Risk Disclosure Notification
Prospergate Capital Ltd is incorporated in the Republic of Cyprus with registration number HE369583. The Company is authorized and regulated by the Cyprus Securities and Exchange Commission (‘CySEC’), with license No.361/18, and registered office at 2 Filiou Zannetou street, 3021, Limassol, Cyprus.
The Company is operating under Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on Markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (the “Markets in Financial Instruments Directive (2014/65/EU)” or “MiFID II”) and amending Directive 2002/92/EC and Directive 2011/61/EU, as last amended by Directive (EU) 2016/1034 of the European Parliament and of the Council, of 23 June 2016 and under Regulation (EU) No 600/2014 of the European Parliament and the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (the “MiFIR”) which was implemented in Cyprus by the Investment Services and Activities and Regulated Markets Law of 2017 (Law 87(Ι)/2017), which provide for the provision of Investment Services, the exercise of Investment Activities, the operation of Regulated Markets and other related matters (the “Investment Services and Activities and Regulated Markets Law”), as the same may be modified and amended from time to time.
The Client acknowledges that the Company’s official language is English.
The office address of the ‘Cyprus Securities and Exchange Commission (CySEC) is 27 Diagorou Street, 1097 Nicosia, Cyprus (Telephone: +357 22 506 600/ Fax: +357 22 506 700, www.cysec.gov.cy and its postal address is P.O BOX 24996, 1306 Nicosia, Cyprus.
Scope of the Notice
The Risk Disclosure Notice, (herein after ‘the Notice’), is provided to the Client in accordance with the Investment Services and Activities and Regulated Markets Law of 2017 (Law 87(Ι)/2017). The Notice is designed to explain in general terms the nature of the risks involved when dealing in Financial Instruments on a fair and non-misleading basis, but does not disclose or explain all of the risks and all aspects involved in dealing in Financial Instruments.
The Client should not risk more than he/she is prepared to lose. Before deciding to trade the Client must ensure that he/she understands the risks involved and takes into account his/her level of experience. Independent advice and consultation must be sought if the Client deems it to be necessary.
The Client acknowledges that there is a great risk of incurring losses in trading Financial Instruments and accepts that he/she is willing to undertake this risk.
The Company will not provide the Client with any investment advice in relation to trading Financial Instruments.
Force Majeure Event
In the case of a Force Majeure Event, the Client will accept the risk of financial losses.
The Company bears no responsibility for any loss that arises as a result of a system failure, including but not limited to: delayed updates of the Client terminal; poor internet connection (either on the Client’s side or the Company’s or both); hardware or software failure, malfunction or misuse (either on the Client’s side or the Company’s or both); incorrect settings on the Customer’s terminal; or the Customer disregarding the rules and procedures described in the Client terminal and in the Company’s website.
The Client acknowledges and accepts that at times of excessive transaction flow, there may be a delay in contacting a member of the Bank by telephone; especially when there are important market announcements and the period in which instructions and requests are executed, may be extended.
The Company bears no responsibility and the Client will accept the risk of any loss that arises as a result of delays or communication sent by the Company not being received by the Client.
The Client accepts sole responsibility for the privacy of any information contained within the communication received by the Company.
The Company bears no responsibility for any loss that arises as a result of unencrypted information sent to the Client by the Company that has been accessed through unauthorized means.
The Company will ensure that the Client is kept updated via the Relationship Manager. The Company cannot be held liable for those messages that the Client fails to receive, open or understand due to the failure of the email system or corruption of the intended message.
Type of Risks
Factors such as external or internal conflicts, coups and racial and national tensions create political instability in Higher Risk Countries. Political instability can significantly influence an issuer’s ability to generate earnings and stock market returns. Furthermore, changes in the political scene may have an impact on the ability to repatriate capital, dividends and profits earned and generally on investment ownership rights. In most Higher Risk Countries, it is not possible to say whether political reforms aimed at creating a multi -party democracy and transition from a centrally planned economy to a market economy will be successful. There is the possibility that these goals could be disrupted or even reversed due to political, social, economic ethnic or religious instability. Higher Risk Countries are frequently criticized for the lack of transparency and fairness in their electoral processes and the results of such processes may not always be acceptable to the international community. Higher Risk Countries may also be faced with corruption within their governmental, administrative and financial systems and practices. Higher Risk Countries may face adverse international relations and/or international economic sanctions and/or international attention to their practices with respect to the prevention of money laundering and financial crime and their practices on the international effort to combat terrorism. Sanctions may apply to the Higher Risk country as a whole or to natural or legal persons from or affiliated with such Higher Risk Countries. There is a particular risk in the Higher Risk Countries that guarantees of investor protection may not always be honored, and that policies encouraging foreign investment may be abandoned, interrupted or reversed. There can be no assurance that any Securities or the assets of the issuer of the Securities will not be subject to nationalization, requisition or confiscation, or compulsory reorganization by any authority or body and attention is drawn to the fact that certain constitutions within Higher Risk Countries may allow respective national governments to undertake such actions without respective obligations for fair compensation.
