Templar Guide to MiFID

1. Templar European Investment Services
MiFID Consumer Guide
Rules to Protect our Investment Clients

2. Templar European Investment Services
We watch over your investments
Regulators and 3rd party professionals watch over us
Our service to you is not limited to;
• our own best ideas.
• your relationship with our representatives and advisers.
It is underpinned and follows the rules of our regulator, the Malta Financial Services Authority
(MFSA), alongside the Markets in Financial Instruments Directive (MiFID).
Our advisers and our business are monitored by the company Board, an independent compliance
service and ultimately by the MFSA. We report to the MFSA every quarter and our business is
audited quarterly to ensure good husbandry.
We are also charged with following the European wide MiFID rules when interacting with our
investment clients.
The following pages are a copy of the Consumer Guide to MiFID, produced by the MFSA. This is
a substantial document which you are not obliged to read but, for those of you who wish to take a
greater interest in how the rules help protect investment clients, it is an excellent presentation of
the rules we follow on your behalf.
These rules relate to investment business and not to insurance business, so these particular rules
do not cover insurance company products such as Offshore Investment Bonds. Templar is also an
enrolled insurance broker (working with mainstream insurance companies) and such products are
arranged under our insurance licence. However, when it comes to arranging and advising on the
investment choices within these products, we follow the MiFID Investment rules.
You can contact us at any time, either through your Representative Officer, via our head office
number 00 356 2776 1094 or by email info@templar-eis.com
TEMPLAR European Investment Services is a trading style of Templar EIS Ltd registered no: C70357, a limited
company registered in Malta, whose registered office is E306, The Hub, Triq Sant Andrija, San Gwann, SGN
1612, Malta. TEMPLAR EIS Ltd is licensed to provide investment services by the Malta Financial Services
Authority and is an Enrolled Insurance Broker.
The information provided is for information purposes. It does not constitute investment, insurance or tax advice.
Information and opinions were obtained in good faith from sources believed to be reliable and neither
representation nor warranty, expressed or implied is made to its accuracy or completeness. Expressions of
opinion are subject to change without notice. These general explanations cannot address your financial situation
as well as your financial needs. Suitable investment and insurance advice can only be provided on the basis of
confirming your knowledge and experience, attitude to risk and personal financial situation.
Templar EIS Limited accepts no liability or responsibility whatsoever for consequential loss of any kind arising
out of this document or any part of its contents. The use of this document should not be regarded as a substitute
for the recipient exercising their own judgment.

3. A consumer’s guide to MiFID
A Consumer’s Guide
to Investments in
Financial Products
Includes information about Markets in
Financial Instruments Directive (‘MiFID’) –
a European Directive that gives high level
of protection to investors

4. Malta Financial Services Authority, Notabile Road, Attard BKR3000, MALTA
Consumer freephone: 800 74924
T: (+356) 2144 1155 | E-mail: consumerinfo@mfsa.com.mt | www.mfsa.com.mt/consumer
The Malta Financial Services Authority (MFSA) has endeavoured to ensure that all information in this guide is correct. However,
no warranty, expressed or implied, is given as to its accuracy and the MFSA does not accept any liability for error or omission.
The MFSA cannot recommend firms or tell you whether a particular investment is right for you.
Reproduction of information contained in this guide for the purpose of developing and publishing value-added products
is allowed, without prior permission or charge, provided reproduction is accurate, not malicious, and is accompanied by an
acknowledgement to the MFSA.
This guide is only a brief overview and not a full description of your rights under MiFID. The contents are merely descriptive and do
not constitute legal advice. The MiFID legal texts are available at: http://ec.europa.eu/internal_market/securities/isd/index_en.htm
The main text of this guide has been prepared by the Committee of European Securities Regulators (CESR). CESR is
an independent committee of European securities regulators which has contributed to the preparation of the MiFID
legal texts. One of the main objectives of CESR is to foster cooperation between its members in the exercise of
their core functions, including raising public awareness on financial services issues and investor information. The
MFSA is an active member in this committee. More information is available from www.cesr.eu
Published by the Malta Financial Services Authority in August 2008.
Design by Logix Communications Ltd.
Introduction
The Malta Financial Services Authority (MFSA) has endeavoured to ensure that all information in this guide is correct. However,
no warranty, expressed or implied, is given as to its accuracy and the MFSA does not accept any liability for error or omission.
The MFSA cannot recommend firms or tell you whether a particular investment is right for you.
Reproduction of information contained in this guide for the purpose of developing and publishing value-added products
is allowed, without prior permission or charge, provided reproduction is accurate, not malicious, and is accompanied by an
acknowledgement to the MFSA.
This guide is only a brief overview and not a full description of your rights under the Markets in Financial Instruments Directive
(MiFID). The contents are merely descriptive and do not constitute legal advice. The MiFID legal texts are available at:
http://ec.europa.eu/internal_market/securities/isd/index_en.htm
The main text of this guide has been prepared by the Committee of European Securities Regulators (CESR). CESR is an
independent committee of European securities regulators which has contributed to the preparation of the MiFID legal texts.
One of the main objectives of CESR is to foster cooperation between its members in the exercise of their core functions,
including raising public awareness on financial services issues and investor information. The MFSA is an active member in this
committee. More information is available from www.cesr.eu

