge about and experience in investments, they are provided a lower level of protection, as they are able to decide and assume the risks arising from investing in financial instruments.
    • Eligible Counterparty: This includes Banks, Investment funds, other ESIS. The level of protection is similar to the investment services company that provides the service, where the basis of the compliance is a series of basic rules of conduct, but not within the scope and content of the protection measures from the other two client categories.

    If you wish, PROFIM can provide you further information about its Policy on the Classification of Clients, where you can see the MiFID's provisions and the objective criteria followed to prepare and communicate its clients this classification.

    We inform you that every client has the right to request a change of classification, in such a way that a Retail Client can request a change to Professional Client or the latter to Retail Client or Eligible Counterparty, as the latter of these two can to Retail Client or Proffesional Client, with the sole requirement of contacting PROFIM by any demonstrable means through the form that can be obtained free of charge from any of the branches or by requesting it via email. In any case, accepting the requested change will depend on the client's fulfilment of the legal requirements established by the MiFID.

    Communication with Clients:

    PROFIM establishes different channels and methods of communication with its clients: You may make an appointment over the phone (91.521.11.25), through email at profim@profim.es or by post sending a request to our headquarter in Madrid, C/ Barbara of Braganza, no. 6 (C.P. 28014).

  • Preventative Measures and the Management of Conflicts of Interest
  • In order to detect and manage real or potential conflicts of interest and thus to avoid these situations from occurring or if they cannot be avoided, to manage them appropriately in accordance with the MiFID regulation, PROFIM has incorporated measures into its policy for the prevention and appropriate management of any such conflict. See our Preventative Measures and the Management of Conflicts of Interest at the link below.

    Taking into consideration the nature and importance of a detected situation of potential conflict, the following measures can be highlighted:

    • General and specific guidelines prohibiting certain behaviour (such as divulging information about a client’s transactions to another client) or giving the criteria for resolving such situations (for instance, the general principle of putting the interests of the client first).
    • Measures aimed at preventing any employee from influencing inappropriately the way any other employee or department carries out investment services or activities.
    • Measures aimed at preventing or controlling the simultaneous or consecutive involvement of an employee in several investment or ancillary services or activities, when such participation might damage a client’s interests.
    • Procedures and measures, specific to the case at hand, aimed at preventing or controlling damage to a client’s interests caused by the exchange of information between different persons or departments carrying out activities which bear an important conflicts of interest risk.
    • Specific measures for employees involved in the writing of investment research reports, aimed at guaranteeing the employees’ autonomy and objectivity

    Given the variety of situations that can potentially give rise to conflicts of interest, PROFIM has therefore drawn up a specific procedure in order to try to resolve unforeseen conflicts of interest situations arising during the ordinary course of its business.

    PROFIM will keep an updated record of the Conflicts of Interest that occur or that are occurring continuously so they can be analysed and subsequently managed.

    Finally, in the event that measures adopted by PROFIM for managing a specific conflict of interest are unable to guarantee,with reasonable confidence, that the risk of damage to a client’s interests will be prevented, PROFIM will disclose the general nature or the source of the relevant conflict to the client before acting on its behalf, thereby allowing the client to make its own decision in terms of what it considers to be the most suitable course of action in respect of the service being offered.

  • Incentives
  • PROFIM provides its clients with information about any third-party fees, commissions and benefit received or paid with respect to the provision of its investment service, always in accordance with the best interest of its clients and its duty to act honestly, fairly and professionally.

    PROFIM informs that in the event of receiving incentives, it will always be from well-established and renowned entities that guarantee swiftness and security when contracting, as well as a quality Administration and Back-Office service. These entities provide clients of the Financial Advisory Company platforms from which to contract operations; however, it will be the client who ultimately decides which entities to operate with. This will lead to the client ultimately assuming a lower brokerage fee.

    PROFIM initially is not aware of which products will provide a higher or lower rebate from its advisory work.

    The existence of these incentives will depend on the type of service contracted by the PROFIM client, in conformance with the contract subscribed and the applicable rates and charges in each of the platforms.

    Below is a current explanatory brochure about the Preventative Measures and the Management of Conflicts of Interest, where there is access to the catalogue of incentives detailing their nature, characteristics, amount and calculation method.

    Download of the explanatory brochure about the Preventative Measures and the Management of Conflicts of Interest.

  • Rates and Charges
  • Below is a current explanatory brochure with the rates and charges applicable to our clients, which are published in the Comisión Nacional del Mercado De Valores (CNMV).

    Download the explanatory brochure with the Rates and Charges.

  • Risk of Investment in Financial Instruments
  • PROFIM has at your disposal extensive and detailed information on the risks involved in investing in Financial Instruments (Complex Products and not Complexes). The client must be aware that, depending on the type of financial asset, there are a series of multiple risks that can affect their final return (e.g. risk related to rates and price, liquidity, solvency, reinvestment, etc.).

