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Austrian Securities Supervision Act 2007

November, 1st,  2007 marked the date on which the Austrian Securities Supervision Act of 2007 (Wertpapieraufsichtsgesetz 2007/WAG 2007) came into force and a new regulatory regime governing transactions in financial instruments became applicable.

The Securities Supervision Act of 2007 transposes the EU’s Directive on markets in financial instruments (Markets in Financial Instruments Directive "MiFID") into Austrian law. The objectives to be met by MiFID are to introduce uniform rules to ensure the protection of investors throughout the EU and to complete the process of creating uniform competitive conditions for all types of trading systems.

MiFID is a further step towards a single European market and regulatory regime for investment services. The scope of application of MiFID basically encompasses financial services companies (banks, investment consultants, etc.) within the EU that perform investment services and activities or ancillary services (e.g. custodianship), as well as all trading systems.

The following pages contain detailed information on the core elements of the Austrian Securities Supervision Act 2007 (WAG 2007). Your relationship manager at Bank Austria will be pleased to provide you with additional information.

The English text describing the Austrian Securities Supervision Act 2007 is a translation of the original German text and is provided for your convenience only. In the event of discrepancies the German original text shall prevail over the English translation.

Significance for Investors

The objectives of implementing the MiFID provisions in the Austrian Securities Supervision Act 2007 (WAG 2007) 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.

WAG 2007 builds on a broad basis created by earlier legislation. Since 1997 the protection of private and professional investors has been regulated by the "conduct of business rules". As of 1 November 2007, WAG 2007 expanded this regulatory framework by introducing a more comprehensive transparency and disclosure regime.

Close cooperation between investor and bank

WAG 2007 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 WAG 2007. 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 WAG 2007 can be summarised 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.

Investor Categories

The Austrian Securities Supervision Act of 2007 (WAG 2007) requires banks to assign customers to one of three categories:

  • Retail customers.
  • Professional customers.
  • Eligible counterparties.

The Bank Austria relationship manager, on the basis of the information provided, assigns the investor to one of these categories. The investor enjoys the level of protection defined by WAG 2007 for the respective category.

Investor categories in detail

Modification of the level of protection upon customer request.

Upon assignment to a specific investor category by the bank, customers who meet the pertinent legal requirements (verification is effected by the bank) may apply in writing to be assigned to a different category. They can thus obtain a higher or lower level of protection.

Mixing investor categories and classifying a customer as a "professional customer" pursuant to Section 59 of WAG 2007 at the customer's request is not possible at Bank Austria.

Investor Profile

The MiFID regulatory regime implemented by WAG 2007 stipulates that bank employees are to provide the best possible investment advice in respect of financial instruments. Guaranteeing this high standard requires effective communication: The bank has to make sure that the customer is in a position to assess the full consequences of the intended transactions. It is to this end that a comprehensive investor profile is drawn up together with the customer.

In the event that the customer is not willing to furnish the legally required information, the bank is permitted to provide only a limited range of activities.

Comprehensive investor protection cannot be guaranteed without an extensive exchange of information between the bank and the customer.

The investor profile must be drawn up prior to entering into an agreement with a customer. The investor profile must be reviewed and updated every time a new investment transaction is concluded. At the consultation during which the investor profile is drawn up together with the customer, the customer signs his or her profile and receives a copy.

Comprehensive investor profile for "retail customers"

Only an exhaustive investor profile creates the basis required by the relationship manager to offer best possible advice to the customer and recommend financial instruments that comply with the respective customer’s

  • investment objectives,
  • knowledge and experience,
  • financial situation and
  • risk appetite.

The information provided by the relationship manager on a financial instrument contributes to giving the customer a fair and balanced picture of the opportunities and risks of the intended transaction. A very important aspect is determining a customer’s risk appetite. Moreover, establishing the customer’s financial situation is crucial to assess the suitability of a financial instrument according to WAG 2007.