5. What is MiFID and how does it affect you?
Part 1: Before investing
1.1 Which type of client are you?
1.2 What services might you receive?
1.3 What information will you
receive before investing?
Part 2: During and after the investment
2.1 What happens when you
give an order to a firm?
2.2 What information will you receive
during and after the investment?
2.3 Some important documents
relating to your investment
Part 3: Ongoing requirements
3.1 Conflicts of interest
3.2 Safeguarding your financial
assets and money
3.3 Investor Compensation Scheme
3.4 Consumer complaints
Part 4: Some terms and concepts explained
Contents
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5
6
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9
10
11
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13
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14
16

6. A consumer’s guide to MiFID
2
What is MiFID and how does it
affect you?
This guide is for you if you have invested or
are planning to invest in financial products.
It explains the basics of an important piece
of European legislation called the Markets in
Financial Instruments Directive (MiFID) and how it
affects you when dealing with firms that provide
investment services in Europe.
Think about the financial products that you
own. You probably have one or more bank
accounts, a home loan, a credit card, some
shares, a retirement plan, an investment
fund… MiFID only applies to some of these
products such as shares, bonds, derivatives and
units in investment funds. It does not apply to
deposits or loans, nor to insurance products.
For those products which are covered by
MiFID, firms may offer you services such as
managing investments on your behalf, giving
you advice on investments and buying or
selling financial products.
One of the main purposes of the MiFID is to
harmonise investor protection throughout
Europe. The degree of investor protection that
you will receive is directly related to the reliance
that you place on the firm and on yourself.
For example, if your financial knowledge and
experience are low and you are asking the firm
to advise you or to take decisions on your
behalf you will be afforded the highest degree
of protection.
MiFID sets three overarching principles that will
apply to firms when they are doing investment
business with you. These are:
to• act honestly, fairly and professionally, in
accordance with your best interests. This
principle protects you when you are dealing
with a firm that, as a professional, is in a
stronger position than you;
to provide you with appropriate and•
comprehensive information which is fair,
clear, and not misleading. This will help you
to understand products and services so
that you can make informed decisions and
ensures that you don’t receive biased or
confusing information; and
to provide you with services that• take
account of your individual circumstances.
This is to ensure that your investments
correspond to your investor profile
and requests.
The structure of this guide is broadly
chronological, reflecting the different stages of
the investment process and how firms organise
and conduct their business with you on a day
to day basis. The MiFID principles apply to every
step of the firm’s relationship with you.

8. A consumer’s guide to MiFID
4
Stagesoftheinvestmentprocess

9. A consumer’s guide to MiFID
5
Part 1:
Before investing

10. A consumer’s guide to MiFID
6
1.1 Which type of client
are you?
Before providing you with an investment service,
your firm is required to categorise you as a
Retail or Professional client. You will normally be
categorised as a Retail client, a category which
includes the majority of individuals.
As a Retail client you receive the highest level
of investor protection. MiFID awards more
protection to investors with less 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, investment funds, large
companies and exceptionally some individuals.
What if you want to become a Professional
client? What if a firm asks you to become a
Professional client? What are the consequences?
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 firm must
make this assessment 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 conditions:
you frequently carry out transactions;•
you have a large portfolio;•
you have worked in the field of•
investment services.
1.2 What services
might you receive?
In broad terms, you are likely to receive one
or more of the following types of investment
services:
you are provided with personal•
recommendations on investments, products
and courses of action (investment advice);
you buy and sell financial products without•
investment advice; or
your investments are managed by a firm on•
your behalf (investment management).
In this section we will explain the different
types of services you may receive from firms
and the processes they will follow to deliver the
appropriate degree of protection to you.