Many Higher Risk Countries have not historically observed international standards for the protection of the environment and for the avoidance of pollution, including industrial pollution. A number of Higher Risk Countries may face heavy financial penalties and clean-up costs imposed on polluting companies or other responsible entities within their respective jurisdictions.
Climate change risks
The economies of Higher Risk Countries are vulnerable to the impact of environmental and climatic change and other types of national disaster. Problems may be particularly severe given the relative economic importance of climatically sensitive sectors (such as agriculture and fisheries), the lack of appropriate emergency management and the limited human, structural and financial capacity to respond to extreme weather conditions and natural disasters. Extreme weather conditions (whether or not linked to climate change) natural disasters could lead to social crises, including famine, epidemic and environmental migration, and may have a material adverse effect on an investor’s returns as well as on economic conditions generally. Some Higher Risk Countries may impose heavy penalties on issuers which are responsible for pollution which may include fines or forfeiture of property.
The underlying economic infrastructure of many Higher Risk Countries is significantly less developed than in more mature economies and many Higher Risk Countries suffer from major macroeconomic problems including hyperinflation, public deficits, unemployment, overdependence on the performance of one or more particular sector(s) including the oil and gas sector in a number of Higher Risk Countries, volatile interest rates, shortages of basic raw materials and increased levels of poverty. Economic policies and reforms may be taken for reasons other than long term macroeconomic environment for issuers of any Securities and prolonged periods of severe economic disruption potentially also leading to total economic collapse. Poor infrastructure including, without limitation, telecommunications and transport systems, and an inefficient banking sector, can hinder business development.
The limited supply of domestic savings, coupled with the absence of mechanisms and institutions through which new capital can easily be raised, may give rise to problems in obtaining funding. There are also high levels of external debt which, if maintained, could weaken the economic situation of Higher Risk Countries. Government policies within Higher Risk Countries may be of an interventionist nature which may impact the operation of the respective capital market including the banking sector and the stock market. Government policies within High er Risk Countries may be of an interventionist nature which may impact the operation of the respective capital market including the banking sector and the stock market. Government interest rate policies (aimed for example at controlling inflation or boosting economic growth) will also impact the performance of the respective stock market as higher interest rates may make Investments in equities less attractive and vice versa.
Legal, regulatory and operational environment
There does not yet exist in many Higher Risk Countries the legal and regulatory systems necessary for the proper and efficient functioning of a modern, efficient and transparent capital market. This may include the non-existence or limited functioning of market regulators, incomplete legislation and regulations pertaining to the capital markets and no or limited investor compensation schemes. There is therefore a high degree of legal uncertainty as to the nature and extent of investor’s rights and the ability to enforce those rights. Many advanced legal concepts which now form significant elements of mature legal systems are not yet in place or, if they are in place, have yet to be tested in courts. It is difficult to predict with a degree of certainty the outcome of judicial proceedings or even the quantum of damages which may be awarded following a successful claim. In Higher Risk Countries, courts, arbitration courts and agencies may not consider themselves bound by precedents so the Client may find it difficult to pursue legal remedies or enforce judgements of foreign courts. Furthermore, many relevant regulations are unclear in scope, which increases the risk that transactions entered into in good faith and with professional advice, could later be seen to be in breach of such regulations and subject to challenge. There is likely to be rapid change in many Higher Risk Countries as new legislation is implemented.
No liability on the part of The Company shall exist as a result of losses sustained or damage caused by a change of law, regulation or interpretation or the inconsistent or capricious application of any law or regulation by any relevant authority. No liability on the part of The Company or its Associated Firms shall exist where The Company acts in accordance with reasonable commercial practice for Western investment advisers operating in the Securities market of Higher Risk Countries.
The Company and its Associated Firms will not be liable for any and all claims, losses, costs, damages of any nature whatsoever or claims expenses from any cause or causes, including attorneys’ fees and costs and expert witness fees and costs on the Clients behalf.
Settlement procedures and ownership risks
The capital markets in many Higher Risk Countries, and the institutions on which they depend, are undeveloped. Therefore, the procedure for settlement, clearing and registration of security transactions can give rise to technical and practical problems. In the worst cases this could lead to disputes over title to Securities. In other cases, inefficient systems may result in delayed payment s. Risks may also arise in relation to local custody arrangements; the provision of custody services is a relatively novel practice, and the controls put in place in more mature markets may not be available. In addition, the country-specific law of many Higher Risk Countries (particularly those in the CIS and African countries whose legal systems are based on European civil law systems) generally do not recognize the distinction between legal and beneficial ownership with the consequence that nominee arrangements cannot be guaranteed to be effective. This can have significant adverse tax implications for the Client because of uncertainty as to the tax treatment and liability to tax as between the custodian and beneficial owner. Securities, especially equity securities, are usually registered in book-entry form only and are not evidenced by actual certificates. Title is therefore dependent on the register of stockholders being properly maintained. At worst, the Client could lose the value of their investment because their interest in securities has not been correctly registered or has been removed, or the register itself has been lost or destroyed. In addition, the Client may have to make payment on a purchase or delivery on a sale before receipt of Securities or, as the case may be, sale proceeds. Where The Company is offering Custodian services to the Client in Higher Risk Countries, the above risks may impact the ability of The Company to execute these custody services.
