Customer Classification Policy

HODL PARTNERS (hereinafter also referred to as “HP”) is required to classify its clients when providing investment services and ancillary services in Luxembourg or other European Member States, pursuant to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments (“MiFID II”) and by the relevant delegated acts (e.g., Commission Delegated Regulation (EU) 2017/565 of 25 April 2016, supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (“DR-MiFID II”), as well as to the relevant applicable regulation in Luxembourg (namely the Grand-Ducal Regulation of 30 May 2018 which transposed the MiFID II Delegated Directive (EU) 2017/593 into national Law and the updated the Law from 5 April 1993 related to the financial sector, respectively the “GDR” and the “LFS”).

Therefore, at the beginning of the business relationship, HP will inform the client of the classification attributed, which might be subject to changes either on the HP’s initiative (only to grant further protection) or upon request of the client, who may ask the Bank to be classified in a category offering more protection (e.g. from professional client to retail client) or in a category offering less protection (e.g. from retail client to professional client). In the latter case, HP will evaluate the client’s competence, experience and knowledge in order to establish if it may accept his request or not. Ultimately, HP will inform the client of the outcome of the assessment and its consequences in terms of protection. The client is also required to inform HP of any changes that might affect her categorization.

Clients are classified into three categories, each afforded a distinct level of protection, reflected in the obligations that intermediaries are required to observe. Client categorization should reflect the client’s experience, knowledge, and expertise to make their own investment decisions and assess the risks they incur.

Retail Clients

These are all those Clients not categorized as eligible counterparties or professional clients; however, this category may also include professional clients and eligible counterparties who in general or in connection with specific services, transactions or financial instruments, have applied for and obtained a downgrade to retail clients. Retail Clients are granted the maximum protection with regard, in particular, to the scope of the information that the Bank has to provide, the performance of checks on the “suitability” and “appropriateness” of the services requested/provided and the transactions performed, and the execution of orders on financial instruments under the most favorable conditions (known as “best execution” principle).

Professional Clients and Institutional Investors

According to Article 1, par. 7, of the GDR, a professional client is a client who possesses the experience, knowledge and expertise to make his own investment decisions and properly assess the risks that it incurs. These clients have to meet the criteria laid down in the Annex III of the LFS.

It is possible to make a distinction between:

Clients who fall within the category of professional clients as defined by the Section A of the Annex III to the LFS (the “Per Se Professional Clients”).
Retail clients who requests to be classified as professional clients pursuant the Section B of the Annex III to the LFS (the “Professional Clients Upon Request”, “Upgraded Retail Clients” or “Elective Professional Client”).

With reference to point 1, the following may be treated as Per Se Professional Clients:

Parties (EU/non-EU) authorized or regulated to operate on financial markets:
1. Credit institutions
2. Investment firms
Other authorized or regulated financial institutions:

1. Insurance and reinsurance companies
2. Undertakings for collective investment schemes and their management companies
3. Pension funds and management companies of such funds

Commodity and commodity derivatives dealers
Local firms, dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets
Other institutional investors:
- Large companies which comply, at the individual company level, with at least two of the following criteria:
  - Balance sheet total: €20,000,000
  - Net turnover: €40,000,000
  - Net equity: €2,000,000
- National and regional governments, including public bodies that manage public debt at national or regional level, Central Banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organizations.
- Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitization of assets or other financing

With reference to point 2, clients may be treated as Professional Clients Upon Request if two of the following criteria are satisfied:

The client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters.
The size of the client’s financial instrument portfolio, defined as including cash deposits and financial instruments exceeds EUR 500,000.
The client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.

Eligible Counterparties

Eligible counterparties are a special category of professional clients as defined in Article 37-7 of the LSF.

In view of the above regulatory provisions, the following may be considered as eligible counterparties (upon discretion of HP):

Entities which are required to be authorized or regulated to operate in the financial markets, such as: (i) investment firms or (ii) credit institutions.
Insurance companies: (i) UCITS and their management companies; (ii) pension funds and their management companies; (iii) other financial institutions authorized or regulated under Union law or under the national law of a Member State.
National governments and their corresponding offices, including public bodies that deal with public debt at national level.
Central banks.
Supranational organizations.
Per Se Professional Clients, if they are legal persons, who are authorized or regulated to operate on financial markets; large companies which comply, at the individual company level, with at least two of the abovementioned size criteria; and national and regional governments, including public bodies that manage public debt at national or regional level, Central Banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organizations.
Upgraded Retail Clients (Elective Professional Clients) and Per Se Professional Clients who are other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitization of assets or other financing transactions, on their own request and if they are legal persons and undertakings.