    Our advice is mainly based on Undertakings for Collective Investment in Transferable Securities (UCITS), specifically, on Investment Funds that have previously been analysed and chosen by our entity. Notwithstanding the foregoing, recommendations of other investment products may also be made provided that they suit the client's investor profile and which therefore our entity considers are suitable.

    Investment funds, like other investment products, involve risks that the investor must be aware of previously, and consequently, we invest all our efforts in explaining them in a clear and detailed way.

    However, we remind you that the entities issuing and marketing Investment Funds must provide, before subscribing the holding, a prospectus of the investment fund, which shall include the following information: (i) Identification of the UCITS; (ii) a short description of its investment objectives and investment policy; (iii) a past-performance presentation or, where relevant, performance scenarios; (iv) costs and associated charges; and (v) risk/reward profile of the investment, including appropriate guidance and warnings in relation to the risks associated with investments in the relevant UCITS. On the other hand, the entities that market investment funds must provide the investor with a copy of the KID (Key Investor Document), previously referred to as the abridged prospectus, together with the last published half-yearly report, always before subscribing the fund. Reading this document before any transaction is essential, whether it is investing (subscribing) or redeeming (selling) your holding. The KID (Key Investor Document) has a maximum length of two pages (extendable to three if structured deposits) and includes all the information required and relevant for the investor to make a decision about whether it is convenient or not from his perspective to invest in that fund. (the above-mentioned prospectus, as well as the KID can also be found at the C.N.M.V.).

    For a better understanding of the risks involved in these investments, below is some information about the risks of investing in financial instruments from a point of view of the market, credit, liquidity and complexity risks, thus providing a merely informative, but not limiting, list:

    1. Fluctuation of the Markets: As a preliminary matter, you must know that the value of the assets in an investment fund, regardless of its investment policy, is subject to market fluctuations, hence both positive returns and losses. Depending on this fluctuation, as well as the convergence of the rest of the risks detailed below, can result in a high volatility of investments that subsequently is translated in significant gains or losses.

    2. Market risk: Market risk is a general risk that results from investing in any type of asset. Asset prices depend especially on the status of the financial markets, and the issuer's economic performance, which, in turn, is affected by the general state of the global economy and economic and political circumstances in each country. In particular, investments carry the following risks:

    • Market risk for equity investment: Deriving from fluctuations in the price of equities. The equities market is generally highly volatile and therefore the price of equities can fluctuate widely.
    • Interest rate risk: Variations or fluctuations in interest rates affect the price of fixed income assets. Increases in interest rates generally exert downward pressure on the price of these assets, while decreases in rates push up their price. The sensitivity of fixed income security prices to fluctuations in interest rates is greater the longer the security's term to maturity.
    • Exchange rate risk (currency risk): Investing in assets denominated in currencies other than the reference currency of the holding entails a risk stemming from fluctuations in exchange rates. There are products that cover the "currency" risk. Investors must consider that despite the objective being to cover the value of the net assets denominated in the fund's reference currency or the exposure to currencies of certain assets (but not necessarily all the assets) in a specific fund, either in the reference currency of the class covered against the exchange rate risk or in an alternative currency, the process of coverage of the exchange rate risk may not provide the appropriate coverage. In addition, there is no guarantee whatsoever that the coverage will provide satisfactory results.
      Investors in the classes covered against the exchange rate risk may be exposed to currencies other than those of their holding class, and they may also be exposed to the risks associated with the instruments used in the coverage process.

    3. Risk of geographical or sectoral concentration: Concentrating a major part of investments in a single country or limited number of countries could involve assuming the risk of economic, political and social conditions in these countries having a significant impact on the returns on investment. Equally, the performance of a fund that concentrates investments in one economic sector or in a limited number of sectors will be closely linked to the performance of the companies in these sectors. Companies in the same sector often face the same hurdles, problems and regulatory burdens and, therefore, the price of their securities could fluctuate in a similar and more parallel manner to these or other market conditions. Consequently, concentration means that fluctuations in the prices of the assets in which investments have been made have a greater impact on the performance of the holding than if a more diversified portfolio is held.

    The so-called “country risk”, refers to the possibility of social, economic, political events in that country affecting the investments made there.

    4. Credit risk: Credit risk is the risk that the issuer of fixed-income assets cannot repay the principal and interest when these are due. Credit rating agencies rate the solvency of some issuers/fixed-income issues to indicate their probable credit risk. In general, the price of a fixed-income security will go down if the obligation to settle the principal or interest is not fulfilled, if the rating agencies downgrade the credit rating for the issuer or issue or if other news affects market perception of the credit risk. Issuers and issues with high credit ratings entail low credit risk, while issuers and issues with a medium credit rating entail moderate credit risk. The non-requirement of a credit rating of issuers of fixed-income securities or the selection of issuers or issues with a low credit rating entail assuming a high credit risk.

