The directive introduces a new client classification regime and distinguishes between three types of clients:

• Retail Clients are clients who are not categorized as Professional Clients nor Eligible Counterparties, and they have the highest level of protection.
• Professional Clients: clients classified as Professional are those who meet one of the following descriptions:
  • Investors who possess market knowledge and investment experience and whose main activity is to invest in financial instruments; or
  • Authorized companies and entities that operate in the financial markets and not classified as Eligible Counterparties Legal entities such as Credit institutions, Insurance companies, Pension funds companies, etc.; or
  • Large Undertakings meeting at least two of the following criteria:
    1. A total balance sheet equal or exceeding €20,000,000
    2. A total net turnover equal or exceeding €40,000,000
    3. A total own capital equal or exceeding €2,000,000

Professional clients have a lower level of protection than Retail clients.

Eligible Counterparties are professional clients or legal entities who provide investment services that involve the reception and transmission or the execution of orders. Clients under this category have the lowest level of protection.

Clients are allowed to request to be reclassified in writing, according to the specifications, conditions, and procedures of MiFID.

An investment firm must deal with any expression of dissatisfaction about any financial services activity provided or withheld by the Company. Complaints could be made orally, in writing, by e-mail or by telephone; and they will be handled properly, regardless of the subject of the complaint.

Complaints will be forwarded to the Back Office Department, and the complainant shall be contacted within 24 hours and will receive a response within 48 hours, or details of how the complaint will be handled and when a final response will be given.

An investment firm is committed to act honestly, fairly and professionally and in the best interests of its clients and to comply with the principles set out in the MiFID legislation when providing investment services. It is required also to take all necessary measures and procedures to detect and avoid any conflict of interest between the firm and its clients.

Below is a summary of our policy and procedures for handling and managing potential conflicts of interests.

Identifying conflicts of interest, with reference to the related investment services and circumstances that may result in such conflicts.

In order to identify the types of conflict of interest that may arise in the course of providing investment services, the Company takes into account whether the company or any relevant person is in the following situations:

1. The Company or that person is likely to make a financial gain, or avoid a financial loss, at the expense of the Client.
2. The Company or that person has an interest in the outcome of a service provided to the Client or of a transaction carried out on behalf of the Client, which is distinct from the Client's interest in that outcome.
3. The Company or that person has a financial or other incentive to favor the interest of another Client or group of Clients over the interests of the Client.
4. The Company or that person carries on the same business as the Client.
5. The Company or that person receives or will receive from a person other than the Client an inducement in relation to a service provided to the Client, in the form of money, goods or services, other than the standard commission or fee for that service.

Managing conflicts of interest through internal policies, effective procedures and measures, as summarized below:

1. Effective procedures to prevent or control the exchange of information between relevant persons engaged in activities that may cause a conflict of interest where the exchange of that information may harm the interests of clients.
2. The separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the Company.
3. The removal of any direct link between the remuneration of relevant persons engaged in one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities.
4. Measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out investment services or activities.
5. Measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate investment or ancillary services or activities where such involvement may impair the proper management of conflicts of interest.

The object of the Fund is to secure any claims of Covered Clients (See below) against members of the Fund and the Fund exists to compensate Covered Clients (See below) for any claims arising from the failure by a member of the Fund to fulfill its obligations regardless of whether that obligation arises from legislation, the client agreement or from wrongdoing on the part of the member of the Fund.

A failure to fulfill its obligations consists of the following:

1. A failure to return to a Covered Client (See below) funds owed to them or funds which belong to them but are held by a member of the Fund, directly or indirectly, in the framework of the provision by the member of the Fund to the client of a covered service and which the client has requested that the member of the Fund returns in exercise of their relevant right; OR
2. A failure to hand over to a Covered Client (See below) financial instruments that belong to them and which the member of the Fund holds, manages or keeps on its account, including the case where the member of the Fund is responsible for the administrative management of the said financial instruments.

The payment of compensation which will be initiated where:

1. The member of the Fund is unable to meet client claims provided that this inability is resultant from its financial circumstances which show no realistic prospect of improvement in the near future; OR
2. A judicial authority has on reasonable grounds directly related to the financial circumstances of the member issued a ruling with the effect that investors’ ability to lodge claims against it are suspended.

A well founded claim by the client against the member must exist.

Covered Services are the services listed on the Company’s license (109/10) issued by CySEC (Cyprus Securities and Exchange Commission).