There is no centralized source of disclosure of corporate actions in many High Risk Countries. The obligation of the issuers may be limited to press announcements. There is therefore the risk of an announcement not being noticed, especially where the issuer has selected the press route as the sole route for public notification of such corporate actions. We will bear no responsibility or liability for failure on our behalf or by our sub-custodians to locate or identify such relevant events. We also advise the Client that where an issuer has not distributed dividends within one year of the announcement of the relevant corporate action, the legal owners of the relevant Securities may never receive their dividend entitlements. Furthermore, during the one year period, the Russian issuer may pay the registered owners of the relevant Securities at different times. As a result, we may only pay distributions to the Client in respect of Securities of which we or our sub-custodians are the legal owners upon (a) full payment being received from the Issuer or (b) one year having passed from the date of the issuer’s corporate meeting where the distribution was declared. We advise the Client that because of the above factors, we may not be able to participate on the Client’s behalf, partially or entirely, in all events to which the Client may be entitled to participate and as a result we will not accept any liability for any losses or liabilities, direct or indirect, that the Client may incur whilst dealing in such conditions or in cases where we are only in a position to partially act on the Client’s behalf.
Market liquidity and volatility
Many of the Securities, which Client may invest in, will not be traded on a Stock Exchange or on an organized market. There is therefore the risk that Investments could not be easily liquidated and the valuation of Investments will be more difficult. The Client is notified and acknowledge that the Investments contemplated herein are highly volatile and relatively illiquid and that there is no guarantee of a return on the investment and no guarantee that a return of or repatriation of any of the invested amounts in a convertible currency will be possible.
Repatriation of funds
The laws of certain Higher Risk Countries can in some cases prohibit the repatriation of funds invested therein. Therefore, there can be no guarantee that all such funds will be capable of being remitted to the Client. Although certain Higher Risk Countries, including CIS countries have specific legislation which currently provides assurances of the rights of foreign investors to remit profits and dividends from their Investments, such rights may be subject to restrictions. The legislation of Higher Risk Countries may change or be reinterpreted to prevent repatriation.
Foreign investment in Securities of issuers in Higher Risk Countries is or may become, in certain cases, legally restricted or may become restricted for reasons beyond Company’s or the Client’s control or understanding. Such actions can affect liquidity, prices of Securities and the overall value of the investment. Sometimes these restrictions are contained in constitutional documents of a company which may not be easily obtainable. The Client acknowledges that ownership of certain Securities in certain Higher Risk Countries is restricted by citizenship, nationality, residency or other requirements which ultimately may purport to implement the policies of certain governments. The Company believes that the inability of the Client under the contract to dictate the purchase of the instruments by the local Associate of The Company results in no imputable beneficial ownership.
There is a risk that local officials could interpret arrangements to be agency type arrangements and attribute the beneficial ownership of the instruments to the Client. The Client acknowledges that such a treatment of the arrangements could have significant negative implications. The Client acknowledges that it is familiar with the risk inherent in purchasing Securities in Higher Risk Countries or related to Emerging Markets, including, without limitation, the risks inherent in purchasing synthetic investments in Higher Risk Countries and that it accepts such risks.
This notice is provided to you in accordance with the Markets in Financial Instrument Directive (“MiFID II”) of the European Union because you are considering dealing with the Company in the financial instrument provided by the Company (“Financial Instruments”).
This notice cannot and does not disclose or explain all of the risks and other significant aspects involved in Portfolio and investment management services.
In order to comply with the Markets in Financial Instrument Directive (“MiFID II”) of the European Union, the Company will classify the prospective customer as Retail Client, Professional Client or Eligible counterparty when considering the application for opening an account, based on the information provided to the Company.
Prior to applying for an account the Client should consider carefully whether trading in derivative Financial Instruments is suitable for him in the light of his circumstances and financial resources. Trading in derivative financial instruments entails the use of “gearing” or “leverage”.
Past performance, simulation or prediction of financial instruments and markets does not constitute an indication of future results. The Client should note that the value of his investment can decrease (as well as increase) as the market price of the underlying asset may fluctuate downwards (or upwards).
For further information, please refer to the ‘Guide to Investing’ issued by the European Securities and Markets Authority (‘ESMA’).
Monitor & Review
The Company will, on a regular basis, monitor and assess the effectiveness of this Policy and the sequence of its order execution arrangements and, in particular, the execution quality of the procedures explained in the Policy in order to deliver the best possible result for the Client, and, where appropriate, the Company reserves the right to correct any deficiencies in this Policy and make improvements to its execution arrangements.
In addition, the Company will review the Policy as well as its order execution arrangements at least annually. A review will also be carried out whenever a material change occurs that affects the ability of the firm to continue to obtain the best possible result for the execution of its Client orders on a consistent basis using the venues included in this Policy.
The Company will notify any Clients affected by material changes in its Policy or order execution arrangements.