MiFID II Directive

Brokerage Office of Bank Handlowy
CAPITAL GROUP: Capital Group of Bank Handlowy w Warszawie
REGISTERED OFFICE AND ADDRESS:
16 Senatorska Street, 00-923 Warsaw
Telephone + 48 22 690 39 44
e-mail: dmbh@citi.com

DMBH conducts brokerage activities on the basis of the license of the Polish Financial Supervision Authority (KNF) DIF-DIFZL.403.1.2020 dated 3 December 2021.
 

Address of the Polish Financial Supervision Authority: 20 Piękna Street, 00-549 Warsaw

DMBH is a member of the Chamber of Brokerage Houses and is subject to the Code of Good Practice of Brokerage Houses.

DMBH provides the following services:

• Receiving and transmitting orders to acquire or dispose of financial instruments;
• Executing orders to acquire or dispose of financial instruments on behalf of the ordering party;
• Acquiring or disposing of financial instruments on own account;
• Offering financial instruments;
• Providing services under concluded investment underwriting and service underwriting agreements, or concluding and performing other agreements of a similar nature, where their subject matter consists of financial instruments;
• Safekeeping or registering financial instruments, including maintaining securities accounts, derivatives accounts and omnibus accounts, as well as maintaining cash accounts; advising companies on capital structure, corporate strategy or other issues related to such structure or strategy;
• Advisory and other services relating to mergers, divisions and acquisitions of companies;
• Foreign exchange transactions, where connected with brokerage activities within the scope indicated in points 1–6;
• Preparing investment analyses, financial analyses and other general recommendations regarding transactions in financial instruments;
• Providing ancillary services related to service or investment underwriting;

Methods of Client communication with the Brokerage Office:

• in person: DMBH, 16 Senatorska Street, 00-923 Warszawa,
• by phone: at the phone numbers indicated in the Agreement,
• electronically: by e-mail to the address specified in the Agreement,

Methods of orders placement:

• in person: at DMBH,
• by phone: at the phone numbers indicated in the Agreement,
• by means of other technical and electronic devices specified in Rules and Regulations and in the Agreement.

Information on the Recording of Communications:

DMBH informs that communications with the Client or potential Client ("Client") are recorded; in particular, telephone conversations are recorded and electronic correspondence, including SMS/MMS, is stored. A copy of the recording of telephone conversations, correspondence with the Client or a record of a meeting with the Client may be made available to the Client upon the Client's request for a period of five years, and in the event that the KNF so requests, for a period of up to seven years. The fee for making available a copy of the recording, correspondence or meeting is specified in the Schedule of Fees and Commissions.

DMBH informs that the internal organisation of DMBH and other internal regulations of DMBH ensure the resolution of potential conflicts of interest in a manner that does not harm the Client's interests.

DMBH informs that it has implemented the "Regulations on managing conflicts of interest in the Brokerage Department of Bank Handlowy", which allows the identification of circumstances constituting or capable of giving rise to a conflict of interest threatening the interests of one or more Clients, in relation to specific investment or ancillary services.

In implementing its conflicts of interest management policy, DMBH implements procedures and measures to prevent or manage such conflicts. The conflicts of interest prevention policy implemented at DMBH prevents situations in which DMBH:

• May gain profit or avoid a loss at the Client's expense;
• Has an interest in a specific outcome of a service provided to the Client or a transaction carried out on behalf of the Client, which is contrary to the Client's interest;
• Has some other reason to favour the interests of another Client or group of Clients over the interests of a given Client;
• Carries out the same type of activity as the Client;
• Receives an inducement from a third party in connection with a service provided to the Client.

In the event that the organizational and administrative arrangements established by DMBH to prevent or manage conflicts of interest are insufficient to ensure that there is no risk of harm to the Client's interests, DMBH:

• Discloses information about the conflict of interests to the Client; and
• Indicates that the organizational and administrative arrangements established to prevent or manage conflicts of interest are insufficient to ensure that there is no risk of harm to the Client's interests; and
• Describes in detail the conflict of interest that has arisen, explaining its general nature and source, together with the risk to the Client and the steps taken to mitigate that risk.

