MiFID II

Information for the customers of the HSBC Continental Europe (Spółka Akcyjna) Oddział w Polsce (further referred to as "HSBC" or "the Bank")

1. Introduction

The EU’s revised Markets in Financial Instruments Directive (“MiFID”) and Markets in Financial Instruments Regulation (MiFIR”), together “MiFID II”, goes live on 3 January 2018. MiFID II seeks to make financial markets in Europe more resilient, transparent and investor-friendly and is part of a number of measures enacted in response to the financial crisis. The MiFID II reform means that organised trading of financial instruments must shift to multilateral and regulated trading platforms or be subject to transparency requirements where traded over-the-counter (OTC). Strict transparency rules will ensure that dark trading of shares and other equity instruments which undermine efficient and fair price formation will no longer be allowed.

2. Legal basis

MiFID II comprises of 3 levels of the regulatory acts: level 1 consists of MiFID II and MiFIR (the framework of the reform), level 2 - RTS (regulatory technical standards) and delegated acts (the detail of the reform) and level 3 - Q&As and Guidelines issued by ESMA (the clarification of the reform). Many of the rules in MiFID II have been implemented into national legislation and regulations.

Part of the rules which were implemented by MiFIR and other EU regulations (which are directly applicable in Member States without the need of any further actions) imposed directly additional obligations and rights on member states.
Part of the rules which were introduced by MiFID II and other delegated directives will need to wait for transposition into the Polish legal system through amendments to relevant acts and delegated regulations, mainly to:
- The Act of July 29, 2005 on Trading in Financial Instruments (Dz.U. of 2010, No. 211, item 1384 with subsequent amendments)
- Ministry of Finance Regulation of 30 May 2018 on terms and conditions of conduct of the investment companies, banks as related to in art. 70 point 2 of the Act on Trading in Financial Instruments, and custodian banks (Dz.U. of 2018, item 1112)
- The Ministry of Finance Regulation of 29 May 2018 on defining specific technical and organizational conditions for the investment companies, banks, as referred to in art. 70. point 2 of the Act on Trading in Financial Instruments, and custodian banks (Dz. U. of 2018, item 1111)

3. General information about HSBC

HSBC Continental Europe (Spółka Akcyjna) Oddział w Polsce, with its seat in Warsaw, at Rondo ONZ 1, 00-124 Warsaw, and registered in the register of entrepreneurs of the National Court Register maintained by the District Court in Warsaw, XII Commercial Department of the National Court Register under KRS No. 0000757904, with a tax identification number NIP 107-00-41-832, the branch of HSBC Continental Europe, a French société anonyme with a share capital of EUR 491 155 980 fully paid up, whose corporate seat is 38 Avenue Kléber, 75116 Paris, registered with the Trade and Companies Registry of Paris (Registre du Commerce et des Societas) under number 775 670 284, with a Polish NIP number 107-00-41-803.

4. MiFID II advantages for customers

MiFID II has been introduced to enhance the protection of interests of customers using the financial and investment services, as well as in order to increase market transparency.

In particular, MiFID II provisions enhance the following rules:

Customer classification
Acting in customer's best interest and best execution rules
Appropriateness and suitability tests allowing to assess whether services offered are appropriate / suitable with regards to customers' knowledge, experience and their individual situation
Rules with regards to financial and non-financial inducements
Requirements related to Conflict of Interests
Market structure
Market transparency
Transaction reporting
Organisational requirements in relation to product governance

5. HSBC services covered by MiFID II provisions

In terms of the relationship with corporate Clients the Bank offers executing transactions in financial instruments (including options, swaps, forward contracts) and within the scope of relationship with financial institutions Bank executes transactions in securities (including debt securities listed on a regulated market). Detailed terms of concluding and settling the transactions are described in relevant Master Agreements.

6. Customer classification

MiFID II maintains rules of customer classification, and thus provides three following categories: retails customers, professional customers and eligible counterparties.

With regards to corporate Clients, Client's classification to one of three above mentioned categories still depends on fulfilling the economic criteria described in the Act on Trading in Financial Instruments. However, there is a change in relation to municipalities and local authorities. Municipalities and local authorities are now required to be treated as retail clients.

Each customer has a right to request that HSBC treats him as a customer of another category to this provided by the Bank. HSBC will reply to each such request in writing and the Bank will point out whether certain qualitative and quantitative conditions have been met.

