Am I a professional investor? Find out the requirements you must meet

Surely, you have asked yourself the following question: am I a professional investor? You may think you are because of your experience, but it is not that simple. Whether we are professional or not is not something for us to say; it is the Markets in Financial Instruments Directive (MiFID) which establishes the requirements for belonging to one group or another.

Why is this distinction made? The answer is summed up by a word: protection. This regulation ensures the investors' safety and establishes different measures according to their knowledge and wealth, so investors will receive different a treatment depending on whether they are classified as a professional or retail investor. It is the CNMV (National Securities Market Commission) which will be responsible for supervising its fulfilment.

So, am I a professional investor or not?

According to European regulations, a professional investor has the experience and knowledge required to make investment decisions on their own behalf and third parties, as well as assess the risks they are taking on with these decisions.

There are two types of professional investors: per se professional investors which are mainly institutions and major corporations, and professional investors through an application. If you are reading this article because you are not sure whether you are a professional investor or not, you most likely belong to the second category, that is, an investor through application.

In order to request the treatment of professional investors, you will have to meet two of these three requirements:

• Your assets are worth more than €500,000
• You have carried out a significant volume of operations within this scope
• You have held a position in the financial sector that requires specific knowledge about the services and operations provided

At this point, you surely know to which group you belong, a retail investor or professional investor through application, but it is also important to know which figures are recognised as per se professional investors.

Financial institutions, management companies, funds, insurance companies, all entities that require express authorisation from authorities to act in the markets and public or private debt issuing institutions are some of the main per se professional investors.

To this group, we have to add entrepreneurs who individually meet at least two of the following conditions:

• The total value of their assets is equal to or greater than €20 million
• Their annual turnover is equal to or greater than €40 million
• Their own funds are equal to or greater than €2 million

As previously mentioned, the CNMV assumes that a professional investor has the experience and knowledge required to make investment decisions while being aware of the possible risks they face. This is why professional investors have a lower level of protection Thanks to this treatment, they will be able to access more investment products than retailers.

In order to comply with its objective of providing investor protection, the MiFID requires entities that provide services to conduct two types of tests on their customers, the suitability test and the appropriateness test. The first is mandatory for all types of investors, whereas the second only has to be completed by retailers.

In the suitability test we collect information relating to your knowledge about and experience in investment in general and private capital. In addition to information about your financial situation and investment goals. At Crescenta you can complete the questionnaire online in just a few minutes.

This content is merely indicative. This content is merely financial training offered to you by Crescenta, without the intention of giving any type of personalised investment recommendation.

It is neither any type of advertising of financial instruments nor a recommendation or purchase offer.

Author

Crescenta