The information should be provided before providing the investment or ancillary service in the context of which the conflict arises.

DMBH makes available to Clients the "General information on the conflicts of interest prevention policy in the Brokerage Department of Bank Handlowy", which is provided to the Client before conclusion of the Agreement, is available on the DMBH website and, at the Client's request, is transmitted via a durable medium, in particular by e-mail.

At the Client's request, DMBH provides additional information on the Conflicts of Interest Policy.

DMBH participates in the compensation scheme of the National Depository for Securities (KDPW S.A.), maintained for the purpose of accumulating funds for paying out monetary funds and compensating for the value of lost financial instruments, in the following cases specified by applicable law:.

• Announcement of bankruptcy or opening of restructuring proceedings of a brokerage house;
• Legally valid dismissal of a bankruptcy petition due to the fact that the assets of the brokerage house are insufficient to cover the costs of proceedings;
• A determination by the Polish Financial Supervision Authority that the brokerage house is unable, for reasons strictly related to its financial situation, to fulfil its obligations arising from clients' claims and that it will not be possible to fulfil them in the near future.

The compensation scheme secures the payment of Client funds (who is not an entity or person excluded from protection under applicable law), reduced by the brokerage house's receivables from the Client for services rendered, up to the PLN equivalent of EUR 3,000 – at 100% of the value of funds covered by the compensation scheme and 90% of the surplus above that amount, with the upper limit of funds covered by the compensation scheme being the PLN equivalent of EUR 22,000.

For the purpose of calculating the euro value in PLN, the average exchange rate of the National Bank of Poland, as published in its exchange rate table, as of the date of the occurrence of the circumstances constituting the basis for paying compensation, shall apply.

The amounts referred to above determine the maximum amount of the Client's claims, regardless of the amount and number of accounts in which the Client held funds or the number of receivables owed to the Client at a given brokerage house.

Financial instruments admitted to organised trading - derivatives.

DMBH registers Client financial instruments in a manner that allows, at any time, the separation of financial instruments held on behalf of one Client from financial instruments of another Client and from DMBH's own financial instruments.

DMBH may establish security interests over Client financial instruments in connection with pursuing or securing claims of DMBH on the terms specified in the Agreement, the Regulations and applicable law.

DMBH does not use Client financial instruments on its own account.

DMBH or the entity holding Client financial instruments may hold certain rights to Client financial instruments, including in particular the right to satisfy DMBH's or the custodian's claims from specified financial instruments, to the extent that such rights are reserved in the agreement with the Client, the service regulations or applicable law.

Cash Funds

The Client holds a claim against DMBH for the return of free cash funds recorded in their Cash Account.

DMBH deposits monetary funds entrusted to DMBH by clients in connection with the provision of brokerage services in a manner that enables the separation of such monetary funds from DMBH's own funds and the determination of the amount of clients' claims for the return of such monetary funds. DMBH client monetary funds are deposited in accounts maintained for DMBH by a domestic bank (Bank Handlowy w Warszawie S.A.) selected by DMBH with due care. Monetary funds recorded in accounts maintained by the bank are subject to overnight deposits and are remunerated in accordance with separate agreements concluded by DMBH with that bank, and the benefits therefrom accrue to DMBH.

The principles of DMBH's potential liability for the actions or omissions of the bank indicated above are determined by applicable law. The risk of insolvency, bankruptcy or other similar event with respect to that bank should be taken into account, the consequences of which are determined by the applicable laws.

The provisions of the Act of 10 June 2016 on the Bank Guarantee Fund, the deposit guarantee scheme and mandatory restructuring govern the issue of clients of investment firms who have entrusted monetary funds to the investment firm in connection with the provision of brokerage services, which funds are deposited in an account of that investment firm maintained by a bank, acquiring the status of depositors within the meaning of that Act, within the limits resulting from their share in the amount accumulated in the account, on the terms and conditions specified in that Act.