11. A consumer’s guide to MiFID
7
Investment advice
When you receive investment advice, you are
placing a higher degree of reliance on the
investment firm than you would do in other
circumstances such as in the case of simple
non-advised transactions. You therefore need to
have some comfort that the firm understands
your individual needs and circumstances so that
it recommends the right products for you. MiFID
requires a process called the Suitability test,
where the firm asks you some questions to reach
an understanding of the types of investments
that will be suitable for you.
As part of the Suitability test, you are likely to be
asked questions about the following:
Your investment objectives•
This can include questions about the length
of time you wish to hold the investment,
your risk appetite and profile, whether you
wish to invest for income or growth, keep
the capital safe and avoid any risk or accept
a high level of risk.
Your financial situation•
Information regarding your financial
situation may be obtained through
questions about matters such as the source
and extent of your regular income, your
assets, real estate property, any debts you
have and other financial commitments.
Your knowledge and experience•
Questions regarding your knowledge
and experience can include the types of
services and products you are familiar with;
the nature, volume and frequency of your
previous transactions; and your level of
education, profession or former profession.
If a firm does not, or cannot, obtain the
necessary information to assess suitability,
then it cannot make a recommendation. If you
provide only limited information, this will affect
the nature of the service the investment firm will
be allowed to provide to you.
Trading in products without investment advice
(a) The Appropriateness test
As we have described, when a firm is giving you
investment advice, it must ensure that its advice
is suitable for you.
When you are not receiving investment
advice from a firm (or not relying on a firm to
manage your investments) you will generally
be expected to take a greater degree of
responsibility for your decisions. When you
want a firm simply to buy or sell an investment
without providing you with investment advice
or portfolio management services, a different
set of protections apply. These protections are
referred to as the Appropriateness test.
The test aims at protecting those who may not
understand or be aware of the implications and
level of risk involved in a transaction, particularly
where the products are‘complex’or where
you have not taken the initiative to carry out
the transaction.
Examples of ‘non-complex’financial
products include:
Shares admitted to trading on a•
regulated market
Money market instruments•
Many types of bonds•
Units in certain investment funds•
Examples of‘complex’financial products include:
Options, futures, swaps, and other derivatives•
Financial contracts for differences•
Convertible bonds•
Warrants•
These examples are by no means exhaustive and
merely indicative.
As part of the Appropriateness test, you
are likely to be asked questions about your
investment knowledge and experience.
If the firm concludes that you have the•
necessary knowledge and experience to
understand the risks involved, then the firm
may simply go ahead with the transaction.
If the firm concludes that you do not have•
the necessary knowledge and experience, or
you have not provided enough information
to enable it to reach a view, then you will
receive a warning from the firm saying
that either the firm does not regard the
proposed transaction as appropriate or that
the information is not enough to enable it
to determine appropriateness. If you insist
on going ahead with the transaction, you
must accept the risk.
(b) Trading in‘non-complex’financial products
on an Execution-only basis
The Appropriateness test does not apply in the
case of some kinds of‘non-advised’transactions.
This service can be described as Execution-only.
The circumstances where the test does not apply
are as follows:

12. A consumer’s guide to MiFID
8
the product involved in the proposed•
transaction is what MiFID calls‘non-
complex’; and
you have chosen to contact the firm to•
carry out your transaction. This means that
you are not responding to a personalised
approach to you from the firm which was
intended to influence you in respect of a
specific product or transaction (for example
in certain situations when you are buying
shares on line).
You will be warned that the firm is not
exercising any judgement on your behalf.
In such cases, you do not have to answer any
questions about your investment knowledge
and experience, financial situation or investment
objectives. The firm may of course ask you
questions for other purposes, particularly if you
are a new customer.
Investment management
Finally, when your investments are managed by
a firm, you are reliant on the firm’s decisions and
choices. As the firm will not communicate with
you every time it makes an investment on your
behalf, it will need to have enough information
from you at the outset to enable it to provide
you with the required service. To achieve this,
as in the case of investment advice above, the
firm will carry out a Suitability test. If you do
not supply the firm with adequate information
it cannot provide the service of investment
management to you. If you provide only limited
information, this will affect the nature of the
services the investment firm will be allowed to
provide to you.
The diagram below is a summary of what we
have discussed in this section.
You would normally go to an investment firm for one of the
following reasons:

13. A consumer’s guide to MiFID
9
1.3 What information
will you receive
before investing?
All information provided to you throughout your
business relationship with a firm should be‘fair,
clear and not misleading’. This principle refers
both to the content of the information and to
the way it is presented to you.
Your firm should provide you with the relevant
information in good time before you invest so
that you can make informed decisions.
Types of information you will receive before
investing include:
Marketing communications: Whether
or not you are a client of a firm, you may
receive advertisements and other marketing
communications issued by a firm. All
advertisements and marketing communications
have to be presented in such a way that you can
identify them as being of a promotional nature.
Contracts: If you are a new Retail client that a
firm has taken on for the provision of investment
services other than investment advice, you will
be asked to agree in writing to a contract which
will contain your and the firm’s essential rights
and obligations.
Information about the firm: A firm must give you
general information about itself, including who
regulates it and the services it offers to clients, to
help you understand the nature of the services
on offer and the risks involved.
Information on investment management: Where
you have asked a firm to manage investments
on your behalf, you should expect to receive
information including a description of the
management objectives and the related level of
risk, what types of products or transactions may
be involved in your portfolio and information
about the valuation method and the frequency
of valuations of your investments.
Information about financial products: You will
receive information explaining the nature,
risks and costs of financial products. Such
information includes, for example, a description
of the products’risks and whether prices/values
may fluctuate. The amount of information will
depend on the type of product, its complexity
and risk profile.
Information about costs and charges: You will
receive information about the direct and indirect
costs and charges of a service or product,
including any commission charged or paid.
This should clearly show you the total costs.
Sometimes, however, the precise amount of the
total costs is not available at the time when the
information is communicated to you. In such
cases, you should instead receive sufficient
information to see how the costs are going to be
calculated, so that you can verify the total price
once it is available.
Inducements
Inducements are payments or non-monetary
benefits which a firm receives or pays out as a
result of advising on or arranging investments
for its customers. Inducements are only
accepted if they meet the following criteria:
(i) they do not impair the duty of the firm to act
in the best interests of the customer, and
(ii) they enhance the quality of the service
provided to the customer.
The firm is required to disclose to you, as
its customer, the essential terms of any
arrangements relating to such fees, commissions
or non-monetary benefits in summary
form. It may, on your request, provide you
with additonal information. The aim of this
requirement is to enable you to understand and be
informed of any incentives which may reward the
firm for promoting a particular product or service.
Additional information: Before investing, it
would be sensible for you to make sure that you
know what the arrangements are if you need to
make a complaint about the firm or seek redress,
and which investor compensation scheme
covers the firm. The firm should give you
this information.

14. A consumer’s guide to MiFID
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Part 2:
During and after
the investment

15. A consumer’s guide to MiFID
11
2.1 What happens
when you give an
order to a firm?
How is your order handled?
When you instruct a firm to buy or sell a product,
your order should be executed promptly, in a
timely manner and sequentially (in the order in
which it was received by the firm).
If for any reason a firm has a material difficulty in
handling your order sequentially, it should
notify you.
What is Best Execution?
To complete the purchase or sale of financial
products your firm has to execute your orders in
such a way as to consistently achieve the best
possible result for you. This is referred to as
‘Best Execution’.
In essence, your firm will identify‘execution
venues’that enable it to obtain Best Execution.
Examples of execution venues are stock
exchanges, trading platforms, other firms, or
even your firm itself (with the firm offering to
purchase itself the instruments you are willing
to sell or, vice-versa, the firm selling to you
the instruments you wish to buy from its own
portfolio. However, not all investment firms are
licensed to carry out such transactions).
Your firm can achieve Best Execution for your
orders by taking a variety of factors into account,
such as price, costs of execution, speed and
likelihood of execution.
The most important factors a firm will take
into account when executing your order
are price and total costs (that is, the total
financial consideration to be paid by you for a
transaction, including the price, all expenses,
execution venue fees, clearing and settlement
fees and any other fees paid to third parties
involved in the execution).
2.2 What information
will you receive
during and after
the investment?
What information should you expect to receive
from firms that execute your orders?
You will receive information about how your firm
achieves best execution for you in practice.
Such information includes:
how the firm determines the factors that are•
more important for achieving best execution;
what are the execution venues that the firm•
relies on;
a warning that if you give a specific execution•
instruction to the firm this will take priority
and the firm will not be able to follow its
own process for achieving Best Execution for
you - it will simply follow your instruction. For
example, if you instruct your firm to execute
your transaction on a specific market, you
may lose the benefit of achieving a better
price somewhere else.
What reports will you receive?
After you have bought or sold a financial product,
your firm will send you a transaction confirmation
with essential information such as name of the
product, price, date and time and the total sum
of commissions and expenses charged.
Where your firm manages your investments
on your behalf, the firm should send you
periodic reports with information such as the
contents and valuation of your investments,
the total amount of fees and charges and how
your investments have performed during the
reporting period.
It is in your interest to retain copies of all
documentation you receive from a firm.
2.3 Some important
documents
relating to your
investment
These are some documents which you will come
across when investing.
Retail client agreement
This is also referred to as the Terms of Business
Letter. It sets out rights and obligations of the
firm and customer, including terms on which
the firm will provide services to the customer. As
a customer, you should expect to be provided
with this document irrespective of the type of
investment service.
Fact Find
A firm has a duty to request details about you
and your finances, and your present and future
needs before it provides you with advice or to
manage your portfolio. The answers which you
provide are recorded in a document called“Fact
Find”or“Client Profile”. For your protection this