All RetailFX clients are covered by the Fund unless they fall within the following categories:

1. The following categories of institutional and professional investors:
   1. Investment Firms
   2. Legal entities associated with RetailFX and, in general, belonging to the same group of companies
   3. Banks
   4. Cooperative credit institutions
   5. Insurance companies
   6. Collective investment organizations in transferable securities and their management companies
   7. Social insurance institutions and funds
   8. Investors characterized by RetailFX as professionals
2. States and supranational organizations.
3. Central, federal, confederate, regional and local administrative authorities
4. Enterprises associated with RetailFX Managerial and Administrative staff
5. Shareholders of RetailFX whose participation directly or indirectly in the capital of the member of the fund amounts to at least 5% of its share capital, or its partners who are personally liable for the obligations of the member of the Fund, as well as persons responsible for the carrying out of the financial audit of the member of the Fund as provided by the Law, such as qualified auditors
6. Investors having in enterprises connected with RetailFX and in general of the group of companies to which RetailFX belongs, positions or duties corresponding to the ones listed in paragraphs 4 and 5 above
7. Second-degree relatives and spouses of the persons listed in paragraphs 4, 5 and 6 as well as third parties acting for the account of these persons
8. Apart from investors convicted of a criminal offence pursuant to the Prevention and Suppression of Money Laundering Activities Law of 1996 -2000, investor-clients of RetailFX responsible for facts pertaining to RetailFX that have caused its financial difficulties or have contributed to the worsening of its financial situation or which have profited from these facts
9. Investors in the form of a company which due to its size is not allowed to draw a summary balance sheet in accordance with the Companies Law or a corresponding law of a Member State.

The Fund initiates the compensation payment procedure when at least one of the following prerequisites is fulfilled:

• The Cyprus Securities and Exchange Commission has determined that the Company is for the time being unable to meet its obligations arising from its investors-customers’ claims, in connection with the covered services it has provided, as long as such inability is directly related to the Company’s financial position which has no realistic prospect of improvement in the near future; OR
• A Court, based on grounds directly related to the financial position of the Company, has made a ruling which has the effect of suspending the investors-customers‘ ability to lodge claims against the Company.

Upon issuance of a decision by the Cyprus Securities and Exchange Commission or by the Court in accordance with paragraph (a) or (b) above respectively, on the commencement of the compensation payment procedure, the Fund publishes in at least three national newspapers an invitation to the covered customers to make their claims against the Company arising from covered services, designating the procedure for the submission of the relevant applications, the deadline for their submission and their content.

The amount of compensation payable to each Covered Customer is calculated in accordance with the legal and contractual terms governing the relation of the Covered Customer with the Company, subject to the rules of setoff applied for the calculation of the claims between the Covered Customer and the Company. The calculation of the payable compensation derives from the sum of total established claims of the Covered Customer against the Company, arising from all Covered Services provided by the Company and regardless of the number of accounts of which the customer is a beneficiary, the currency and place of provision of these services.

Insofar as the amount of the claim determined, exceeds the amount in Cyprus Pounds corresponding to €20,000, the claimant receives as compensation the lump sum in Cyprus Pounds of the amount of €20,000.

For the determination of the equivalent of the Cyprus Pound against the EURO, the average exchange rate is taken into account as fixed by the Central Bank of Cyprus on the day of issue of the decision of the Cyprus Securities and Exchange Commission on the commencement of the compensation payment procedure by the Fund in accordance with paragraph 5(a) above, or the Court ruling in accordance with paragraph 5(b) above, respectively.

Upon completion of the valuation, the Fund (a) issues minutes listing the customers of the Company who are entitled to compensation, along with the amount of money each one of them is entitled to receive and communicates it to the Cyprus Securities and Exchange Commission and the Company within five working days from its issue and (b) communicates to each affected customer its finding no later than fifteen days from the issue of the minutes, determining the total compensation amount this customer is entitled to receive.

The claimant, to whom the Fund communicates the total compensation amount to which he is entitled, in case he disagrees with the Fund’s decision, has the right within ten days from the communication of the decision to appeal to the Cyprus Securities and Exchange Commission, justifying sufficiently his alleged claim.

The Fund is obliged to pay to each Covered Customer – claimant the compensation within three months from sending to the Cyprus Securities and Exchange Commission the minutes with the compensation beneficiaries.

For any further information regarding the Fund, please refer to the offices of the Administrative Committee of the Fund, at the following address:

Administrative Committee of the Investor Compensation Fund for Customers of CIFs and other IFs:

32 Stasikratous Street, 4th floor

P.O. Box 24996

1306 Nicosia

E-mail address: investmentfirms@cysec.gov.cy

Fax no.: 22 375762