DMBH informs that:

• In the event of enforcement proceedings being initiated against DMBH, monetary funds entrusted by DMBH clients in connection with the provision of brokerage services shall not be subject to attachment,
• In the event of DMBH's bankruptcy being declared, monetary funds entrusted by DMBH clients in connection with the provision of brokerage services shall be excluded from the DMBH bankruptcy estate.

This results from the state of the economic situation in the world or in a given country, which directly or indirectly affects the economic environment in which the issuer of financial instruments operates or its financial situation, or the capital market on which the financial instruments are traded. The state of the economic situation is expressed by macroeconomic factors such as indicators of: economic growth, consumer demand, inflation, budget deficit, investments, commodity price levels, etc., or the geopolitical situation.

An investor making an investment should be aware that in the event of:

• Uncertainty regarding macroeconomic factors or the geopolitical situation, the volatility of financial instrument prices increases, and consequently the risk of acquiring a financial instrument at an inflated price;
• Unfavourable macroeconomic factors, financial instrument prices may fall (undervaluation of the financial instrument price) for no reason related to the current situation of the issuer as expressed by financial results or measured by fundamental analysis indicators;
• A prolonged period of favourable economic conditions, financial instrument prices may rise (overvaluation of financial instrument prices) for no reason related to the current situation of the issuer as expressed by financial results or measured by fundamental analysis indicators.

This results from political stability or instability in a given country, the principles and methods of shaping economic, administrative and fiscal policy, and their long-term stability.
 

An investor making an investment should be aware that in the event of political instability, unexpected changes in economic or fiscal policy, the volatility of financial instrument prices increases, and when an investment is made, significant changes in financial instrument prices may occur depending on the positive or negative impact of the above-mentioned change on the issuer's financial situation or economic environment (e.g. increasing or decreasing taxes paid by the issuer or its suppliers, or the impact on the financial instrument (e.g. introduction or increase of capital market transaction taxation)).

This results from economic and business conditions specific to a given group of financial instruments issued by entities in the same industry or sector of the economy, i.e. unfavourable financial conditions, competition, falling demand for products, and other factors specific to a given sector of the economy, resulting in a deterioration of the issuer's economic situation, or from intangible factors related to specific behaviour of investors (groups of investors) arising from promoted investment trends that may influence the overvaluation or undervaluation of prices of instruments in a given sector.
 

An investor making an investment should be aware that when investing in financial instruments issued by issuers in specific sectors – e.g. those whose revenues are seasonal (e.g. soft drink producers) or periodic, dependent on time-specific external investment or development programmes (e.g. issuers building roads), sectors constituting or not constituting a priority of economic development in a given country (e.g. the IT sector or mining) – periodic volatility of financial instrument prices may occur, or the prices of a financial instrument may move in an identifiable upward or downward trend not justified by the issuer's current financial situation but caused by changes in factors characteristic of a given sector.

This is the risk resulting from the manner of management and running of the issuer's economic affairs, which has a direct impact on the issuer's financial results and, consequenty, on the valuation of the financial instrument, the issuer's ability to meet its obligations (in the case of debt instruments) and their price volatility.

An investor making an investment should be aware that the issuer risk is greater in the event of:

• Sustained persistent negative financial results of the issuer over a longer period;
• The issuer having an administrative penalty imposed or to be imposed by state authorities or a regulator authorised to do so;
• The issuer failing to publish periodic financial reports, failing to meet disclosure obligations, failing to disclose important information affecting the valuation of financial instruments, etc.;
• Bankruptcy proceedings being initiated;
• An increasing probability of deterioration of the issuer's financial situation, and consequently an increase in credit risk and the impact on the price of the financial instrument.

This is the risk of loss, unfavourable change in the financial situation, or solvency arising from fluctuations in the creditworthiness of issuers of securities, guarantors and counterparties, manifested as the risk of delay, partial performance or non-performance of assumed obligations. Credit risk is associated with uncertainty regarding the future financial situation of the above-mentioned entities and may have a significant impact on the price of the financial instrument held by the Client (e.g. shares, bonds), on the performance of obligations under financial instruments (e.g. redemption of bonds or performance of another obligation in the case of other financial instruments), on the performance of obligations under a guarantee in the case of a guarantor (e.g. bonds), on the performance of a counterparty's obligations where the counterparty is a key entity in the process related to the execution, delivery, settlement or safekeeping of a financial instrument, etc. (e.g. settlement of investment funds, creation or redemption of ETF participation units, safekeeping of securities).

