Before providing you with an investment service, your firm is required to carry out a client classification and categorise you as a Retail or Professional client. Since the information included here is mainly targeted for retail clients, we will focus on such client classification and the protection afforded by such classification.
As a Retail client you receive the highest level of investor protection. The Conduct of Business Rulebook awards more protection to investors with less/no investment knowledge and experience (Retail clients), while investors with more investment knowledge and experience (Professional clients) are provided with less protection. Professional clients include banks, governments, pension funds, large companies and exceptionally some individuals.
In limited circumstances you can be treated as a Professional client. You may want to consider this to access products which are not available to Retail clients, or if you want to become a client of a firm that does not do business with Retail clients.
If you want to become a Professional client you need to feel confident that you are capable of making your own investment decisions, capable of assessing the risks that you incur, and do not need a high level of investor protection.
If you choose to be a Professional client, you will lose some of the regulatory protections that apply to Retail clients. The firm will explain this to you. For example, you will generally receive less information and fewer disclosures or warnings on a number of topics.
Before classifying you as a Professional client, a firm will first have to assess whether this category is appropriate for you. The purpose of the assessment is for the firm to establish that you are capable of making your own investment decisions and you are able to understand the risks involved.
Your firm will be able to categorise you as a Professional client only if you meet at least two of the following three conditions:
- you frequently carry out transactions;
- you have a large portfolio;
- you have worked in the field of investment services for at least one year.