7. Appropriateness test

Rules of MiFID II require as those of MiFID I that the financial institutions request their customers or potential customers to provide basic information regarding their investment services knowledge and experience, such as is necessary to assess whether the financial instrument or the investment service is appropriate for a customer with regards to customer's individual situation (the appropriateness test).

Based on these provisions, all customers classified as retail customers under MiFID II who enter into an agreement with the Bank related to the provision of services covered by MiFID rules are requested to fill in a short questionnaire allowing to assess whether the financial instruments covered by the agreement are appropriate taking into consideration customer's knowledge and experience.

8. Documentation and customers’ data

Under MiFID II additional client data is required to meet by investment firm multiple obligations related inter alia to the appropriateness assessment, transactions reporting (including customer’s obligation to have an LEI code).

The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code, utilised to uniquely identify legal entities that engage in financial transactions.

According to ESMA statement from 3 January 2018 investment firms may offer services to clients when they do not have an LEI only provided that customers evidence that they have already applied for an LEI. Otherwise Bank will not be able to trade any in-scope financial instrument with a legal entity that does not have an LEI.

If you don’t already have an LEI, please apply for one as soon as possible via the Global Legal Identifier Foundation (GLEIF) portal (www.gleif.org) or KDPW https://lei.kdpw.pl/.

9. Transactions reporting

According to MiFIR and delegated regulations requirements a broader scope of financial transactions now need to be reported. Both counterparties (investment firms) to a trade must report transactions data (65 fields, which include investor details) to the Regulator (KNF). Transaction Reporting may be done through an investment firm’s own arrangements, an Approved Reporting Mechanism (ARM) or by the trading venue through which the transaction was completed no later than the close of the following working day.

10. Best execution

HSBC is subject to the regulatory duty of best execution under MiFID II in respect of our Markets activities. MiFID II regulates the provision of execution services. HSBC has a general duty to act in accordance with the best interests of those of our clients who are not eligible counterparties when providing those services. Best execution is a specific application of that general duty.

Irrespective of the scope of best execution, we are committed to being efficient, transparent and client focused in our sales to and servicing of clients.

HSBC has a Best Execution Policy and related arrangements on best execution in respect of our Markets activities.

Client Disclosure Statement on our Best Execution Policy is available here (PDF, 193KB).

11. Conflict of Interests Policy

The Bank belongs to the HSBC Group, which provides financial services through its associated members in many countries and regions of the world. As such, the Bank informs, that a company being a member of the HSBC Group may have interests which conflict with the Client's or the group of Clients' interests, or the Bank's duties owned to its Clients.

Moreover, as the Bank is engaged in performing numerous transactions with many different Clients and is active within many areas of banking products, there may arise a Conflict of Interest between the Bank's interests and the interests of an individual Client.

The Bank has adopted a Conflict of Interests Policy, which sets rules aiming to prevent any actual or potential conflicts of interests, which may arise with regards to the customers.

The Bank recognizes that procedures and controls may not be sufficient to ensure that a potential conflict of interest does not damage a Client's interests. In these circumstances the Bank may decide to specifically disclose the actual or potential Conflict to the Client and obtain the Client's formal consent to proceed. The Bank may also decline to perform its services for a Client in circumstances, where the Conflict of Interests entails a material risk of damage to Clients.

Summary of the HSBC Conflict of Interests Policy is available herein (PDF, 172KB).

Full content of the Conflict of Interests Policy shall be provided to customers on their requests.

12. Communication with customers

HSBC is obliged to provide to its customers fair, complete and professional information on the financial instruments it offers. In particular, a detailed information covering description of the financial instrument, the related risks and fees (if any) charged in connection with its provision.

Customers may contact HSBC in Polish and English language. HSBC provides its documentation in both languages. HSBC can provide documentation in other languages on customer individual request.

When providing investment services, the Bank communicates with the customers through:

Phone lines, at provided phone contact numbers
It systems, where indicated so in the agreements signed with customers

13. Costs and charges

Under MiFID II, HSBC is required to inform its clients of the costs and charges for the services offered and products traded on an ex-ante (i.e. pre-trade) basis. HSBC Continental Europe (Spółka Akcyjna) Global Markets MiFID II Ex-ante Costs and Charges Disclosures may be found here (PDF 415KB). Should you require additional information in relation to a particular transaction or service, please contact your HSBC representative.