    In addition, the fund may present the so-called counterparty risk: when the net asset value is guaranteed or depends on one or more contracts with a counterparty, there is a risk that the latter fails to fulfil its payment obligations. It is important to bear in mind if the fund uses derrivatives instruments in the OTC (“Over The Counter”) markets:

    Therefore, knowing the issuers' credit quality before the investment by means of the rating established by specialised entities (rating agencies) is important.

    5. Liquidity risk: This risk can negatively influence the fund's liquidity and/or the price conditions in which the fund may be forced to change its positions.

    6. Risk of investment in derivative financial instruments: The use of derivative financial instruments to hedge cash investments also entails risks. These include the possibility of an imperfect correlation between the movement in the value of the derivative contracts and the hedged items, whereby the hedge may not be as effective as planned.

    Investing in derivative financial instruments involves other risks in addition to those entailed in cash investments, due to the leverage factor. This makes them especially sensitive to fluctuations in the price of the underlying and could multiply the loss in a portfolio's value (underlying risk).

    Trading in derivative financial instruments other than on organised derivatives markets involves additional risks. These include the risk of a counterparty breaching its obligations, since there is no clearing house acting as intermediary between parties to ensure that trades are settled.

    7. Guarantees risk: The investor must know that some investment funds, despite the existence of a guarantee, can include a series of contract clauses that condition their effectiveness, in such way that the investor must be aware of these conditions before subscribing. Again, reading the prospectus is especially important to be aware of the conditions under which the guarantee will be valid.

    Remember, neither the invested capital nor returns are guaranteed in funds that do not have a third-party guarantee.

    8. Risk of investment in general financial instruments: The investor must be aware of the fact that equity funds have higher risks than fixed-income funds, as the share prices are more volatile; however, investing in fixed-income funds can also generate losses, as their value also fluctuates as a result of the variations of the interest rates. Another consideration is that when the fund invests in securities not traded in regulated markets, an additional risk is taken due to a lesser control of their issuers. In addition, the valuation of these assets is more complex, since there is no objective market price.

    9. "Author” risk: Funds whose evolution is linked to the agent's conviction assume a higher risk of following a wrong strategy and/or choose the wrong securities.

    10. “Index” risk: Funds that follow or replicate the evolution of an index cannot deviate (essentially) from its benchmark; therefore, they cannot go against the market when it turns around.

    11. Concentration risk: A fund's risk is higher the more its portfolio concentrates on few assets. If due to circumstances related or unrelated to the market, one or several of its investments drop in value, the effect on the net asset value can be significant.

    Remember that any purchase or sale decision on any type or class of financial instruments made by the Client is personal and it should be adopted according to the existing public information on said financial instruments, and, as appropriate, depending on the type of product, the risks mentioned in this document and, especially, in line with the prospectus corresponding to said financial instruments which must be registered with and available at the Comisión Nacional del Mercado de Valores, as well as in the governing body of the corresponding market, the trading companies or issuing companies of said financial instruments, the latter of which shall be responsible for the information contained in the prospectus: article 28 of the Securities Market Act).

    The Client must bear in mind that the financial instruments or securities referred to may not be suited to your investment goals or your financial situation on the date of issue; therefore, the CLIENT is recommended to frequently review his investor profile and communicate any variation to PROFIM, and where applicable, the corresponding financial institution. PROFIM does not guarantee a concrete result and warns the CLIENT that the correct recommendations in past recommendations do not imply correct future recommendations and that the historical or past returns of the investments do not guarantee returns or future results. The CLIENT is expressly advised through this document that any investment in financial instruments involves risks that the investor must know beforehand, including the loss (even the total loss) of the investment made.

    Any information regarding profitability or results are data to be taken into account but not the only data or the most important. In any case they refer to the periods between twelve months and five years, expressly warning that any figures relating to past results or returns or historical yields are not a reliable indicator of future returns or results. With regard to currencies, the CLIENT is expressly advised to consider possible increases or decreases in yield depending on currency fluctuations. Under no circumstances will any recommendation or forecast made be a reliable indicator of obtaining future results or returns.

    Any mention to a competent authority does not mean that this authority approves or supports the services or products referred to.

  • Terms and Conditions of Contract
  • This section includes the latest version of the Terms and Conditions of Contract, where you can find out the basic aspects of the standard contract that governs the relationship between PROFIM and its clients (obliged parties; obligations agreed by the parties; information that the entity must provide its clients; incentives policy; rates and charges; specific clauses regarding modifications and termination by the parties; the procedure to update information pertaining to the client's knowledge, financial situation and investment objectives; etc.).

    Prior to contracting any of our services, you will receive background documentation in which you will be informed in detail about all the conditions. It is very important that you answer the questions in the Appropriateness Test, the result of which will help us adjust our advice to your investor profile.

    Download Standard Contract form.