Credit risk is influenced by:

• External factors – independent of the enterprise: macroeconomic and social factors (competition, economic conditions, fiscal and monetary policy, inflation, unemployment, etc.), political factors (deregulation and liberalisation of commercial transactions), demographic factors (ageing society), technological factors (IT);
• Internal factors – dependent on the enterprise: employee qualifications, diversification of the contract portfolio, types and amounts of contractual security used, applied accounting standards.

In market practice, a rating system is often used to measure credit risk, e.g. based on the ratings of an external rating agency.
 

Credit risk has numerous interactions with other types of risk, including in particular interest rate risk, currency risk and liquidity risk. An investor making investments in financial instruments should be aware that the greater the credit risk, the greater the risk of a potential loss for the investor and the impact of the above-mentioned risk on the volatility of the financial instrument's price or on a reduction in its liquidity.
 

DMBH draws Clients' attention to the fact that in the event of an issuer's bankruptcy, the order of satisfying claims from the issuer's assets is strictly regulated by law, which means that an investor who is a shareholder faces the probability of losing all or a significant part of the invested capital. In the case of bonds, the issuer may stipulate in the terms of issue that claims arising from the bonds issued by it, if not secured, in the event of the issuer's bankruptcy or liquidation, will be satisfied after the satisfaction of all other claims of creditors against that issuer.

Market risk is the risk of a change in the price of financial instruments (shares, bonds, futures contracts and other financial instruments) held by the client as a result of general and specific market factors having a direct or indirect impact on a specific financial instrument. The risk results from the principles governing the functioning of the capital market and the formation of prices on the basis of supply and demand equilibrium, and a change in the price of a single financial instrument or group of financial instruments is caused by factors that are often independent of the issuer, arising from the nature of the financial market. It should be noted that market risk can be significantly influenced by intangible factors, in particular:

• Emotional ones related to the psychological perception of macroeconomic, financial, sector, regional, company-specific factors, etc.;
• Those related to specific investor (investor group) behaviour arising from promoted investment trends that may influence the overvaluation or undervaluation of financial instrument prices;
• Those arising from the globalisation of financial markets and the speed of information flow – a change in stock exchange indices on other financial markets, a change in economic conditions on the main world markets or other markets classified in the same region may result in high volatility of financial instrument prices on the local market, despite the stable financial situation of their issuers, which does not justify such high volatility.

An investor making an investment should be aware that market risk is not a homogeneous risk, and many different factors, often independent of the issuer, influence this risk.

This consists in the inability to sell or purchase financial instruments in the short or medium term without materially affecting market price levels. Liquidity risk has a direct impact on price volatility, with the principle that the lower the liquidity, the greater the price volatility. Liquidity risk depends on many factors, often interdependent, that affect the restriction of supply or demand in trading in those financial instruments. The most important factors:

Supply-side:

• Low-value issuance of financial instruments – small number of financial instruments in circulation – supply restriction;
• Lack of adequate dispersion of financial instrument buyers (supply restriction);
• Low so-called free float – i.e. a restricted number of financial instruments in free circulation as a result of a small issuance, or lack of dispersion, or concentration of financial instruments on the secondary market by a limited number of buyers, thereby restricting the supply side;
• Small market capitalisation of the company.

Demand-side:

• Increasing macroeconomic, political, sector and market risk – affecting the volatility of the financial instrument's price, the state of the capital market or the issuer of financial instruments within a foreseeable specific time perspective, increasing investment uncertainty; 
• Increasing issuer risk – improper economic policy or changes in external factors affecting the deterioration of the issuer's financial situation, a financial situation threatening bankruptcy or failure to meet assumed financial obligations; 
• Improperly conducted information policy – variability or lack of information policy, concealment or distortion of material information that may affect financial instrument prices; 
• Warnings, reprimands or penalties imposed by state authorities or regulators authorised to do so (KNF, UOKiK, etc.).

