Before making investments, it is important to understand both the nature of the products and the risks associated with them. SEB Bank classifies financial instruments and products according to their risk level and complexity to help you make informed decisions.
Classification of Investment Products
- Very low risk level financial products. Mainly short-term investments. Under normal circumstances, there is generally a very low risk of loss associated with such financial instruments and products, provided that the financial instrument and/or product is quoted in major currency and is kept until maturity.
- Low risk level financial instruments and products. Carry the risk that you may lose part of your investment.
- Medium risk level financial instruments and products. Carry the risk that you may lose a significant part of your investments.
- High risk level financial instruments and products. Carry the risk that you may lose all of the capital invested. The financial instruments in this product group are more complex and may be difficult to understand than lower risk level products.
- Very high risk level financial instruments and products. The riskiest investments where you may lose more than the initial investment and may be required to pay additional amounts. These products are more complex than most other products and should only be considered by investors with significant experience.
Complexity – financial instruments are classified into two groups:
- complex (the appropriateness of financial instruments is tested when client submits buy order);
- non-complex (the appropriateness of financial instruments is not tested).
In all risk levels each product has a risk to lose the initial investment, just the probability of it happening depend on the risk level of a particular product – the lower the risk level, the lower the probability.
Important general information
The placement of a financial instrument or product in the product classification may change in time depending on the instrument’s or product’s characteristics. SEB tries to assess the appropriateness of an instrument or product to its clients on the basis of the instrument’s classification at the time of the transaction.
- Financial instruments, that are available only on the customer’s own initiative are not subject of target market assessment, only the knowledge and experience of the customer will be evaluated (if applicable).
- Financial instruments that SEB banka actively offers to clients, recommends, distributes marketing material or otherwise promotes product sales, are subject to target market assessment in order to meet the needs, characteristics, and objectives of an identified target market.
Several types of risks have been excluded in the classification of financial instruments and products.
- The currency risk, which may emerge when a client invests in a currency that differs from their major currency, has not been considered. For investors it is less risky to invest in their major currency, unless they have extensive knowledge of currency risks;
- Liquidity risk (the tradability of an instrument on the market) may vary over time;
- Inflation risk is a risk that the real return on investment might be lower as calculated nominal return due to the general increase in prices. If during the investment period an average inflation rate is higher than the average nominal return on investment, the purchasing power of the invested amount will decrease;
- The investment horizon or investment goal of the specific client is not considered in the classification of products.
Clients who invest in an instrument or product must understand the following:
- investments are made only at the client’s own risk;
- when trading in financial instruments, clients should carefully read the transaction confirmations and promptly notify SEB of any possible errors;
- clients should regularly monitor the changes in the value of their holdings and positions in financial instruments;
- clients should implement appropriate measures whenever necessary to reduce the losses relating to their investments.
- You should independently asses tax risk, which is related to any type of taxes in activity of investing (e.g. income tax to paid on the sale of a product). Clients should independently evaluate all circumstances related to taxes on investments or their return even if in the material provided to the clients the bank has indicated particular tax aspects;
- SEB bank shall not liable for any damage or loss resulting from an act or omission of the third party, except the cases when it has been caused by a deliberate act of SEB bank. Damage or loss related to any act or omission of the third party may be caused, inter alia, because of the loss of the securities, failure to execute the order in due time or the undue execution thereof, insolvency, etc.