16. A consumer’s guide to MiFID
12
document is kept on file and a copy is provided
for your records. The firm will rely on this
information to be able to assist you. Be honest
when replying.
The sort of questions /information that will be
asked/requested by your firm may include:
Personal details (which may include age,•
children or dependants, occupation);
Summary of assets (such as cash held at•
bank, property, other investment);
Summary of liabilities (such as periodic•
payments for house loans or other loans,
school fees, future commitments, life
assurance covers);
Health care;•
Retirement planning arrangements;•
Overall investment objective including your•
attitude to risk.
If there are sections on the Fact Find that do not
apply to you please write‘none’in those sections
rather than leaving them blank or just putting
a line through them. All information which you
provide will be treated as confidential and will
only be used for advising you on your financial
affairs and for no other purpose.
Statements
A firm is obliged to send you twice-yearly
statements of your portfolio. You may request
more frequent statements, especially if
your portfolio consists of a large number of
investments. Your statement should include
information about the contents and valuation
of the portfolio, including market values, cash
balances at the beginning and end of the
reporting period, total amount of dividends and
interest received during the period, and the total
amount of fees and charges. You may request a
detailed breakdown of these items.
Contract Notes
You should expect your firm to send you the
contract note for a purchase or sale of an
instrument no later than the first business day
following execution. If confirmation is received
by the firm from a third party (for example,
another stockbroker), the contract note should
be sent to you by no later than the first business
day following receipt of confirmation from such
third party. The contract note should include
information about the trading day and trading
time, type of order, venue identification, name
of instrument, quantity, unit price and total
consideration. You should also have complete
disclosure of the commissions and expenses for
the transaction, including commission payable
to any counterparty.