   

   

   

The manner of executing orders is subject to the laws and rules applicable to the foreign venue for the execution of the Client's order. The laws and rules referred to above may differ from those applicable on the Polish regulated market. The Client should be aware of the legal regulations relating to those instruments, applicable in the country in which the transaction is being carried out, and should take this fact into account when making an investment decision.

The principles governing the issuer's functioning as a legal entity are subject to the law of the country in which the issuer is domiciled and may differ from those applicable in Poland. In particular, this applies to bankruptcy or liquidation proceedings of the company, reduction or increase of the company's share capital, and the rules for acquiring corporate or property rights from shares. The Client should be aware of the legal regulations related to this fact and the differences in the above-mentioned processes and their rights and obligations compared to the analogous processes applicable under Polish law. In particular, DMBH draws the Client's attention to the possibility, under the legislation of certain countries (e.g. the USA), of cancellation (redemption) of shares without compensation, and the associated risk of the Client losing the invested capital. The legal conditions that must be met to carry out the above-mentioned operation and the rules for the cancellation (redemption) of shares are determined by the laws of the country applicable to the issuer's domicile, and may in particular apply in the context of an arrangement with creditors or bankruptcy proceedings.

Furthermore, DMBH draws the Client's attention to the fact that the acquisition or holding of foreign financial instruments may be associated with obligations of a reporting, notification or other nature, as specified in the applicable laws, related in particular to crossing certain ownership thresholds specified in those laws (e.g. the obligation to notify the issuer of shares of a crossing of a specified voting threshold).

The manner of safekeeping foreign financial instruments is subject to the laws and rules applicable to the foreign place of their safekeeping. The laws and rules referred to above may differ from those applicable on the Polish market. The Client should be aware of the legal regulations relating to the safekeeping of foreign financial instruments, as they may have a direct impact on the manner of exercising rights from securities or corporate rights arising from foreign securities acquired or held by the Client.

The negative impact of a change in the price of the currency in which the foreign financial instrument is acquired or disposed of relative to the Polish currency (or the base currency of the account other than the currency in which the financial instrument is acquired), arising from the conversion of the financial result achieved in the currency in which the financial instrument is acquired into the Polish currency (or the base currency of the account). In the event of unfavourable market changes, it may turn out that the Client may achieve a profit on the financial instrument, but upon conversion into the base currency, report a loss, which will be the final financial result of the investment.

There is a risk of bankruptcy, insolvency, liquidation or a similar event with respect to entities participating in the conclusion and settlement of transactions or the registration and safekeeping of foreign financial instruments (foreign broker, foreign depositary), which may result in the inability to deliver foreign financial instruments purchased by the Client, temporary restriction of the Client's right to dispose of foreign financial instruments, or the necessity of participating in the relevant bankruptcy, liquidation or similar proceedings in order to assert and enforce the Client's claim.

In the event of placing an order to sell foreign financial instruments before the settlement of their purchase transaction, there is a risk of the sale transaction not being settled if the previous purchase transaction for those financial instruments is not settled.

The information obligations of issuers of foreign financial instruments may be structured differently than on the Polish market. In addition, the Client's access to such information may be limited or delayed as a result of time differences, lack of direct access to information services, or different requirements and methods of disclosing information to the public.

DMBH draws Clients' attention to the fact that information published by issuers of foreign financial instruments (current and periodic reports, etc.) is not available in the Polish language, and may not be available in the English language. Information documents – prospectuses, terms of issue, information memoranda – of foreign financial instruments are not published in the Polish language and may not be available in the English language.

In the case of securities admitted to trading on both a foreign regulated market and the Polish regulated market, the above-mentioned information may not be available in the Polish language. Limited availability of information materials in the Polish language may have a direct impact on the buyer's awareness of their rights and obligations regarding a given financial instrument, or on the timely performance of those obligations, due to the lack of or difficulty in reading them, the occurrence of interpretation errors, or differences in the meaning of terms or definitions provided in a foreign language.

