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26/10/2016  Buy Sell
CZK 27.6930  26.3410 
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Significance for investors

The objectives of implementing the MiFID provisions include 

  • improving the level of protection for investors,
  • enhancing transparency on financial markets and
  • ensuring the integrity of the overall market and the parties involved.

Close cooperation between the investor and the bank

MiFID ensures that financial services companies provide investors with adequate advice with regard to treasury and securities transactions so that investors are able to assess the implications and consequences of intended transactions. This requires a broadly-based exchange of information between investor and adviser. A relationship manager is in a position to offer sound advice only if he or she is able to make an informed assessment of key aspects such as the investor’s risk appetite, financial situation, investment goal and experience in financial markets on the basis of information obtained from the customer.

If an investor refuses to furnish the information required by law, the law does not permit the provision of investment advice and a personal recommendation of investment products or the conclusion of an investment management agreement with this investor.

These data must be collected in order to draw up a comprehensive investor profile, which is mandatory for banks under MiFID. Providing this information is in the sole interest of the investor. Banks are, of course, subject to the bank secrecy rules in respect of information obtained in this process, and for this reason such information enjoys special protection.

The core elements of MiFID can be summarized as follows:

  • Each investor must be assigned to one of the three categories.
  • An investor profile must be jointly prepared and continuously updated.
  • The suitability and appropriateness of a financial instrument for the customer must be assessed.
  • The legislation requires the bank to provide customers with more information and extends its reporting duties vis-à-vis the customer.
  • Conflicts of customer interests with those of the bank providing the service must be identified and prevented.
  • The principles governing order execution must be documented in writing.
  • Documentation and record preservation requirements are expanded.