Legal and tax information

The Markets in Financial Instruments Directive (MIFID II) has been in effect since January 3, 2018. It aims to ensure financial market stability and transparency, improve investor protection, as well as the efficiency of financial markets and reduce costs for investors. MIFID II imposes stricter requirements on investment service providers in order to protect investors' ownership rights to securities and funds. In Latvia, compliance with MIFID II is ensured by the Financial Instrument Market Law.

The Markets in Financial Instruments Regulation (MiFIR), which is related to MIFID II, pertains to the execution of transactions with financial instruments, public disclosure of data on financial instruments, and reporting to supervisory authorities.

Regarding investor protection, MIFID II sets forth the following requirements:

• Prevention of conflicts of interest: Bank employees involved in execution of client orders are subject to stricter supervision to prevent actions that could lead to conflicts of interest, market abuse, or other negative impacts.
• Protection of clients' financial instruments and money: To ensure the protection of client`s investments, banks maintain records, separate holdings of securities and reconciliation with records of other financial institutions involved in custody services, along with periodic evaluations of these institutions.
• Investor information: Banks inform clients about the bank itself, the exchange of information between clients and banks, services and potential risks, order execution, costs, and protection of client`s investments.
• Client classification: Before conducting transactions in financial instruments, clients are classified into three categories: retail clients (highest protection), professional clients (medium protection), and eligible counterparties (lowest protection). Initially, a client is assigned a retail classification. If a client meets certain criteria and their initial classification is changed, they will be notified separately.
• Best execution: The bank takes measures to ensure the best possible results in the execution of client orders, including individual management of each client's financial instruments.
• Transaction execution reports: Clients receive detailed and standardized reports on execution of transactions involving financial instruments, including costs and applicable commissions.