The Bank Austria brochure "Investment-Related Information. Disclosure of Risk" contains the required information and offers useful guidance.

Abbreviated investor profile for "professional customers"

WAG 2007 stipulates that an "abbreviated investor profile" is to be drawn up for "professional customers" as well. The customer’s experience and knowledge with respect to financial instruments need not be established in this case, as the required expert knowledge can be taken for granted.

Disclosure Obligations

An intensive exchange of information between the investor and the bank is the basis for any responsible business relationship. WAG 2007 stipulates that banks, prior to providing financial services, must inform customers in detail about the bank and the services it offers. Investors are to be given a clear picture of the framework conditions under which they are carrying out their treasury and securities transactions.

The scope of disclosure obligations varies depending on the investor category. The more experience a customer possesses with regard to individual financial instruments, the more expert knowledge may be taken for granted under WAG 2007.

The detailed information on Bank Austria for investors required in accordance with WAG 2007 is given below.

Information about Bank Austria

The Company Profile provides you, as investor, with information regarding the services and activities of Bank Austria. It also details the type, frequency and timing of reports on services rendered and provides information on deposit guarantee and investor compensation.

Company profile of Bank Austria

Information regarding the execution policy in the best possible interest of the customer

The execution Policy of Bank Austria lays down the principles for the execution of customer orders for the acquisition and disposal of financial instruments in the customer’s best interest. This set of rules governing order execution was compiled to ensure that best possible results are obtained for the customer in executing orders.

The criteria according to which transactions are concluded must be transparent and comprehensible for the customer.

The bank is required to establish its execution policy in line with legal requirements.
Bank Austria’s execution policy was drawn up taking into account the following aspects:

  • The price of the financial instrument.
  • The costs related to the execution of the order.
  • The speed of execution.
  • The probability of executing and processing the order.
  • The size and type of the order.
  • All other aspects relevant to achieving the best possible results in the execution of the order.

For "retail customers", achievement of the best possible result is assessed on the basis of total costs, that is, the price of the financial instrument plus the costs involved in order execution.

Bank Austria’s execution policy is designed to optimise all these factors to the best possible benefit of the customer. However, as regards the establishment of the best possible venue for executing orders, this venue cannot in each individual case be guaranteed to obtain the objectively best possible result on a consistent basis.

Information regarding charges for securities services offered

Pursuant to WAG 2007, the bank is obligated to inform customers in advance of the costs involved in the execution of securities and treasury transactions. These costs include all expenses arising for a customer in direct relation to the execution of an order as well as any fees and charges paid to third parties involved in executing the order.

The list of fees and charges for securities services of Bank Austria and information on the costs involved in the execution of treasury transactions are available from your relationship manager at Bank Austria.

Managing Conflicts of Interest

A large universal bank like Bank Austria provides customers with a wide variety of different treasury and securities services.

At the same time, Bank Austria operates in numerous other fields of business where the bank finances and advises customers or invests for its own account. The large number of transactions effected in the broad financial services segment makes it impossible to guarantee that a conflict of bank and customer interests can be excluded.

With this in mind, the bank, based on WAG 2007, developed "Guidelines for Managing Conflicts of Interest and for Disclosure of Benefits", which help to identify potential conflicts of interest and provide guidelines on how to manage these situations.

"Customer interests, as a matter of principle, always come before the interests of the bank and its employees."

For Bank Austria, the objective is to prevent conflicts of interest as far as possible. If a conflict of interest arises, the bank’s top priority is to resolve the problem in the customer’s interest.

If, according to a reasonable assessment, the organisational and administrative arrangements made by the bank are not sufficient to avoid the risk of damage to customers’ interests, the bank will disclose to the customer the nature and source of the conflict of interests before undertaking business on the customer’s behalf.

This disclosure must be made in a general manner while maintaining banking secrecy vis-à-vis other customers.

For further details on dealing with conflicts of interest at Bank Austria please refer to the
"Guidelines for managing conflicts of interest".