17. A consumer’s guide to MiFID
13
Part 3:
Ongoing
requirements

18. A consumer’s guide to MiFID
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MiFID establishes organisational requirements
on how a firm must run its business at all times.
Some of these are especially relevant when
doing business with you.
3.1 Conflicts of interest
Firms should act in accordance with your best
interests; to this end they should have in place
effective arrangements to prevent conflicts
from adversely affecting your interests. Your
firm should avoid unduly putting other clients’
interests or the firm’s interests ahead of yours
when providing you with a service.
A case of conflict of interest is when the firm is
likely to make a financial gain or avoid loss at
your expense; or when it has an incentive to
favour another client’s interests over yours.
Your firm will also inform you of the key steps it
follows to identify and manage conflicts
of interests.
When your firm’s arrangements are not sufficient
to manage a conflict of interest, then it should
disclose to you in a clear manner the nature and
sources of this conflict of interest, before it does
business with you.
3.2 Safeguarding your financial
assets and money
When you place financial assets or money with
a firm, the firm will safeguard your ownership
rights by having arrangements in place to:
keep them separate from both the firm’s•
and other clients’assets and money;
keep accurate records and accounts and•
perform regular reconciliations;
send you a statement at least twice a year•
with details of the assets and money held
on your behalf.
3.3 Investor Compensation
Scheme
The Investor Compensation Scheme is a rescue
fund for investors that are clients of investment
firms licensed by the MFSA and which have
stopped trading and/or have become insolvent.
The Scheme can only pay compensation if a
licensed firm is unable or likely to be unable to
pay claims against it. Generally this occurs when
the licensed firm stops trading or becomes
insolvent. The Scheme is based on an EU
Directive on investor-compensation schemes.
If your claim is accepted by the Scheme, you
will be paid 90% of the net loss subject to a
maximum of €20,000.
To qualify for compensation you need to satisfy
a number of conditions, such as:
You are claiming as an individual or a small•
or medium sized company (the law lists
a number of entities which are unable to
claim compensation).
Youareclaimingagainstafirmwhichislicensed•
toprovideinvestmentservicesbytheMFSA.
You cannot claim compensation on the basis of:
Market movements resulting in a •
decrease in the value of an investment.
Poor investment advice.•
A failed investment that had been•
duly executed.
A bankruptcy of a collective•
investment scheme.
Inflation.•
A decrease in interest rates.•
More information about the Investor
Compensation Scheme is available from
www.compensationschemes.org.mt
3.4 Consumer complaints
The Consumer Complaints Manager at the Malta
Financial Services Authority may be able to help
if you have a complaint you cannot sort out
with your:
bank;•
firm providing investment services; or•
insurance company or insurance agent; and •
broker or tied intermediary.•
The Complaints Manager considers each case
impartially and on its merits, after discussing it
with all parties concerned including yourself.
The service offered by the MFSA is free of charge
and is available to retail clients only. The MFSA
is not able to give advice about financial or legal
matters.
You can also contact the MFSA if you have any
query relating to financial services.

19. A consumer’s guide to MiFID
15
The Consumer Complaints Manager may be
contacted as follows:
In writing:
Consumer Complaints Manager,
Malta Financial Services Authority
Notabile Road, Attard BKR3000
MALTA
By e-mail: consumerinfo@mfsa.com.mt
By phone: Free phone (+356) 800 74924 or
(+356) 2144 1155
You can also use the above numbers to make an appointment.
For more information, please visit the MFSA’s
Consumer Complaints website:
www.mfsa.com.mt/consumer.
Conclusion
With the publication of this guide, our intention
is to raise consumers’awareness of the changes
that are going to affect them as a consequence
of MiFID. All the changes and aspects detailed
in this guide have been designed to ensure that
you, as a consumer, are adequately protected
when investing in financial products.
Remember the key principles that firms need to
fulfil when dealing with you:
To act honestly, fairly and professionally, in•
accordance with your best interests.
To provide you with appropriate and•
comprehensive information which is fair,
clear and not misleading.
To provide you with services that take•
account of your individual circumstances.
My Notes

