CLM supports with questionnaires – one for entities and one for individuals – the MiFID obligations related to:
- Product categorization.
- Determination of the MiFID category the customer belongs to.
- The request from the customer to be assigned a different category; this is the so called opt-down/opt-up process.
- The suitability and appropriateness of the investment for the customer.
The customer categorization (points 2 and 3 above) has a dual goal:
- Regulatory protection
The level of protection afforded to each group is inversely proportional to their financial knowledge, experience, and expertise.
Therefore, Eligible Counterparties (which include, among others, investment firms, credit institutions, and insurance companies) are provided the least protection, while Retail clients – considered to be investors with lower financial capabilities – are provided the highest.
- Products/services offering
Based on their categorisation, customers are provided with different products and services as well as varying levels of information necessary to understand details and risks of a transaction.
Furthermore, it is worth noting that during a review of an existing customer file (for example, Periodic Review and Event Driven Review), the user has the ability to re-categorise the customer. Re-categorisation reasons include but are not limited to incorrect categorisation, or an entity becoming regulated or de-regulated.