The principles governing the issuer's functioning as a legal entity are subject to the laws of the country in which the issuer is domiciled, including tax regulations, and may differ from those applicable in Poland. In particular, this applies to differences in withholding tax rates (dividends, interest) and reporting or information obligations. The investor should take into account the risk of tax changes in the country of the issuer's domicile to the extent that they will affect the amount and method of withholding tax collection.

DMBH draws the Client's attention to the possibility, under the legislation of certain countries (e.g. the USA), of cancellation (redemption) of shares without compensation, and the risk of the inability to classify that action under the definitions of disposal of a financial instrument accepted by Polish tax authorities.

The rules for the settlement of capital income earned by a Polish tax resident, including income from the acquisition or disposal of foreign securities, are governed by the Act of 26 July 1991 on Personal Income Tax (Journal of Laws 2012.361, as amended ("UPDOF")).

In accordance with UPDOF, in the case of foreign securities, for tax purposes the acquisition or disposal price of foreign securities is determined in accordance with the binding provisions of law ("UPDOF") in Polish zloty at the average exchange rate announced by the NBP for the day preceding the settlement date of the transaction. Taking the above into account, the Client should be aware that for tax purposes, exchange rate differences may affect the final financial result of an investment. In particular, the Client may achieve a profit on an investment calculated in the transaction currency, while for tax purposes reporting a loss in Polish zloty as a result of the above-mentioned exchange rate risk, and vice versa.

Income earned from the paid disposal of financial instruments and from the exercise of rights arising therefrom is subject to taxation in accordance with UPDOF and is not payable through DMBH.

The manner of executing orders is subject to the laws and rules applicable to the foreign venue for the execution of the Client's order. The laws and rules referred to above may differ from those applicable on the Polish regulated market. The Client should be aware of the legal regulations relating to those instruments, applicable in the country in which the transaction is being carried out, and should take this fact into account when making an investment decision.

All costs and fees charged to the Client in connection with the service provided to the Client by DMBH are set out in the Agreement and in DMBH Schedule of Fees and Commissions.

DMBH discloses in particular: one-off fees, current fees related to the provision of the service, commissions, subscription and redemption fees paid to the fund manager, all taxes payable through DMBH .

DMBH, in connection with the provision of brokerage services to the Client, may not accept or transmit any monetary benefits, including fees and commissions, or non-monetary benefits, with the exception of the permitted exceptions specified in applicable law.

DMBH discloses to the Client information in connection with all payments, monetary or non-monetary benefits or advantages received from or made to third parties in this document or prior to the commencement of the provision of the service. Minor non-monetary benefits are described in general terms in this document. Other non-monetary benefits received or paid by DMBH in connection with the service provided to the Client are valued and disclosed separately by DMBH.

If, on the basis of a prior assessment (ex ante), DMBH is unable to determine the amount of the monetary or non-monetary benefit accepted or transmitted, payment received or made, or advantage, DMBH instead discloses in this document to the Client the manner of calculating that amount.

DMBH provides Clients with information on the exact amount of the monetary or non-monetary benefit accepted or transmitted, payment received or made, or advantage on an ex post basis.

At least once a year, for as long as DMBH receives the above-mentioned inducements in connection with brokerage services provided to the Client, DMBH will individually inform Clients of the actual amounts of monetary or non-monetary benefits accepted or transmitted, payments received or made, or advantages, with DMBH describing minor non-monetary benefits in general terms.

DMBH accepts and transmits in particular:

• Customarily accepted costs of meetings, meals and gifts in accordance with DMBH's internal procedures;
• Reimbursement of costs incurred in respect of external legal advisors in connection with the service provided.

At the Client’s request DMBH shall provide the Client with additional information about the above fees and commissions, including their nature and amount or how they were calculated. 

As part of permitted minor non-monetary benefits, DMBH – based on the principles indicated in separate internal procedures – may incur reasonable hospitality expenses, such as food and beverages at a business meeting or conference, seminar or other training events, and other non-monetary benefits that are recognized under applicable law as capable of enhancing the quality of the service provided by DMBH to the Client and are unlikely to negatively affect DMBH's fulfilment of its obligation to act in the best interests of the Client.