20. A consumer’s guide to MiFID
16
Part 4:
Some terms and
concepts explained

21. A consumer’s guide to MiFID
17
This is a glossary of some important words
you may have came across in this guide and
others which you may need when investing.
An asterisk placed before a *word in the
definitions indicates that the term is defined
further in this glossary.
Best Execution: The obligation of intermediaries to execute
customer’s orders at the best price available at the time the
trade is entered.
Bond(s): A long-term security in which the issuer agrees to
pay the owner the amount of the face value on a future date
and to pay interest at a specified rate at regular intervals.
Certificate: The actual piece of paper that is evidence of
ownership of a share in a company or stock issued by
a government.
Clients’Account: Intermediaries are required to establish
separate bank accounts into which investors’money
available for investment is maintained. *MFSA prohibits a
firm from using investors’money to finance its own activities.
It also requires intermediaries to segregate such money from
that of its own.
Closed Ended Fund(s): Shares in Closed Ended Funds are
not readily transferable on the market especially if they are
not listed on a securities exchange. Shares issued by such
funds are bought and sold similar to ordinary shares. The
capitalisation of these companies remains the same unless
action is taken to increase the *issued capital. (See Open
Ended Funds)
Collective Investment Scheme (CIS): These are financial
products where money from a number of different investors
are pooled and then invested by a *fund manager
according to specific criteria. The scheme or fund is divided
into segments called‘units’, which are to some degree similar
to shares. Investors take a stake in the fund by buying these
units – they will therefore become unit holders. The price of
a unit is based on the value of the investments the fund has
invested in (Net asset value).
Commission(s): The firm’s basic fee for purchasing or selling
securities on your behalf. Ask for a copy of the firm’s
commission schedule which lists fees or charges you will
be required to pay when buying or selling *securities and
when opening, operating and closing an investment account.
Consideration: The money value of a transaction (the
number of shares multiplied by the price before adding or
deducting commission, stamp duty etc.)
Contract Note(s): On the same day as a transaction takes
place, a firm sends to the investor a contract note detailing
the transaction including full title of the *security, price,
stamp duty (if applicable), *consideration, commission,
time of deal etc.
Convertible bond: A convertible bond is a type of bond that
can be converted into *shares of an issuing company at a
specific price within a certain time frame.
Derivatives: A financial instrument whose characteristics
and value depend upon the characteristics and value of an
underlying financial instrument such as a *bond, *share or
currency. Futures and options are examples of derivatives.
Professional investors may purchase or sell derivatives to
manage the risk associated with the underlying financial
instrument, to protect against fluctuations in value, or to
profit from periods of inactivity or decline. Derivatives are
complicated and risky, and not usually available to
retail investors.
Discretionary Portfolio Management: An account in which
the customer gives the firm discretion to buy and sell
*securities, including selection, timing, amount and price to
be paid or received.
Diversification: The practice of putting money into a number
of different investments. Investors diversify so they can
reduce the risk of their investments losing money. If you put
your money into five *shares and five *bonds, for example,
you’re practising diversification. In effect, you’re hoping that
if one investment is not doing well, it will be offset by most
of the other investments, which presumably are making
money. Buying a *collective investment scheme is one of
the best ways to diversify. Collective investments schemes,
because they are a collection of *shares, *bonds or other
securities, are typically diversified investments.
Equity: see Ordinary Shares
Eurobond: A long-tem loan issued in a currency other than
that of a country or market in which it is issued.
Execution Only: A service in which the firm has no
responsibility for advising the investor on whether a
particular transaction is suitable or not (for the investor). The
firm’s responsibility is limited to executing the transaction on
the investor’s instruction.
Execution venue: The place where a transaction takes place,
usually a *regulated market (such as a stock exchange).
Fact Find: A document compiled by a firm that details
vital facts about an investor’s financial circumstances and
investment objectives. The firm will rely on the information
contained in a fact find to make appropriate investment
recommendations to the investor.
Fund Manager (or Fund Management Company): A Fund
Manager is usually a company whose line of business is
investing in other companies and entities on behalf of a
*collective investment scheme. The Scheme appoints the
Fund Manager to buy and sell securities in accordance with
the *investment objectives.
Informed decision: A decision which is taken after all details
are explained or provided by a firm.
Investment Objective: The goal – such as growth, capital
appreciation, or income – that an investor pursues.
*Collective investment schemes also have investment
objectives which are stated in the *prospectus. The
investment objective often determines the type of
*securities in which the fund invests, the result expected
and the level of risk with which it is associated.
Investment Portfolio: A variety of securities owned by an
individual or an entity.
Investment Risk: The possibility of losing money or not
gaining value in an investment.
Investor Compensation Scheme: This is the technical
term which is used to describe a scheme which provides
compensation to retail investors who stand to lose money as
a result of the default or bankruptcy of an authorised firm.
Payment of claims are limited to a specified amount – that
is, investors may receive only a part of the monies invested
through a firm who has defaulted or gone bankrupt.
Issued Share Capital: The number of shares on offer to the
public at a particular time.
Liquidity: (i) How easily one’s assets can be converted back
into cash. For example, money in an account that cannot be
withdrawn for five years is not very liquid; (ii) The ability of
the market in a particular security to absorb a reasonable
amount of buying or selling at reasonable price changes.
Liquidity is one of the most important characteristics of a
good market.
Listed Security(ies): The security of a company that is traded
on a *stock exchange.
Market Price: The last reported price at which the security
is sold.

