Financial services providers are subject to strict obligations relating to the protection of and explanation towards their customers. The Securities Supervision Act (WAG 2007 – Wertpapieraufsichtsgesetz 2007) defines obligations about their behaviour (“rules of conduct”) in providing their services that must be adhered to for many capital market products.
When providing commercial services that are connected to securities or other forms of investment of assets of customers, the customer’s best interests must be given foremost consideration. Such services are to be conducted by financial services providers with the necessary expert knowledge, diligence and scrupulousness in the interest of the customer (such as for example ensuring that an order is executed at the best possible price).
Furthermore, the providers of financial services are required to obtain information from customers about their experience and knowledge about the transactions, that are intended to be the object of the financial services to be provided, about the aims they strive for by conducting the transactions and also about their financial situation, to the extent necessary to ensure that the customer’s best interests are maintained and also with regard to the nature and scope of the intended transactions. This legal rule is intended for your protections, and your adviser is only in a position to advise you, as a result of it.
Any financial services provider that does not ask such questions acts in an unprofessional manner, and also breaks the law. Accordingly the financial services provider is required to draw up a customer profile, which must be also be made available to the customer upon request.
Furthermore, all necessary information (e.g. the characteristics and risks of the transaction, costs, terms, price limits and trading venue) must be communicated to the customer about the planned investment, to the extent that is necessary to protect the interests of the customer and in accordance with the nature and scope of the intended transactions. This provision subjects the financial services provider to a comprehensive disclosure obligation and obligation to explain the risks entailed.
The details about the investment can often only be found in the terms and conditions. It is therefore strongly recommended to ask in detail about the conditions of investment.
If the credit institution or investment firm does not adhere to the principles above in relation to consultations, then it is possible that an issue of misleading advice has occurred.
In the case of the adviser making personal recommendation to the customer, a particularly high level of diligence must apply – in particular in relation to the correctness and completeness of information that has been passed on. The aim of the consultations with advisers is to ensure that the customer only invests in such forms of investments that:
Source: Leitfaden zur Anwendung der Wohlverhaltensregeln nach dem Wertpapieraufsichtsgesetz 2007, Wirtschaftskammer Österreich (Bank – Versicherung)
Ask whether you will receive a prospectus, and whether it is a mandatory prospectus in accordance with the Capital Market Act or the Stock Exchange Act, that has been checked or approved by a checker of prospectuses or the FMA. The issuer, prospectus auditor, the auditor or your financial services provider are only liable in the event that there is a mandatory prospectus. The financial services provider is obliged to give you any other kind of prospectus that exists upon request.
In the event that the investment is a capital investment fund then the necessary information documents (e.g. Prospectus, key information documents, important investor information) should be made available, to allow an investment decision to be made. A separate information document exists for alternative investment funds (AIFs) pursuant to Article 21 of the Alternative Investment Fund Managers Act (AIFMG – Alternative Investmentfonds-Manager-Gesetz).
Frequently buying and selling securities does not necessarily emerge to be an advantage for your investments, since it may lead to losses in capital, as a result of unnecessary excessive charging of fees and commission (also known as “churning”). Check your securities account regularly, and if you are uncertain about anything, contact your adviser.
In principle information and advertising material must be fairly written, with contents being imparted fairly, and such material must not be misleading. All marketing information and advertising materials must be presented in such a way that it is possible to recognise them as being advertising.
The overly frequent presence of financial services providers in the media does not form a benchmark for their integrity. Financial product adverts, which are used explicitly to solicit customer deposits, are principally associated with risks.
The Financial Market Authority is required to disclose the range of market standard fees for investment firms on its website.
The disclosure of the range of market standard fees for investment firms – including with regard to detecting potential conflicts of interest – is intended to act as a guide for customers wanting to make use of investment services. In this regard, investment firms are subject to an additional information requirement towards their customers, namely advising their customers about the range of standard fees that are disclosed by the Financial Market Authority.
Further information can be found here (available in German only).
In the event that a company holds financial instruments or money that belong to you, the company is required to take suitable precautions, to protect your rights as owner:
In Austria the requirement named with regard to the distinctness of funds for a credit institution is covered by Article 11 (custody ledger) of the Securities Deposit Act (DepotG – Depotgesetz).
Source: Guidelines for Customers on the Markets in Financial Instruments Directive (MiFID); Investing capital in financial instruments.
If you appoint a company to purchase or sell a financial instrument, your order should be executed directly after comparable customer orders (in the order in which the company received the order) and without delay.
If for any reason the company has any significant difficulty is processing your order in the correct sequence, they must inform you of this being the case.
Best execution means that the company is required to execute your orders in such a way, that the best possible outcome is ensured for you. This is known as best execution.
To obtain the best execution of your orders, the company must take a range of factors into account, such as the price, execution costs, as well as the probability of execution.
The most important aspects are those of the price and the total costs (therefore the total costs to be paid by you for a transaction, including the price, all expenses, fees for the chosen trading place, clearing and settlement fees and other fees that might be payable to third parties involved in the execution of the order).
Your financial services provider must provide you with reports in a suitable form about the investment services provided. The specific reporting requirements depend on the type of service concerned, but however must always contain any associated costs.
Frequently accounts and securities custody accounts are opened at banks and brokers with familiar sounding names, but whose name is easily confused with companies with an excellent reputation. In this case, you should also check with your regular bank. The broker may be authorised to make arrangements using your assets on behalf of your financial services provider that you do not know anything about.