Qualified investor (EEA)

In the European Economic Area (EEA), qualified investors primarily include entities regulated or licensed to operate in financial markets, large undertakings, public authorities, and other institutional investors. Other clients, including individuals, may also fall into this category if they are recognized as professional clients upon their own request in accordance with established procedures.

The definition of qualified investors is set forth in Article 2(e) of Regulation (EU) 2017/1129 on prospectuses, which refers to Annex II and Article 30 of Directive 2014/65/EU on markets in financial instruments (MiFID II). An exception is provided for individuals and organizations that have entered into a written agreement to be treated as non-professional clients.

Professional clients include:
• Entities subject to regulation or licensing to operate in financial markets. These include, for example, credit institutions, investment firms, insurance companies, collective investment undertakings and their management companies, pension funds, and their management companies.
• Large undertakings that meet at least two of the following three criteria:
    o balance-sheet total of at least €20 million,
    o net turnover of at least €40 million,
    o own funds of at least €2 million.
• National and regional public authorities, including public bodies managing public debt at the national or regional level, as well as central banks, international, and supranational organizations.
• Other institutional investors whose primary business is investing in financial instruments.

Other clients, including individuals and organizations, may be recognized as professional clients upon their own written request. In such cases, the assessment is conducted by the investment firm providing investment services to that client. If such services are provided by a bank, the bank is responsible for classifying the client.

The investment firm assesses the client’s competence, experience, and knowledge, as well as their ability to make independent investment decisions and understand the risks of proposed transactions or services, and notifies the client in writing of any protections that may be lost as a result of the procedure.

The assessment must satisfy at least two of the following three criteria:
• the client has executed transactions of significant volume in the relevant market on average at least 10 times per quarter over the past four quarters;
• the client’s portfolio of financial instruments, including cash on deposit, exceeds €500,000;
• the client works or has worked in the financial sector for at least one year in a position requiring knowledge of the relevant transactions or services.

If the client is a municipality or local government, EEA states may also establish additional criteria in accordance with MiFID II.

Qualified investor status is relevant when determining which investors in the European Economic Area (EEA) may be approached with a bond issue. If an offering is intended solely for qualified investors, the offer in the EEA is addressed exclusively to persons or entities meeting this definition. Such securities may have features that require additional knowledge to assess their terms and risks: for example, they may be subordinated or have a complex payment structure. Specific restrictions on the offering, sale, and subsequent trading of these securities are set forth in the offering documents.