22. A consumer’s guide to MiFID
18
Maturity Date: The date that a bond comes due and must be
paid off.
MIFID: Markets in Financial Instruments Directive.
MFSA: Malta Financial Services Authority (Regulator of
financial services in Malta).
Nominee Services: Investors’money and investments are
held in the name of the firm on their behalf.
Non-professional Investor: see Retail Investor
Open-Ended Fund(s): Open-ended funds sell their own new
units to investors, stand ready to buy back their old units,
and are sometimes listed on a stock exchange. Open-ended
funds are so called because their capitalisation is not fixed,
they issue more shares depending on how much investors
want to invest (in the fund). In Malta, the words SICAV p.l.c.
(a French acronym that stands for collective investment
scheme with variable capital) which follows a name of a
*collective investment scheme denote that the fund is
open ended.
Ordinary Share(s): The most common form of share. The
holders are the owners of the company and receive
dividends which vary in amount in line with the profitability
of the company and recommendation of directors. Also
referred to as“equity”.
Portfolio(s): A group of shares, bonds or other investments
owned by a *collective investment scheme or individual
investor.
Preference Share(s): These are normally fixed-income shares
whose holders have the right to receive dividends before
ordinary shareholders but after debt holders have received
their interest.
Professional Investor(s): Professional investors would be
experienced in financial matters and therefore capable
of investing with minimum or without assistance of
intermediaries. (See Retail Investor).
Prospectus: (i) A legal document that describes an
investment objective and policies, investment restrictions,
officers, directors and expenses of *collective investment
schemes; (ii) A document that provides details about a new
offering of securities for sale to the public. It gives a detailed
financial background of the issuing company, how the
proceeds of the securities will be used, and other
pertinent information investors will need to make an
informed decision.
Protected fund: A type of fund that guarantees an investor
at least the initial investment, plus any gains or returns, if
held until the contract matures. Typically, these funds would
indicate when the fund commences and the term until when
it matures. During this period the fund is able to invest in
the stock market in the hope of generating a return on your
investment, but with the benefit that the initial amount
invested is returned on maturity. There may be instances
where no return is paid if the stock market is unfavourable.
Ratings: A grade given to bonds that indicates their credit
quality. Private independent rating services such as Standard
& Poor’s, Moody’s and Fitch provide these evaluations of a
bond issuer’s financial strength, or its the ability to pay a
bond’s principal and interest in a timely fashion. Ratings
are expressed as letters ranging from“AAA”, which is the
highest grade, to“C”(“junk”), which is the lowest grade.
Different rating services use the same letter grades, but use
various combinations of upper- and lower-case letters to
differentiate themselves. To illustrate the bond ratings and
their meaning, we’ll use the Standard & Poor’s format: (i)
AAA and AA: High credit-quality investment grade; (ii) A and
BBB: Medium credit-quality investment grade (iii) BB, B, CCC,
CC, C: Low credit-quality (non-investment grade), or“junk
bonds”; (iv) D: Bonds in default for non-payment of principal
and/or interest.
Regulated Market: A regulated market is an exchange that is
authorised as a regulated market by a competent authority.
Most *stock exchanges are considered to operate as
regulated markets.
Retail Investor (also referred to as Non-Professional
Investor): A person who buys or sells securities for his or
her own account. A retail investor is dependant on the
firm for information and assistance. Therefore the level of
protection of a retail investor is higher than that given to a
*professional investor.
Risk assessment: The means by which a firm ensures that an
informed decision is taken at all times.
Risk: see Investment Risk
Secondary market: When stocks or bonds are traded or
resold, they are said to be sold on the secondary market.
The majority of all securities transactions take place on the
secondary market.
Security(ies): A general term for stocks, *bonds, *collective
investment schemes and other products.
Settlement: Conclusion of a *securities transaction when
a customer pays a broker/dealer for securities purchased
or delivers securities sold and receives from the broker the
proceeds of a sale.
Shares: see Ordinary Shares
SICAV: see Open-Ended Fund
Stock Exchange: A market for the sale and purchase of
*securities, in which prices are controlled by the laws of
supply and demand. Their basic functions is to allow public
entities and governments to raise capital by selling securities
to investors. They perform valuable secondary functions
by allowing those investors to buy and sell these securities,
providing *liquidity and reducing the risks attached to
investment. Sometimes referred to as Stock Market.
Terms of Business Letter: This is a document which sets out in
detail the investment services agreement between the firm
and the investor. It should specify, amongst other things,
whether the firm will provide investment advice or not, and
the type of fees and commissions which the firm will charge.
Sometimes referred to as Retail Customer Agreement.
Valuation Statement(s): A report showing the extent to
which investments have increased or decreased from all the
various gains and losses registered in a specific period.
Warrant: A derivative security that gives the holder the right
to purchase *securities (usually *equity) from the issuer at
a specific price within a certain time frame.